611.0031/11–645
The Ambassador in Cuba (Norweb) to the Secretary of State
[Received November 9—2:32 p.m.]
Sir: I have the honor to refer to the Department’s secret air mail instruction no. 199 of November 1, 1945, informing the Embassy of the proposed early publication of “Proposals for the Expansion of World Trade and Employment” which will suggest measures for the reduction of governmental barriers to international trade, et cetera, and which will touch also upon the matter of preferential trade relations between various countries of the world. The Department points out that if there is to be a solution to the problem created by such preferential trading arrangements as those which exist between the members of the British Commonwealth of Nations, consideration must equally be given to the existing preferential trading arrangement between the United States and Cuba.
It is noted that the Department, realizing that the Proposals and especially the reference therein to trade preferences, will have wide repercussions in Cuba, considers it advisable to give the Cuban Government some advance notice and therefore proposes, shortly before the publication thereof, to deliver an explanatory memorandum, together with supplementary oral information, to the officer in charge of the Cuban Embassy, who will be requested to transmit the memorandum (of which a draft was attached to the Department’s instruction no. 199) to his Government.
I have studied carefully the Department’s instruction and draft memorandum and find myself in full agreement with the suggested procedure. We obviously cannot consistently endeavor to maintain [Page 1343] the Cuban tariff preferences in the face of our overall commercial policies and our request of the British that they eliminate or reduce imperial preferences.
As the Department points out, the effects in Cuba of the announcement that the preferential tariff treatment which the United States and Cuba have accorded each other since 1902 must be abandoned will be far-reaching. Those effects, however, will be more political and psychological than economic, as the duty preference on Cuban sugar (which is still the all-important item in Cuba’s economy) has already been substantially reduced as a result of our trade agreement with Peru,14 while Cuba’s need for the preference has been largely removed by the operation of the 1937 Sugar Act,15 which assures Cuba of a substantial participation in our sugar market. Moreover, such other important items in Cuba’s trade with the United States as Havana tobacco (because of its exceptional quality) and fresh fruits and vegetables (because of their perishable nature and Cuba’s geographic proximity to the United States) may be expected to suffer little, if at all, from the loss of their duty preferences.
It is not intended to convey the impression that the elimination of the tariff preferences will not prove prejudicial to certain phases of Cuba’s economy, but I believe it is safe to say that it will affect more seriously our exports to Cuba than Cuba’s exports to the United States. Our rice growers, for instance, when again faced with Oriental competition, will, if deprived of the Cuban duty preference on American rice, expectedly lose the Cuban market, which during recent years has taken about 25 percent of our entire rice production. Although rice is perhaps the outstanding example, there are many other instances where American producers, manufacturers and exporters will find it difficult if not impossible to maintain their position in the Cuban market once they no longer have the competitive advantage afforded them by the duty preferentials. It is assumed, of course, that the Department and the other interested agencies of our Government are fully aware of and have given careful consideration to this particular aspect of the matter.
With further reference to the repercussions in Cuba of the elimination of the tariff preferences, it should be mentioned that Cuba has for the past several years been enjoying unusual prosperity and that this condition may be expected to endure so long as the sugar market continues favorable. If the proposed step must be taken, the present moment would therefore seem to afford as propitious an opportunity as can be hoped for as its effects would be less severely felt now than during a period of economy depression. These effects will doubtless [Page 1344] be further minimized by Cuba’s inclusion in the group of leading trade nations with which our Government hopes next spring to negotiate a multilateral trade agreement, as the Cubans will gather therefrom that they may expect to receive additional tariff concessions on some of their leading export products even though these concessions are on an unconditional-most-favored-nation or multilateral basis. The Embassy is therefore especially gratified that the Department has decided to include Cuba in this select group.
In conclusion, I wish to express my appreciative recognition of the competent and tactful manner in which the Department proposes to broach this delicate problem, a procedure which it is believed will help materially to cushion the impact of the measure on Cuban public opinion and to minimize its psychological and political effects.
Respectfully yours,