611.2331/119
The Ambassador in Peru (Steinhardt) to the Secretary of State
[Received November 15.]
Sir: I have the honor to refer to my despatch No. 737 of November 5, 1938, and to report that my appointment with Dr. Concha having been postponed by him from yesterday afternoon until this morning, I was in receipt of the Department’s telegraphic instruction No. 46 of November 8, 5 p.m. before our conference took place.
At the outset Dr. Concha reiterated and emphasized that it was essential for him to obtain a general exception—present and future—from the operation of the unconditional most-favored-nation clause in the case of Chile in order that he would be in a position to meet such demands as the Chilean Government might make of him in the future. He stressed the unusual relations between Peru and Chile and said that anyone who had studied the history of the Chilean-Peruvian war38 was well aware of the fact that it had been brought about by commercial reasons. He also referred to his pending negotiations with Bolivia and the unusual status of the relations between Peru and Bolivia.
From Dr. Concha’s general comments I judged that he had—at least in his own mind—abandoned his hope of obtaining exceptions in favor of Brazil, Colombia and Ecuador, subject only to the customary provision concerning limited frontier traffic. Thereafter, in the course of a discussion which lasted for over an hour, Dr. Concha made no further reference to Bolivia, from which I judge that he will not be too insistent on an exception in the case of that country, although it is still entirely possible that he may request specific limited exceptions in the case of Bolivia.
As to Chile, he again adverted to the necessity of his making almost any concessions that that country might demand, in order to preserve the Chilean market for Peruvian sugar. I again pressed him to suggest specific limited exceptions in the case of Chile so that I might communicate the same to the Department for a prompt reply, in the hope of expediting the negotiations.
As I am reasonably certain that Dr. Concha would prefer to have the negotiations with the United States either definitely concluded or broken off before he must face his new negotiations with Chile, and as these negotiations—judging by the procedure adopted during the past two years—will have to be undertaken within the next three or [Page 869] four months, I referred at this stage of the discussion to the requisite period of time which must elapse in Washington after the first notice of intention to negotiate is publicly made, pointing out to him that the period would consume approximately three months, and stressing the desirability of putting the Department in a position, as soon as possible, to give the first notice of intention to negotiate.
Dr. Concha asked me whether it was my understanding that this notice would probably be given after the question of the exceptions to the unconditional most-favored-nation clause had been agreed upon, and I told him that that was my understanding, subject, of course, to other considerations in the Department with which I might not be familiar; but that I was reasonably satisfied that once the exceptions were agreed upon, the Department contemplated giving immediate consideration to the publication of the first notice of intention to negotiate. This aspect of the matter appeared to have an effect upon Dr. Concha, for his insistence on a general exception in the case of Chile became noticeably weaker thereafter.
His first objection to limited specific exceptions was that the list would be interminably long, because—as he put it—the Chileans would want favored treatment on a large number of items in respect of which their exports to Peru were inconsequential but as to which they appear to have hopes of expanding their exports to Peru in the remote future. I suggested to him that perhaps various of these items could be lumped so that the list would not have to be so long. Dr. Concha’s reply to this thought was to disclose five of the products which he apparently will desire excepted, to-wit: wheat, coal, fruit, canned goods and manufactured products.
As to wheat he called my attention to the quota of 40,000 tons at present granted Chile free of duty and asked me to speculate as to what the Department’s position would be regarding such an exception in favor of wheat. I told him that without the slightest knowledge of the Department’s attitude were he to ask for an exception of 25,000 tons duty free, I would recommend to the Department that the United States ask for a similar quota, duty free,—Chile and the United States, after filling their respective quotas, to be on the basis of equal treatment in respect of further imports. I also called his attention to the fact that Chile had not exported a single ton of wheat to Peru last year.
Dr. Concha seemed to be somewhat taken aback by my thought and wanted to know how he was to continue to sell sugar to Chile if he could not offer the Chileans the slightest advantage for their wheat as against the United States in the Peruvian market. This exchange disclosed to me that what Dr. Concha had in mind principally was sufficient exceptions to compel Chile to continue to purchase at least 100,000 tons of Peruvian sugar. I then pointed out to him [Page 870] that he was perhaps unduly concerned as to the possibility of a discontinuance by Chile of the purchase of Peruvian sugar in as much as the total world marketable supply of sugar was fixed by the Council in London, and if Chile were to purchase the 100,000 tons elsewhere, the Peruvian supply would undoubtedly fill the gap occasioned by such purchases.
I then told Dr. Concha that if he were to abandon his request for a general exception in the case of Chile and ask for a specific limited exception of 25,000 tons of wheat, and ask for no other exceptions, I would communicate his request to the Department telegraphically and ask for a telegraphic reply. This terminated the discussion with respect to wheat.
Dr. Concha then mentioned coal, canned goods, fruit and manufactured articles without, however, elaborating on any of these products.
He then referred to his advisory committee and said that he would have to take the subject up with them, and that perhaps it would be better for him to discuss the subject first with Dr. Lavalle (a member of the committee) who has been the chief negotiator of the Chilean-Peruvian agreements. He again suggested that I send him a most informal memorandum, to which I replied that I did not feel qualified to give him even the most informal memorandum without submitting the same first to the Department for its approval, and that this meant a delay of several weeks. I sensed that the threatened delay would not appeal to Dr. Concha—which was apparently justified—as he replied that it was perhaps just as well not to have any further exchange of memoranda until the possibility of an agreement in the matter of exceptions had first been further explored.
The discussion came to a close with a promise by Dr. Concha to discuss the matter with Dr. Lavalle, thereafter with the advisory committee and to confer with me further within a week.
It is my opinion that Dr. Concha intends to recommend to the advisory committee that his request for general exceptions be abandoned, and that he content himself with an exception in favor of limited frontier traffic in the case of Bolivia, Brazil, Colombia and Ecuador, and limited exceptions in the case of Chile, such exceptions, however, to be very considerable in scope and quantity.
I am not at all sanguine, however, as to the reaction of the committee. The members are men of such standing in the community that they cannot be regarded as rubber stamps for Dr. Concha. I have believed, ever since I first heard of the creation of this committee, that it would prove our principal stumbling block. I fear that the committee may insist upon broader exceptions than the Department may be prepared to grant.
[Page 871]I am already entertaining suspicions that one or more members of the advisory committee are opposed to any commercial agreement between Peru and the United States. The ramifications of the personal interests of several of these gentlemen would doubtless support my suspicions if they could be fully ascertained. Even assuming that selfish, personal interests may not be motives, there are foreign interests shrewdly represented in Lima who of late have been evidencing great alarm at the prospects of a trade agreement between the United States and Peru and who are not above “employing” one or more members of the advisory committee in an endeavor to sabotage the contemplated agreement. One or two members of the committee have not been any too friendly to the United States in the past, and one of them in particular—the Department will recall—was under my suspicion in connection with the withholding of a license to the Associated Press.
In questioning Dr. Concha as to his reason for having constituted this committee he explained the necessity of freeing himself from future criticism in respect of the terms of any trade agreement that might be consummated and referred to the elaborate machinery set up in Washington, as constituting the reason for his not undertaking to negotiate an agreement without the assistance of an advisory committee. When I review, however, the difficulties placed in Dr. Concha’s path by other committees which he has constituted—such as the recent Mission to Japan—and the failure of Dr. Belaunde in the Ecuadoran-Peruvian boundary dispute,39 to carry out his wishes, I entertain some misgiving as to the reply that I may expect to receive next week.
With particular regard to the suggestion contained in the Department’s telegram No. 46, November 8, 5 p.m., that I strongly resist Dr. Concha’s argument concerning Peru’s trade balances with Bolivia and Chile, citing our Government’s well known position, unfortunately I regret that our position has little appeal for Dr. Concha under the existing circumstances for the following reason:
In principle, Dr. Concha would prefer that the proposed Peruvian-American trade agreement be based upon unconditional most-favored-nation treatment, without any limitation or qualification of any kind. In other words, his point of view is identical with that of the Department. It is not Peru which is seeking special favors or exceptional treatment from contiguous countries. Quite the contrary, it is Chile—and to a lesser extent Bolivia—which is demanding special concessions of Peru. The Chileans are merely capitalizing the imperative necessity of Peru to continue sales of not less than 100,000 tons of sugar to Chile.
Dr. Concha has made it quite clear—as previously reported by me—that if he could find another market for not less than 100,000 tons of [Page 872] Peruvian sugar he would refuse to accede to any of the Chilean demands. Thus it would appear that Dr. Concha’s desire for exceptions—particularly in the case of Chile, and to a lesser extent in the case of Bolivia—springs from the pressure which these two countries are bringing to bear upon him. I am convinced that such pressure is both unwelcome and irritating to him.
In consequence, Dr. Concha is able to reply in good faith to the Department’s well known position in favor of multilateral trade as against bi-lateral conventions that he entertains the identical desire and that if the Department can find some way of removing the pressure brought upon him by Chile—and to a lesser extent by Bolivia—he will be only too pleased to enter into an agreement based on the unconditional most-favored-nation treatment,—without exceptions of any kind.
I confess to great difficulty in meeting Dr. Concha’s answer, in view of my recognition of the truth of his claim that he must have a market for the 100,000 tons of sugar in question, and that unless he grants special treatment to Chile, he is in great danger of losing this market.
Respectfully yours,
- For references to correspondence in Foreign Relations volumes for the years 1879, 1880, 1881, 1882, and 1883 regarding this war, see General Index to the Published Volumes of the Diplomatic Correspondence and Foreign Relations of the United States, 1861–1899 (Washington, Government Printing Office, 1902), heading: “War of Chile against Bolivia and Peru,” pp. 882 ff.↩
- See pp. 217 ff.↩