611.2231/439: Telegram
The Secretary of State to the Minister in Ecuador (Long)
39. Department’s 36, May 16, 5 p.m. Since action in the present circumstances under Article XIII could not in our opinion appropriately be taken by the Ecuadoran Government, and since the Foreign Minister’s proposal to collect specific duties on a basis fluctuating with the exchange rate would involve a formal modification of the agreement which it is believed neither Government desires, you may present the following as our suggestions regarding possible emergency action by the Ecuadoran Government:
If neither permitting currency depreciation, nor increasing duties on non-schedule products or imposing quotas on such products is considered sufficient to remedy the immediate situation, we would be prepared to consider sympathetically specific proposals by the Eucadoran Government under the currency safeguard clause of paragraph 2 of Article VII. Such proposals if made should be embodied in a note from the Foreign Minister, which should state the compelling reasons for invoking the clause and specify the precise nature of the proposed action in regard to quotas on schedule products imported from this country. It would of course be helpful if the Foreign Minister included a statement that any quotas imposed would be relaxed and ultimately be abolished as soon as possible. Consideration of any such proposals would be expedited here.
As to the administration of quotas in accordance with the pertinent provisions of the agreement, it is believed that the most simple and equitable plan would be to establish for each product a global quota equal to a reasonable percentage of actual imports of such product in a mutually agreeable base period, and applicable to imports from all countries. The quota period would be not less than 3 months. A specific percentage share would then be allocated to the United States equal to our share of the total imports of the affected product during the base period or, if the Ecuadoran Government so desired in order to simplify quota administration, we would probably agree to dispense with the allocation of specific shares to the United States; in other words agree to unallocated global quotas. You should mention to Doctor Tobar that, if quotas should be imposed, we would probably not be disposed to accept a proposal for the reestablishment of the former system of permits to individual importers which proved so unsatisfactory.
Restriction of imports under such a plan as mentioned above could become effective 30 days after agreement between the two governments in regard to the proposed action.
[Page 863]The Department of Commerce has issued a statement, without reference to source of information, advising exporters to proceed cautiously in advancing further credits to Ecuadoran importers. The statement has received publicity in trade journals and other publications.