Foreign Relations of the United States Diplomatic Papers, 1941, The American Republics, Volume VII

611.2331/210b

The Department of State to the Peruvian Embassy ⁶⁸

Aide-Mémoire

Reference is made to recent conversations held between representatives of the Governments of the United States and Peru looking toward the establishment of a basis for the negotiation of a trade agreement.

These conversations have disclosed the mutual belief that a sufficient basis would have been established for public announcement to be made of intention to negotiate a trade agreement between the United States and Peru if agreement were to be reached on the points discussed hereafter. When such a basis shall have been established, the question of when the proposed negotiations should be publicly announced will be given consideration.

With respect to the list of products upon which the Government of the United States might grant concessions to Peru, which is appended hereto,⁶⁹ the Government of the United States would consider, subject to possible modification in the light of information obtained following public notice of intention to negotiate a trade agreement with Peru, a reduction of 50 percent (the maximum permitted under the authority of the Trade Agreements Act⁷⁰) in the present rate of duty on long-staple cotton one and one-eighth inches and over in staple length, such a reduction to be applicable to an amount of such cotton approximately equal to the total volume of long-staple cotton at present permitted to enter the United States under the existing absolute quotas on that product (45,656,420 pounds). The Government of the United States has in view in this connection the removal of the present quotas simultaneously with the effective date of the trade agreement with Peru. Under such an arrangement it would be proposed that the tariff quota be unallocated, that is, there would be no restrictions upon the amount of cotton which might be imported from individual countries at the reduced rate of duty up to the full amount of the quota. If at a later date the Government of Peru should desire a specific allocation, the Government of the United States would give sympathetic consideration to a request along such lines. The Government of the United States is not in a position at this time to indicate what the agreement might provide in respect of the rate of duty applicable to imports in excess of the suggested tariff quota.

With respect to sugar, the Government of the United States would be prepared to consider at this time, subject to possible modification in the light of information obtained following public notice of intention to negotiate a trade agreement with Peru, a reduction of 75 cents per hundred pounds of standard raw sugar (to $1.125 per hundred pounds), in the rate of duty applicable to imports from Peru. The Government of the United States is unable to offer the Government of Peru any assurances as to the amount of Peruvian sugar which might be permitted to enter the United States in any year as this is a matter determined at present by the Sugar Act of 1937,⁷¹ the provisions of which are not subject to modification under the authority to negotiate agreements conferred on the Executive by the Trade Agreements Act. The Government of the United States would be willing, however, to consider the inclusion in the proposed agreement of a provision whereby the Government of Peru would have the right, to be exercised within a specified period following the close of each sugar control year, to terminate the entire agreement if in the previous control year the amount of Peruvian sugar permitted to be imported into the United States had been altered substantially to the disadvantage of Peru. Any reduction in duty would be made dependent upon the continuance of the Sugar Act of 1937 or similar legislation.

With regard to the other items appearing in the appended list, the Government of the United States is unable to indicate at present the extent of the concessions which might be offered but would consider granting the most liberal treatment possible in the light of information which may be developed following public notice of intention to negotiate an agreement with Peru.

With respect to the concessions which the Government of the United States would request the Peruvian Government to grant on products of this country, a list of which will be submitted at a later date, the Government of the United States considers that a sufficient basis for negotiations will have been established if the Government of Peru would agree to give sympathetic consideration to granting as liberal concessions as possible on the products in that list in the light of the concessions offered by the United States.

Regarding the general provisions of the proposed agreement, a suggested draft of which is attached,⁷² it would appear, on the basis of preliminary conversations, that serious problems of negotiation are likely to arise only on the question of the exceptions to unconditional most-favored-nation treatment requested by the Government of Peru in connection with trade with contiguous countries. If agreement were to be reached on this point at this time, therefore, as well as on those discussed above, it is believed that a basis would have been established for proceeding with negotiations.

As the Government of Peru is aware, the Government of the United States attaches great importance to the principle of unconditional most-favored-nation treatment. It would be extremely reluctant, therefore, under ordinary circumstances, to agree to exceptions such as those which have been indicated by the Government of Peru. The Government of the United States has a full realization, however, that unusual conditions prevail at the present time, and is mindful, also, of the provisions of Resolution LXXX of the Seventh International Conference of American States, Montevideo, 1933,⁷³ regarding commercial advantages between neighboring states. Therefore, with a view to facilitating the negotiation of a trade agreement with Peru, the Government of the United States makes the following suggestions:

1. The Article on most-favored-nation treatment would be included in the general provisions of the proposed agreement in its unconditional and unrestricted form.

2. In an exchange of notes, accompanying the agreement, the United States would agree not to invoke the provisions of the most-favored-nation Article with respect to special advantages extended by Peru to contiguous countries, provided a formula for regional tariff preferences, as described below, is recommended by the Inter-American Financial and Economic Advisory Committee: The preferences would have to be made effective through trade agreements embodying tariff reductions or exemptions; the parties to such agreements must reserve the right to reduce or eliminate the customs duties on like imports from other countries; and any such regional tariff preferences should not be permitted to stand in the way of any broad program of economic reconstruction involving the reduction of tariffs and the scaling down or elimination of tariff and other trade preferences with a view to the fullest possible development of international trade on a multilateral, unconditional most-favored-nation basis. It would be further understood that if the Government of Peru should extend to any non-contiguous country a preference now or hereafter accorded to a contiguous country, the benefit of such a preference would be immediately and unconditionally extended to the United States.

3. It would be clearly understood and recorded in a final minute in regard to the negotiations, that the waiver on the part of the United States of the right to invoke the provisions of the most-favored-nation Article on the conditions specified in the preceding paragraph would not in any way prevent the Government of the United States from taking up with the Peruvian Government at any time the question of modifying any existing preference which fails to meet the requirements of the contractual formula outlined above or which, even if it does meet such requirements, has resulted in substantial injury to United States exports to Peru of the product or products concerned. The Peruvian Government would, of course, be expected to give careful and sympathetic consideration to any proposals of the Government of the United States in regard to any such preference. If, however, the two Governments should fail to agree in regard to any such proposal, the Government of the United States would be free to suspend or terminate the agreement in whole or in part on thirty days’ written notice.

With respect to the question of increasing the existing preferences or of adding new preferences, the Government of Peru would agree to consult in advance with the Government of the United States before taking any action thereon. The Government of the United States would consider the proposed action carefully and sympathetically in the light of the contractual formula described above and of the probable effects of the proposed action on United States exports to Peru of the product or products concerned. If, after consultation, the Government of the United States should object to the proposed action, the Government of Peru would, nevertheless, be free to take the action proposed. However, if such action were taken, the Government of the United States would be free to suspend or terminate the agreement in whole or in part on thirty days’ written notice.

It would be appreciated if the Government of Peru would indicate whether it agrees with the proposals set forth above.

Washington , June 4, 1941.

68. Handed to the Commercial Counselor of the Peruvian Embassy on June 5.
69. Not printed.
70. Approved June 12, 1934; 48 Stat. 943.
71. Approved September 1, 1937; 50 Stat. 903.
72. Not printed.
73. Department of State Conference Series No. 19: Report of the Delegates of the United States of America to the Seventh International Conference of American States, Montevideo, Uruguay, December 3–26, 1933 (Washington, Government Printing Office, 1934), p. 275.