545. Letter From the Ambassador in Uruguay (Mcintosh) to the Assistant Secretary of State for Inter-American Affairs (Holland)1
Dear Henry: During the past few weeks I have been endeavoring to learn more about the wool tops business and particularly to find out just why Uruguayan wool tops are presently not sold in the United States market and what steps would need to be taken to develop such sales. I have been especially interested in endeavoring to find out how important a factor in this situation is the present American countervailing duty of 6 and whether, if that countervailing duty were eliminated entirely, would that in itself be sufficient to create a market for Uruguayan wool tops in the United States.
In my letter to you of September 1,2 I expressed the opinion that the basic reason why Uruguayan wool tops are not being sold to the United States is because the prices quoted on Uruguayan wool tops are too high. I also stated that in my opinion, for Uruguayan wool tops to achieve a large volume of sales in the United States, it would be necessary to not only have the countervailing duty of 6 removed, but to also have Uruguayan wool tops prices reduced at least a further 4. I also stated that although it was a matter of opinion, everyone in the trade here felt that at the least, to create a market for Uruguayan wool tops in the United States, the entire countervailing duty would need to be removed.
In this connection, without disclosing any motive other than the interest of the Embassy in securing more information about the tops business, I asked an American resident in Montevideo, Frank J. Raquet, who is the head of Engraw Export & Import Company, S.A. of Montevideo, an American owned wool tops manufacturing plant, first why he was not shipping any of his wool tops to the United States market and secondly, when he told me that the reason was the inability to meet price competition, what prices he would need to quote to be competitive and to secure business. To secure this information, Mr. Raquet cabled his American connection, Energetic Worsted Corporation of Bridgeport, Pennsylvania, asking for information as to the current prices being quoted by United States tops manufacturers, together with comments about the market for Uruguayan tops. You will find enclosed copy of letter addressed to Mr. Raquet [Page 1092] under date of September 8 by Energetic Worsted Corporation3 stating the reasons, in their opinion, why Uruguayan wool tops cannot presently be sold in the United States and giving the competitive price information.
The competitive price data submitted with the letter of Energetic Worsted Corporation covers quotations on American produced tops submitted by Nichols & Company, Inc., of Boston, one of the largest tops manufacturers in the United States and prices on Uruguayan produced tops submitted by Engraw Export & Import Company, S.A. of Montevideo. For your ready reference, the comparative prices on the principal types of tops, showing the Uruguayan prices with and without the 6 countervailing duty, are as follows:
|Type of Tops||American Tops (Nichols)||Uruguayan Tops (Engraw) Including 6 Countervailing duty||Uruguayan Tops (Engraw) Excluding 6 Countervailing duty|
You will note from the above price comparison that even if there were no countervailing duty, the prices of Uruguayan tops would still be approximately 7 higher than the prices of American tops in similar grades. Furthermore, Energetic Worsted Corporation state that there is anticipated a further decline in the American prices.
In this connection, it is interesting to note that Energetic Worsted Corporation during the ten-year period prior to 1950 used entirely Uruguayan wool tops, but that since 1950 they have not purchased any Uruguayan wool tops whatsoever due apparently to the Uruguayan tops being out of price. One of the purposes of American import duties is presumably to equalize American and foreign costs, that is, to offset lower foreign labor costs, but in the case of wool tops, it certainly seems that Uruguay is being penalized and is not in a position to compete with American manufacturers.