Memorandum by the Acting Secretary of State to President Truman


Memorandum for the President

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

James E. Webb

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
  1. Text in Department of State Executive Agreement Series No. 311, and 57 Stat. 833.
  2. The Department of State file copy bears the notation: “Approved Harry S. Truman”.
  3. For pertinent documentation, see Foreign Relations, 1947, vol. viii, pp. 772 ff.
  4. See ibid., 1948, vol. ix, pp. 641 ff.
  5. The text of the General Agreement on Tariffs and Trade (GATT) is contained in TIAS 1700, and 61 Stat. (pts. 5–6). Documentation on U.S. participation is contained in volume i.
  6. For the text of an announcement by the Department of State on June 23, 1950 on an exchange of notes between the United States and Mexico terminating the 1942 trade agreement effective after December 31, 1950, see Department of State Bulletin, August 7, 1950, p. 215.