418. Memorandum From the Deputy Assistant Secretary of State for Economic Affairs (Beale) and the Assistant Secretary of State for Inter-American Affairs (Rubottom) to the Acting Secretary of State1
- Action Program for Cuba: Procedures re Compensation for Expropriation and Consequent Readjustment of Commercial Relations
Mr. Rubottom’s memorandum of December 28, 1959, Tab C,2 approved by you on December 30, 1959, outlines various aspects of an action program for resolution of the problem created by the expropriation of American properties by the present Government of Cuba. Certain elements of that program would, if implemented, involve actions contrary to existing legal commitments of this Government under international agreements to which the United States and Cuba are parties.
The program envisages, if discussions regarding a settlement of the expropriation claims should fail, the possibility of: (1) the withdrawal of the existing tariff preferences for Cuban products, (2) the imposition of a fee on sugar imported from Cuba but not on any other sugar or on other Cuban products,3 and (3) appropriate legislation and institutional arrangements for use in the settlement of the expropriation claims of additional revenue derived from these measures. If [Page 729] duties were raised to the most-favored-nation levels and/or4 if a discriminatory fee were imposed on sugar imports from Cuba, the additional revenue could be set aside (once the necessary legislation had been obtained) for a fund to be used in the settlement of expropriation claims.
However, the removal of Cuban preference or the imposition of a fee on imports of Cuban sugar would be contrary to our present legal commitments.
Furthermore, in the event that the President were to exercise his authority under the proposed sugar legislation (which is the subject of a separate memorandum) to modify sugar quotas in such a manner as to substantially reduce the Cuban quota without a comparable reduction of other sugar import quotas, the resultant discrimination would be contrary to our existing international commitments.
This memorandum proposes a procedure for negotiations regarding settlement of the claims for compensation as a result of the Cuban expropriation and, if these are unsuccessful, for the modification or termination of existing commitments to Cuba which would free the United States to take the measures proposed above, including the withdrawal of the Cuban preference. If the Contracting Parties were to grant a waiver which would permit the withdrawal of preferences to Cuba by raising of United States duties on Cuban products to the most-favored-nation rates, it is probable that the Contracting Parties would wish this waiver to authorize Cuba to take corresponding action.5
An outline of these steps follows: Each of the first six steps is explained more fully in a correspondingly numbered attachment to this memorandum.6
Expropriation Compensation Discussions
After appropriate discussions in Washington and in Havana with representatives of the affected U.S. interests, the Department would instruct Ambassador Bonsal to renew discussions looking toward the resolution of the problem of expropriation and other damages inflicted on American properties in Cuba.
Arbitration re Compensation
Ambassador Bonsal would—again after consultations with representatives of affected property owners had been held—discuss with the Cuban Government some form of judicial or semijudicial settlement of expropriation issues.
At an appropriate time, should no solution of the compensation issue be achieved by steps 1 and 2 above,7 Ambassador Bonsal would inform the Cuban Government of the United States Government’s willingness to accede to Cuba’s urgent request for a review of economic relations. We would hope that the outcome of this review would result in the joint termination of the Convention of Reciprocity of 1902 and the United States-Cuban Trade Agreement of 1934 and revision of the exclusive trade agreement of 1947.
Cuban GATT Violations
Should it appear that efforts (steps 1 and 2 above) to settle the compensation issue are not likely to succeed within a reasonable time, following consultations with GATT leaders, the United States would consider requesting the Contracting Parties to examine its pending complaints of GATT violations by Cuba.
Unilateral Termination of Bilaterals
At the same time, should Cuba not have agreed to terminate the 1902 and 1934 agreements by mutual consent (step 3 above) the United States would give Cuba notice of its termination of them in accordance with their provisions for unilateral termination.
In connection with or following the presentation of the complaints against Cuba (step 4), the United States would consider the feasibility of requesting the Contracting Parties to grant it some form of waiver from its obligations to Cuba under GATT, sufficient to permit it to take the action then deemed appropriate. Whether a waiver is requested and, if so, its scope would depend upon the action the United States has in view at the time application is considered and the assessment then made of the probabilities of success in securing a suitable waiver.
Should the United States (1) fail to have reached a satisfactory settlement with Cuba and (2) be free of conflicting international commitments as a result of actions taken pursuant to steps 3–6, the Administration would then consider requesting legislation authorizing the executive to [Page 731]
- submit to a domestic claims commission the problem of determination of valuation and compensation of expropriated properties of U.S. citizens in Cuba and
- impose a tax on Cuban sugar or utilize [several undecipherable handwritten words] and to assign revenue derived from this tax and/or from the elimination of preferences, to a fund to be disbursed by the aforesaid claims commission in the settlement of claims of affected American interests.
That you approve the course of action set forth in steps 1–7 above.8
- Source: Department of State, CCA Files: Lot 70 D 149, Cuba. Confidential. Drafted by Walter Hollis (L/E), Herbert F. Propps (CPT), and Selma G. Kallis (TA); concurred in by Deputy Assistant Secretary of State for Congressional Affairs John S. Hoghland, Legal Adviser Eric H. Hager, Director of the Office of International Trade Theodore J. Hadraba, and Assistant Chief of the Trade Agreements Division Joe A. Robinson. Attached is a memorandum of January 8 from Rubottom to Dillon, in which Rubottom concurs in the memorandum provided “certain minor amendments and reservations” were taken into consideration. These amendments and reservations were set forth in a memorandum of January 8 from Wieland to Rubottom, also attached. In the memorandum Wieland noted that CMA had not yet had time to review carefully the tabs to the memorandum, except for tabs 1 and 2 on which CMA had no comment. Wieland’s amendments and reservations are noted in footnotes below. Also noted are Dillon’s responses, as described briefly in a memorandum of January 9 from T.J. Dunnigan, Duty Officer in the Executive Secretariat to Devine, also attached.↩
- Document 414.↩
- In his January 8 memorandum to Rubottom, Wieland noted that the reference to any other sugar was unnecessary here and the reference to other Cuban products should be eliminated. Wieland argued that its elimination “would permit the imposition of a tax on selected Cuban products in the event the Department should consider this desirable as events develop.” In his memorandum of January 9 to Devine, Dunnigan indicated that Dillon said: “No on other Cuban products.”↩
In his January 8 memorandum, Wieland argued that “or”, which was in the original text, should be changed to “and”. His reasons were: “This is essential in order to make the sentence consistent with what has gone before. Eliminating the preferences alone would not provide compensation to the affected United States interests.”
In his memorandum of January 9 to Devine, Dunnigan indicated that Dillon had decided it should be “and/or”.↩
- With regard to this paragraph, Wieland indicated in his January 8 memorandum that there was a difference of opinion as to whether Article I of the GATT required the United States to obtain a waiver from the Contracting Parties to withdraw tariff preferences. Wieland wrote that if it did prove necessary, CMA had no objection. Dillon apparently did not comment on this point.↩
- None printed.↩
- In his January 8 memorandum, Wieland suggested the insertion here of the phrase “should no solution of the compensation issue be achieved by steps 1 and 2 above.” In his memorandum of January 9 to Devine, Dunnigan indicated that Dillon had approved this change.↩
- Dillon initialed his approval of steps 1–7 on January 9.↩