No. 607
Subject: “United States-Guatemalan Relations; United
Fruit Company.”
The memorandum seems to argue from the premises that discrimination
against large agricultural firms follows a modern labor trend in the
United States and elsewhere, and that appeasement of labor is a
necessary evil to stimulation of democracy, and comes up with the
far-reaching conclusion the Department should “adopt a general
policy of refraining from attempting to extend diplomatic protection
to American firms in connection with labor problems in Latin
America”.
The Embassy believes that American business enterprises operating
abroad legitimately are entitled to the
appropriate measure or degree of protection by the United States
Government if and when discriminated against in fact; and that it is
a duty of the Foreign Service to render
appropriate assistance in such cases, whether the discrimination
involves labor or taxes, for example, is immaterial. American
business does not have any special obligation to finance labor and
social reforms abroad out of proportion to the responsibility of
domestic business.* Apart
from the practical consideration that such an obligation might place
the foreign firm in an unfavorable competitive situation, it would
seem to constitute unfair treatment as understood in international
practices; and when unfair treatment is suffered by virtue of a
firm’s foreign character, its only recourse is to look to its own
government for assistance. This assistance, or protection, is
implicit in international relations. Otherwise, all international
treaties, conventions, pronouncements, et cetera, looking to equal
opportunity and fair treatment of foreign nationals and interests
are but meaningless phrases.
Admittedly, the degree of assistance or protection must be
conditioned by circumstances and coordinated with overall policy.
But, where discrimination clearly exists, then mutual respect for
international law and accepted practices requires the foreign
Government to take cognizance of the situation in fulfilment of its
duty to protect the legitimate interests of its nationals abroad,
and obligates the host Government to admit the right of so-called
diplomatic intervention.
The Embassy is not concerned with “white-washing” the United Fruit
Company; nor does it contend the company’s public relations have
been perfect. The essential point is, so it seems, that it is an
obligation of the Department and the Foreign Service to lend appropriate assistance and protection to
American interests abroad. What form and forcefulness this
assistance should take in a given case must be determined at the
time. The last paragraph of the ARA
memorandum suggests one line of approach which might appear to [Page 891] be the feasible one in
some instances. Each case must be weighed in the light of
circumstances. However, in the Embassy’s considered opinion, the
adoption of a general policy of refraining from extending diplomatic
protection to American firms abroad in labor conflicts would
compromise a sound principle and set a dangerous precedent; it would
be tantamount to discrimination against legitimate American
interests in favor of a pressure group abroad.
I enclose a memorandum on the subject prepared by Third Secretary
(and labor reporting officer) Kenedon P. Steins, which, I am
confident, the Department will find pertinent and interesting.
[Enclosure]
confidential
May 16,
1950.
Memorandum
Subject: Comments on ARA Memorandum
Herewith are a few comments that occur to me on reading the
ARA memorandum about
“U.S.-Guatemalan Relations; United Fruit Company”. It offers
much food for thought, but I must say I disagree with some of
the statements and main ideas.
Labor Troubles Caused by Discrimination
Issue?
The writer opens his exposition with a statement that seems to me
quite incorrect: “The labor difficulties which the United Fruit
Company has been experiencing in Guatemala stem from the
Company’s feeling that the same regulations which apply to other
agricultural firms should also apply to it.” I was not in
Guatemala during the big 1948–9 United Fruit conflict, but from
what I have read and heard about it I understand that the Labor
Code discrimination issue played no part in it. As for the
present United Fruit conflict, I have seen no indication that
the discrimination issue has anything to do with the matter.
The 1948–9 dispute began when the “… Company … received petitions
for wage increases and other demands from its workers’ unions on
both its Pacific and Caribbean coast properties.Ӡ In
other words, it originated as a not uncommon conflict between
employer and workers over demands by the latter on wages and
working conditions. But besides being a labor question, it
became also very much a political affair, in which, again, the
Labor Code discriminations against the Company did not enter,
except insofar as the same prejudices that had produced those
discriminations were in play to complicate the labor [Page 892] conflict. The
all-important non-labor aspect of that conflict was well
summarized as follows:
The United Fruit Company conflict was a complex problem
involving far more than the labor issues which touched it
off. It was fundamentally an expression of nationalistic
prejudice against a powerful American company which was
being held accountable today for what Guatemalans felt they
had suffered in the past, when old-fashioned “imperialism”
was not unknown. The present size and prosperity of the
company readily provided fuel to the flames of emotion
engendered on this basis by vocal enemies of the Company,
and despite the determination of the present-day management
of the company to follow an enlightened policy, eradication
of the latent Guatemalan distrust will be a matter of
years.‡
The United Fruit labor conflict now underway had, once more,
perfectly normal origins without any connection whatsoever with
the Labor Code discrimination issue: the Company’s collective
contracts with the unions of its workers expired, thus giving
rise to the necessity of negotiating new contracts. Negotiations
with the union SETUFCO have
now been complicated by the company’s decision to close down its
operations in the SETUFCO
area, but the factors to be observed behind that decision are
climatological (storm damage) and, botanical (plant-disease
damage), plus that of a union demand that the company claims to
be a disguised closed shop.2
In the current dispute, politics have once again raised their
ugly head, but there has been no mention or hint, from anybody,
of the old issue of Labor Code discrimination, which seems to
have been relegated to a back seat for some time.
Labor Code Discriminations Favored by
Guatemalans?
It may be that the distinctions established by the Labor Code
(minus one), as the author says, “appear to be legitimate in
terms of modern thinking”. It is worth noting, however, since he
remarks that they represent the “feeling of many Guatemalans”,
that organized labor in Guatemala has been trying for a long
time to revise the Labor Code articles which “… are opposed by
labor as discriminating against the great mass of rural labor
employed on smaller farms. The same articles are opposed by the
United Fruit Company, also on grounds of discrimination”.§
[Page 893]
Why the Discrimination?
The memorandum argues as follows: “It has been argued that the
Code is discriminatory against the United Fruit Company because
of the firm’s U.S. ownership. This argument can hardly be
sustained inasmuch as no other American firm operating in
Guatemala alleges such discrimination with respect to provisions
of the Code”. The only point that is really made with this
passage is that the Labor Code does not discriminate against any
other American company in Guatemala. We are still faced with the
fact that it does discriminate against the United Fruit
Company.
That it should discriminate against the United Fruit and against
no other American firm is not so strange as it would seem. In
the first place, the discriminatory provisions are such that
United Fruit is the only American company in a category to be
touched by them, and if the Code’s writers had wished to
discriminate against some other U.S. firm as well, different
discriminatory provisions would have been necessary. In the
second place, as I say, it does not seem unnatural that United
Fruit should have been singled out among U.S. firms in Guatemala
as a target by gringophobes. It is after all the biggest of
these firms.
Now, as to the relative importance of the factors of United
Fruit’s U.S. ownership, its size, its past history or its
present power in motivating discrimination against it I am not
in a position to make a categorical statement, but the essential
fact is that United Fruit is
discriminated against. The fact is, in short, that the Labor
Code’s discriminatory provisions were not conceived of as
“following a trend in the United States and in other countries”,
but were conjured up with the United Fruit Company specifically
in mind.
Paternalism vs. Industrial Democracy?
The memorandum admits that United Fruit pays “higher wages than
any other agricultural firm in Guatemala”. It says that maybe
the company was forced by “local pressures” into the “relatively
high wages and favorable working conditions” that it offers, but
that even if they were “granted voluntarily” the company doesn’t
necessarily deserve any credit for them. In this paragraph the
principal implication appears to be that the United Fruit people
can’t go to heaven no matter what they do.
But it contains another implication in passing, that seems to
contradict the earlier statement that the company’s labor
troubles “stem from” opposition to Labor Code discriminations.
We are admonished that, “… the Company will have to learn that
labor very often does not appreciate paternalism but wishes to
share in determining its own fate. This trend to extend
democracy into industrial relations is very powerful”. Do we
have any evidence that United Fruit’s recent labor [Page 894] troubles stem from the
company’s “paternalism” or its opposition to the extension of
“democracy into industrial relations”? Such things as the
illegal slowdown strike that was a major irritant in the 1948–9
conflict are, to my way of thinking, a far cry from any issue of
democracy in industrial relations as well as from any issue of
Labor Code discriminations.
Embassy Intervention
Now as to what the Embassy should or should not do in these
matters. The memorandum says: “It has been argued that the
American companies are in the right and that, therefore, come
what may, this Government should protect them. In the labor
field it is oftentimes impossible to say where labor demands and
where management’s policies are right or wrong.” With reference
to the first sentence, I should like to restate it this way:
whenever and wherever American companies are in the right, this
Government should indeed do what it can to protect them. With
regard to the second sentence, what it says is obviously true;
and it should hardly be necessary to add that our Government has
no intention of stepping into every labor dispute between United
Fruit and its unions and deciding how much of the wage demands
should be granted or any other such point. That is not our
business. It is our business, on the other hand, to protect
legitimate American interests, whether they consist of a huge
private enterprise that is being handled unfairly or an American
citizen who has lost his passport.
The memorandum in reality only clouds the issue by bringing up
the Novella cement case and concluding that, “The problem,
therefore, is by no means entirety one of discrimination against
foreign firms, but rather it is also one of general, internal
labor relations.” If the Guatemalans want to handle a Guatemalan
company roughly, that, again, is none of our business. But if
they handle an American company roughly it is our business. Naturally we should take into
account, in our evaluation of United Fruit labor troubles, that
there is also a problem “of general, internal labor relations”,
and it would be, as the memorandum expresses it, “unwise for us
to be tied to the Company’s position, without regard for
Guatemala’s aspirations or sovereign feelings”. We do not
consider ourselves “tied to the Company’s position” (what
position, by the way?), but by the same token neither are we
properly the standard-bearers of “Guatemala’s aspirations and
sovereign feelings”. If Guatemala feels sovereign by kicking
around foreign companies, we frankly do not sympathize with such
“aspirations” as these.
Also, we recognize the “difficulty of reaching objective
judgements of fairness and legality”, and would in every case
hesitate to intervene unless unfairness and illegality were
reasonably clear to us. I [Page 895] can hardly disagree with the broad
statement that, “… as a general rule, it would appear unwise for
this Government to make diplomatic representations in cases of
labor disputes.” Surely it is understood that the mere existence
of a labor dispute is not considered grounds for diplomatic
representation. Labor disputes may come and go, and it is to our
interest here that U.S. firms settle theirs within the bounds of
fairness and legality.
Policy Suggested
The memorandum concludes with the suggestion “that the Department
adopt a general policy of refraining from attempting to extend
diplomatic protection to American firms in connection with labor
problems in Latin America”. I wonder, first, whether we have the
right to so refrain, and second, if it would be good policy. I
have already stated what is, to the best of my knowledge, a
basic tenet of the Foreign Service: the protection of legitimate
American interests abroad. Is not this tenet not just a policy,
for us, but a raison d’être? Adoption of
the suggested policy would mean a serious curtailment of that
protection. Is it consciously proposed then, to amend one of the
very purposes of the Foreign Service’s existence?
Be that as it may, I question whether the policy suggested would
be good policy. It seems to be based on two premises: that the
diplomatic protection referred to would only be ineffectual
bucking of a wave of the future; and that it plays into the
hands of the communists.
Wave of the Future?
I infer from the memorandum a bit of confusion about the intent
of such diplomatic protection. That the Company should be
“expected to do more than grant higher wages and better working
conditions than its smaller, local competitors” is labeled an
“inevitable trend”. What more the company might do is not
mentioned, so it is unclear to where this “inevitable trend”
leads. As far as Guatemala is concerned, besides the “higher
wages and better working conditions” which United Fruit already
provides, the company’s chief extra duty appears to be to serve
as a whipping-boy for the exigencies of national politics and,
more particularly, as a big fat sitting-duck for communist
propaganda. The Embassy feels that the United Fruit Company is
not bound to accept these special functions in good grace.
I repeat that the Embassy does not conceive of its potential
diplomatic protection as a weapon at the service of the United
Fruit Company to freeze wages or working-hours or any other
legitimate demands of labor, but rather as the force of
influence to which United Fruit or any other U.S. firms can
resort—by right—for intervention against unjust treatment. As to its effectiveness, that of
course will vary with each specific case, but I am a little
surprised that the memorandum speaks of our “unfortunate and
ineffective attempts to help [Page 896] the Company”. I have the impression that
U.S. Government support of United Fruit last year did have some effect on the eventual
outcome of that affair.
Prevent Communist Poses?
The other main motive for the suggestion made—that our
representations “permit the Communists to pose as the champions
of labor and national sovereignty”—does not hold much water in
my opinion. In the making, or retaining, of any Government
policy nowadays, one of the factors that should receive careful
consideration is, I believe, that of what propaganda value the
policy would furnish to the communists. But that factor is,
after all, only one of many. If we allowed that factor to be an
overriding consideration our foreign policy would be very
literally a “do-nothing” policy.
The communists exploit the Marshall Plan for all the political
capital they can get out of it. They have had a heyday with the
North Atlantic Pact, propaganda-wise, and are going strong on
the Mutual Aid implementation of it. In Guatemala the United
Fruit Company will always be a prize target for the communists
because it is a “natural” for their Latin American line of
anti-“imperialism”. We are witnessing abundant proof of that
right now: United Fruit has been daily cursed by local commies
because it put its imperialist tentacles in Guatemala and
because it has stayed here—and now it is being roundly cursed
because (in one of its two divisions) it wants to go away!
As for local anti-communists, as far as I have been able to
observe, the thinking members of those circles feel impatient
with our extreme forbearance and what they see as our reluctance
to stand up for our rights and protect our legitimate interests
and prestige. One of the byproducts of the policy suggested
would be a sharp loss of face among many elements in these
countries. And as for the communists, they of course will make
the most of whatever we do—or don’t do. If we flounder around
looking for non-existent policies that the Communists cannot
twist and exploit, we will have gone miserably and ridiculously
on the defensive.
Kenedon P. Steins
Third Secretary of Embassy
