611.9631/12–1446
The Acting Secretary of State to President Truman
My Dear Mr. President: Enclosed are two draft proclamations relating to the agreement on trade between the United States and the Philippines signed on July 4, 194621 pursuant to the Philippine Trade Act of 1946 (Public Law 371, 79th Congress). The longer draft would proclaim this agreement and notes exchanged on October 22, 1946 making clarifying amendments thereto, and the shorter one would announce the date of entry into force of the agreement. The Philippine Trade Act of 1946, which lays down in great detail the provisions that shall be included in the agreement which the President is authorized to conclude thereunder, provides for eight years of free trade followed by twenty years of declining preferences, as well as for quotas on imports of certain Philippine articles and for several other matters affecting trade between the two countries.
The Act also specifies that, in the agreement authorized, the Philippines shall undertake promptly to amend their constitution to permit American citizens and enterprises to engage in certain activities, such as mining and public utilities reserved therein for Philippine citizens, and that the agreement shall be suspended or terminated if the President of the United States determines that such amendments have not been made within a reasonable time or that the Philippines are in any manner discriminating against American citizens or enterprises. These provisions have been embodied in the agreement. Upon termination of the agreement most of the provisions of our law giving trade preferences to the Philippines will terminate under the Act.
Moreover, the Act makes acceptance of the agreement by the Congress of the Philippines and enactment of legislation to carry it out a condition precedent to its entry into force. You will recall that, to avoid possible political complications in the Philippines, it was decided in telephone conversations between Washington and Manila that the Philippine Congress might, prior to July 4, enact the legislation required by the Philippine Trade Act of 1946. Thus the Philippine Commonwealth Act No. 733, approved by the President [Page 938] of the Philippine Commonwealth on July 3, 1946, stated that a draft agreement quoted therein, which had not yet been signed, was accepted, and also contained provisions enacting the requisite legislation. Because it had been telegraphed to Manila, the text that was so accepted, and subsequently signed on July 4, contained a number of divergencies from the requirements of our Act, a few of which were somewhat misleading. The more important errors have been corrected in the exchange of notes of October 22 which is included in the enclosed proclamation containing the text of the agreement of July 4.
Enactment of the Philippine legislation prior to independence, and reluctance on account of the political situation in the Philippines to submit the amendatory exchange of notes also to the Philippine Congress for acceptance, have raised some legal questions which are outlined in the attached memorandum. These questions have warranted careful consideration on legal grounds, especially because of the likelihood that the agreement may be attacked on the basis of its legality. Although the Philippine Trade Act of 1946 itself contains provisions to carry out the agreement, pressures are almost sure to be exerted during the next twenty-eight years upon Congress to terminate the trade preferences accorded to the Philippines by the agreement. The possibility that future Congresses would give way to such pressures, and enact legislation contrary to the undertakings of this Government in the agreement, will be enhanced considerably if a basis could be found for attacking the validity of the agreement or alleging that it was not concluded in accordance with the Congressional intent embodied in the Philippine Trade Act of 1946. Moreover, that Act authorizes the imposition by the President of the United States of new quotas on the importation of Philippine articles after the agreement has entered into force. Should any such quotas be imposed, importers could easily question in the courts the validity of the quotas on the ground that the agreement had not been properly brought into force.
These legal questions have been considered by this Department and, for the reasons indicated in the memorandum, are not believed to justify further delaying proclamation of the agreement. However, should you care to go into them further, or to obtain an opinion of the Attorney General with regard to any of them, this Department would be glad to furnish further details as to the matters involved.
The legislation to provide for a plebiscite on the amendments to the Philippine constitution required by the agreement has passed the Philippine Congress by a narrow margin and the amendments will be submitted to popular vote in the spring. Meanwhile, the failure of this Government to proclaim the agreement has been interpreted by the opposition to the Philippine President as an indication that the [Page 939] United States does not desire to bring it into force. Consequently, unless you wish to investigate the legal questions further, it is recommended that the longer proclamation, containing the text of the agreement, should be issued promptly. If you care to sign the shorter proclamation at the same time, and return it to this Department without dating it, the dates could be added and the proclamation sealed after the Philippine President has proclaimed the agreement.
This Department is planning to release to the press the text of the proclamation including the agreement and the notes when it is signed.
Faithfully yours,