The Acting Secretary of State to the Ambassador in Chile (Bowers)

No. 4934

The Acting Secretary of State refers to the Embassy’s despatch no. 12040 of April 30, 194593 enclosing the text of the counter-proposal of the Chilean Government for a trade agreement with the United States. Inasmuch as the Department has not received a copy from the Chilean Embassy, it is requested that, if it has not yet done so, the Embassy formally acknowledge the receipt by it, but indicating that it is not expected that serious study can be given to the proposal until the Congress has acted upon the bill now before it for the renewal and broadening of the Trade Agreements Act.

A preliminary examination of the Chilean counter-proposal, however, reveals that the Chilean Government has asked for at least two types of concessions which it would appear that this Government could not grant.

First, there is a request for this Government to place certain dutiable or taxable commodities, notably copper and manganese, on the free list. Under the present authority of the Trade Agreements Act, or even under the legislation now before the Congress, it would not be possible to transfer items from the dutiable list to the free list.

Secondly, Article V in the Chilean proposal apparently calls for permanent guarantees by this Government that minimum quantities of copper and nitrates, based upon the average imports during the last [Page 832] three years prior to this war, shall be imported by the United States from Chile, and that prices shall be not less favorable than those enjoyed by similar domestic products. This Government fully recognizes the importance of these two commodities to the economy of Chile and their major role in the international trade of the country; and it earnestly hopes that a satisfactory solution may be found to the postwar problems connected with those commodities. But purchases, or guarantees to purchase, minimum annual quantities of these or other commodities or guarantees of their prices on a permanent basis in the post-war period (which is what would apparently be required under the Chilean proposal if imports by private interests failed to reach a certain volume in any year or prices paid by private interests were below a certain figure), clearly could not be made in the absence of legislative authority to do so. It might be added parenthetically that it is highly unlikely the Congress would adopt legislation of such a character. To the extent that this proposal would involve the further development of state trading in the post-war period, as contrasted with a vigorous expansion of international trade by private competitive enterprise, it would run counter to one of the basic elements in this Government’s recognized commercial policy. It is realized, of course, that agencies of this Government are engaged in operations at present which in normal times would be conducted by private business, but it is also this Government’s intention that such governmental operations will be terminated as soon as war conditions permit.

The other proposal of the Chilean Government, referred to in the Embassy’s telegram no. 597 of May 10, 1945,95 to broaden its modus vivendi with the United States by granting many duty reductions to this country, seems to have been made partially in the expectation that this Government would accept the Chilean Government’s counterproposals, particularly in respect of copper and nitrates, for a formal trade agreement with the United States. It is believed advisable at the outset to eliminate any misunderstanding by the Chilean Government on this matter, and this point will therefore be covered in the reply that the Department will in the near future send to the Embassy for transmission to the Ministry of Foreign Affairs in response to the Chilean proposal for a temporary broadening of the present commercial arrangement.

There is enclosed for the information of the Embassy a memorandum of a recent conversation between the Commercial Counselor of the Chilean Embassy and officers of the Department95 covering certain of the foregoing points.

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