411.3131/8–2652

Memorandum by the Acting Secretary of State to the President 1

secret

Subject:

  • Request by Interdepartmental Committee on Trade Agreements for approval of the results of the negotiations of a supplementary trade agreement with Venezuela.

There is attached a recommendation by the Interdepartmental Committee on Trade Agreements requesting your approval of the results of the negotiations of a supplementary trade agreement with Venezuela.

I believe that the results of the negotiations are such that you may give effect to them under the authority of the Trade Agreements Act [Page 1629] of 1934, as amended. In addition they are consistent with the recommendation of the National Security Council of March 5, 1952.

If you approve the Committee’s recommendation and if the signature text can be prepared in time, it is planned to sign the agreement in Caracas on August 27, 1952. Publicity with regard to the details of the agreement will be released simultaneously by both Governments, but such release may not be made until sometime during the following week.

I recommend that the recommendations of the Committee be approved.

David Bruce

[Annex]

Memorandum by the Chairman of the Interdepartmental Committee on Trade Agreements ( Corse ) to the President 2

secret

Subject:

  • Request for Presidential Approval of Results of Trade Agreement Negotiations with Venezuela.

On August 29, 1951, you approved the recommendation of the Interdepartmental Committee on Trade Agreements to enter into negotiations for the purpose of supplementing the 1939 Trade Agreement with Venezuela.

Public announcement of intention to negotiate such a trade agreement was also issued on August 29, 1951. All other procedural steps in connection with the preparations for the negotiations as set forth in Executive Order No. 10082 and the Trade Agreements Extension Act of 1951 have been taken. Specifically, 1) a list of products on which concessions might be made by the United States was attached to the public notice of intention to negotiate; 2) this list was transmitted by you to the United States Tariff Commission in order that that Agency might report the limit below which concessions in its opinion could not be granted without causing or threatening serious injury to the domestic industry producing like or directly competitive products (popularly known as peril point findings); 3) opportunity to file written briefs and to present oral testimony with regard to all aspects of the negotiations was given to interested persons; 4) the United States Tariff Commission reported its peril point findings to you on December 27, 1951; 5) digests of trade information on United States import products and on United States export products were made available to the Interdepartmental Committee on Trade Agreements by the United States Tariff Commission and the Department of Commerce respectively.

[Page 1630]

After consideration of the information obtained through the above procedural steps, the Committee obtained your approval on March 17, 1952 of the following two recommendations:

1.
Offers by the United States and requests of Venezuela by the United States on the basis of an offer of 10½ cents on Venezuelan oil.*
2.
An offer going below 10½ cents provided that the Venezuelans refused to negotiate on the basis of recommendation 1, and that reciprocal concessions were obtained from Venezuela commensurate to the value of concessions granted by the United States. Other offers by the United States would remain within the peril point findings of the Tariff Commission.

Negotiations with the Venezuelans were begun on the basis of recommendation 1. Every effort was made to persuade the Venezuelans to negotiate on the basis of a 10½ cent offer. Despite intensive negotiation, the Venezuelans refused to accept such an offer as providing a basis for an agreement and were prepared to break off the negotiations and to give notice of termination of the 1939 Trade Agreement. At that time, with the approval of the Trade Agreements Committee, the additional offer on Venezuelan oil, as provided for in recommendation 2, was made and reluctantly accepted by the Venezuelans as providing, from their point of view, a valid concession on Venezuelan oil.

Having surmounted this important obstacle, it was possible to bring the negotiations to a successful conclusion. The text of the agreement is attached as Appendix A.3

As compared to the 1939 agreement, Venezuela grants new or improved concessions on $154 million of imports from the United States; on $12 million of imports they are withdrawing the 1939 concessions; [Page 1631] and on $6 million of imports the new agreement provides for higher Venezuelan rates than in the 1939 agreement. The trade coverage of the 1939 agreement as supplemented by the new agreement is $240 million or about 60 per cent of total United States exports to Venezuela. Under the 1939 agreement, only 35 per cent of our exports were covered. Among the important items receiving new or improved duty concessions are apples, pears, certain dried vegetables, rolled oats, wheat flour, barley malt, baby and dietetic foods, wrapping paper, laboratory and refractory glass products, galvanized iron sheets, enameled iron and steel manufactures, builders’ hardware, table flatware, unassembled trucks and passenger cars, motorcycles, aircraft and parts, trailers, radio and television receivers including parts, phonographs including combinations and parts, phonograph records, automatic refrigerators, scientific apparatus, hand tools, photographic products, office machinery, electric motors, pumps, numerous types of industrial machinery and apparatus and parts, generators and transformers. Among the products on which new bindings of duty-free treatment were granted by Venezuela are road building, textile and printing machinery; stoves, heaters and ovens, and parts for agricultural machinery. The agreement, as revised, covers 179 Venezuelan tariff items as compared with 88 in the 1939 agreement. It includes products of interest to practically every important group of United States exporters. The concessions by Venezuela have particular significance in as much as that country has no balance of payment difficulties in purchasing from the dollar area.

In 1950 United States imports from Venezuela of crude petroleum and residual fuel oil amounted to $288 million or about 90 per cent of our total imports from Venezuela. It is estimated that the 1950 value of trade on which United States granted improved customs treatment is about $175 million, of which practically all was crude petroleum and residual fuel oil. New concessions of potential value to Venezuela consisted of the binding of existing duty-free entry for iron ore, deposits of which are now being developed.

The supplementary trade agreement also revises some of the general provisions of the original 1939 agreement. The more important changes are (1) a revised provision under which tariff concessions are better protected against nullification or impairment by the use of quota restrictions, and (2) the inclusion of the escape clause pursuant to section 6–b of the Trade Agreements Extension Act of 1951. The Venezuelans also agree to extend more favorable customs treatment to products of the Virgin Islands.

If you approve the results of these negotiations, you are required under section 4 (a) of the Trade Agreements Extension Act of 1951 to transmit to Congress, within 30 days after entering into the agreement, [Page 1632] a copy of the agreement together with a message identifying the article with respect to which a concession exceeding the peril point was granted and stating your reason for such action with respect to such article. A draft message to Congress is attached as Appendix B.4

In addition to the negotiating difficulty caused by the existence of a peril point finding by the Tariff Commission at a rate of duty on Venezuelan oil which was unacceptable to the Venezuelans as a basis for negotiations, the negotiations were further complicated by the desire of the Venezuelans to withdraw or modify certain of the concessions contained in the 1939 Trade Agreement. The products involved were generally agricultural, but did include a few industrial products. Generally, the reasons for such withdrawals or modifications were for the stated purpose of furthering the economic development of Venezuela. The Committee feels that the new concessions offered by Venezuela compensate for the concessions granted by the United States as well as for the 1939 concessions which Venezuela withdrew or modified. There is attached a letter5 to you from the Secretary of Agriculture6 which, while expressing concern that there may be an unfavorable reaction to the agreement from the United States agricultural community, does not interpose objection to the approval of this agreement with Venezuela because of the very important strategic value present in the other commodity areas. The Department of Agriculture feels however, that the new agricultural concessions by Venezuela do not balance the agricultural concessions in the 1939 agreement which Venezuela is withdrawing or modifying, and that this is serious in view of the rising tendency toward agricultural protectionism in Venezuela. Every effort was made to obtain additional agricultural concessions from Venezuela but such efforts were not successful.

Although recognizing that the Trade Agreement Act clearly authorizes the President to exceed a peril point finding by the Tariff Commission, the member from the Tariff Commission did not feel free, as a member of the Commission, to cast his vote in favor of a proposed agreement containing a reduction in the import excise tax on petroleum below the Commission’s peril point finding. In addition, it was his view that, considering both the coverage and the quality of the concessions which would be granted by each country in the proposed agreement, the balance was decidedly in Venezuela’s favor. On the other hand, he recognized that there was room for differences of views regarding the question of balance, and, further that the issues involved include considerations of public policy which the President would, of [Page 1633] course, take into account in exercising his authority under the Trade Agreements Act. In these circumstances he felt that the proper course was to abstain from voting.

Considering the supplementary agreement in its entirety, it appears to the Committee that the concessions both ways are substantially in balance. It believes that proposed United States concessions on the controversial petroleum items are reasonable ones and ones which will generally be acceptable to the domestic industry. It is firmly of the opinion that it will be beneficial to the trade and security interest of the United States to enter into the agreement.

Your approval of the results of the negotiation with Venezuela is hereby requested.7

Carl D. Corse
  1. Drafted by Mr. Corse.
  2. Drafted by Mr. Corse.
  3. The kinds of petroleum products included in the designation “Venezuelan oil” are crude petroleum, topped crude petroleum, residual fuel oil and distillate fuel oil. For practical purposes, the peril point found by the Tariff Commission for Venezuelan oil may be considered as 10½ cents per barrel on all imports, although three of the Commissioners found that the peril point was the existing tariff quota arrangements (10½ cents per barrel on a quantity equal to 5 per cent of the total quantity of crude petroleum processed in refineries in Continental United States during the preceding calendar year and 21 cents per barrel on imports in excess of this quantity), while the other three Commissioners found that a rate of 10½ cents per barrel on imports would not result in serious injury being caused or threatened to the domestic industry. [Footnote in the source text.]
  4. A rate of 5¼ cents per barrel on all imports of crude petroleum, distillate fuel oil and residual fuel oil (for technical reasons topped crude is excluded) of less than 25 degrees API (American Petroleum Institute rating); a rate of 10½ cents per barrel on all imports of these products of 25 degrees or greater API. [Footnote in the source text.]
  5. The technical question of whether imports of topped crude should be excluded or included in the concession set forth in footnote 2, page 2 was reconsidered subsequent to its March recommendations and the Committee decide to include such imports in the concession. [Footnote in the source text.]
  6. Not printed here.
  7. Not printed.
  8. The referenced letter, dated Aug. 21, 1952, is not printed.
  9. Charles F. Brannan.
  10. President Truman approved the results of the negotiations with Venezuela on Aug. 28, and a Supplementary Trade Agreement was signed at Caracas on Aug. 28, 1952. For text of the Agreement, which entered into force on Oct. 11, 1952, see TIAS No. 2565, or United States Treaties and Other International Agreements (UST), vol. 3 (pt. 3), p. 4195. For text of President Truman’s message of Aug. 29 to Congress concerning the Agreement, see Department of State Bulletin, Sept. 15, 1952, pp. 401–403.