611.11B31/11–1045

Memorandum by the Director of the Office of International Trade Policy (Wilcox) to the Assistant Secretary of State (Clayton)

I.
The question at issue as between the Tydings and Bell Bills73 is not whether the U.S. should help in the rehabilitation of the Philippines but a question of how best to do it. The Department desires to assist the Philippines in emerging from the ravages of war and in developing an economy consistent with a status of political independence. Such assistance however should be in line with our policy of encouraging trade expansion on a non-preferential basis.
II.
The Department opposes the Bell bill because of its provisions for (a) a 20–year continuance of preferential tariffs; (b) preferences with respect to internal taxes; (c) and restrictions on Philippine tariff autonomy in relation to third countries. Tariff preferences will encourage revival of industries dependent on preferences; our continuation of preferences will weaken our leadership in efforts toward a non-preferential world trading system.74 (See Attachments I-A, E, F).75
III.
The Tydings’ trade proposals are in general accord with Department’s trade policy. They incorporate a plan of gradual changeover to a non-preferential trade basis which is less likely to encourage industries requiring preferential treatment than would be the case under provisions of the Bell bill. (See Attachment I–B).
IV.
Tydings’ omnibus bill (S. 1488) incorporates other measures for assisting the Philippines, namely provisions covering war damage [Page 1219] compensation, surplus property disposal, and transfer of enemy property. (Attachments II, III, IV, V). A request by the Commonwealth for UNRRA assistance is now under consideration.76 (See Attachment VI).
V.
Some Philippine processing industries may be affected by removing existent tariff preferences. It is believed however that adjustments within the industries and between them would be such that no serious overall effect on the Philippine economy would result from a program of gradual reduction of tariff preferences. (A summary of probable effects on principal Philippine export commodities is attached (Attachment I–D)).
  1. S. 1279 and H.R. 4185; for texts, see Philippine Trade Act of 1945: Hearings before the House Committee on Ways and Means, 79th Cong., 1st sess. (Washington, Government Printing Office, 1945 [1946]), pp. 2, 95.
  2. In a memorandum of October 1 to President Truman, the Acting Secretary of State (Acheson) had stated: “In accordance with our established commercial policy opposing discriminatory trade arrangements we are seeking, in the current conversations with the British, the reduction and ultimate elimination of Empire preferences. Any suggestion at this time that we intend to abandon our program for the gradual elimination of preferential trade relations with the Philippines would embarrass our representatives and inevitably lessen our chances of getting satisfactory commitments with respect to trade preferences from the United Kingdom.” (611.11B31/10–145) For documentation on trade discussions with the United Kingdom, see pp. 1 ff.
  3. Attachments to this memorandum not printed.
  4. For documentation on requests by the Philippine Commonwealth for assistance by the United Nations Relief and Rehabilitation Administration, see vol. ii, pp. 969971.