611.1231/1–2347
The Secretary of State to the Embassy in Mexico
No. 1283
The Secretary of State encloses, for the information of the Embassy, a copy of the Department’s note of June 12, 1947 to the Mexican Ambassador,71 in response to his note of April 2372 relating to the Mexican Government’s proposal that the existing trade agreement be modified to permit the imposition of increased duties on certain products included in Schedule I of the trade agreement.
A proposed draft reply was summarized for the Embassy’s information in the Department’s airgram A–474 of June 2,72 as were the considerations which led to its preparation in that form. The definitive reply, which represents the general agreement of representatives of various interested agencies in Washington and which has received the approval of the Committee on Trade Agreements meeting at Geneva, does not differ essentially from the proposed draft reply.
It will be noted that the reply has been related directly and exclusively to the application of the trade agreement to the problem presented by the Mexican Government. It states that this Government cannot agree with the Mexican suggestion that, broadly interpreted, Article X could serve as a basis for permitting duty increases on certain scheduled products, and suggests indirectly that the agreement provides methods other than increased rates of duty for restricting imports in certain circumstances.
A consideration which prompted the preparation of the reply note in its present form was the thought that the Mexican Government was, in effect, seeking to shift to this Government the responsibility, properly belonging to itself, for a decision made necessary largely as a result of internal political pressure for tariff protection.
No specific reference was made in the reply to the provisions of the trade agreement pursuant to which the Mexican Government may take action to relieve the situation. That course was followed in view of the strong preference expressed by one of the interested agencies [Page 780] for recommending the use of internal taxes to meet the Mexican problem, and its vigorous objection to a recommendation that quantitative restrictions be used. However, the action which this Government regards as least undesirable under the described circumstances is, in fact, the imposition of temporary quantitative restrictions pursuant to Article X.
As stated in airgram A–474,73 the imposition of temporary quantitative restrictions “to protect the exchange value of the currency” is provided for by the trade agreement, and their use by Mexico in the present instance would maintain the agreement unimpaired during the Geneva meeting and possibly until such time thereafter as general negotiations with Mexico may be undertaken. Such action would be defensible in the event of discussion in connection with congressional opposition to the trade-agreements program.
The Department desires to reiterate that the general position of this Government with regard to quantitative restrictions remains unchanged, namely, that their use as regular long-term methods of import control is most undesirable. Without prejudice to that general position, it is considered, however, that their temporary use is admissible as a flexible means of meeting emergency situations of a financial character, such as a short-run disequilibrium in a country’s balance of payments.
The foregoing has been set forth as background information for officers of the Embassy in connection with possible discussion of the Department’s note with Mexican officials.
The Embassy will be interested to learn that, in a discussion of the reply note with an official of the Mexican Embassy, it was brought out that the trade-agreement items in the list of projected tariff increases mentioned in the Mexican note amounted to a very small proportion of Mexico’s total imports and that it was therefore doubtful whether action taken by Mexico to control imports of the specified trade-agreement items would have much, if any, effect on the general situation described in the note. The Embassy may find it desirable to emphasize this point in any discussions of the reply note which it may have.