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

ETA–3. Memorandum by the Assistant Secretary of State for Economic Affairs (Mann) to the Acting Secretary of State¹

Washington, January 31, 1958

SUBJECT

• Economic Policies—Latin America

The following comments relate to the portion of the Secretary’s statement which was assigned to E in Mr. Howe’s memorandum of January 24.²

I. Latin American Exports.

In our economic relations with Latin America, the most important problem facing us is the decline in demand and prices of Latin American exports which directly affect their budgetary and economic development plans. Related to this, is the growing protectionist sentiment in the United States, stimulated in part by the current fall off in our domestic economic activity, which threatens to restrict their access to the United States market. All of this makes it easier for Russia to increase its commercial relations with the area.

This problem can best be attacked on a commodity by commodity, rather than on a general, basis. The most urgent facet of the general problem is what we can do if, as expected, the Tariff Commission recommends soon increased tariffs or quotas on lead and zinc. The Latin American countries most affected would be Mexico and Peru. We shall soon be faced with a similar problem regarding copper which is of great importance to Chile.

My suggestion is that we consider at once the position we take with respect to lead and zinc. It would be best from a foreign relations standpoint if we were not to impose additional tariffs or restrictions on the import of lead and zinc, but it is possible that the President may consider himself committed to tariff action in response to a report by the Tariff Commission. On the assumption that the President will feel so committed, we should develop a program along the following lines:

(1) Explore the feasibility of our participating in an international lead and zinc study or commodity group built around a competent secretariat which would make objective studies of trends in supply and demand and recommend measures by exporting countries to keep them in approximate balance. Our participation in such a group would be of great psychological and political advantage to us in the underdeveloped countries. We would not expect it to perform miracles in stabilizing prices but we could hope that over a period of years the Secretariat could introduce at some degree order in the situation. The difficulty is opposition within the United States, on doctrinaire grounds, to any commodity arrangement, and probable opposition on similar grounds by Canada and other industrial countries. Nevertheless, it would be of great value in our relations with lead and zinc producing countries to be able to offer this as a means of easing the blow which they will feel they have sustained when we raise the tariff on lead and zinc.

(2) Avoid by all means the imposition of quotas on the import of lead and zinc. This is necessary because the marginal producers of lead and zinc in the United States will urge quotas, as probably the only means of salvaging their position. Quotas would be administratively very difficult, and from a policy standpoint extremely injurious.

(3) Seek to develop effective legislation to take care of industries and communities in the United States which have been seriously affected by exhaustion of resources which they were exploiting, or which have otherwise suffered economic depression through circumstances beyond their control. Action on this front will demonstrate to other countries that we seek to solve our own problems through domestic action, and not through transferring the burden of adjustment to countries less able to bear it than we. We are making a more detailed study of the possibilities in this field.

(4) Continue to consider stockpile acquisition through direct purchase or through barter as a possible means of assisting the lead and zinc industry. We now have a large stockpile, and it may be too large, in public security terms. The special stockpile committee³ has just reported to Gordon Gray that the stockpile should not be used for domestic price support purchases, but we have used it for this purpose rather extensively in the past few years, and we cannot taper it off too quickly. It still has some validity in lead and zinc.

As other commodity problems arise, notably copper, a similar analysis should be undertaken, and a program should be developed which will enable us to avoid the kind of restrictive action which many people consider inevitable in lead and zinc. With respect to commodities which we do not produce, such as coffee, we should change our attitude and be willing to consider, on their merits, proposals for commodity stabilization. This change would be vital in connection with the chief Latin American commodity, coffee.

II. Financial Assistance.

As dollars earned by Latin American exports decline, it will be even more important to increase aid through the World and Exim-Banks and through the Development Loan Fund. ARA and E are jointly working on collecting and appraising projects with a view to determining which ones are eligible for DLF financing.⁴

1. Source: Department of State, Central Files, 811.0020/1–3158. Confidential. Drafted by Assistant Secretary Mann.
2. See Document ETA�1.
3. Apparent reference to the Special Stockpile Advisory Committee established in October 1957 to review U.S. stockpile policies. A joint Department of State-United States Information Agency message containing information about the formation of the Committee was cabled to the field in circular telegram 412, October 31, 1957, not printed. (711.6/10–3157)
4. A note from Rubottom to Howe, dated January 31, attached to the source text, reads as follows: “I concur in substance, but I would like to discuss one or two parts of the paper with Mr. Mann himself.”
   A handwritten notation from Mann to Howe on Rubottom’s note reads as follows: “I think R[ubottom] will want to leave open the possibility of a quota instead of a tariff & other details that can very well be decided until we have the report of the Tariff Commission.”