611.2231/249
The Minister in Ecuador (Long) to the Secretary of State
[Received June 21.]
Sir: In acknowledgement of the Department’s instruction No. 9 of June 6, 1938, and with reference to my telegram No. 67 of June 14, 9 a.m., 1938, regarding the general provisions of the proposed Trade Agreement with Ecuador, I have the honor to report that Mr. Gade and I today had an interview with Dr. Banda, at which we acquainted him with the Department’s observations contained therein.
With respect to Article 2, Dr. Banda thought that the Ecuadorean Government would not consent to bind the surcharges on imports now collected in lieu of a former sales tax, inasmuch as this binding would have to apply to other countries under their commercial treaties with Ecuador, and would thereby prevent the Government from collecting the equivalent of an increased sales tax on a large percentage of imports. Should the cost of living continue to rise through a depreciation of the Sucre, he added, the salaries of Government employees would have to be raised and the Government would be obliged to find increased revenue, chiefly from customs sources, for this purpose.
With regard to Article 6, Dr. Banda asserted that it would be necessary to repeal the law granting Municipalities the right to tax foreign products, in order to comply with the Department’s views. While [Page 524] the municipalities, he stated, collected very little from this source, he felt sure that they would strenuously oppose being deprived of this right. Dr. Banda added that very few American products would be affected in competition with domestic products since there are no comparable products. Moreover, in relation to similar foreign products, of course, the United States would enjoy parity of treatment.
Referring to Article 7, we brought the matter up with Dr. Banda and mutually agreed that the consideration of this question might well be deferred until the other more serious obstacles had been overcome.
As Articles 8 and 9 have to do with Exchange Control, Dr. Banda felt that it would be necessary to await the issuance of the additional Exchange Control Regulations, which are now being drafted.
Taken as a whole Dr. Banda thought that the Department’s position as explained in the instruction under acknowledgement raised some very substantial obstacles but expressed the hope that if, when the Exchange Control Regulations were issued, they offered no insurmountable restrictions, then the other obstacles might be overcome.
Dr. Banda reminded us that the Law on the Control of Imports (Legation’s despatch No. 30 of May 21, 193815) provided that in issuing permits consideration should be given to the balance of trade of the country supplying the merchandise, the availability of exchange for that country, and the needs of Ecuador for the articles. In this connection he pointed out that according to Customs House figures for the first three months of this year, the trade balance between Ecuador and the United States was unfavorable to Ecuador. But for the fact that a similar condition exists with respect to the trade of other nations, we might assume that the Exchange Control would work a hardship upon our trade, without intentional discrimination on the part of Ecuador.
First Quarter 1938 figures received from the Consul General at Guayaquil of five principal countries are as follows:
| To Ecuador from: | Sucres | To Ecuador to: | Sucres |
| United States | 13,874,532 | United States | 10,862,526 |
| Germany | 12,139,951 | Germany | 4,869,750 |
| United Kingdom | 4,137,278 | United Kingdom | 1,024,599 |
| Japan | 5,916,013 | Japan | 192,518 |
| France | 1,547,832 | France | 1,004,092 |
It appears that the figures include shipments of minerals as is required by Ecuadorean statistical laws or practice. During that period of three months the exports of gold and silver in the form of cyanide precipitates (“tierra mineral”) to the United States amounted to about 5,706,764 sucres.
[Page 525]Total imports into Ecuador from January 1 to March 31, 1938, were 44,900,332 sucres ($3,741,692.) and total exports during the same period amounted to 27,828,353 sucres ($2,319,030). Imports during the same period last year were $2,314,823 and exports were $2,985,321. Imports from all countries during the first three months of 1938 exceeded those during the same period of last year were about 22% below those of the last.
Respectfully yours,
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