Foreign Relations of the United States Diplomatic Papers, 1939, The American Republics, Volume V

611.3531/1436: Telegram

The Ambassador in Argentina (Armour) to the Secretary of State

Buenos Aires, December 30, 1939—6 p.m.
[Received December 31—1:40 a.m.]

317. Confirming my conversation over the telephone with Hawkins this afternoon, the formal reply of the Argentine Government to my note of December 28 setting forth our final proposals as given in the Department’s telegrams 286, December 26, 8 p.m., and 287, December 27, 5 p.m., was received at 3:30 this afternoon. The note concludes with:

“In summary of what has been set forth, the position of the Argentine Government may be established as follows:

(a) In matters of exchange and quantitative regulations of imports it maintains its position, since it can only assume such obligations as it finds itself in condition to meet fully.

(b) With respect to tariff reductions for Argentine products, it insists on the suppression of the customs quotas on canned beef and flaxseed and the modification of the administrative regulations which hamper the importation of the products enumerated in Schedule II.

(c) With respect to concessions for imports of articles from the United States, this Government would be disposed to reconsider with the best willingness the possibility of increasing the advantages offered, bringing to a greater limit the degree of sacrifice that would be imposed on national industry and the loss of revenue.

(d) Regarding the general provisions of agreement, excluding those referring to exchange, it accepts in general the draft proposed by the Government of the United States under date of the 18th of the current month subject to small modification in the definitive text which articles would lie presented for the consideration of the United States negotiators.”

The text of the note, which is dated December 30, reads in translation as follows, the opening paragraph and the antepenultimate paragraph, quoted above, being omitted:

[“] The Argentine Government has analyzed with all good faith the new proposals which have been made, and its analysis discloses that they do not represent a substantial improvement with respect to the previous position.

In effect, for two products of primary interest, linseed and canned meats, the principle of the customs quota is retained.

This is the fundamental difficulty in accepting the schedule of reductions which Your Excellency’s Government proposes. It is necessary to intercede once more that the Argentine Government hopes that this agreement may constitute an instrument capable of permitting a definite equilibrium in the interchange between the two countries, which is indispensable in order to assure for merchandise originating in the United States the system for the granting of prior exchange permits which is being requested.

If in the agreement we do not obtain for two products of such importance customs reductions which can be utilized freely and without limitation of quantity, its practical application will give a stable character to the deficit which normally characterizes our commercial interchange with the United States. Such a situation, capable of remedy if there should be maintained the conditions which governed in international commerce up to the year 1930, constitutes in the present circumstances a serious problem which can only be resolved in the agreement if the concessions stipulated for Argentine products permit a calculation to be made, with a reasonable security, that there will be produced a considerable increase in the volume and value of our sales to the United States.

With respect to that which is set forth in Your Excellency’s note relative to the detriment of a customs quota, I must point out to the Ambassador that in the judgment of the Argentine Government, when in order to increase a market it is necessary to enter into competition with local production which is highly protected, it is completely untenable, practically and theoretically, that a tariff reduction linked to a quota, favors the development of the trade. In these cases it follows that it is [more?] important to obtain the application of duty reduction to the total volume which it may be possible to place in the United States market than to reach the maximum reduction permitted by the Trade Agreements Act.

Even though in the note of the 22nd instant and in previous [conversations?] we have explained fully our points of view regarding the concessions which we consider essential to obtain from the United States in order to arrive at the signature of the agreement, we regard it necessary to set forth here several arguments which may facilitate their rapid comprehension.

We will recall with respect to linseed, that since the average of our exports is very much larger than 12 million bushels, the reduction offered us does not favor in any sense a real increase in allowance the volume of our sales, nor does it contribute, in an effective way to the discouragement of a domestic production obtained, thanks to a high tariff and to ostensibly governmental measures of an internal character.

Evidently, the customs quota alone tends to furnish a check on the increase of our exports and it is necessary to point out here that the Argentine Republic is the primary producer of linseed and the most important supplier of the world market, and that in treating of an article in which case we have indisputable lead, it was natural to hope that there would be displayed on the part of the Government of the United States an attitude in harmony with the basic principles that inspire its commercial policy tending to reestablish international commerce.

In order to produce an increase in our exports of linseed to the United States, it would be necessary that through a lower cost obtained by a reduction in the duty, the domestic price in the United States would be reduced so as to encourage an increase in the consumption of this oil seed, in order for it to be able to displace substitutes, or to increase the use of linseed oil in conjunction with other oils. But it is well known that the price of a product is always fixed by the cost of the marginal supplies, which is [in?] the case of Argentine linseed, would be represented by the importations over and above the quota. Therefore, the practical application of this system does not signify the least improvement with respect to the actual situation. If we carried the argument to the extreme, it would be possible to say that the quota rates would have the same effect as a reduction in duty in favor of American importers, which would not benefit the Argentine producer.

With regard to meats, the expansion obtained through a specific customs reduction subject [to?] a quota, is considered entirely insufficient in the face of the obligations which the Argentine Government would assume as a consequence of the proposed agreement. We desire to obtain for meats the maximum reduction permitted by law without limitation of quantity. The reduction should be extended not only to the specific duty but also to the ad valorem duty. At the present time when preserved meat has an f.o.b. Buenos Aires value higher than 15 cents United States per pound, the ad valorem duty would already be effective on Argentine meats which obtain a higher price because of their quality. On the other hand, preserved meats from competing countries would be the chief beneficiaries of a reduction which would only partially affect our products and which would be obtained by the Argentine Government as a counterpart of important concessions. In this regard it suffices to recall the statement made by the Argentine subcommittee in its memorandum of September 20 last.

With regard to corn, for which no concession is offered, we should recall that in the memorandum referred to above there was also stressed the considerable importance to our country of the possibility of marketing in zones near certain ports of the United States, an annual volume of 250,000 tons, and it was stated that this request could not be considered separately but should be taken into account bearing in mind the aggregate of obligations derived from the agreement.

With regard to wool, we have no official reply concerning the tolerance of 25% requested for wool imported not finer than 40s with reimbursable duties since destined to the manufacture of carpets, door mats or any kind of floor covering.

Furthermore, the request of our negotiators for a reconsideration or clarification in a favorable sense of the administrative measures which hinder the importation of Argentine products has not received a satisfactory reply.

We limit these considerations to the examination of the new proposal of the United States, because we feel that with respect to all the other points of difference there could only be repeated the arguments already known and which in the opinion of this Government are sufficiently convincing.

In comparing the concessions which both countries have offered in customs matters to date, Your Excellency states that ‘altogether, the reductions and bindings thus far offered would cover only about 60% of Argentina’s imports from the United States, on the basis of 1938 figures, as compared with concessions in Schedule I covering about 86% of imports into the United States from Argentina.’ But the percentages mentioned by Your Excellency in this case are in the present abstract indices and lead to error. The reality is as follows: The Argentine Republic has offered reductions and bindings for a total of goods which upon entering the Republic have a value of 181,000,000 pesos and the United States offering reductions and bindings for Argentine goods which upon being exported from our country reach a value of only 102,000,000 pesos Argentine currency. These figures correspond to the real value of the merchandise calculated with regard to imports and exports at the official buying rate of exchange which governed in 1938.

But, in comparing Schedules I and II annexed to the agreement, it should also be borne in mind that the granting of reductions has been planned taking as a basis two entirely different tariff systems. In the United States the customs tariff constitutes a real barrier raised for protectionist purposes, with high customs duties which are reinforced by the application of administrative measures.

Our customs tariff has always had an exclusively fiscal purpose and, with it, has not been intended to eliminate foreign products from the domestic market. For numerous articles for which duties are now being bound, the values fixed by law are far below the real value of the goods, and the duties levied on the importation thereof are low. Furthermore, it should be recalled that even though the customs tariff establishes duties and values in pesos gold, they are paid for in pesos of the national currency at the rate of 2.27 and that, notwithstanding the change in value of our currency, the valuations which serve as a basis for the application of the duties have not been revised. The Argentine Government, in accepting bindings has waived the possibility of modifying the tariff valuations to adapt them to the present actual situation. On the other hand the reductions accorded are of importance and they represent a real sacrifice which deprives the state of an important part of its revenue. These considerations lead to the hope that the Government of the United States will appreciate the real significance of not only the value of the concessions already offered by this Government in matters of customs reductions but also the disequilibrium which exists between the advantages offered by Argentina and the proposals made the United States.

It is also fundamental that Your Excellency’s Government reconsider its requests in matters of exchange and quantitative regulations on imports. In the manner in which the pertinent clauses of the agreement have been proposed they constitute a rigid system which could not be applied in practice.

On the other hand the position adopted by the Argentine Republic in this matter is not doctrinaire and only conforms to the reality of international commerce. It assures to the products of the United States a treatment no less favorable than that accorded to the products coming from any other country and a preponderant share in the supplying of the Argentine market, with the only reservation of conserving a certain elasticity which would be applied when the circumstances so required for a limited number of exceptional cases.

Your Excellency may be certain that the minute study of the system such as we propose, and our insistence in not modifying it, explain the impossibility of accepting other bases. On the other hand, the firm intention and the known interest of the Argentine Government to accord to imports from the United States the most favorable treatment possible constitutes a guarantee of fair treatment, more smoothness, than all the stipulations which might be imagined

In leaving clearly established the position of the Argentine Government, I cherish the hope that Your Excellency’s Government will be disposed to reconsider its offers with a view to satisfying the legitimate and reasonable aspirations of both Governments in order thus to reach the signature of an agreement which represents a real step in the improvement of the trade between our two countries.

I take the opportunity to reiterate to Your Excellency the expressions of my highest and most distinguished consideration.

Signed: José María Cantilo.”

Armour