611.2231/490
The Chief of the Division of Commercial Policy and Agreements (Hawkins) to the Commercial Attaché in Ecuador (Tewksbury)
Dear Tewksbury: I was glad to receive your letter of October 2513 in regard to the Finance Minister’s desire to apply higher rates of duty as soon as possible and to remove the commitment in the trade agreement which stands in the way of such action.
As you and Mr. Long have stated, Schedule II would, as a practical matter, have to be terminated if Schedule I were terminated, and at the same time. As to the time between public notice of termination of both schedules and the effective date, we would, I feel sure, agree to whatever the Government of Ecuador might suggest, provided at least 30 days’ notice were given.
However, we have not been too happy about the prospect of terminating both schedules. In the case of Schedule II, termination would have an adverse effect on the hat industry in Ecuador and here, and if we should eventually give the concession to Peru, we would give up a considerable part of our limited bargaining power with Ecuador. In the case of Schedule I, our exporters would not only be faced with increased rates (20 percent higher, according to Mr. Illingworth) but would not have definite assurance that the rates would not go back, later on if not immediately, to pre-agreement levels plus 20 percent. This would be so despite Mr. Illingworth’s statement that the Government of Ecuador has no intention of restoring the pre-agreement rates and adding the 20 percent to such rates.
I am leaning in the direction of a different approach to the solution of this problem, namely: [Page 307]
- 1.
- The Government of Ecuador would address a note to us stressing the financial emergency now confronting the country as a result of the war; loss of European markets and decline of imports from Europe with consequent diminution of customs revenue which makes up such a large percentage of total national revenue; stating desire to raise all customs duties by 20 percent as an emergency measure, purely fiscal in nature and purpose, deemed necessary in order to safeguard the vital interests of the nation; stating also the intention to remove this emergency surcharge as soon as the wartime emergency has passed; asking whether, in view of the foregoing, this Government would refrain from invoking the pertinent provisions of the trade agreement, which was negotiated in time of peace and which does not specifically provide sufficient flexibility to take care of wartime emergency situations such as that now confronting Ecuador; and winding up with a statement to the effect that the only alternative would appear to be termination of both schedules, an alternative which the Government of Ecuador would naturally regret having to propose.
- 2.
- This Government would reply appropriately to the effect that, in all the circumstances, it would not invoke the pertinent provisions of the agreement; perhaps adding something designed to protect goods in transit.
I should like very much to have Mr. Long’s reaction, and yours, to this possible alternative approach. Meanwhile, I shall take it up with others in the Department and in the Trade Agreements Committee.
Cordially yours,
- Not printed.↩