In the memorandum which I have the pleasure of sending to Your Excellency
with this note, there are set forth the general points of view which the
Government of Mexico feels should inspire the negotiations for a trade
agreement between our two countries. In addition, amendments, additions
or substitutions are proposed for articles in the draft drawn up by the
Department of State, the reasons being given which, in the opinion of
the Mexican Government, justify the advisability of the changes
suggested. Lastly, the memorandum contains certain new articles which my
Government considers it indispensable to include in the definitive text
of the agreement.
I have the pleasure of informing Your Excellency that my Government is
animated by the greatest willingness to make, in the course of the
negotiations, all such concessions as are compatible with its
possibilities, without further limitations than those inescapably
imposed by its economy; nevertheless, my Government wishes to invite
Your Excellency’s attention to the principal concession which my own
Government is disposed to offer and which consists in undertaking not to
raise its tariffs with respect to a great many products, a circumstance
which, of itself, means a great advantage for the United States.
Lastly, I am pleased to inform Your Excellency that the technical
delegation appointed by the Mexican Government is now in the city of
Washington; accordingly, this Embassy feels that it is an easy matter to
hasten the negotiations, beginning the final conversations at the
earliest date convenient for Your Excellency’s Government.
Mr. Ramón Beteta, Envoy Extraordinary and Minister Plenipotentiary, heads
the said delegation.
[Enclosure—Translation]
Memorandum
I
With respect to the fundamental points of view concerning commercial
and tariff policy which the trade agreement between Mexico and the
United States should determine for the two countries, the Government
of Mexico has special interest in having the Government of the
United States give attention to the general considerations which are
herein briefly set forth and which, in the course of the
negotiations, may be enlarged upon to the necessary degree.
The Government of Mexico feels that, in order for the agreement which
is to be negotiated to be founded on a basis of real, just and
equitable reciprocity, account will have to be taken of the
necessity of substantial tariff concessions being granted by the
United States, in general, even though, in some cases, Mexico may
find it impossible to modify its tariff rates now in force, or else
can only decrease them on a very slight scale.
Any concession which Mexico may make in this respect, however little
it may appear, certainly means a sacrifice greater than a similar
reduction in its tariff rates can mean for the United States of
America. In fact, Mexico is in a disadvantageous position with
respect to the United States as regards the tariff situation. A
number of reasons may be invoked to justify the above assertion;
and, among others, the following comments may be made herewith:
a) The so-called “Underwood Tariff”, approved
in 1913,16 set
import duties which were far too high—even though it could be called
liberal by comparison with the excessive protectionism of the 1897
tariff,17 which
established quotas which were relatively as high as in the tariff of
1864,18 famous
for its high tariff level. After the last World War, the said level
was raised on various occasions and, in 1922, a new tariff19 was established in
the United States which had even more protectionist tendencies.
Finally, in 1930, the Hawley-Smoot tariff,20 in effect at present, set
the highest import duties in all American history.
[Page 499]
Accordingly, the American tariff which will serve as a point of
departure in the negotiations for the agreement is a tariff, without
precedent, as respects its height, in the history of the United
States and, possibly, without equal in the rest of the world, while
the tariff in force in Mexico can be termed one of the lowest in
existence.
b) Almost all Mexican duties on imports are
specific duties and, accordingly, are
constant and independent of the prices of the products; while those
in the United States are, in the great majority, ad-valorem, the
result of which is that they fluctuate along with the price of the
products.
As a consequence, as the value of Mexican currency has been
decreasing in relation to the dollar, that is, in proportion as
prices, in pesos, of American articles imported by Mexico have gone
up—which has happened to a marked degree since 1932—Mexican tariffs have amounted to an actual,
increasingly smaller charge against American products
imported by Mexico, and the disparity between them and the
corresponding duties in the United states has been becoming
continually sharper.
Furthermore, the low level of the Mexican peso (which is due to
reasons which it is not necessary to explain here) is far from
having decreased Mexico’s capacity to import American goods. On the
contrary, such imports have considerably increased, as is shown by
statistics for the years 1932 to 1941 (Appendix 1).21
c) Mexico does not seek autarchy nor does it
try, on any grounds, to do without articles from the United States.
However, being a country whose industrial development is barely
starting, the majority of its incipient industries unavoidably
require protection against the competition of foreign industries
which are already full grown, and which operate on a large scale,
with low costs of production. The Mexican Government has decided to
limit this protection to those industrial activities which, in
accordance with the means and resources of the country, may be
useful in assuring the stability of its economic future, and is not
trying artificially to stimulate, with tariff measures, the
establishment of exotic industries, lacking a basis of real economic
support.
d) The Governments of Mexico and the United
States obtain approximately equal amounts, in absolute figures, from
duties on the commercial movement between the two countries, as may
be seen by the statistical table attached (Appendix 2);21 however, the amount of
such sums is equivalent, in Mexico, to more than
one-fourth of the total collections (27.1% in 1940), while,
in the United States, it represents only 0.5 per cent of the Federal
receipts in the same year, 1940.
e) Furthermore, within the limit of its
possibilities, the Government of Mexico is assisting in continental
defense, a circumstance which will necessarily have the effect of
increasing its expenditures for military purposes and projects of a
strategic character. This is one additional reason why Mexico cannot
dispense to a substantial degree with the receipts coming from its
tariffs.
[Page 500]
f) The recent agreements concluded between
Mexico and the United States on the oil and claims questions24 impose on
Mexico the obligation of paying the Government of the United States
very large amounts, the payment of which will be made in
installments which will mean a positive sacrifice for the Mexican
treasury. In addition, the balance of payments will be still more
unfavorable for Mexico at the time when it has to pay the principal
and interest on the new American investments. Mexico will only be
able to export the necessary amount of foreign exchange if it sells
an equal amount of goods or services to the United States.
Accordingly, it is considered necessary for the Government of the
United States to take Mexico’s situation as a debtor country into
consideration so as to grant it special tariff concessions, which
will surely be greater than those which it has granted to other
countries with which it has concluded trade agreements in recent
years.
The Government of Mexico considers that the facts and arguments set
forth in the above paragraphs satisfactorily prove that, in order
for there to be true reciprocity in the trade agreement between
Mexico and the United States, it is necessary for the greater part
of the tariff reductions established to be granted by the United
States.
II
The Mexican Government has studied with great care the concrete
proposals submitted to it by the Government of the United States in
the documents to which reference was made at the beginning of this
memorandum. With respect to them, it is necessary to point out
forthwith that Mexico holds that the forthcoming trade agreement
should permanently strengthen the economic relations between the two
countries; therefore, the Mexican Government would like to have the
agreement be in effect for the longest possible time and not have as
its limit, not even in the case of certain concessions, the
termination of the present conflict. To this it must be added that,
in any event, Articles X and XI of the proposed agreement presented
by the Government of the United States empower either of the two
countries to withdraw the concessions established, in whole or in
part, in case they involve an injury to the interests of either of
the contracting parties.
III
With respect to the guarantees touching on export duties, mentioned
in the Department of State’s memorandum of May 21 [20?], 1942,25 it may be remarked that, as soon as the
concessions which the
[Page 501]
Government of the United States is disposed to make to the
Government of Mexico are known, the latter will study the proposals
submitted to it with the greatest good will, with the understanding
that it is confident that a formula will be found which will satisfy
the interests of both countries.
IV
The Government of Mexico considers it pertinent to make certain
proposals concerning some of the articles which constitute the draft
trade agreement submitted to its Embassy in Washington by the
Department of State. At the same time, it begs to propose the
acceptance of certain additional articles which the Government of
Mexico considers it necessary to include in the aforesaid agreement.
The Government of Mexico does not doubt that they will meet with the
approval of the Government of the United States since it feels that
the stipulations thereof are in harmony with the general spirit
which animates the proposals of the American Government and in view
of the fact that some of the said articles have been adopted in
similar agreements signed by the United States with other
countries.
A. Concerning the draft agreement proposed by the Government of the
United States, the Government of Mexico considers that the preamble
and articles I, II, IV, V, VIII, IX, XIV and XVI can be accepted
without change, in the form in which they were drawn up by the
Department of State.
With regard to Article II [III] of the
above-mentioned draft, the Mexican Government has no objection to
accepting the first paragraph thereof. But with regard to paragraph
2, it believes that the wording should be changed to read as
follows:
“If the Government of the United States of America or the
Government of the United Mexican States imposes any
restriction or quota allotment on the importation or
exportation of any article, or on the sale, distribution or
use of any article imported, public knowledge shall be given
of the total amount or the total value of the said article
which it shall be permitted to import, export, sell,
distribute or use during the period specified, as well as of
any change in the said amount or value. Furthermore, if the
Government of the United States of America or the Government
of the United Mexican States allots a proportion of that
amount or value to any third county it shall allot to the
other country, with respect to any article in which it has
an important interest, a share based on the proportion of
the total value or amount supplied by the said country or,
in the case of exports, a share based on the proportion
exported to the said other country during a previous period
which can be considered as typical. In the case of quotas on
imports or exports already established on the date of the
Treaty, they must be modified in conformity with the
principle established in the foregoing sentence. In no case
shall one year be selected as a typical period and an
endeavor shall be made to take, as the basis for quota
allotments, a share equivalent
[Page 502]
to the proportion of the trade in each
specific article which the respective countries have had
during a typical previous five-year period, or in any other
previous typical period on which the governments of the two
countries may agree.”
Paragraph 3 is acceptable in the form in which it was presented. With
regard to Article V, the Mexican Government proposes that the
wording of the first paragraph be changed to read as follows:
“If the Government of the United States of America or the
Government of the United Mexican States establishes or
maintains in force an institution with exclusive rights over
the importation, sale, distribution or production of any
article, or if exclusive privileges are granted to any
agency to import, sell, distribute or produce any article,
fair and equitable treatment shall be granted to the
commerce of the other country as concerns the foreign
purchases of the said institution or agency. To this end,
the said institution or agency shall be governed, in making
its purchases of any article abroad, solely by
considerations such as price, quality, market,
transportation and terms of sale, which would ordinarily be
taken into consideration by a private commercial company
interested solely in buying the said article on the most
favorable conditions.”
Paragraph 2 of this article can be accepted in its present form.
The Mexican Government considers that paragraphs 1, 2, 3, and 4 of
Article VI of the United States draft are acceptable in the form in
which they were presented, but that the wording of paragraph 5
should be changed to read as indicated below:
“If the Government of the United States of America or the
Government of the United Mexican States makes
representations to the other government with respect to the
application of any law or sanitary regulation for the
protection of human, animal or vegetable life or health, and
if there is disagreement in regard thereto, there shall be
established, at the request of either of the governments, a
committee of technical experts on which each government
shall be represented in equal numbers, to consider the case
and make a decision with regard thereto. If the said
committee should not reach an agreement, an arbiter shall be
appointed, after consultation with both governments, and he
shall be a person of unquestioned integrity and technical
ability.”
The Government of Mexico believes that Article XII should be
eliminated from the forthcoming agreement, since it considers it
inadvisable that causes foreign thereto may be taken as a reason for
giving notice to terminate it.
With respect to Article XIII, the Government of Mexico accepts the
first paragraph but it thinks that the second paragraph should be
modified by eliminating the part which reads “but they shall not be
applicable to the Panama Canal Zone.”
B. The Government of Mexico also feels that certain articles should
be added to the draft agreement which was presented to this Embassy
[Page 503]
by the Government of
the United States of America and begs to suggest that the latter be
these articles:
“Article_The Government of the United States of America and
the Government of the United Mexican States shall give all
facilities in their power to achieve the free transit across
their respective territories of articles the produce,
manufacture or growth of the other country which are
consigned to third countries.
“Article_As respects articles the growth, produce or
manufacture of the United States of America or of the United
Mexican States, included and described on Schedules I and II
respectively, on which, upon their importation into one
country from the other, ad valorem import duties or duties
based on value or in any way governed thereby, are imposed
or might be imposed, it is understood and agreed that the
bases and methods for determining the value at which the
duty and the conversion of currencies are applied shall not
be less favorable to the importers than the bases and
methods established by the laws and regulations of the
United States of America and of the United Mexican States
respectively, in force on the day of the signing of this
Treaty.”
V
After studying the schedule of Mexican articles proposed by the
Department of State, the Government of Mexico believes that those
specified in Appendix 326 of this Memorandum should be excluded, since it
must reserve the liberty of changing the tariffs thereon, with a
view to the needs of the national industry.
VI
The Government of Mexico wishes to point out that, in examining the
schedule of American articles which was submitted to it by the
Department of State, it has interpreted the numbers of the items
included thereon as being those which must be taken into
consideration for the negotiations and that, in cases where the
wording of the item on the schedule does not concur with wording of
the official tariff, it is to be understood that the negotiations
will embrace the whole item and not only part thereof.
Furthermore, the Government of Mexico would like to have accepted an
elastic interpretation of some items, which list certain articles in
a limited way, in order that it might be able to include within them
other similar articles which are not expressly mentioned in the said
items.
VII
Mexico desires an increase in the quota at present in force for the
importation into the United States of certain products which have a
preponderant place in Mexico’s economy and which will be discussed
in detail in the course of the negotiations. Among such products
[Page 504]
is, first of all, oil,—of
which at present the United States imports from Mexico, on a low
quota, only the amount of 3,592,103 barrels. The said amount is
included in the very low allotment of 3.8 percent of the 5 percent
of American consumption which is the quota allotted to
“miscellaneous countries.”
The Government of Mexico considers that both the huge increase in
consumption of fuels resulting from the war and the prime necessity
therefor which the United States now has, for the application of its
policy of defense of the Continent and the Democracies, as well as
the radical changes which have recently occurred in the distribution
of the oil-producing territories of the world justify and demand,
indeed to the advantage of the United States itself, a considerable
increase in the quota at present in force. Mexico would,
accordingly, like the said quota to be enlarged so as to admit the
amount of 31,000,000 barrels, which is the amount which it can
annually furnish the United States of America.
Washington
, July
6, 1942.
