611.1231/8–548
Statement by the Counselor of Embassy for Economic Affairs (Bohan) at the Ninth Plenary Meeting, United States–Mexican Trade Agreement Negotiations1
Mr. Minister and Gentlemen: In accordance with the conversation which I had the pleasure of having with the Minister on July 29, I advised my Government that the [Mexican] negotiators felt it would be impossible to find a basis for the revision of Schedule I of the Trade Agreement and, therefore, they suggested that consideration be given to means for bringing the present negotiations to a close.
. . . . . . . . . . . . . .
Let me request that you be patient with me while I make a brief résumé of the position of the United States in the present negotiations, a position which we consider is both reasonable and understanding.
The United States fully realizes the desire of the Mexican Government to promote the industrialization program and is prepared to modify Trade Agreement concessions in those cases where a higher duty is necessary in order to give adequate protection to sound industry. It has already proved its willingness in this regard by having agreed, in December 1947, to very substantial increases in duties affecting eleven Schedule I fractions. This, in addition to the general increase to which my Government also agreed.
The United States is willing to modify Article XI, the so-called escape clause, so that in case of emergency the Mexican Government may take immediate action to protect a local industry if imports cause or threaten to cause serious injury to a domestic industry. The United States believes that it has gone as far as it safely can in balancing elasticity and stability in the escape clause and that it would be unwise for either Mexico or the United States to go further than the suggested draft we have handed you for a new Article XI.
[Page 644]In connection with Article X—restrictions on imports for balance of payments reasons—the United States is prepared to extend to Mexico the very liberal provisions contained in Articles XII and XV of GATT, which we believe would fully meet the needs of Mexico in connection with its balance of payments difficulties.
I feel that you will agree with us that my Government genuinely desires to find a solution for the problem of the revision of the Trade Agreement, but if you gentlemen feel that such a solution is beyond the bounds of present possibilities, we have been authorized to suggest that these conversations be brought to an end through a joint denunciation of the present agreement.
A suggested formula has been submitted to us by the Department. Briefly, it provides that by mutual agreement our Governments terminate the Trade Agreement giving six months’ notice of intention, with the proviso that the agreement can remain in effect beyond that period if Mexico should, in the meantime, indicate its desire to become a member of GATT and if conversations indicate that a basis exists for accession to that general agreement. This would have a number of advantages. It would show that both countries sincerely desire to prevent world trade from returning to the chaotic conditions of the 1930’s, and this is of vital interest to the basic economies of both Mexico and the United States; it would assure Mexico of concessions which would otherwise be lost by earlier termination, since in 1946 some fifty-three million dollars of United State imports from Mexico entered under reduced duties which would revert to higher levels if the agreement should no longer be effective; it would not prejudice Mexican industry since during the next six months at least the devaluation of the peso will provide a vastly increased barrier to foreign products; and it could not affect the exchange situation since so large a percentage of the commodities now included in Schedule I are subject to strict import control by the Mexican Government.
We ask our Mexican friends to consider the first alternative before the second. Our basic philosophies cannot be so far apart as to prevent agreement. Mexico’s economy still depends primarily on foreign trade and the United States is prepared to cooperate and assist Mexico in the realization of any sound industrial program. The American negotiators, however, if Mexico feels that the agreement must be terminated, are prepared to recommend to their Government the timing and manner of termination which, in the opinion of the Mexican Government, will do the least harm to Mexican economy.2