Department of State Press Release: Negotiations for Revision of Trade Agreement With Mexico2

Negotiations for the revision of schedule I of the trade agreement between the United States and Mexico3 will be initiated at Mexico City next week, probably on Tuesday, April 20.4 Schedule I covers tariff concessions on imports into Mexico from the United States.5

Because of the many questions to which the Mexican trade agreement has given rise in this country in recent months, the Department of State believes that the following statement will be useful to an understanding of the announced negotiation.

Several times during 1945 and 1946 the Mexican Government suggested revision of the trade agreement of December 1942 with the United States stating that circumstances since signature had thrown the benefits out of balance to Mexico’s disadvantage.
In 1947, the Mexican Government, impelled by circumstances and after consultation with this Government in the cases where it was required, took various steps to restrict imports.
The circumstances impelling this action were
A marked and continuing decline in Mexico’s foreign-exchange reserve largely due to an adverse trade balance with the United States contrary to the prewar situation.
Strong domestic pressure for increased tariffs
To protect war born industries;
To encourage economic development;
To change the specific duties to compound duties equivalent on an ad valorem basis to those applying when the agreement was signed in 1942.
The principal steps taken by Mexico were
A prohibition, in July 1947, against imports of a wide range of nonessential goods including some items in the trade agreement with the United States.
A change, in November 1947, to the ad valorem equivalent of the duty in 1942 or higher, of the rates of duty on some 5000 items not in the trade agreement.
In December 1947 it became evident that Mexico would raise the duty on items in the trade agreement. At this point the United States
Could have announced its intention of denouncing the agreement in the event of such action by Mexico or
Could have sought a solution to the problem through negotiation and agreement.
Denunciation of the agreement
Would have resulted in a major, and it is believed, unnecessary breach in United States economic relations with Mexico.
Would have lost for the United States the opportunity to influence the amount by which Mexico would increase rates and to obtain compensation for such increases by further bargaining.
Therefore, after full consideration by the interdepartmental trade-agreements organization of all phases of the problem, and with over-all United States–Mexico relations in mind, the United States agreed to provisional increases in duties on trade-agreement items to levels equivalent, on an ad valorem basis, to those provided in the trade agreement when it first came into effect. In return Mexico agreed to negotiations intended to restore the balance in the agreement through revision of the new Mexican rates on items not now in the agreement.
If a satisfactory adjustment of Mexican tariff rates should prove impossible to negotiate, the United States is not precluded from [Page 643] seeking agreement on the basis of withdrawing concessions previously made by this country to Mexico or from terminating the agreement in accordance with its provisions.
  1. Department of State Bulletin, April 25, 1948, p. 553.
  2. For reciprocal trade agreement of December 23, 1942, see Department of State Executive Agreement Series No. 311, or 57 Stat. 833.
  3. The first meeting was held on May 4, 1948.
  4. Department of State Bulletin of January 11, 1948, p. 59, and February 15, 1948, p. 212.