The Ambassador in Argentina ( Messersmith ) to the Assistant Secretary of State for Transportation and Communication ( Norton )
Dear Norton: I wish to refer to our telephone conversation this morning with regard to ships for the Argentine and the question of linseed oil shipments, and I wish to supplement the conversation with the following:
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So far as this shipping clause67 is concerned which has been put into certain treaties by the Argentine, for example with Chile and others, it has no present significance for us because we are not engaged in the trades covered and would not likely be for years, and so far as the clause itself is concerned, it is a clause which will not stand because it is contrary to established maritime practice as well as against international practice, and I know in the Foreign Office here they realize that this clause cannot stand. We have to remember that these treaties have been made recently by people in the Central Bank and not in the Foreign Office, and that they represent certain arbitrary thinking on the part of certain people here who do not know the world. These clauses in these treaties will not stand, and we should not make the mistake of basing any action of ours on such clauses.
So far as discrimination in Argentine ports in favor of Argentine ships is concerned, of which so much has been said recently by Moore-McCormack in particular, there is really nothing to this. There has been some preference shown to Argentine vessels carrying passengers and there has been some preference shown to certain vessels carrying crude oil for the Argentine oil monopoly, but the difficulties caused to American and foreign flag ships in the port of Buenos Aires is due to the tremendous congestion for the most part and to the heavy shipments here and to the large number of ships of our flag and other foreign flags which are coming here. The situation is one which has been chronic in the port of Buenos Aires for years and is now exaggerated by virtue of the heavy shipments. It is a situation which has really little to do with flag discrimination, and so far as flag discrimination is concerned, the Argentine Government knows it is unsound and it will not be carried through.
So far as the tax legislation is concerned concerning which objection has been made, it is covered by a memorandum which is attached [Page 260] to my despatch No. 2264,68 and the shipping companies are really not concerned about this because it is not discriminatory in character and they intend to pass any taxes on to freights.
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We have reached a serious situation with respect to shipping here. Various Argentine interests have bought some ships from us recently and have paid for them. The Dodero Company is the principal purchaser, and it is a private company and for that reason it is all the more important that its ship purchases should be facilitated. No matter how many ships the Argentine Government wants to buy or Argentine interests want to buy for its merchant marine, the number will be small for they have only limited capacity to purchase or to operate. If we were to sell to the Argentine or if she were to buy or have constructed all the ships she wants and can presently absorb, she would still only be able to carry a very small portion of her trade in her bottoms—I should say not more than 10 percent, and I think much less than that. That is certainly reasonable even if it were 10 percent, which it will not be.
A serious crisis has been caused here by the refusal recently of the Maritime Commission to approve the sale of three ships to the Dodero Company which it purchased from the Newport News Shipbuilding Company. These are three of the Navy flat-tops which the Navy did not want and sold for scrap to the Newport News Company. Dodero bought them from the Newport News Company at a cost of $1,750,000.00 each and it was very good business for the Newport News Company because it keeps their shipyard going, and God knows, we need to keep it going. This refusal of this sale has caused consternation here, not only among the Dodero Company and other shipping circles, but in the Government, and rightly or wrongly, the feeling is that we do not want the Argentine to build up her merchant marine. Rightly or wrongly, the feeling here is that the Moore-McCormack interests have been very active with the Maritime Commission, etc. and are responsible for this refusal of the Maritime Commission to approve the sale, although, of course, these other reasons would be advanced for the refusal such as Argentine discriminations, etc.
This is a serious situation and has had its repercussions already.
When I was home in January, our Government asked me to buy 40,000 tons of linseed oil for delivery by the end of May as we needed this as imperatively and urgently as we needed any item. I took it up on my return, and within a few days the Argentine Government sold us these 40,000 tons at the price they had sold 100,000 tons to the British and in spite of the fact that immediate delivery was very [Page 261] difficult, they agreed to give it to us for shipment by the end of May so as to meet our needs. I will not go into details about this sale, but Commodity Credit and I am sure Secretary Anderson69 will tell you the Argentines were most forthcoming in this whole matter for they did not hold us to certain conditions which others had to meet.
The Argentine Government did not make it a condition of the sale that half should be carried in Argentine bottoms, but they asked us that this should be done, and naturally I agreed with the approval of the Department that this should be done. It is not written into the contract, but it is just as important that we carry through as if it were in the contract.
We tried here in the Embassy and in Commodity Credit to carry this through, but through negligence of some employees in Dodero, we were informed they would not have a ship available which would carry about 10,000 tons when they really had a ship, and as a result Commodity Credit made arrangements for Moore-McCormack to carry most of the oil. I think it probable that while the people here would have been sore about this they would have let it go by if it had not been that the sale of these three vessels to Dodero was not approved by the Maritime Commission. That started things going, and this morning we were told that export licenses would not be issued for more than 20,000 tons of this oil to be carried in U.S. bottoms. It is a silly action and I am sure it will not be carried through when it is brought to the attention of the higher authorities here, but it indicates the state of feeling, and the feeling is that we are trying to keep Argentine ships out of the River Plate–New York trade so as to keep it for Moore-McCormack.
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I hope from this letter you will see my great preoccupation and why I think it imperative that we do certain things immediately. The first is to see that the Maritime Commission approves immediately the sale of these three vessels to Dodero for if they don’t, I have little hope for the air agreement,70 and if we get the right kind of an air agreement with the Argentine, we will get this whole situation with regard to air agreements with the other American Republics definitely cleared up, and if we don’t get the right kind of an agreement with the Argentine, we will have all sorts of trouble even for the existing trades.
The second thing is to see that Commodity Credit obliges Moore-McCormack to cancel some of the space we had taken from them without compensation so that we can let the Quilmes of Dodero carry 10,000 tons.[Page 262]
I am tremendously concerned about this whole matter because there is a state of tension in the relationships between the two countries and things like this unnecessarily and unhappily complicate the situation.
I have written frankly about this matter because it is necessary to deal with it in the baldest form, and I have had to dictate this very hurriedly to catch the confidential pouch this evening. I think I can handle the oil question with the Commodity Credit, but the question of the sale of three ships is something which will have to be handled by the Department.
Unfortunately, I may say that I think the circular instruction of April 7 to diplomatic officers starting with the sentence “It has been brought to the Department’s attention that the Argentine is attempting to build up its merchant marine through a system of preferences and discriminations” is not going to be any too helpful. There are some discrepancies and contradictions in this instruction, and there is no need of bringing this Argentine situation into the foreground before all of our people because the system of preferences is bound not to last, and so far as discriminations are concerned, they are not established. I will make a separate reply to this instruction, but I did want to say I think it is unfortunate we should start a circular instruction to our officers in the field by pointing the finger at the Argentine. It has made mistakes, and there is no doubt about that, but what it is doing is endeavoring to bring about a merchant marine just as we did.
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