CH–35. Instruction from the Acting Secretary of State to the Embassy in Chile1
SUBJECT
- Chilean Proposal for Removal of U.S. Copper Excise Tax
In the course of President Eisenhower’s February 29, 1960 conversation with President Alessandri, the latter expressed the hope [Typeset Page 295] that the United States copper excise tax would be removed. President Eisenhower said he would have the matter looked into. Following careful examination of this problem by interested agencies of the United States Government, the Embassy is requested to inform the Chilean Government that removal of the tax does not appear to be practicable at this time, for the reasons set forth below.
Suspension or removal of the copper tax could be effected only through legislation. Legislation was passed suspending the tax continually from April 1947 through June 1958, with the exception of a brief interval in 1950–51. These prior suspensions of the tax were enacted at times when copper was in short supply, a situation which does not now prevail. The present tax is 1.7 cents per pound so long as the United States price remains at or above 24 cents per pound. At prices below 24 cents, the so-called “snap back” point, the tax becomes 2 cents.
The current United States market price for copper is 33 cents per pound, making the ad valorem equivalent of the existing tax only about 5 percent. It is felt that this tax has little restrictive effect at present and that the Chileans have virtually full access to the United States market. Indeed, a substantial part of total copper imports from Chile is reexported after processing, and is therefore not subject to the tax.
The present copper market is thin and it seems probable that the price will fall in the months just ahead. Removal of the tax might accentuate the downward pressure on the United States copper price and thus possibly cancel out any benefit which Chile might expect to derive from suspension or removal.
[Facsimile Page 2]The present session of Congress might be an especially inappropriate occasion to seek suspension or removal of the copper tax. It will probably be a short session and the calendar is unusually crowded with items which would take precedence over copper legislation.
There is sentiment in certain segments of the domestic copper producing industry in favor of raising the level of the present tax on copper or the “snap back” price or both. This sentiment is reflected in the attitudes of some members of Congress. If repeal or suspension were recommended to Congress it is possible that Congressional action, if any, would bring about a situation less satisfactory than the present one.
The copper situation is, of course, being closely and continuously studied by all interested agencies of the United States Government, and, should future circumstances appear to favor a removal of the copper excise tax, the Administration would be prepared to consider supporting an appropriate measure for this purpose.
The United States Government wishes to reiterate its willingness to discuss with the Chilean Government any problem which might affect a commodity of such importance to Chile as copper.
[Typeset Page 296]As soon as the above information is given to the Chilean Government, please confirm by telegram the fact of delivery so that the Department may give the same information promptly to the Chilean Embassy. If the information is conveyed orally to the Chilean Government, the Embassy is requested to submit (in reproducible form) a memorandum of conversation. If it is conveyed by note, the Embassy is requested to transmit to the Department a (reproducible) copy of the note and of any communication received in reply.
Acting
- Source: Department of State, Central Files, 411.254/5–1360. Confidential. Drafted by Phillips on May 10, and approved by Rubottom.↩