611.3531/1628
Memorandum by the Chief of the Division of
Commercial Treaties and Agreements (Hawkins)
[Washington,] February 6, 1941.
I explained to the Secretary yesterday that we had reached agreement with
Dr. Prebisch on the general provisions, final minutes, exchanges of
notes and proposals with respect to the schedules; that I had agreed to
seek Secretary Hull’s approval of these documents as a basis for
trade-agreement negotiations with Argentina in the event that it should
be decided to undertake such negotiations; and that Dr. Prebisch had
agreed to recommend them to his Government. I explained to the Secretary
further, that if he indicated his approval by initialing the attached
covering memorandum,161
would then initial the original and give it to Dr. Prebisch together
with the enclosures and ask him to initial our blue copy of it, advising
Dr. Prebisch orally that the Secretary had approved the basis.
I pointed out to the Secretary that if he approved the basis as outlined
in these documents we would be bound by these proposals if it should be
decided to undertake the negotiations, subject, of course, to the
President’s approval, to agreement with the Argentines on proposals
which they later will make regarding their Schedule I17 concessions to us, and to the
qualification that any of our proposed tariff concessions could be
altered if new facts or considerations submitted in written briefs or in
the public hearings should so require. I said, however, that in view of
the extensive hearings held a year ago and the numerous times these
concessions have been discussed, it is unlikely that any new facts or
considerations will be presented.
After a brief discussion of several points, the Secretary, who had been
given these documents for study several days ago, indicated his approval
of the proposed basis and initialed the memorandum.
Today I handed Dr. Prebisch the originals of the attached documents after
initialing the covering memorandum and obtaining his initials on the
attached blue copy. In doing so, I advised him that the Secretary had
approved the recommendations embodied in these documents.
[Page 392]
I referred to the fact that we have not yet reached an understanding on
the basis for Argentina’s concessions in Schedule I of the agreement,
and suggested that the proposals now under discussion be considered by
the Argentine Government and that the latter Government make definite
proposals to us with respect to the Schedule. We would then consider
them and submit them for approval. Our proposals regarding the rest of
the agreement are, of course, contingent on a satisfactory basis being
worked out for Schedule I.
I also emphasized to Dr. Prebisch the necessity of keeping these matters
completely confidential; that if there should be premature publicity
causing political repercussions here and adversely affecting other
important issues, it might be necessary to make denials which would
render it difficult to proceed with the negotiations. Dr. Prebisch said
that he recognized fully the need for, and importance of, secrecy, and
that he did not intend to submit the proposals to the Argentine
Government for study until he received word from us that this would be
all right; that he would meanwhile confine the studies of these
documents to officials of the Central Bank where there would be no
danger whatever of leakage.
Dr. Prebisch then referred to his conversation with Mr. Wheeler18 at the Department of
Agriculture this morning regarding flaxseed, which he said was very
discouraging to him in that it did not appear that the Department of
Agriculture has materially changed its policy in the direction of
discouraging flaxseed production, and particularly because of the
estimate of an official of the Department of Agriculture that imports
are not on the average likely to exceed 10,000,000 bushels. He said that
in view of Department of Agriculture’s policies and the discouraging
outlook for imports of Argentine flaxseed, he felt compelled to make
less favorable recommendations respecting Argentine concessions in
Schedule I than he had previously intended. For this reason, he was not
prepared to recommend the proposals for Schedule I which had been drawn
up. Nevertheless, I gave him copies of these proposals, marking them
“tentative”, and suggested that on his return to Buenos Aires he draw up
a firm offer on Schedule I and submit it to us for consideration. I
reminded him, however, that all of our proposals regarding other parts
of the agreement are conditioned upon a satisfactory Schedule I and
urged him to keep the foregoing in mind in formulating the proposals on
this Schedule. I said further that if the proposals submitted by the
Argentine Government were materially less favorable than those we had
discussed, I did not think they could be accepted.
[Page 393]
With respect to the subject of regional preferences, I said that the
Secretary, having approved our proposals, is sending a note to this
effect to the Argentine Ambassador in reply to the Ambassador’s note on
this subject. I asked, however, that care be taken to avoid any
publicity on this subject until it comes up in the Inter-American
Committee, and that when the matter does become public an effort be made
to dispel the idea that this involves the abandonment or any material
impairment of the policy of either country with respect to the
most-favored-nation principle. I said that press reports of the
discussion of this subject at the Montevideo Conference indicated the
need of taking steps to avoid such misinterpretation. Dr. Prebisch said
that he would make every effort to see that this matter is not
misconstrued in the manner indicated.
[Annex 1]
Draft General Provisions
[Aside from a few slight verbal changes the articles of this draft
were the same as the final text signed October 14, 1941, Department
of State Executive Agreement Series No. 277, or 56 Stat. (pt. 2)
1685, with the following exceptions:
Article IV, paragraph 3: The following sentence in the draft does not
appear in the final agreement: “If the Government of either country
avails itself of the rights reserved under this paragraph, it shall
inform the government of the other country in writing.”
Article VI, paragraph 2: The phrase in the first sentence of the
final agreement “prior to the date of publication” reads in the
draft: “prior to the expiration of thirty days after the date of
publication.”
Article VII, paragraph 1: The following final sentence in the draft
does not appear in the final agreement: “Furthermore, the said
articles shall not be assessed for customs purposes at valuations
higher than those specified in the said Schedule.”
Article XIII: In the draft the following phrase appears at the end of
the first sentence: “on the day of the signature of this
Agreement.”
Article XV, paragraph 2: At the end of this paragraph there was a
footnote reading as follows: “The Government of the United States
may wish to propose the following additional clause: ‘(d) should that country be engaged in
hostilities or war.’”
Article XVI. This article in the draft contained three paragraphs
instead of two as in the final agreement. Paragraph 1 was omitted
[Page 394]
and the other
paragraphs were renumbered in the final draft. Paragraph 1
reads:
“Greater than nominal penalties will not be imposed in the United
States of America or in the Argentine Republic upon importations of
articles the growth, produce or manufacture of the other country
because of errors in documentation obviously clerical in origin or
where good faith can be established.”]
[Annex 2]
Final Minutes
With a view to recording the understanding which the Delegations of
the United States of America and the Argentine Republic reached with
respect to certain provisions of the Trade Agreement signed today,
the Minutes of the Final Meeting of the two Delegations have been
drawn up as follows:
- 1.
- It was agreed that if the Government of either country
finds it necessary to invoke the provisions of the second
paragraph of Article XI or of the first paragraph of Article
XII, it will in practice, prior to taking such action,
afford the other Government adequate opportunity for
consultation in regard to the proposed measure through the
medium of the Commission provided for in the second
paragraph of Article XII.
- 2.
- With reference to the Exchange of Notes relating to
preferences to the areas covered by the existing payments
arrangement between Argentina and the United Kingdom and to
contiguous countries, respectively, it was agreed that the
Government of either country, prior to according any such
preference, would in practice afford the Government of the
other country adequate opportunity for consultation through
the medium of the said Commission.
- 3.
- With reference to Article III, paragraph 2, it was of
course understood that no obstacles of any kind would be
placed in the way of imports of any product of interest to
the other country unless it should be decided (subject to
the provisions of Article XI) to announce publicly the
imposition of a global quota and the allotments, if any,
among the various supplying countries; moreover, it was
agreed that once any global quota established by either
country or the share therein allotted to the other country
has been publicly announced as effective for a stated
period, it will not ordinarily be reduced during that
period.
- 4.
- It was agreed that, while the texts of these minutes would
not be published as such, there would be no objection to
making the substance of them generally public.
[Page 395]
[Annex 3]
Memorandum by Mr. Vernon L. Phelps, of the
Division of Commercial Treaties and Agreements
[Washington,] February 4,
1941.
During the exploratory conversations just concluded between the
representatives of the Argentine Government and of the Government of
the United States with a view to finding a basis for undertaking the
negotiation of a trade agreement it was agreed, in the event that it
should be decided to proceed with such negotiations, (1) that prior
to announcement of trade-agreement negotiations the Argentine
Government would provide the Government of the United States a
complete list of the preferences which it would accord to the United
Kingdom and to contiguous countries, as envisaged in the exchanges
of notes relating to such preferences, during an initial period of
not less than three months following the coming into force of the
agreement; and (2) that any modification of the said list of
preferences applicable to any subsequent period would be made
effective only after adequate opportunity on the part of the
Government of the United States for consultation relative thereto
through the medium of the mixed commission as provided for in
Article XII of the draft general provisions and in the Final
Minutes.
[Annex 4]
Draft Proposal for Sliding Scale of Tariff
Reductions
It is understood that Argentina would undertake to grant the tariff
reductions, generally on a sliding scale basis, and the bindings of
present rates of duty, indicated in the attached tentative Schedule
I.19
The sliding scale basis would be established as follows:20
A.
First Stage
The first reductions in Argentine import duties shall become
effective immediately upon the entry into force of the agreement and
may apply to any or all of the tariff items enumerated in the
attached tentative Schedule I that may be selected by the United
States during the negotiations; provided that the loss in Argentine
customs revenues resulting from the reductions effected in the first
stage shall not exceed approximately 2,000,000 paper pesos as
calculated from a previously agreed upon estimate of Argentine
customs revenues for the year 1941.
It is agreed that any reduction in import duty made by Argentina
[Page 396]
pursuant to the foregoing
formula shall remain in force despite any eventual reduction in
total customs revenues.
B.
Second Stage
The second-stage reductions in Argentine import duties shall become
effective when total Argentine customs revenues reach 271,000,000
paper pesos. These reductions shall apply to all tariff items
enumerated in the attached tentative Schedule I, other than those
upon which rates of duty may have been bound and those on which the
full reductions requested have become effective in the first stage,
and the extent of such reductions shall be not less than one half of
the percentual reductions indicated in the first column of the
attached tentative Schedule I.
As indicated in the final paragraph describing the first stage, any
reduction made by Argentina in the second stage shall remain in
force despite any eventual reduction in total customs revenues.
C.
Third Stage
The third-stage reductions in Argentine import duties shall become
effective when total Argentine customs revenues reach 300,000,000
paper pesos. These reductions shall be not less than the reductions
indicated in the first column of the attached tentative Schedule I
plus the reductions indicated in the second column of that
schedule.
As indicated in the discussion of the first and second stages, any
reduction made by Argentina in the third stage shall remain in force
despite any eventual reduction in total customs revenues.
It was understood also that sympathetic and objective
consideration would be given to the requests for modifications
of the descriptions of articles indicated in tentative Schedule
I of January 15, 1941; to the notes included in the said
schedule; and to the requests for duty reductions or adjustments
in tariff classification, as the case may be, in respect of
those articles listed in Part B of the attached tentative
Schedule I.
It was further understood that any preference in regard to
sulphur would be confined to Chilean sulphur and that the United
States would be given a quota on sulphur amounting to not less
than 10% of the total importations during the period of
hostilities between the United Kingdom and Germany.
With reference to machines and spare parts (weighing less than
100 net kilograms) and automobile parts and accessories, it was
agreed that duty reductions would be granted on those machines,
parts and accessories which are not now produced in Argentina at
all or are not being produced there on a sound economic basis,
or on those subject to unreasonably high duties. In the case of
other machines, parts and
[Page 397]
accessories, there would be no objection
to binding existing rates of duty.
[Annex 5]
Exchange of Notes Under Consideration During
Previous Negotiations
Excellency: I have the honor to refer to
conversations which have taken place, in connection with the trade
agreement signed this day, regarding the desirability of
consultation between the two Governments with regard to certain
matters.
It is my understanding that each Government, whenever practicable,
will consult with the Government of the other country with respect
to such measures as export subsidies, governmentally fixed prices,
and other forms of compensation on sales, which may have the effect
of artificially determining prices or which, by interfering with the
free play of supply and demand, may tend to prejudice the interests
of the other country.
I avail myself of this opportunity to renew to Your Excellency the
assurances of my highest consideration,
[Other annexes, not printed, included drafts for Argentine
notes. These notes, slightly revised, appear in the final
agreement, Department of State Executive Agreement Series
No. 277, or 56 Stat. (pt. 2) 1685. Also attached were draft
schedules I, II, and III, not printed. The final texts of
the schedules also appear in Executive Agreement Series No.
277, or 56 Stat. (pt. 2) 1685.]
