611.3531/1420: Telegram
The Ambassador in Argentina (Armour) to the Secretary of State
[Received 8:30 p.m.]
309. Embassy’s telegram 301, December 20, 3 p.m. Confirming our conversation with Hawkins, the Argentine Government’s formal reply to our revised proposals was handed to me at 11 o’clock this morning.
They express the hope that the circumstances which unfortunately prevail at this time will not be allowed to prevent us from satisfying Argentina’s minimum requests and reiterate that their firm intention to contract only those obligations which they can meet requires them to maintain the position adopted in matters of exchange and quantitative regulation of imports.
They imply that they were led into public announcement under a misconception of the situation, saying that they could not interpret our reply of August 20 to their memorandum of August 12 as presaging the small importance of our proposed tariff concessions and the institution of a system of customs quotas, which they assert was not even hinted at during the preliminary conversations held in Washington and Buenos Aires.
They recall that they were persuaded to withdraw their requests for the addition of articles to the list of products which would be considered for tariff treatment and that there then remained to them only the possibility that the maximum reductions at the time would be the difficulties for the items included in the original list. However, they go on to say that the Government of the United States, in its proposals of November 15, omitted certain products like corn, pears and cheese, which offered possibilities for increasing the exchange available for payment of imports, offered no reduction on hides and restricted the value of the concessions on flaxseed and frozen turkeys by means of customs quotas. They point out that while a 50% reduction in the specific duty on canned beef was offered, the ad valorem rate was increased, which would mean that if a growth in demand should cause the price of the product to rise this would immediately initiate a nullification of the advantage obtained and automatically check any possibility of their exports reaching the important proportions contemplated under the general frame work of the agreement. As for the alternative proposal, it is stated that if it is borne in mind that Argentina’s share of our imports of canned beef amounts to only 45% of the total, the scant value of the offer will be readily appreciated. In the best of cases, they say, there could only be a probable increase of 10,000 [Page 279] tons over their present exports, which is very far from their long range expectations in the matter.
They explain that the reason they first presented their counterproposals on Schedule II, requesting more generous treatment, was their belief that a large increase in the sale of Argentine products to the United States is a condition sine qua non to the contraction of obligations in matters of exchange and quantitative regulation of imports.
They assert that our revised proposals are not only very far from the minimum which they consider essential, but also would create a serious problem for the future of our reciprocal agreement. In this connection they stress the difference they perceive between a system of quotas imposed for the purpose of keeping imports down to the amount the country can pay for and a system of quotas which serves protectionist purposes only.
They say that the imposition of customs quotas on products which, like flaxseed and canned beef, have constituted the fundamental items in Argentina’s exports to the United States would create a situation too serious to be accepted, and they remark in this respect, “We could not possibly conceal the surprise that this proposal caused us.” They recall that the conviction existed here that the chief purpose of negotiating an agreement was to increase the volume of reciprocal trade, but claim that under our proposals the reality would be entirely different.
They say that they are aware of the factors tending to make the United States self-sufficient and therefore can estimate what the acceptance of a customs quota would mean. They feel that under normal conditions the customs quota would in effect signify the maximum limit of their share in supplying the American market during the life of the agreement, and in this connection they point out that the same reasons which are now responsible for the suggested imposition of a customs quota might lead to progressively smaller customs quotas.
They point out with respect to coarse wools that they have not been able to obtain any satisfaction in the matter of an increased tolerance. As for the duty reductions on wools not finer than 44s, they say these are of no interest since they amount to only 5 cents pet category, or a reduction of only 17 per cent. They add in this regard that they desire for this type of wools, as well as for those under paragraph 1101 (a), the maximum reductions which can be granted under the Trade Agreements Act.
They note that we recently offered a reduction of only 25 per cent on hides, but recall that we have offered nothing on corn.
They concede their references to Schedule II by asserting that their analysis of the situation entirely justifies the requests they have made during the course of the negotiations and they express the hope that [Page 280] the spirit of understanding which animates the authorities of the United States will facilitate the acceptance of the Argentine Government’s point of view and permit tariff reductions on Argentina’s major export products to be granted without any limitations whatsoever.
They go on to refer to their requests for modification of our administrative regulations affecting imports of their products and note that they have not as yet received a satisfactory report. In this respect they urge that any customs concession no matter how great can be annulled through the application of administrative regulations and insist that the latter must be modified if the agreement is to produce a substantial increase in their exports.
With regard to quantitative regulation of imports, they state they have accepted most of our proposals but consider it essential to maintain a certain degree of flexibility of action, so that under exceptional circumstances the system would not be too rigid to permit the fulfillment of obligations contracted with the United States and other countries.
They assert categorically that the position of the Argentine Government with respect to matters of exchange and quantitative regulation of imports is definitive and cannot be modified. In this connection, they say it is the firm purpose of the Argentine Government to give the most favorable treatment possible to imports of United States origin. They regard it of capital importance that the Argentine Government maintains exchange control and quantitative regulation of imports for the sole purpose of protecting the value of the currency and of continuing to meet its international financial obligations. It is with these aims that the Argentine Government seeks to obtain an increase in the volume of Argentina’s exports to the United States. As a result of the agreement, they go on to say, that if the Government of the United States takes into account all the factors which have led Argentina to consider its position on matters of exchange and duty reductions for Argentine products as final, the Argentine Government, desirous of harmonizing the interests of the two countries in other matters in which there is still disagreement, would be disposed to reexamine its proposals even though it considers that in the matter of customs it has practically reached the maximum of concessions it can grant.
It is stated that the Argentine Government entered the negotiations feeling fully confident that the results thereof would permit it gradually to return to multilateralism in international trade; that one of the great difficulties encountered heretofore has been the United States tariff coupled with administrative measures that constitute additional restrictions on Argentina’s export trade. The note ends with the statement that the Argentine Government hopes that the full application of the general principles represented by the Government [Page 281] of the United States in matters of economic policy will make it possible to conclude a trade agreement of mutual benefit.