145. Memorandum of a Conversation, Alvear Palace, Buenos Aires, August 16, 19571
Buenos Aires, August 16, 1957
USDel/MC/14
PARTICIPANTS
- Messrs. Dillon and Leddy, U.S. Delegation
- Dr. Raúl Prebisch, Secretary General of ECLA
- and Mr. A. Santa Cruz, Secretary of ECLA
SUBJECT
- ECLA Activities in the Field of Inter-American Trade
- (1)
- In accordance with arrangements made earlier in Santiago, Dr. Prebisch and Mr. Santa Cruz called on Mr. Dillon to discuss this subject. Mr. Dillon said that he had read ECLA’s recent report entitled “ECLA Activities Relating to Payments and a Regional Market in Latin America”. He had found the report very interesting and had been particularly pleased to note the stress which had been placed upon private enterprise and competition. He said that there had been some misunderstanding in Washington that the views of the ECLA secretariat with respect to regional trade agreements in Latin America anticipated a considerable degree of monopoly and state planning. In reading the report he had found that this was apparently not the intention.
- (2)
- Dr. Prebisch stated emphatically that the ideas of the secretariat on developing a larger regional market in Latin America were strongly opposed to arrangements which would lead to monopoly. He said that the misunderstanding of which Mr. Dillon had spoken probably arose from the use of the phrase “division of the market” in describing certain aspects of the proposals. If monopolies were allowed to develop, or regional trade were not fostered on a free enterprise basis, this would ruin the whole concept of the common market. Dr. Prebisch stated that the idea of creating a common market for individual products in the field of capital goods or heavy durable consumer goods would be economically productive only if there were complete freedom of competition between industries in the countries participating in the plan. For example, if a common market were to be established for automobiles and tractors between, say, Brazil, Argentina and Chile, there would be complete freedom of decision by private enterprise to determine where the industries should be located. With respect to state trading, he said that the ECLA secretariat thought that there should be some form of inter-governmental [Page 522] technical assistance to new industry, for example, a pulp and paper industry in Chile, but that the secretariat was opposed to any extension of state trading, which tended to be highly restrictive.
- (3)
- Mr. Dillon then inquired as to the reason for approaching the common market on a selective commodity basis. He said that the United States believed that for regional arrangements to be truly productive it would probably be necessary to cover all commodities and sectors of the economy. He appreciated that it might not be possible to achieve a complete integration within a few years, but thought that it would be wise if regional arrangements were developed, to be sure that they envisaged full-scale integration as the end result of the process. Dr. Prebisch said that the reason for confining the common market proposals to individual commodities and to capital goods industries which were not now in existence, was essentially political. He said that it would be extremely difficult for the Latin American countries to establish a common market for consumer goods of which there was existing production. On the other hand, if a beginning could be made for non-existing industry it might be possible to widen the arrangements to include existing industry at a later time.
- (4)
- Dr. Prebisch confirmed the impression left by Mr. Swenson in Santiago earlier in the week (see memo of conversation prepared by Mr. Eakens, Embassy Santiago2) that for the time being ECLA would be concentrating on progress toward the elimination of bilateral payments arrangements. Bilateral trade balancing agreements were presently the most important factor restricting inter-American trade and it would be necessary to achieve a degree of relaxation in this field before common market proposals could have much effect. He agreed that the multilateralization of inter-American payments would probably have to be accompanied by a greater degree of coordination of internal monetary and fiscal policies in the participating countries.
- (5)
- The point was made to Dr. Prebisch that in considering proposals for market integration, the level of the external tariff was an important factor to be looked at, as well as the degree of internal integration contemplated. He said that for tractors and automobiles, for example, the ECLA people were thinking that a rate as high as 30 to 40 per cent might be necessary. To the comment that this seemed a fairly stiff tariff, he replied that the Latin American countries already had even higher rates in existence as well as other forms of restriction; and that it would be expected that if a common [Page 523] market for the automotive industry were established, the 30–40 per cent tariff would be the only restriction on imports from the outside.