Foreign Relations of the United States Diplomatic Papers, 1937, The American Republics, Volume V

611.2231/199

The Minister in Ecuador (Gonzalez) to the Secretary of State

No. 911

Quito, September 27, 1937.
[Received October 7.]

Sir: With reference to my despatch No. 909 of September 25, 1937,⁵¹ reporting my conversation with the Minister for Foreign Affairs in the matter of the proposed trade agreement, I have the honor to transmit herewith a Memorandum with English translation received this morning which sets forth the concessions which Ecuador is prepared to make.

With regard to the percentage reductions, those in tariff items Nos. 684–a, –b, –c, –d and –e, the percentage reductions are slightly higher than those indicated since for example in No. 684–a the duty would actually be reduced from 45% to 35% (see page 3 of my despatch under reference).

With regard to the last paragraph of the Memorandum I deemed it desirable that the Department have the exact text of the reasons for Ecuador’s insistence upon the inclusion of the trade balance clause, in view of which I incorporated it in my telegram No. 55 of September 27, 1 p.m., 1937. What the Foreign Office desires to express is that the visible balance of trade must show an active balance for Ecuador in order to cover the appreciable invisible items of ocean freight, insurance, capital remittances, and the appreciable proportion of the value of petroleum and cyanide precipitates shipments which appear in export statistics but which do not return to the country. In order to achieve that favorable visible balance Ecuador has committed itself to the exigency that all countries must show a passive balance in their trade with Ecuador in order to obtain and continue to enjoy the maximum concessions and benefits granted under the Preferential Tariff and other trade arrangements.

Respectfully yours,

Antonio C. Gonzalez

[Enclosure—Translation]

The Ecuadoran Ministry for Foreign Affairs to the American Legation

1.— The binding (estabilización) of certain customs items may be agreed, provided that they are based on the Present Tariff, that is, including the amendments made on June 30, 1937 (Registro Oficial No. 531, July 5, 1937);

2. —A reduction is granted in item No. 274 (prepared paints, in liquid, etc.) from 70 centavos to 60 centavos per gross kilogram;

3.— In item No. 362 (c) (pharmaceutical preparations and specialties), the duties are reduced from 1.50 sucres to 1.20 sucres per legal kilogram;

4.— In item No. 684:

(a)	(Automobiles),	reduced	from	45%	ad	valorem	to 35% ad valorem
(b)	. . . . . . .	“	“	60%	“	“	to 45% ad valorem
(c)	. . . . . . .	“	“	100%	“	“	to 85% ad valorem
(e)	. . . . . . .	“	“	35%	“	“	to 25% ad valorem

Summarizing the preceding concessions, Ecuador would grant to the United States the following reductions:

Ecuadorean Tariff Item Number		Percentage of Reduction
13–a	Hog Lard	50%
87	Pure wheat flour	50%
153	Lubricating oils for machinery and vehicles in general	30%
274	All prepared liquid paints, etc., (actually pay 70 centavos, the United States would pay 60 centavos)
290	Paste, powder, or any other preparation for Dental hygiene	30%
372–c	Pharmaceutical preparations and specialties (actually pay 1.50 sucres, the United States Would pay 1.20 sucres)
525	Machetes, hoes, pickaxes, shovels, etc	30%
676	Electric batteries in general	30%
684–a	Automobiles up to 600 dollars	10%
684–b	“   from 601 to 900 dollars	15%
684–c	“   from 901 dollars and above	15%
684–d	Omnibusses and similar vehicles	5%
684–e	Parts, loose pieces and replacement parts for Automobiles, omnibusses and trucks, etc.	10%

The United States will also enjoy the 30% of the Preferential Tariff from the following products:

31		Sardines in any form;
32		Edible oils in general;
222	–a	Table glassware which has a thickness of 1.20 millimeters or more in its thinnest part;
647		Sewing machines, with or without cover;
688		Inner tubes for tires of vehicles;
703		Tires or covers for automobile wheels, solid, hollow, etc;
837		Writing paper;
889		Oilcloth with a base of cotton or other vegetable fibers;
1076	–b	Stockings and socks for men and women;
1144		Disks, etc., for phonographs and talking machines;
1148		Phonographs in general, talking machines and apparatuses.

However, it must be left on record that in order that Ecuador should continue these unique concessions which until now it has made to no other country, it is agreed that the commercial balance shall be favorable to Ecuador inasmuch as this principle is of vital importance to the economy of the country; since it is the only way that it can cover payments in gold for ocean freight and insurance as well as the merchandise we import and which we export, which principle has been incorporated in the commercial treaties already concluded by Ecuador and which has been accepted by the other countries.

51. Not printed.