611.2531/143a
The Secretary of State to
the Chargé in Chile (Scott)
No. 176
Washington, July 30, 1935.
Sir: The trade agreements program of the United
States contemplates eventual negotiations with each important commercial
country with which the basis for an agreement in harmony with the
principles and objectives of the program is believed to exist. Trade
agreements have been signed with five countries, negotiations are now in
progress with thirteen others, and it is planned to institute
negotiations with additional countries from time to time in the future.
It is expected, therefore, that in due course this Government will have
occasion to initiate discussions with the Chilean Government with a view
to determining whether there is a basis for the conclusion of a
satisfactory agreement with that government and whether that government
would be disposed to enter into such negotiations.
Meanwhile it is desirable that a complete understanding should exist in
that country of the general objectives and fundamental principles of the
commercial policy of the United States. Similarly, it is desirable for
this Government to be fully cognizant of any considerations which may
govern the commercial policies of Chile, and of the reaction of that
Government to the policies of the United States. An exchange of views of
a purely informal character, restricted to general considerations of
policy rather than the detailed study which would follow in connection
with negotiations, may serve a useful purpose at this time, and may
facilitate the progress of any negotiations which might subsequently be
initiated.
With this in view the Department considers that you may usefully, at your
discretion, enter into informal conversation with the Minister of
Foreign Affairs, and such other officials as may be deemed appropriate,
for the purpose of explaining the commercial policy of this Government,
and ascertaining the reaction thereto of the Chilean Government. You may
supplement your reports of the substance of these conversations by such
additional comment as you believe would be of interest to the
Department, with particular reference to the
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ultimate possibility for the negotiation of a
trade agreement between the two countries.
As an aid to you in discussing this general subject, there is enclosed a
brief memorandum outlining the salient features of the commercial policy
of the United States, as well as a copy of a press release of the
Department entitled, “Policy of the United States Concerning the
Generalization of Tariff Concessions under Trade Agreements”.1 In referring
to these basic principles you may find it appropriate to point out that
they are in harmony with the resolution on economic, commercial and
tariff policy approved by the Seventh International Conference of
American States at Montevideo in December, 1933.2
Should any points arise in your conversations concerning which there may
be some doubt, the Department will welcome your inquiries in the
premises.
Very truly yours,
For the Secretary of State:
Francis
B. Sayre
[Enclosure]
Memorandum on the Commercial Policy of the
United States
1. The Negotiation of Reciprocal
Trade Agreements.
The Trade Agreements Act of June 12, 1934,3 authorizes the President
of the United States, under certain circumstances and for the
purpose of expanding foreign markets for the products of the United
States, to reduce by not more than one-half, or to provide for
continuance at their present levels, of the rates of duty on imports
into the United States in connection with reciprocal trade
agreements with foreign countries.
Under this authority the Government of the United States has embarked
upon a program of reviving and stimulating its foreign trade by a
determined effort to reduce or remove the many barriers of different
kinds which now hamper the flow of trade between the countries of
the world, including not only excessive rates of duty but also
import restrictions such as quotas and licensing systems, and
restrictive exchange controls. This program rests upon the
conviction that the welfare of the United States, as of the rest of
the world, will be enhanced by an increase in the production and
mutually profitable interchange of goods, and that an effective
means to that
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end is to be
found in the reduction of the barriers to international trade. It is
with this object in view that the Government of the United States
has negotiated trade agreements with certain countries, is now
negotiating with others, and contemplates entering, in due course,
into negotiations with additional countries with a view to the
exchange of reciprocal concessions in tariff rates and the reduction
or removal of other barriers to trade. In the negotiation of these
trade agreements, the United States is prepared to grant reductions
in its import duties on goods supplied by the other country, or to
agree not to increase existing duties or to impose new duties on
such goods, in return for tariff reductions, increased quotas, and
liberalization of restrictions by that country on products supplied
by the United States.
It is hoped that in the negotiation of these agreements the
governments concerned will exchange as extensive concessions as the
nature of their trade and their domestic situation will permit. It
is the general policy of the United States to grant concessions in
its import duties on products of which the other country
participating in the negotiations is the principal or an important
source of importations into the United States. The application of
this rule gives assurance that the chief benefit of the concessions
exchanged will inure to the trade of the countries entering into the
reciprocal agreement.
In cases where there are several important foreign suppliers of an
important commodity on which a concession might reasonably be
granted, negotiations with those countries may be carried on
concurrently or a relatively small reduction may be made in one case
and a further reduction, within the 50 percent limitation and
subject to careful consideration of the extent to which it is deemed
reasonable to reduce the duty within that limitation, may be granted
under a trade agreement with another important supplier.
2. The Most-Favored-Nation
Policy.
The principle of unconditional most-favored-nation treatment, which
is a basic element in the commercial policy of the United States, is
not affected by the program of concluding reciprocal trade
agreements. It remains an integral part of the policy of the United
States as developed in connection with the negotiation of reciprocal
trade agreements. The Government of the United States believes that
the spread of discriminatory practices in the regulation and
restriction of international trade constitutes a serious hindrance
to the revival of that trade. The use of preferential tariffs,
quotas and exchange allocations as bargaining devices for the
securing of exclusive advantages is disruptive of normal trade
relations, diverts trade into uneconomic channels, and thus tends to
reduce the volume of trade. Since
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third countries are discriminated against,
retaliatory measures tend to be provoked, and in the end the
cumulative effect of these discriminatory practices is destructive
of international commerce and finance.
It is felt that the restoration and further development of the
world’s trade requires the discontinuance of these practices as
rapidly as may be possible, and the most widespread return on a
broad basis to the principle of equal treatment, which is the
essential element of the unconditional most-favored-nation
principle. It is recognized that the various measures of restriction
and control of international trade and exchange, out of which the
current discriminatory acts have largely arisen are themselves the
results of endeavors to meet the pressing difficulties of recent
economic situations. The Government of the United States is deeply
sympathetic with the governments of countries whose currency and
debt situations require the application of measures designed to
reduce or control the total volume of merchandise imports. However,
it is the view of the Government of the United States that tariff
rates, quotas and licensing systems, foreign exchange controls,
clearing and compensation agreements, governmental monopoly
purchases, as well as all other methods employed for restricting and
controlling foreign trade, should be administered in such a way as
not to discriminate against American commerce; that specifically
they should be administered in such a way as not to alter the
relative share which the United States would enjoy in the total
import trade of the country in which they are administered in the
absence of the restrictions in question. It is the belief of this
Government that irrespective of the effect of such measures on the
total trade of the countries which adopt them, they should be
administered in such a manner as not to divert trade arbitrarily
from one country to another and so to disrupt the normal channels of
international commerce.
3. Generalization of Concessions
Granted By the United States.
The foregoing is recognized in the application of the trade
agreements policy of the United States. The Trade Agreements Act
provides that the duties and other import restrictions proclaimed in
connection with any trade agreement shall apply to the like articles
originating in all foreign countries except those which discriminate
against American commerce or take actions or pursue policies which
tend to defeat the purposes of the Act. In the development of the
trade agreements program the principle is followed that if a foreign
country does not discriminate against American commerce, that is, if
American commerce is given treatment by that country substantially
no less favorable than that accorded the commerce of any third
country, then it is considered that the commerce of that country is
entitled to receive the benefits of the concessions granted by the
United States
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under trade
agreements with, other countries. (The special relationship between
the United States and Cuba is, of course, an exception based upon
the special and historic circumstances of the case).
If, on the other hand, any foreign nation engages in practices which
discriminate against American trade, then the President is
authorized, under authority of the Trade Agreements Act, to refrain
from extending, or may withdraw, the application of the reduced
rates effected under the Act to the like products of that country. A
full discussion of the policy of the United States with respect to
the generalization of tariff concessions granted in connection with
trade agreements is contained in a press release issued by the
Department of State on April 1, 1935, a copy of which is
attached.
