611.914/4–254
The Ambassador in India (Allen) to the Department of State
confidential
No. 1549
New
Delhi, April 2, 1954.
Ref:
- Dept’s A–332, March 9, 1954,1 and previous
Subject:
- Treaty of Friendship and Establishment
On March 31 the Ambassador discussed with N. R. Pillai, Secretary General of
the Ministry of External Affairs, the current status of the proposed
Treaty of Friendship and Establishment. The Ambassador handed to Mr.
Pillai a letter dated
March 31 (Enclosure 1 to this despatch) stating that the United
States wishes to go forward with the Treaty and expressing the
belief that substantial agreement has already been reached on its
major provisions. Mr. Pillai
has previously expressed the hope that something of a concrete
nature be done to counteract the adverse Indo-American psychological
reaction to recent developments.
The Ambassador pointed to the many advantages, including those in the
field of public relations, which would result from the conclusion of
the Treaty. He added that the Treaty could very well contribute
toward the psychological climate desired by Mr. Pillai. The latter appeared to be
favorably impressed with the submission and promised to look into
the current status of the Treaty without delay.
On April 2, Andrew V. Corry,
accompanied by J. Wesley
Adams and Robert W.
Adams, called by appointment on K. G. Ambegaokar,
Secretary for Economic Affairs, Ministry of Finance, who has been
[Page 1748]
the principal
negotiating officer on the Indian side. The purpose of the visit was
two-fold; firstly, to preclude any impression that Mr. Ambegaokar
was being by-passed in this matter, copies of the Ambassador’s
letter to Mr. Pillai being
furnished him; and, secondly, to seek to determine the status of the
Treaty on a technical negotiation level.
Mr. Ambegaokar glanced at the Ambassador’s letter to Mr. Pillai and the accompanying
Memorandum and expressed his interest in the picture presented. He
reminded the Embassy officers who were interviewing him that when
John A. Loftus, the
former Counselor for Economic Affairs, had approached him regarding
the then-dormant status of the Treaty (see Embassy Despatch No. 912,
November 30, 1953),2 he had been reluctant to refer the
matter up to the policy-deciding level. The reason was that he
judged the psychological climate to be unpropitious. He observed
that the Ambassador’s initiative in taking up the matter with
N. R. Pillai seemed to
him the right step because Pillai was best able to judge whether the climate
for the consideration of the Treaty would now be favorable.
The Embassy officers said to Mr. Ambegaokar that it was precisely the
United States Government’s interest to foster the formation of a
mutually agreeable climate that led the Embassy to commend the draft
Treaty to the Government of India for appropriate action at this
time. The Treaty, if entered upon, could well become a vehicle which
would serve to improve the psychological climate. The absence of a
Treaty was an obstacle, indeed an important psychological obstacle,
to the formation of useful business ties on both sides. Mr.
Ambegaokar accepted this point, to which he said he assigned full
weight. He then stressed, however, the objections he had previously
voiced to Mr. Loftus, which
he felt made it not altogether useful to have a Treaty. He stated
that in his opinion a Treaty opened up fields of controversy. The
Embassy officers stated they fully understood Mr. Ambegaokar’s
argument, which was expressed very concisely, but they urged that
the important consideration remained the creation of a useful
psychological climate.
Mr. Ambegaokar was asked to get in touch with J. Wesley Adams and Robert W. Adams of the Embassy
when he wished to pursue the subject further. He was also informed
that the Ambassador expected to keep in touch with N. R. Pillai on the subject.
For the Ambassador:
Robert W. Adams
Second Secretary of
Embassy
[Enclosure]
The Ambassador in India (Allen)
to the Secretary General of the Ministry
of External Affairs (Pillai)
confidential
New
Delhi, March 31, 1954.
My Dear Mr. Secretary General: The
proposed Treaty of Friendship and Establishment between India
and the United States has been the subject of conversations
between officials of the Government of India and the Embassy
since October 1949.3
Numerous revisions have been mutually agreed upon and the
current draft, dated March 3, 1953, was submitted to your
Government for its consideration in May 1953.4
I wish to state on behalf of my Government that it wishes to go
forward with this Treaty. I believe that agreement has already
been reached on all its major provisions and that the remaining
issues can be resolved without much difficulty. I await with
interest the views of your Government concerning the revised
draft on March 3, 1953.
There is enclosed for your convenient reference a brief
Memorandum outlining the history of the negotiations on the
Treaty and its current status.
Sincerely,
[Enclosure]
Memorandum on the Proposed Treaty of
Friendship and Establishment between India and the United
States
In October 1949 the United States presented to the Government of
India for its consideration a proposed Treaty of Friendship,
Commerce, and Navigation. It was identical with the standard
draft used by the Department of State in the negotiation of
similar Treaties with other countries. Among such Treaties
recently concluded by the United States are those with Colombia,
Denmark, Italy, Eire, Greece, Israel, and Japan.
During 1950 and 1951 there were numerous discussions between
officials of the Government of India, principally of the
Ministry of Finance, and the Embassy concerning each of the
provisions of the proposed Treaty. In the summer of 1952 it was
mutually agreed that the existing draft needed substantial
revision and the deletion of various provisions relating to
navigation and commercial matters. The
[Page 1750]
proposed deletions and other revisions
suggested by the negotiating officials of the Government of
India were transmitted to the Department of State and
conversations in New Delhi were, therefore, interrupted in
December 1952.
The proposals of the Indian negotiators were then incorporated by
the Department of State in a new draft Treaty. This revised
draft is dated March 3, 1953 and is entitled “Treaty of
Friendship and Establishment”, the title having been changed
because of the deletion of the navigation and commercial
provisions. The current draft of March 3, 1953 was transmitted
by the Embassy to the Ministry of External Affairs in May 1953.
Various conversations have taken place since that date between
the Government of India and Embassy officials concerned although
actual negotiations have not been resumed.
The current draft of the proposed Treaty consists of 20 Articles
and a Protocol. Among its important provisions are those
concerning: (a) equitable treatment to
persons and interests; (b) entry and
sojourn, including “treaty trader” and “treaty investor” status;
(c) personal rights and free access
to courts; (d) property rights; (e) acquisition of property and interests,
including patents and trade marks; (f)
national and most-favored-nation treatment with respect to
enterprises and the right effectively to control one’s
properties; (g) nondiscriminatory
taxation and remittance in foreign currency of earnings; and
(h) most-favored-nation treatment
with respect to commercial travelers and all matters relating to
importation and exportation.
On the basis of informal conversations between the officials
concerned, it would appear that there remains only one
difference of opinion with respect to the current draft Treaty.
This is in connection with Article X, paragraph 2(c), which states that each party shall,
after allocating foreign exchange for goods and services
essential to the health and welfare of its people, make
reasonable provision for the remittance in the currency of the
other Party of compensation, earnings, dividends, commissions,
and “(c) amounts for amortization of
loans, depreciation of direct investments, and capital
transfers…”. The negotiators for the Government of India have
objected to this clause (c) on the
grounds that it might adversely affect India’s current foreign
exchange control procedures. The Embassy believes that
sufficient safeguards concerning India’s balance-of-payments
position are contained in the provision, and that further
discussions on this matter would be useful. There may, of
course, be other minor points, principally in connection with
phraseology, which may require clarification. None of these,
however, are regarded as of such a nature as to affect the
general agreement already reached between India and the United
States both on the Treaty as a whole and on each of its major
provisions.
