611.2531/663
Memorandum of Conversation, by Mr. H. Gerald Smith of the Division of Trade Agreements
| Participants: | Señor Guillermo Gazitúa, Counselor, Chilean Embassy |
| Mr. Fowler, TA12 | |
| Mr. Smith, TA |
Señor Gazitúa called at the Department to resume discussion of the general provisions of the proposed trade agreement. Reference was made to the conversations which had taken place in Santiago during the third week in January with the Chilean officials, in which Mr. Frost, Mr. Fowler and Mr. Allen participated. It was explained to Señor Gazitúa that the pressure of work in the TA Division in connection with the hearings on the renewal of the Trade Agreements Act13 had been so great that it had been possible only within the last few days to give detailed consideration to the general provision counterproposals advanced by the Chilean Government in mid-January or to determining if any further comment would be necessary on those counterproposals in addition to that which had been supplied in Santiago by Mr. Fowler and Mr. Allen. The conversations reported below were based upon the Chilean counterproposals on the general provisions in relation to the text originally suggested by the United States and in the light of the comments contained in the memorandum left with the Chilean Undersecretary of Commerce by Mr. Fowler and Mr. Allen.
With respect to Article I, there was a discussion regarding the exact wording of the League of Nations’ formula14 and it was indicated to Señor Gazitúa that while the United States would probably be willing [Page 676] to accept the League’s formula in substance, there were certain points in which the Chilean text did not conform to the language desired by the United States, such as the use of the term “natural and manufactured products” and goods “originating in and coming from” and the absence of the phrase in the Chilean draft relating to the sale and use of imported goods within the country. On each of these points Señor Gazitúa was requested once more to bring the views of the United States to the attention of his Government. With regard to the question of restricting most-favored-nation treatment to goods not only originating in but coming (directly) from the other country, it was pointed out to Señor Gazitúa that it might be considerably to Chile’s disadvantage if the most-favored-nation clause were thus limited; if, for example, at some time in the future the United States should decide to restrict most-favored-nation treatment to direct shipments. It was mentioned to Señor Gazitúa that our desire was to restrict the scope of the most-favored-nation clause as little as possible.
There was some discussion of Article II in so far as it related to national treatment on internal taxes, along the lines of that reported by Mr. Fowler at the time of the conversations in Santiago. It was agreed that there would be taken up with the Trade Agreement Committee the possibility of making certain exceptions from the guarantee of national treatment in the case of existing legislation in Chile, such as Law 5786 and its amendments, providing for certain taxes on both imported and domestic products. Señor Gazitúa agreed to consult with his Government on the general question of modifying existing laws so as to permit national treatment in the application of internal taxes to products imported from the United States.
With respect to Article III, on quotas, it was indicated to Señor Gazitúa that the first paragraph of the Chilean draft would probably be acceptable to the United States, except for the use of the phrase “natural and fabricated”, which the United States would prefer to have read “growth, produce or manufacture”. Señor Gazitúa was informed that the second paragraph as proposed by the Chilean Government was definitely not acceptable. The flexibility in the original proposal of the United States was mentioned to Señor Gazitúa who was requested once more to inquire whether his Government could not accept the United States draft.
With regard to Article IV, on exchange control, Señor Gazitúa was requested to discuss this matter further with his Government, in view of the fact that despite the arrangement made prior to the announcement of negotiations, the Chilean Treaty Commission had proposed an entirely new formula which was not acceptable to the United States and which ignored those arrangements. If the Treaty Commission did [Page 677] not know of these arrangements, it was requested that they be informed and asked to consider our original proposal and suggest a formula for the delayed-action protocol. In substance, the question was what would the Chilean Government be prepared to offer in the way of a definite commitment on the exchange treatment for American products during the life of the trade agreement. It was pointed out to Señor Gazitúa that the Chilean proposal was based on no definite principles which would serve to guide either Government in the interpretation of the Article and it was not even a guarantee to give the United States the best treatment possible, but merely a statement in effect that the Chilean Government would endeavor to grant the United States treatment compatible with the exchange situation between the two countries.