[Attachment]
Position Paper
Termination of the Trade Agreement With
Mexico
the problem
Should the United States Government, in conjunction with the
joint termination of the existing trade agreement between the
two countries, accept the proposal of the Mexican Government for
the substitution therefor of a modus
vivendi providing for unconditional and unlimited
most-favored-nation treatment in customs matters?
[Here follow a repetition of the recommendations made in the
covering memorandum, a résumé of bilateral negotiations on the
subject, and a discussion of possible methods and effective
dates for joint termination. For previous documentation, see the
annotated memorandum of October 8, 1949, from Under Secretary of
State James E. Webb to President Truman,
Foreign Relations, 1949, volume II,
pages 690 ff.]
B. Modus vivendi.
The recommendation that this Government not accept the Mexican
proposal that a modus vivendi be
substituted for the trade agreement upon termination of the
latter has been made for the following reasons:
- 1.
- The present policy of this Government does not favor
the conclusion of simple most-favored-nation accords at
this time. It is directed toward the conclusion of
broader agreements for that purpose, such as the General
Agreement on Tariffs and Trade,4 or treaties of
friendship, commerce and economic development.
- 2.
- The United States declined, in October, 1949, to
conclude a similar agreement with Colombia.5
- 3.
- As a contracting party to the General Agreement on
Tariffs and Trade, the United States is committed
(Article XXIX) to “undertake to observe to the fullest
extent [of its] executive authority the [Page 941] general principles of …
the Havana Charter …”6 The Charter contemplates as a basic principle
that contracting parties to the General Agreement may
cease to apply concessions granted in that Agreement to
the trade of countries which have failed to become
contracting parties. Therefore, unless there are
compelling reasons to the contrary, it is believed that
no action should be taken by the United States at this
time which would in the future limit its freedom of
action under the Charter.
- 4.
- There appear to be no compelling economic reasons of
advantage to United States trade counselling acceptance
of the proposed modus vivendi,
which would make of Mexico an exception to the policies
of this Government referred to in paragraphs 1 and 3
above.
- (a)
- Mexico has a single-column tariff. Therefore,
the most-favored-nation commitment on customs
matters offered by Mexico would represent no
greater advantage to the United States than Mexico
accords all other countries. On the other hand,
the United States would be committed, during the
life of the modus vivendi,
to give Mexico, without compensation, the
advantage of the reduced rates of duty which have
been accorded other countries as the result of
tariff negotiations and reciprocal
concessions.
- (b)
- By the terms of the proposed modus vivendi, the United States would
obtain from Mexico only an assurance against
discriminatory treatment with respect to tariff
rates and formalities; there would be no safeguard
against discriminatory treatment of other aspects
of trade. The United States would, of course, be
similarly committed in the modus
vivendi only to accord Mexico
most-favored-nation treatment with respect to
customs matters. However, it is the policy of the
United States to consider that other aspects of
trade, such as internal taxation or import and
export restrictions, fall within the scope of its
most-favored-nation commitments. Mexico would,
therefore, obtain all the advantages implicit in
United States policy, without a reciprocal
commitment on its part.
- (c)
- It is believed that the proposed modus vivendi would in effect
be more binding upon the United States than upon
Mexico. The Government of Mexico has not
hesitated, in the past, to take action contrary to
an international commercial commitment when it has
regarded such action as necessary to its economy.
The United States should not overlook the
possibility that Mexico might, despite a
commitment in the proposed modus
vivendi, impose restrictions on United States
trade from time to time, relying upon the terms of
the agreement to prevent retaliation by the United
States, and upon the probable reluctance of the
United States to denounce the modus vivendi for what might individually be
minor violations.
- 5.
- From the point of view of general United
States-Mexican relations, it is believed that a refusal
now to accede to the Mexican proposal for a modus vivendi would have less
unfavorable reseults than would later action to denounce
the modus vivendi, should such
action become necessary either in the circumstances
referred to in paragraph (c)
above, or by reason of United States obligations under
the Havana Charter, mentioned in paragraph 3.
- 6.
- In addition to the considerations of United States
policy referred to in numbered paragraphs 1 through 5,
above, it may be pointed out that a modus vivendi is not necessary to assure to
Mexico, for the time being, the continuation of
most-favored-nation treatment by the United States. It
is the present policy of the United States to generalize
tariff treatment to all countries unless they are found
to discriminate against its trade. Therefore, until such
time as current United States policy changes, and
assuming continued non-discriminatory treatment of
United States trade, Mexico will enjoy
most-favored-nation treatment even though no document
providing therefor may exist.
C. Unilateral termination of
trade agreement.
The President, in approving the procedure recommended by the
interdepartmental Trade Agreements Committee for the termination
of the trade agreement with Mexico, has authorized unilateral
denunciation as a final United States position in the event no
other available means of settling the apparent impasse in the
negotiations can be found. It is believed that the United
States, in proposing joint termination and inviting substitute
proposals by Mexico, has done all possible to avoid the
necessity of terminating the agreement unilaterally. Even now,
any appropriate Mexican offer would be carefully considered. If
none is forthcoming, however, and if joint termination is not
acceptable to Mexico, it is believed that the United States has
no alternative but to take unilateral action to denounce the
agreement in accordance with its terms.
