The Chief of the Shipping Division (Saugstad) to the Ambassador in Argentina (Messersmith)

My Dear Mr. Messersmith: I was very glad to receive your letter of March 558 with your helpful comments on the present port situation in Argentina, and your assurance of personal interest in the matter which is giving us great concern in many directions. I hope through your able handling of this situation that it may be cleared up without too much official disturbance.

For some time the United States Maritime Commission, the National Federation of American Shipping, representatives of European shipping establishments, both official and private, have been piling up charges and allegations on the inconsistent position of the Argentine Government in some of their own undertakings as related to our indirect assistance in selling them tonnage. Two days ago the representative of an important admiralty firm asked me whether the Department would give support to organized opposition on the part of the interested shipping companies, both American and foreign, to Argentine discrimination. This plan contemplates coordinated pressure and representations through industry and diplomatic channels. I told him that such a program would undoubtedly be helpful at the right time, that you were giving personal attention to the matter and that we would want your advice as to procedure in order to make effective representations in a matter which can have a world-wide effect. He agreed to await developments and expressed his confidence in the procedure you propose.

You asked whether any of our ports give preference to American flag vessels over those of foreign registry. In response I believe we can say without fear of contradiction that no American port favors [Page 252] American ships with regard to berthing or to other port facilities. To make a formal statement to this effect on the part of the Government would mean that we would have to contact and question every port authority in the United States, since, as you know, our port system is not under Federal control. I think it is sufficient however to say that neither I nor any other officer in the Shipping Division know of any case of such discrimination against a foreign vessel. I can attest to the fact that during the past ten years I know of no case in which a foreign government has found it necessary to make representations on the subject. During the war, of course, some discrimination did take place under the Ship Warrant scheme, a necessary war device to make shipping effective in a major military operation. This control no longer exists, however, and assignments of berths, et cetera, rests with municipal, state or private owners of port facilities.

You may be interested to note that within the past few days Moore-McCormack has raised with us discrimination questions in regard to preferential treatment of Argentine vessels in Buenos Aires under a decree published March 13. The company has brought to our attention an old United States statute which so far as I know has never been used. This statute is a section of the Shipping Act of 1886 (46 U.S.C. 142)59 under which the President by proclamation may deny commercial privileges to foreign vessels as a retaliatory measure. While the use of this and possibly other statutes would not be in conformity with our general policy of liberal reciprocity and national treatment of shipping, the fact remains that if discriminations continue to increase there may be sufficient pressure on the part of the shipping companies to force us to take undesirable retaliatory measures. I am sure you will agree that such action should be used only as a last resort since retaliation merely leads to more discrimination, to more retaliation—a vicious circle—to the detriment of all concerned.

There is another matter which has been giving us concern. Article 22 of the Agreement on Economic and Financial Cooperation between the Republics of Chile and Argentina and similar provisions in agreements between Argentina and other countries contemplate preferential treatment. If carried to its logical conclusion this would result in restricting the carriage between the countries concerned to national ships, on a fifty-fifty basis. It is well-known that many of the South American Republics, notably Brazil and Chile, have long advocated such arrangements. As you well know, such an arrangement would be contrary to our navigation treaties and would run counter to our policy of freeing trade from artificial restrictions.

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With reference to this the Argentine Government is not proceeding in a consistent manner. The Argentine Government has on occasion supported the principle that the American nations adhere to the liberal principles of international trade conducted for peaceful motives and based upon equality of treatment and fair and equitable practices. The division of trade such as contemplated by the provisions of treaties either already negotiated or now being negotiated by Argentina with Brazil, Chile, France, Peru, Spain and Switzerland could not be said to be a liberal principle of international trade nor based upon equality of treatment or fair and equitable practices. Moreover, these treaties if concluded would be inconsistent with Resolution X of the Inter-American Maritime Conference of 194060 in which Argentina participated. Resolution X recommended to the Inter-American Financial and Economic Advisory Committee that it request each of the twenty-one governments of the American Republics give sympathetic consideration to the modification of any laws and regulations which restrict the transportation of cargo to vessels of its own registry except in the coastwise trade.

A wave of protest is arising in connection with the income tax on outward ocean freights provided by Decree No. 14338 of the Argentine Government. For your information, I am enclosing a separate memorandum61 on the subject. You will be interested to note in this connection that we have been approached informally by several governments in regard to our action in selling ships to Argentina. The record shows that Argentina has received proportionately the greatest share of the highest class tonnage sold. This is so serious that it appears to me that we are forced to give consideration to the possibility of holding up ship sales to Argentina in direct opposition to your recommendations. While we want to avoid tying the ship sales program in with other matters, we cannot lose sight of the fact that such sales might prove embarrassing if Argentina continues on a policy of discrimination.

In connection with this and in any discussion you may have with officials of the Argentine Government, you may want to emphasize that Argentine shipping interests which have applied for the purchase of surplus war-built vessels from the United States Maritime Commission have received very expeditious and favorable actions on the applications as compared with applications received from other nationalities. The following Argentine applications for purchase of [Page 254] vessels are still pending before the United States Maritime Commission for action:

Companía Argentina de Navegación Dodero for eight Liberty vessels, four Victories of the troop type class.
YPF (Yacimientos Petrolíferos Fiscales) for the purchase of two tankers and one C1–MAV1 type vessel.
Companía Argentina de Navegación de Ultramar for the purchase of four Liberty vessels.

The possible purchase by Dodero of three Aircraft Carriers (Escort) from the Newport News Shipbuilding and Dry Dock Company, which are now being reconverted to C–3 type cargo vessels is also under consideration.

In view of the language set forth in Article 22 of the Agreement on Economic and Financial Cooperation by the Republic of Argentina and Chile, above referred to, agencies of this government may be criticized for permitting any more sales of American vessels to Argentine shipping companies which vessels may be used as a means of implementing the agreement which is distinctly out of line with the broad economic policy of this government.

Sincerely yours,

J. E. Saugstad
  1. Not printed.
  2. 24 Stat. 79.
  3. Department of State, Inter-American Maritime Conference, Report of the Delegates of the United States (Washington, 1941.)
  4. Not printed.