Foreign Relations of the United States, 1958–1960, Volume V, Microfiche Supplement, American Republics

EC–7. Despatch from the Ambassador in Ecuador (Ravndal) to the Department of State¹

No. 730.

Quito, May 13, 1958

REF

• Embassy’s D-718, May 6, 1958, and previous messages²

SUBJECT

• Ecuadoran Discrimination Against American Shipping.

During the visit of Vice President Nixon and his party to Ecuador, Assistant Secretary of State Rubottom and Messrs. Waugh and Bernbaum had a long conversation with Foreign Minister Tobar, Minister of Economy Intriago, Minister of Public Works Duran, Minister of Treasury Cordovez, Manager of the Central Bank Perez Chiriboga, Ambassador [illegible in the original] Ponce Enriquez and Under Secretary of State Espinosa. The principal topic of conversation at this meeting was the recent Ecuadoran decree law requiring certain imports into Ecuador to be transported on Ecuadoran or Grancolombiana vessels.³

Having received forceful indications of the seriousness with which the United States views the new shipping measure, Foreign Minister Tobar opened the meeting with a discussion of the decree and claimed that it is not discriminatory at all. He pointed out that the Ponce Government has been trying for a year and a half to eliminate the consular fee differential, that the Flota Grancolombiana is actually an organ of the Colombian and Ecuadoran Governments, and that the Ecuadoran Government feels obligated to do all in its power to foster the growth of the Grancolombiana. He said that all countries try to protect their merchant fleets and that many of them go much further than Ecuador in this respect. He mentioned particularly the Chilean Law calling for 50% of all cargo entering and leaving Chile to be transported in Chilean vessels. He said that Ecuador must support Colombia and that Colombia exerted so much pressure after the consular fee differential was reduced to 1%⁴ that Ecuador felt it must take some positing acting to help the Grancolombiana. He pointed out that exceptions can be made to the provisions of the new decree and then called on the Minister of Economy to continue the discussion.

The Minister of Economy reiterated the same arguments and went back over the history of Ecuadoran legislation on shipped preferences. He said that the new decree could not possibly affect more than 18% or 20% of all incoming cargo (and perhaps no more than 12%), and that the effect on United States shipping lines would therefore be very small. He referred to the preferential treatment given by Colombia to its merchant vessels including, he said, the privilege of paying in pesos and exemption from stamp taxes. He referred also to the United States laws in support of its merchant marine, stating that the United States has given a series of concessions to its ships including financial aid, loans, and subsidies. He said it would be unthinkable that a sovereign government could not pass regulations that its own materials must be brought in its own vessels. He referred to the shipping provisions under the United States PL–480 program and the Eximbank loan program and said that Ecuador accepts those regulations as being normal and natural, implying that the United States should therefore not object to the new Ecuadoran law.

The Minister also said that one of the principal reasons for the Flota’s great increase in percentage of Ecuadoran-bound traffic is the fact that the Flota ships go all the way to Guayaquil, whereas the Grace ships offload at Puna with consequent added expense and exposure of cargo to theft and damage. He said that Grace was complaining so bitterly about the Ecuadoran law simply because it is a powerful company and is accustomed to brooking no competition.

The Minister of Economy ended up by saying that if he had had the slightest idea that the new law might be considered discriminatory, he would have advised President Ponce not to sign it. He said that Ecuador must keep the friendship of the United States which has been so helpful to Ecuador in all its problems.

There was then a discussion of the percentage of cargo carried by the Grace Line and the percentage carried by the Flota Grancolombiana, with the Ecuadoran officials insisting that the new decree would have little if any effect on the traffic of the Grace Line.

Assistant Secretary Rubottom said that the principle is the important thing, rather than statistics, although these are interesting and important. He said that since there is no political problem outstanding between the United States and Ecuador, the group was free to concentrate freely on this shipping question and that he appreciated the frank manner in which the Ecuadorans had brought up the subject. He pointed out that the United States has tried for years to wipe off the slate the consular free question and that it seemed to be on the way to termination when this new decree was passed. He pointed out that the new decree was a heavy blow to United States expectations of seeing an end to the shipping problem and stated that in our point of view there is no doubt that the new decree is discriminatory.

Mr. Rubottom said that the United States has always taken the same firm position on questions of discrimination and that we must continue to face such questions. He said that the attitude of the United States Government is not dependent in any way on the Grace Line and pointed out that the United States has been following the same principle of protesting against discrimination in the case of Argentina and Brazil. Mr. Rubbottom referred to the subsidies received by American shipping lines and said the Ecuadorans are the first to recognize that if the United States did not maintain a strong merchant fleet the resultant weakness would prevent it from being able to face Russia. He pointed out also that the provisions for shipment of PL–480 and Eximbank cargoes on American vessels (to the extent of 50%) is natural since the shipments are made possible by dollar loans which usually include the dollar cost of freight.

Mr. Rubottom said he appreciated the fact that Ecuador was under pressure from Colombia, but he pointed out that Colombia itself has never passed an act so discriminatory as the new Ecuadoran law. He concluded by saying that the provisions of Article 6 are not entirely clear,⁵ but the act as a whole seems completely discriminatory.

Mr. Bernbaum said that if the United States did not prevent an example of discrimination such as the new Ecuadoran law, the measure could serve as an example for the rest of the world and other countries might follow Ecuador’s lead. He pointed out that the United States had protested the Chile law and that this law is not yet in effect. He mentioned the difficulties with Argentina, dating from the time of the Peron⁶ Administration, but added that these difficulties had recently been solved through an exchange of notes with the new Argentine Government.

Mr. Bernbaum admitted that a Government has the right to bring its own cargo in its own ships for its own account, but pointed out that the new Ecuadoran decree goes far beyond such a measure. He said that the United States asks only for the right to compete on a commercial basis and pointed out that subsidies like those granted to United States shipping lines do not prevent competition.

The decree was discussed further along the above lines and the Ecuadorans indicated that they would like information as to how the United States had settled the shipping discrimination issue with Argentina.

In summary, Mr. Rubottom spoke very frankly and forcefully and left no doubt in any one’s mind as to the attitude of the United States in this matter.

Enclosed for the use of the Department of State and other agencies are memoranda from officials of the Grace Line showing how seriously the new decree is expected to affect American shipping interests, and a copy of a memorandum written by the Minister of Economy to the Minister of Foreign Affairs in justification of the new decree.⁷

The Embassy has learned that the German Ambassador⁸ in Quito has received instructions from his Government to make a vigorous protest against the new Ecuadoran decree. The British Embassy in Quito is also lodging a formal protest with the Ecuadoran Foreign Ministry on behalf largely of Canadian interests.

Christian M. Ravndal

1. Source: Department of State, Central Files, 422.006/5–1358. Confidential. Drafted by John I. Fishburne, Counselor for Economic Affairs at the Embassy in Ecuador.
2. The referenced despatch reported the possible effects of Emergency Decree No. 18 of April 23, 1958, on U.S. shipping interests. (422.006/5–658)
3. Reference is to the Ecuadoran shipping decree published in the Registro Official, April 23, 1958; a copy with English translation was sent to the Department of State under cover of despatch 711 from Quito, April 30, 1958. (922.753/4–3058)
4. Reference is to the special rate of consular duties that the Ecuadoran Government had conceded to those importers who transported their merchandise in Ecuadoran or Flota Grancolombiana ships. Effective January 1, 1958, Ecuador reduced the consular fee differential from 2½ to 1 percent.
5. Telegram 484 to Quito, June 17, reported that Ambassador Chiriboga of Ecuador informed the Department of State in a note of June 10 that, in accordance with Article 6 of the April 23 decree, Ecuador had decided to limit applicability of the decree to cargoes destined for Government and public agencies. (922.73/6–1758)
6. General Juan Domingo Perón, President of Argentina, June 4, 1946–September 22, 1955.
7. The enclosures are not printed.
8. Rudolf Pamperrien.