Memorandum by the Director of the Office of Middle American Affairs ( Mann ) to the Deputy Assistant Secretary of State for Inter-American Affairs ( Barber )

Subject: Re your inquiry of Dick Rubottom1 concerning the Mexican trade agreement.

The full story is as follows (Dick was not present during all the discussions):

As you know, if the Mexican trade agreement is terminated and there is no modus vivendi, it will affect Venezuela to the extent that [Page 943] approximately half of Venezuelan oil imports will come into the United States at a duty of 21¢ a barrel instead of 10½¢ a barrel.2

Before taking action on the recommendations from E that the agreement be terminated and that we not agree to the Mexican proposal for a modus vivendi, I set up a meeting at which Mr. Mills,3 Carl Corse4 and other interested persons were present. In this meeting I inquired, among other things, whether there would be any objection from NWC to the termination of the agreement in view of the effect on Venezuela, particularly since there was some uncertainty as to whether this Congress would impose higher tariffs or quota restrictions on the importation of Venezuelan oil. Mr. Mills took the position that NWC would not object if we terminated the Mexican agreement, and on that basis I agreed with Corse to go ahead.

When I informed Mr. Miller at the next 9:30 staff meeting that this decision had been taken, he asked that no action be taken toward terminating the agreement until Mr. Donnelly’s5 arrival when the matter would be discussed with him. Mr. Donnelly was expected in Washington in one week and it was agreed that a final decision would be postponed for that length of time.

After Mr. Donnelly’s arrival I explained to him the background as set out in the preceding paragraphs of this memorandum and stated that it was MID’s intention to proceed forthwith with the termination of the agreement, adding that the people in E felt strongly that the agreement should be terminated promptly since we had failed over a two-year period to get Mexico to live up to its part of the agreement and since Mexican violations gave Mexican traders an undue advantage over American traders. I also said that the Trade Commission6 was in favor of termination and that I anticipated MID’s position would become difficult if there were an indefinite delay.

Mr. Donnelly stated that he was opposed to termination at this time and would take the matter up with Mr. Mills and with Mr. Miller. He said that the psychological effect in Venezuela of notice of termination at this time—even though the termination would not be effective until June 1—would be serious and that he would find it difficult to explain to the Venezuelan Government that the United States Government was genuinely concerned about the pending legislation in Congress if, at the same time, our Government moved to terminate the Mexican agreement which would automatically burden the Venezuelan oil industry.

Shortly thereafter at an ARA 9:30 staff meeting—or possibly in conversations following such a meeting—Ambassador Donnelly [Page 944] brought the subject up again and Mr. Miller agreed with him that we should not take any action until the situation in Congress was clearer.

Subsequently I told Mr. Donnelly that I hoped this did not mean an indefinite delay and asked him what time period he had in mind. He said that he would prefer that no action be taken until after the adjournment of this session of Congress. I said that I was not sure we could wait that long and that I was hopeful that Congress would take action one way or another on the Venezuelan oil bills so that we would be able to proceed before the adjournment of this session of Congress.

Carl Corse has been informed, and while he regrets that this decision has been taken he has not as yet pressed his belief that there should be a prompt termination of the Mexican agreement. We do know, however, that he has been somewhat embarrassed in defending this decision before the other agencies represented on the Trade Agreements Committee.

Here the matter stands at this moment. I am hopeful that there will be some developments in Congress which will make it possible for us to go ahead at an early date. I believe it is conceded by everyone that the trade agreement must be terminated, and the only question is as regards the timing.

The Embassy has of course been informed and it has made no objections thus far.7

Thomas C. Mann
  1. Roy R. Rubottom, Jr., Officer in Charge of Mexican Affairs.
  2. For explanation of the effect on Venezuela of termination of the Mexican Trade Agreement, see the Policy Statement for Venezuela, June 30, 1950, p. 1024.
  3. Sheldon T. Mills, Director of the Office of North and West Coast Affairs.
  4. Chief of the Commercial Policy Staff.
  5. Walter J. Donnelly, Ambassador to Venezuela.
  6. Reference is apparently to the Trade Agreements Committee.
  7. On April 6 Mr. Mann and other officials informed Sr. Antonio Martinez Baez, Minister of National Economy, of the U.S. rejection of the modus vivendi proposal. They also pointed out that even after termination of the trade agreement, Mexico would continue to enjoy most-favored-nation treatment in accordance with general U.S. commercial policy. Sr. Martinez Baez was told the United States was not pressing for immediate termination because of possible repercussions in Venezuela. (Memorandum of conversation by Elizabeth McGrory, 411.1231/4–650)