Foreign Relations of the United States: Diplomatic Papers, 1945, General: Political and Economic Matters, Volume II

611.0031/11–145

The Secretary of State to the Ambassador in Cuba (Norweb)

[Extracts]

No. 199

Washington, November 1, 1945.

Sir: Within the immediate future the Department proposes to publish “Proposals for the Expansion of World Trade and Employment—Developed by Staff Members of Various Departments of the United States Government in Preparation for an International Conference on Trade and Employment, and Presented for Consideration by the Governments and Peoples of the World.” These Proposals will suggest measures for the reduction of governmental barriers to international trade; prevention of action by private business interests which restrict international trade; policies which should be adopted with respect to commodities when supply exceeds effective demand; international measures for the maintenance of high levels of employment; and the creation of an International Trade Organization under the United Nations Economic and Social Council, to serve as a forum for discussion of problems in the entire field of commercial policy.

The proposals for the reduction of trade barriers will cover such questions as the lowering of tariffs and the general elimination of quotas and licenses. They will touch also upon the matter of preferential trade relations between various countries of the world and it is clear that if there is to be a solution to the problem created by the existence of such preferential trading arrangements as those which exist between the members of the British Commonwealth of Nations, consideration must equally be given to the preferential trading arrangement which has existed between the United States and Cuba.

Because it is recognized that the publication of these Proposals, including reference to the matter of trade preferences (even though the United States-Cuban situation is not specifically mentioned), will have important repercussions in Cuba, it has been deemed desirable to give the Cuban Government some advance notice and explanation regarding the Proposals in general and the matter of preferences in particular in so far as they will relate to the Cuban situation.…

. . . . . . . . . . . . . .

With regard to substance, in so far as the matter of preferences is concerned, there is enclosed a copy of the section of the Proposals dealing with that subject. These Proposals are in somewhat different form than at the time they were explained to Mr. Nufer¹² when he was in the Department. The purpose of these Proposals is to set forth the general objective that tariff preferences will be eliminated as a part of a world-wide movement for the relaxation of trade barriers of all kinds and, as a step to this end, to provide a basis on which initial negotiations can be conducted. While it is the Department’s hope that the negotiations in the Spring of 1946 will result in the substantial elimination of preferences, it is recognized that the extent to which this can be achieved will largely depend upon the willingness of the major trading nations to take equally comprehensive and thoroughgoing action with regard to other barriers to trade. In other words, it is an essential part of the Proposals that those countries which are asked to relinquish the protection to their exports afforded by preferences will be compensated by the additional outlets for their exports expected to result from a general lowering of trade barriers.

Since it is believed that the Cuban Government is likely to raise questions on these points, the following explanation is offered with regard to subparagraphs a and b of paragraph 1 of the statement on preferences:

1. With regard to point a, providing that existing international commitments (such as those embodied in the trade agreement between the United States and Cuba¹³) will not be permitted to stand in the way of action agreed upon with respect to tariff preferences, it is not meant by this that such commitments are to be abrogated forthwith, but merely that they shall be adapted, through the normal processes of consultation between the parties concerned, so as not to impede the effectiveness of the arrangements agreed upon. The inclusion of Cuba among the nations which would be invited to participate in the negotiations next Spring would assure the Cuban Government a voice in determining these arrangements.

2. Point b sets forth a principle which is important primarily in dealing with British preferences and is designed to prevent the adoption of the bargaining position that the reduction or elimination of each margin of preference must be negotiated entirely apart from the the reduction of the non-preferential tariff accompanying the preference. It should be emphasized, however, that this provision does not mean that preferential rates of duty, such as those applying to articles imported into the United States from Cuba, cannot be reduced.

The Embassy will be kept currently informed as to further developments, and whether the advance information for the Cuban Government is to be transmitted through the Cuban Embassy in Washington or through the Embassy in Habana. In the meantime, if after studying the enclosures, the Embassy has questions with regard to any point, the Department will be pleased to supply the necessary information.

Very truly yours,

For the Secretary of State:

William L. Clayton

[Enclosure]

Preferences

1. Import tariffs and preferences. In the light of the principles set forth in Article VII of the mutual aid agreements, members should enter into definite arrangements for the substantial reduction of tariffs and for the elimination of tariff preferences. As an initial step in the process of eliminating tariff preferences it should be agreed that:

a. Existing international commitments will not be permitted to stand in the way of action agreed upon with respect to tariff preferences.

b. All negotiated reductions in most-favored-nation tariffs will operate automatically to reduce or eliminate margins of preference.

c. Margins of preference on any product will in no case be increased and no new preferences will be introduced.

2. Action for the elimination of tariff preferences would be taken in conjunction with adequate measures for the substantial reduction of barriers to world trade, as part of the mutually advantageous international arrangements contemplated in this document.

12. Albert F. Nufer, Economic Counselor of the American Embassy in Cuba.
13. For documentation on the second supplementary reciprocal trade agreement between the United States and Cuba, signed at Habana, December 23, 1941, see Foreign Relations, 1941, vol. vii, pp. 196 ff.; for text of agreement, see Department of State Executive Agreement Series No. 229, or 55 Stat. (pt. 2) 1449.