Memorandum by the Officer in Charge of Mexican Affairs (Rubottom) to the Director of the Office of International Trade Policy (Brown)


Subject: Termination of the Trade Agreement1 with Mexico

There is attached a Position Paper2 on the foregoing subject, which recommends:

Joint termination of the existing trade agreement with Mexico, without concluding a most-favored-nation modus vivendi, as proposed by Mexico;3 or
Unilateral termination by the United States in the event that there is no agreement on the foregoing basis, or that Mexico makes no practicable and definitive substitute offer promptly.

If you concur in these recommendations, MID will prepare, for clearance in the Department, an instruction to the American Embassy at Mexico City, based upon the attached Position Paper.


Position Paper

Termination of the Trade Agreement With Mexico

the problem

Should the United States Government, in conjunction with the joint termination of the existing trade agreement between the two countries, accept the proposal of the Mexican Government for the substitution therefor of a modus vivendi providing for unconditional and unlimited most-favored-nation treatment in customs matters?

[Here follow a repetition of the recommendations made in the covering memorandum, a résumé of bilateral negotiations on the subject, and a discussion of possible methods and effective dates for joint termination. For previous documentation, see the annotated memorandum of October 8, 1949, from Under Secretary of State James E. Webb to President Truman, Foreign Relations, 1949, volume II, pages 690 ff.]

B. Modus vivendi.

The recommendation that this Government not accept the Mexican proposal that a modus vivendi be substituted for the trade agreement upon termination of the latter has been made for the following reasons:

The present policy of this Government does not favor the conclusion of simple most-favored-nation accords at this time. It is directed toward the conclusion of broader agreements for that purpose, such as the General Agreement on Tariffs and Trade,4 or treaties of friendship, commerce and economic development.
The United States declined, in October, 1949, to conclude a similar agreement with Colombia.5
As a contracting party to the General Agreement on Tariffs and Trade, the United States is committed (Article XXIX) to “undertake to observe to the fullest extent [of its] executive authority the [Page 941] general principles of … the Havana Charter …”6 The Charter contemplates as a basic principle that contracting parties to the General Agreement may cease to apply concessions granted in that Agreement to the trade of countries which have failed to become contracting parties. Therefore, unless there are compelling reasons to the contrary, it is believed that no action should be taken by the United States at this time which would in the future limit its freedom of action under the Charter.
There appear to be no compelling economic reasons of advantage to United States trade counselling acceptance of the proposed modus vivendi, which would make of Mexico an exception to the policies of this Government referred to in paragraphs 1 and 3 above.
Mexico has a single-column tariff. Therefore, the most-favored-nation commitment on customs matters offered by Mexico would represent no greater advantage to the United States than Mexico accords all other countries. On the other hand, the United States would be committed, during the life of the modus vivendi, to give Mexico, without compensation, the advantage of the reduced rates of duty which have been accorded other countries as the result of tariff negotiations and reciprocal concessions.
By the terms of the proposed modus vivendi, the United States would obtain from Mexico only an assurance against discriminatory treatment with respect to tariff rates and formalities; there would be no safeguard against discriminatory treatment of other aspects of trade. The United States would, of course, be similarly committed in the modus vivendi only to accord Mexico most-favored-nation treatment with respect to customs matters. However, it is the policy of the United States to consider that other aspects of trade, such as internal taxation or import and export restrictions, fall within the scope of its most-favored-nation commitments. Mexico would, therefore, obtain all the advantages implicit in United States policy, without a reciprocal commitment on its part.
It is believed that the proposed modus vivendi would in effect be more binding upon the United States than upon Mexico. The Government of Mexico has not hesitated, in the past, to take action contrary to an international commercial commitment when it has regarded such action as necessary to its economy. The United States should not overlook the possibility that Mexico might, despite a commitment in the proposed modus vivendi, impose restrictions on United States trade from time to time, relying upon the terms of the agreement to prevent retaliation by the United States, and upon the probable reluctance of the United States to denounce the modus vivendi for what might individually be minor violations.
From the point of view of general United States-Mexican relations, it is believed that a refusal now to accede to the Mexican proposal for a modus vivendi would have less unfavorable reseults than would later action to denounce the modus vivendi, should such action become necessary either in the circumstances referred to in paragraph (c) above, or by reason of United States obligations under the Havana Charter, mentioned in paragraph 3.
In addition to the considerations of United States policy referred to in numbered paragraphs 1 through 5, above, it may be pointed out that a modus vivendi is not necessary to assure to Mexico, for the time being, the continuation of most-favored-nation treatment by the United States. It is the present policy of the United States to generalize tariff treatment to all countries unless they are found to discriminate against its trade. Therefore, until such time as current United States policy changes, and assuming continued non-discriminatory treatment of United States trade, Mexico will enjoy most-favored-nation treatment even though no document providing therefor may exist.

C. Unilateral termination of trade agreement.

The President, in approving the procedure recommended by the interdepartmental Trade Agreements Committee for the termination of the trade agreement with Mexico, has authorized unilateral denunciation as a final United States position in the event no other available means of settling the apparent impasse in the negotiations can be found. It is believed that the United States, in proposing joint termination and inviting substitute proposals by Mexico, has done all possible to avoid the necessity of terminating the agreement unilaterally. Even now, any appropriate Mexican offer would be carefully considered. If none is forthcoming, however, and if joint termination is not acceptable to Mexico, it is believed that the United States has no alternative but to take unilateral action to denounce the agreement in accordance with its terms.

  1. The Reciprocal Trade Agreement signed at Washington, December 23, 1942. For text, see Department of State Executive Agreement Series (EAS) No. 311, or 57 Stat. (pt.2) 833.
  2. The position paper was drafted by Elizabeth M. McGrory, who was assigned to Mexican Affairs. A marginal note signed by her reads: “6/29/50 Note: Altho not initialed, this paper was approved in draft by all interested offices in the Dept, including E (not by Mr. Thorp personally), & was the basis of action subsequently taken—i.e., joint termination, announced June 23, effective Dec. 31, 1950.” Willard Thorp was Assistant Secretary of State for Economic Affairs.
  3. Mexican draft proposals of December 23, 1949, not printed.
  4. Concluded at Geneva October 30, 1947; for text, see Department of State Treaties and Other International Acts Series (TIAS) No. 1700, or 61 Stat, (pts. 5 and 6).
  5. For documentation pertinent to termination of the United States–Colombia Trade Agreement of September 13, 1935 (49 Stat. (pt. 2) 3875), see Foreign Relations, 1949, vol. ii, pp. 603 ff.
  6. Article XXIX, Section 1 is misquoted here. It is a “Draft Charter,” not “the Havana Charter,” which is mentioned in it.

    The Havana Charter was signed March 24, 1948. It was not ratified by the United States, nor did it go into effect among other powers. Text is printed in Department of State, Havana Charter for an International Trade Organization and Final Act and Related Documents (Washington: Government Printing Office, 1948).

    Brackets and omissions in this quotation appear in the source text.