It will be noted that the proposed basis for a trade agreement embodied
in the memorandum is in line with the suggestions, with respect to the
basis for a trade agreement, made to Uruguayan officials by officers of
the Department during conversations in Montevideo. The memorandum
contemplates the negotiation of a trade agreement under which, from its
effective date, the Uruguayan Government would accord full equality of
treatment to United States trade, as provided in the proposed general
provisions, and tariff treatment as indicated for United States
products. It is desired to ascertain what concessions the Uruguayan
Government would expect in return for according this treatment to United
States trade under an agreement.
As indicated in the enclosed memorandum, the question of the negotiation
of a trade agreement with Uruguay is closely related to the question of
the negotiation of a trade agreement with Argentina.6
Similar consideration and questions in regard to the basis for a trade
agreement are also being presented to the Argentine Government and the
Department will keep you promptly advised in regard to the progress of
discussions with that Government.
A copy of the enclosed memorandum is being handed to the Uruguayan
Minister in Washington.
Please telegraph the Department any suggestions you may have regarding
the contents of the memorandum prior to transmitting it to the Uruguayan
Government, and you will, of course, report promptly to the Department
the reaction of Uruguayan officials.
[Enclosure]
Memorandum To Be Presented by the American Chargé
in Uruguay (Dwyre) to the Uruguayan
Minister for Foreign Affairs (Guani)
The Government of the United States, in pursuance of the
conversations in Montevideo between officers of the Department of
State of the United States and officials of the Government of
Uruguay, desires to present to the Uruguayan Government certain
considerations and questions regarding the basis for a trade
agreement between the two countries.
Three essential elements comprise the basis for the negotiation of a
trade agreement: 1) possible tariff concessions by the United
States; 2) the general provisions of the agreement, particularly
those relating to quotas and exchange; and 3) possible tariff
concessions by Uruguay.
With reference to possible tariff concessions by the United States,
the maximum reduction in United States import charges permitted by
the Trade Agreements Act, under authority of which trade agreements
are negotiated, is 50 per cent. As the Government of Uruguay is
aware, the United States customarily grants tariff concessions only
in respect of articles of which the other country concerned is the
chief or an important source of imports into the United States. In
accordance with this principle, the Government of the United States
has exhaustively studied all products of which Uruguay is the chief
or an important supplier to the United States. The products studied
are contained in the attached list.7 As a result of this study, the
Government of the United States is now fully prepared to give
consideration to any requests which the Government of Uruguay may
desire to make in respect of the tariff treatment of the products
listed.
In making the above-mentioned study, the Government of the United
States has borne prominently in mind the importance attached by
Uruguay to the trade in meat, and has reexamined with the greatest
care the questions relating to the importation of chilled and frozen
meats from Uruguay. It has been forced to conclude that
circumstances connected with the sanitary laws and regulations of
this country are such that no practicable means can be found for
effecting any immediate improvement in this situation. However, the
Government of the United States, having in mind possible future
developments, would be willing to cooperate with interested
governments such as those of Uruguay, Argentina, and Brazil, should
such governments desire, in a study of rinderpest and foot-and-mouth
disease. A study of these diseases by an international group of
well-qualified scientists, preferably non-governmental, might
result, among other
[Page 789]
things, in a finding that meat prepared in certain ways could not
possibly transmit these diseases.
As regards the second element in the basis for negotiations, namely,
the general provisions, the Government of the United States could
not consider signing an agreement, involving substantial concessions
by the United States, which would leave products of the United
States exported to Uruguay at a disadvantage as compared with like
products imported from any other country.
The disadvantage to which United States trade in Uruguay is now
subjected is due to the practice of the Uruguayan Government of
controlling imports on a bilateral basis, by means of exchange
quotas and differential exchange rates, which favors imports from
certain countries to the detriment of other countries, particularly
the United States.
The Government of the United States fully appreciates that the
Uruguayan Government may be compelled to control imports in order to
safeguard foreign debt service and other necessary remittances
abroad and to protect the exchange value of the Uruguayan currency
during periods of foreign exchange stringency due to abnormally low
returns from exports. However, the Government of the United States
believes that any control of imports deemed necessary by the
Uruguayan Government can be exercised more effectively and more
fairly on a commodity basis than, as at present, on a country
basis.
The control of imports on a commodity basis would permit the control
of total imports, whereas the present practice may result in a
diversion of imports from a disfavored to a favored nation and thus
cause only a change in the source of imports. The control of imports
on a commodity basis would be more fair than the existing practice
because all suppliers to the Uruguayan market and Uruguayan
importers would receive equitable treatment with respect to such
imports as were admitted and the burden of restrictions would be
spread over all export and import interests involved in the trade in
the articles subject to restrictions. Even in the worst years, many
articles could be permitted to enter without any restriction
whatever. In the case of articles subject to restriction Uruguayan
importers would be free to buy where they could buy to best
advantage, within the limits determined upon by the Uruguayan
Government.
Under the procedure here suggested, import quotas, applicable to
imports of particular products from all countries, could be
established when necessary for the protection of the exchange value
of the Uruguayan currency. The maximum quantity of a given product
which would be admitted into Uruguay during a specified period,
including any imports of such product under compensation
arrangements, would not have to be allocated among supplying
countries. However, if the Uruguayan Government should allocate a
share of
[Page 790]
any such quantity
to any third country, the United States would be allotted a fair
share on the basis of its position as a supplier in a previous
representative period. The previous representative period upon which
the share of the United States in a total quota would be based would
not necessarily be specified in the agreement. The Uruguayan
Government would be free to select a base period for each product
subject to an import quota on the general understanding that the
period selected would be representative with respect to imports into
Uruguay of the product in question. If shares of a quota are
allotted to a third country and to the United States on this basis,
the balance, if any, of the quota over and above these shares could,
if the Uruguayan Government so desires, be made available to all
other countries without specific allocation to such countries, or be
allotted among several countries or even entirely to one other
country. It is assumed, however, that the Uruguayan Government would
as a general rule wish to allocate the balance, which in some cases
would be a large part of the total quota, among other exporting
countries on the same basis as that on which the allocation to the
United States would be made.
Such control of imports, based on careful estimates of exchange
available for merchandise transactions after the debt service and
other necessary remittances have been provided for and with
sufficient flexibility for any revision of such estimates as might
appear advisable, would insure that imports would not exceed
Uruguay’s capacity to pay. Thus the present basis for the allocation
or non-allocation of exchange quotas and differential exchange rates
as between countries would be removed and since only an amount of
imports would be admitted for which exchange was available, payment
could be made promptly for all imports.
There are attached a set of general provisions which the Government
of the United States would wish to have included in a trade
agreement, together with a memorandum explaining the articles
pertinent to the above discussion.
With reference to the third element in the basis for negotiations,
the Government of the United States would expect the Uruguayan
Government to grant, under a trade agreement, improvement in customs
treatment,—that is, in the total charges resulting from the
combination of official valuation, base duty, surtaxes, and gold
surcharge,—to important United States products, including:
- Prunes and raisins
- Apples (on a seasonal basis)
- Automotive vehicles, parts, and accessories
- Lumber
- Radio receiving sets, parts, and tubes
- Automatic refrigerators and parts
- Varnish paints, enamels, and lacquers
[Page 791]
and to bind existing customs treatment of other
products of which the United States is the principal or an important
supplier.
The Government of Uruguay, like the Government of the United States,
doubtless has been giving intensive study to the possibilities of a
trade agreement and is therefore in a position to indicate at an
early date the concessions it would expect the United States to
grant in a trade agreement.
The view has been expressed that, because of the similarity in
important respects between the export trade of Uruguay and Argentina
with the United States, the negotiation of trade agreements between
the United States and Uruguay and between the United States and
Argentina should take place simultaneously.
Similar considerations and questions regarding the basis for a trade
agreement are also being presented to the Government of Argentina.
In the event it should be impossible to reach agreement as to the
basis for a trade agreement with the Argentine Government, it would
be necessary for the Government of the United States to reconsider,
in the light of those circumstances, the question of a trade
agreement with Uruguay.
It is obviously desirable that both Governments make every effort to
avoid any publicity in regard to any proposals under discussion or
to the fact that such discussions are in progress.
Washington,
June 28,
1939.
