In the attached memorandum, the Interdepartmental Committee on Trade
Agreements recommends proposing to the Mexican Government that
representatives of the two Governments consider the advisability of
their taking joint action to conclude currently unfinished
negotiations for the revision of Schedule I of the existing trade
agreement, and to terminate the United States-Mexican trade
agreement signed December 23, 1942.1 This action, suggested procedure for which
is outlined in the memorandum, is recommended because of the
likelihood that no mutually satisfactory agreement can be
reached.
The Committee has been reluctant to recommend the termination of the
agreement, and is ready to give full consideration to any
practicable substitute procedure which the Mexican Government may
wish to propose. The Committee would consider unilateral
denunciation of the agreement only as a final United States position
should exploration of all other available means of settling the
apparent impasse in our trade-agreement negotiations be without
result.
The Committee requests your approval of its suggested course of
action, and I concur in this request.2
[Enclosure]
Memorandum for the President
Subject: Recommendation of the Interdepartmental
Committee on Trade Agreements Relative to a Proposal To
Terminate the Trade Agreement with Mexico.
In December, 1947, as one of a series of measures designed to
restrict imports in order to conserve foreign exchange, the
Government [Page 691] of Mexico
increased its import duties on products included in Schedule I
of the existing trade agreement.3
The United States consented to the action provisionally, upon
agreement by Mexico to renegotiate Schedule I with a view to
restoring the balance of the agreement. Following public
announcement of intention to negotiate with Mexico and public
hearings in accordance with customary trade agreement procedure,
formal negotiations between the United States and Mexico were
begun in April, 1948.4
Since the initiation of the conversations more than 15 months
ago, it has been clearly evident that the Government of Mexico
is reluctant, if not unwilling, to adhere to the terms of the
understanding reached by the two Governments with respect to the
negotiations, and months of protracted and difficult
negotiations have resulted only in agreement concerning a
relatively small number of items, generally of minor individual
importance.
Meanwhile, the Mexican Government has taken additional measures
to curtail imports. These have ostensibly been for the purpose
of exchange conservation, but the way in which they have been
implemented has emphasized Mexico’s present policy of
stimulating industrial development through increased tariff
protection and other types of import controls obviously designed
for purposes of protection. Many of the measures have
contravened provisions of the existing trade agreement, but
Mexican authorities have shown little disposition to withdraw
them despite vigorous and repeated representations.
The Committee believes that the Mexican Government, because it
considers the present situation to be entirely favorable from
its point of view, will take no steps in the foreseeable future
calculated to bring the Schedule I negotiations to a
satisfactory conclusion or to withdraw the numerous measures
currently impairing the trade agreement. The Committee also
believes that the Mexican Government will not hesitate to
institute other measures in violation of the agreement whenever
such action may appear expedient. Under such circumstances, the
value of the agreement to the United States appears to be
limited.
The Committee has reached the conclusion that further deferment
of an attempt to bring about a settlement of the present
situation would result in public criticism of the United States
Government for countenancing Mexican action in regard to the
agreement and would raise serious questions, both in the United
States and abroad, concerning [Page 692] the significance of the entire
trade-agreements program, including the General Agreement on
Tariffs and Trade.5
Therefore, if you approve, the Committee proposes to instruct the
United States negotiators to suggest to the Mexican negotiators
that they consider the advisability of the two Governments
joining in terminating the present negotiations and in agreeing
jointly to terminate the existing trade agreement. At the same
time, the US negotiators would be instructed to give clear
indication of United States willingness to consider any
practicable substitute procedure Mexico may wish to propose in
lieu of termination of the agreement. Should no acceptable offer
be made by Mexico, and should it not agree to the joint
termination of the agreement, the Committee would be disposed to
terminate unilaterally. However, it would adopt that procedure
only after all other available means of settlement have been
fully explored and exhausted.
In deciding to recommend the foregoing procedure, the Committee
has recognized that termination of the agreement would result in
the reversion, to their pre-Mexican-agreement level, of United
States import duties on a number of significant items (totalling
approximately 36 per cent of all concessions given to Mexico, on
the basis of 1946 trade statistics) which have not been included
in any other agreement. Lead in various forms, fluorspar,
cottonseed oil cake and meal, tomatoes, pineapples, and
handicraft articles such as huaraches would be included among
those items. To the extent that demand for such products in the
United States would be affected by the increased duties on
imports from Mexico or other countries, there would be a
corresponding loss to United States importing and consuming
interests.
From the point of view of United States exporters, the loss would
no doubt be more serious, for it is probable that, with the
termination of the agreement, pressure by Mexican manufacturers
would result in the imposition of higher duties or of other
restrictive measures on a substantial number of the items listed
in Schedule I. However, in view of the present tendency of the
Mexican Government to adopt measures without regard to the
agreement, the Committee believes that the reasons counselling
the proposed action, even though it might lead to termination of
the agreement, are more cogent than those which suggest the
desirability of maintaining it under present circumstances.
It is proposed to institute conversations immediately and to
press for a decision in the very near future. Should the
prospective discussions with Mexican officials result in a
decision to terminate the [Page 693] trade agreement jointly, it is proposed to do
so by an exchange of notes or by a more formal agreement. If
unilateral denunciation of the agreement should eventually be
necessary, it would be done in accordance with Article XVIII of
the agreement, which provides for termination on six months’
notice. In either case, there would be sent you for your
signature a proclamation revoking the proclamation of December
31, 1942, which gave effect to the reductions in duty provided
for in the trade agreement with Mexico.
Your approval of the course of action set forth above is
requested.6
Woodbury Willoughby
Chairman Interdepartmental Committee on Trade
Agreements
