611.2231/481
The Department of State to the Ecuadoran Embassy
Memorandum
Reference is made to conversations which have taken place recently in the Department of State regarding the desire of the Government of Ecuador, in the present emergency, to increase customs and other revenues, and the restrictions imposed by the trade agreement between the United States and Ecuador against any increase in customs [Page 303] duties on products imported from the United States and included in Schedule I of that agreement.
The Government of the United States has given sympathetic consideration to the fiscal problems confronting the Government of Ecuador in the existing economic situation and is prepared to work out an arrangement along the lines of that discussed in the Department of State with the Ecuadoran Minister of Finance.
It is believed that the desire of the Government of Ecuador for greater freedom of action in increasing customs duties can most readily be attained through the termination of those provisions of the trade agreement between the United States and Ecuador which now impede such action. It would of course be necessary at the same time to terminate those provisions of the agreement relating to the customs treatment accorded Ecuadoran products imported into the United States and included in Schedule II of the trade agreement.
A minor point regarding Schedule I involves the note referring to pharmaceutical products which follows Tariff Item 374. It is assumed that the Government of Ecuador would have no objection to the retention of that note in the agreement.
The Government of the United States is of the opinion that a revision of the trade agreement such as would thus be effected, offers an opportunity to bring about a further change relating to Article X, on exchange control. As it is believed that this Article, in the form in which it is drafted, is somewhat too rigid to meet existing conditions, it is believed that it might be eliminated. However, in order that some provisions might be in force between the two countries with respect to exchange control measures, it is proposed that the notes to be exchanged between the Governments of the United States and Ecuador provide in substance for the granting of most-favored-nation treatment with respect to exchange matters.
The changes in the trade agreement set forth above would involve the termination of Articles I, II, III, IV (except in so far as it refers to the note regarding pharmaceutical products following item 374 of Schedule I), VI, VII and X. The remainder of the trade agreement would, of course, remain in full force and effect.
As the Minister of Finance of Ecuador has expressed the desire that the matter under consideration be handled definitively in Quito, it is contemplated that appropriate instructions in the sense of the foregoing will be sent to the American Minister at Quito. From the standpoint of the United States the arrangement set forth above could be handled by means of an exchange of notes between the American Minister at Quito and the Foreign Minister of Ecuador.