Foreign Relations of the United States, 1952–1954, The American Republics, Volume IV

362/2–1254

Memorandum by the Assistant Secretary of State for Inter-American Affairs (Cabot) to the Acting Secretary of State

secret

[Washington,] February 12, 1954.

Subject:

• Latin American Policy¹

In accordance with your instructions of this morning, there is attached a memorandum outlining major problems in our relations with the other American republics to be used as the basis for your meeting² with the President next week.

[Annex]

Memorandum by the Assistant Secretary of State for Inter-American Affairs (Cabot)

secret

[Washington,] February 15, 1954.

A. Pending Latin American matters on which I have not been able to get adequate favorable action despite every effort:

1. The “package deal”³ (draft letter to Mr. Dodge attached, Tab A).⁴ Some of the items in this were included in our regular budget request but ran into unyielding opposition at relatively low levels at which our total Latin American policy was clearly not taken into account. I have consequently come to feel that the only way to get a Latin American program through is to present an integrated program showing how little is required to carry out the Eisenhower Report recommendations and fulfill Republican pledges.

In a meeting on February 11² in Mr. Lourie’s office, attended by Mr. Ralph Burton and Mr. Hart Perry of the Bureau of the Budget, as well as Mr. Wailes⁵ and Mr. Nolting, Budget’s position was to tear the program item from item, say that any increases should come through readjusting appropriations in the presently-recommended budget, and point to trivial increases already embodied in a few items as a possible talking point at Caracas. They did agree to go ahead with the authorization for the Panama facilities, for which appropriations will perhaps not be necessary until a future budget. They did hold out a very slight hope for an increased appropriation for the Inter-American Highway. At best, however, their position would wreck the program and the possibility of our asserting that we have done anything effective to implement the Eisenhower Report. Virtually the only steps we have taken to carry its recommendations into effect (trade, tax incentives) have been taken on a world wide basis.

2. Since our meeting at the White House on January 21,⁶ the matter of drafting a position regarding loan policy for Caracas has been referred to a subcommittee of Assistant Secretaries Overby, Anderson and myself; Mr. Corbett of State and Mr. deBeers⁷ of Treasury have also participated. We are still unable to agree on any statement about the Export–Import Bank which I consider adequately reassuring to the other American republics, and it is clear that Mr. Overby will not go beyond a very strict interpretation of the agreement⁸ between the International Bank and the Export–Import Bank approved by the NAC on January 22. He is now doing a redraft in an effort to meet our objections. The position of Treasury in this entire matter is clearly inconsistent with the Latin American policy statement adopted at the NSC meeting on March 18, 1953,⁹ the pertinent paragraph of which reads as follows:

“7. The United States should seek to assist in the economic development of Latin America by:¹⁰

. . . . . . .

“b. Continuing the present level of International Bank loans and Export–Import Bank loans and, where appropriate, accelerating and increasing them, as a necessary supplement to foreign private investment.”

3. On February 10 at the staff meeting,¹¹ you took a favorable view of my suggestion that the President issue a statement regarding the coffee situation which would be reassuring to the coffee-producing countries. Finding that the President was having a press conference at 10:30,¹² I telephoned Dr. Hauge at the White House and emphasized to him the desirability of having the President issue a statement. Dr. Hauge was rather dubious about this. He pointed out that any such statement might be resented by the American public or by Congress, or considered as prejudging the FTC and other investigations.¹³ He finally agreed to suggest to the President that he make some general statement indicating that the coffee situation should not be permitted to disturb our relations with our sister republics. I gather that, because no question was asked at the conference, no statement was made. Latin American public opinion is becoming more and more aroused regarding this issue and several of the republics which are most friendly to us (Brazil, Colombia) are particularly bitter. A good presidential statement should help materially at Caracas.¹⁴

4. Although we have been trying since June to obtain an acceptable position statement from the Pentagon regarding labor policy, we are still unable to do so despite the President’s statement at his meeting with President Remón¹⁵ (later reiterated in the Joint Statement¹⁶) that our international commitment in note of March 2, 1936¹⁷ would be fulfilled. We feel that the minimum that should be done in the Zone today to ease this most vexatious single irritant in United States–Panama relations is:

a. To merge the present dual-wage systems into a single-wage scale and uniformity in treatment of labor;

b. To have this new single scale and uniformity in treatment apply to all U.S. Government agencies operating in the Canal Zone; and

c. To have whatever retirement system finally adopted applied uniformly to non-American employees of all Government agencies in the Zone.

A number of other matters have been only less delayed. For example, no reply has yet been received to comments submitted to the Pentagon for clearance as early as December 21, 1953 on the following items: Panamanian Document “A”:¹⁸ Par. 1–4, Panamanian participation in Canal Zone market; Par. 4, Buy American Act;¹⁹ Par. 5, 6, Contraband control; Par. 6, Commissary location; Par. 8, Alcoholic beverage imports; Par. 9, Sales of surplus property; Par. 10, Manufacturing activities in Zone; Par. 12, Repairs to ships; and Par. 13, Sales to ships.

B. We have the following particular problems which continue to cause resentment in the other American republics:

1. We have imposed an 18 percent countervailing duty on Uruguayan wool tops on the basis that Urguay was subsidizing the exports through a multiple exchange rate.²⁰

2. We have broken our GATT commitment to Uruguay to lower our meat tariffs.

3. We dumped surplus linseed oil on the market, undercutting Argentina’s markets.

4. We have imposed a quota of 2,500,000 bushels of oats, thereby cutting off Argentine importations and leaving several million bushels already under contract with no place to go.

5. After a great deal of publicity regarding the great copper development project at Toquepala (Peru), for which the DMB was to put up $60 million on the basis of a certificate of national necessity, the Export–Import Bank $60 million as a loan, and the American Smelting to supply $48 million of its own funds, the DMB withdrew its certificate and the project is now completely stalled, to Peru’s irritation. The development is commercially sound and will be needed to supply the estimated world demand for copper by the time it can be opened.

6. The NSC recently decided that we should not enter the International Tin Agreement.²¹ I believe that the Department has just decided to request a reversal of this decision, but as it stands it will cause resentment not only in Bolivia, but also in other countries which believe in price stabilization agreements for primary products.

7. We have been unable to reach an agreement with Mexico with regard to migrant labor and on January 15 started operating unilaterally. This had ARA’s concurrence because the old agreement²² did not work in practice, but it has caused some resentment.

8. In August, the Chileans asked us to buy 100,000 tons of accumulated copper. The negotiations are in abeyance with ARA’s concurrence because we felt that we should not buy this copper before Chile gave American copper companies fairer treatment and took measures to clean house economically, but it has again caused resentment.

9. There are numerous reports that the Guatemalans plan to raise the issue of intervention at Caracas and it is obvious from reports reaching us from the field that the other American republics are not prepared, even if the problems listed above are satisfactorily adjusted, to take multilateral action against Guatemala at this stage. We are nevertheless being harassed by such items as Senator Margaret Smith’s bill²³ connecting Guatemalan Communism with high coffee prices (which would play squarely into the hands of the Guatemalan Communists at Caracas) and Walter Winchell’s broadcast calling for a boycott on Guatemalan coffee.

The significance of the above in connection with our position at Caracas is not merely that we will be incapable of meeting, even to a limited extent, the aspirations which Latin America will expect to see fulfilled in Caracas as a result of the various statements which have been made by this Government throughout the past year, but that our efforts to achieve a strong resolution on Communism will be frustrated and weakened by Latin America’s feeling that our position does not respond to their needs.

C. Among the steps which the President might still take if he wishes us to go to Caracas with a reasonable minimum Latin American program are the following:

1. Direct Treasury to prepare within a week a statement regarding loan policy which would assure the other American republics of credit facilities not less ample than those which were available to them on January 20, 1953 (or March 18, 1953) and would emphasize the role of the Export–Import Bank, with particular reference to the prospective new use by it of powers available to it, such as guaranties, techniques for tapping private credit, etc. (Tab E).²⁴

2. Direct Budget to draft within a week, in concurrence with State, a program for the appropriations necessary for the implementation of our Latin American policy, with particular reference to the Eisenhower Report. Consult with Congressional leaders regarding this program, emphasizing to the Republicans that it represents a party pledge and to the Democrats that in no area of our bipartisan foreign policy is there so little disagreement.

3. Issue at his next press conference as reassuring a statement as possible for the coffee-producing nations, with due regard to Congressional and public opinion. A draft of such a statement is attached (Tab B).²⁵

4. Direct State and other interested agencies to formulate urgently a program for the restricted sale under bilateral agreement of surplus foodstuffs in the other American republics, and for the use of local currency so obtained for cultural purposes (Tab C).²⁵

5. Direct the Postmaster General²⁶ to announce, on March 1, a plan to issue within a year a set of twenty commemorative stamps honoring the other American republics. (I have been unable since last March to get an answer to this proposal.) (Tab D)²⁵

6. Instruct the pertinent agencies of the Government to give due weight to foreign policy considerations in connection with any proposed commodity stabilization agreement, and not to reject them on the basis of unessential considerations of domestic policy when (as in the tin agreement) foreign policy considerations seem clearly paramount.

1. In a memorandum to Acting Secretary of State Smith, dated Feb. 11, 1954, Mr. Cabot stated in part that although the Tenth Inter-American Conference would soon convene, the United States was “still without a program which will be in any way satisfying to the other American republics”, that the major obstacle to the development of an effective program for Latin America was that “it almost invariably cuts across other policies” which are “generally considered overriding”, and he recommended that “the question of Latin American policy be urgently considered at the highest level.” (362/2–1154)
2. No record of this meeting was found in Department of State files.
3. Reference is to the revised budget request recommended by ARA in implementation of the Milton Eisenhower report totaling approximately $85 million, which represented an increase of about $17 million over the amount already included in the 1955 budget request for Latin America. For additional documentation on this subject, see pp. 196 ff.
4. Not printed.
2. No record of this meeting was found in Department of State files.
5. Edward T. Wailes, Assistant Secretary of State for Personnel and Administration.
6. A memorandum of conversation, summarizing the referenced meeting, by Mr. Cabot, dated Jan. 21, 1954, is printed on p. 206.
7. John S. deBeers, Chief, Latin American Division, Office of International Finance.
8. Reference is to the “Statement of Principles Governing the United States Position in Respect to Loans by the Export–Import Bank of Washington and the International Bank for Reconstruction and Development”, approved at the 206th meeting of the National Advisory Council; for text and additional documentation, see volume i .
9. Reference is to NSC 144/1, a report on “United States Objectives and Courses of Action With Respect to Latin America”, approved by President Eisenhower on Mar. 18, 1953; for text, see p. 6.
10. The following omission indicated in the source text.
11. A memorandum of conversation summarizing the referenced meeting, dated Feb. 10, 1954, by Director of the Executive Secretariat Walter K. Scott, is contained in Secretary’s Staff Meetings, lot 63 D 75, “Minutes, 1954–1955”.
12. The record of President Eisenhower’s news conference of Feb. 10 is printed in Public Papers of the Presidents of the United States: Dwight D. Eisenhower, 1954 (Washington, 1960), pp. 245 ff.
13. Reference is to investigations of rising coffee prices conducted by federal agencies in 1953 and 1954. For the result of the FTC’s investigation, see Federal Trade Commission, Economic report on the investigation of coffee prices, July 30, 1954 (Washington, 1954). For additional documentation, see U.S. Senate, Banking and Currency Committee, Study of Coffee Prices; hearings before a special subcommittee, 83d Cong., 2d Sess. (Washington, 1954), and Department of State Bulletin, Feb. 15, 1954, pp. 257–258.
14. Secretary Dulles’ address delivered at Caracas, Mar. 4, 1954, contained a statement on coffee; for text of the address, see ibid., Mar. 15, 1954, pp. 379–383, or USDel Report, pp. 43–51.
15. President Remón of Panama visited the United States between Sept. 28 and Oct. 7, 1953; for documentation relating to his visit and his meeting with President Eisenhower on Sept. 28, see pp. 1417 ff.
16. Reference is to the statement issued by President Eisenhower and President Remón after their meeting; for text, see White House press release dated Oct. 1, 1953, in Department of State Bulletin, Oct. 12, 1953, pp. 487–488.
17. For text of the referenced note, 1 of 16 exchanges of notes accompanying and interpreting the general treaty of friendship and cooperation between the United States and Panama, signed at Washington, Mar. 2, 1936, and entered into force, July 27, 1939, see Department of State Treaty Series (TS) No. 945 or 53 Stat. 1807.
18. Reference is to a proposal presented to the Department of State by the Special Panamanian Mission to the United States in September 1953 calling for, inter alia, restrictions on sales by commissaries in the Canal Zone; for a synopsis of the Panamanian proposals, see p. 1423.
19. Apparent reference to Title III of the Appropriations Act (Public Law 428), approved Mar. 3, 1933; for text of the act, see 47 Stat. 1520. For additional information on the status of “Buy American” legislation as of early 1954, see Staff Papers Presented to the Commission on Foreign Economic Policy (Washington, 1954), pp.315–320.
20. Secretary Dulles’ Mar. 4 address at Caracas contained a statement with respect to wool. See footnote 14, above.
21. For documentation relating to the decision of the United States not to adhere to the International Tin Agreement, see volume i .
22. Apparent reference to the exchange of notes constituting an agreement between the United States and Mexico relating to agricultural workers, signed at Mexico, Aug. 11, 1951, and entered into force on the same date; for text, see TIAS No. 2331 or 2 UST (pt. 2) 1940. For additional documentation on the agreement, see Foreign Relations, 1951, vol. ii, pp. 1488 ff.
23. Apparent reference to Senate resolution 211, introduced by Senator Smith (R.–Maine) on Feb. 8, 1954; for text, see Congressional Record, 83d Cong., 2d Sess., vol. 100 (pt. 2), p. 1475.
24. Not printed.
25. Not printed.
25. Not printed.
26. Arthur E. Summerfield.
25. Not printed.