Foreign Relations of the United States, 1952–1954, East Asia and the Pacific, Volume XII, Part 2

411.9631/12–1553: Telegram

No. 346
The Ambassador in the Philippines (Spruance) to the Department of State

secret

Manila, December 15, 1953—midnight.

1337. For Secretary Dulles from Spruance. Reference Department telegram 1471 and Embassy telegram 1283 concerning possible revision trade agreement.¹

1. After full consideration this subject I have arrived conclusion informal discussions this matter should begin with Magsaysay’s economic advisors before December 30 which is present deadline report by those advisors to Magsaysay. Embassy has excellent opportunity guide Magsaysay toward proposals which will be in best interest Philippines and United States, but we have not taken advantage that opportunity in view Department telegram 1471. After Magsaysay’s advisors submit report, we will no longer have same opportunity.

2. I believe United States should agree negotiate revision present agreement and should take general positions recommended despatch 456, October 22.² In particular, United States should allow Philippines impose import duties on American products if levying such duties serves permit elimination of import and exchange controls. Also, we should permit Philippines modify exchange rate without requiring approval United States President, that is, with no less and no more freedom than all other countries. Also, we should be prepared negotiate friendship, commerce and navigation treaty.

3. Believe revision of agreement could result in great benefit to Philippines. Import duties could do much strengthen economic foundation Philippines by encouraging investment while removing hazards and uncertainties import and exchange controls plus 17 percent tax. As pointed out despatch 456, it should be possible levy Philippine duties on many United States products without significantly affecting United States trade.

4. As stated by Vice President Nixon, we must not allow Magsaysay fail. Ability of United States to lead Southeast Asia and Far East toward democratic way of life depends to important degree upon success Magsaysay administration. We must demonstrate that friendship toward United States earns friendship from United States. But friendship toward Philippines cannot, and should not, consist solely of necessary financial and technical assistance. It is, perhaps, even more important that United States remove last vestiges its economic domination of Philippines. We must prove to world, and to this part of world particularly, that we want strong and healthy Philippines for benefit of Filipinos and even at expense our special trade advantages here.

5. All other countries have right impose duties on United States exports and it would play direct into hands of Communists to deny that right to Philippines. Furthermore, advantages to American business of duty-free status in Philippines were already somewhat dissipated in 1949 when Philippines imposed import and exchange controls with approval of United States. If negotiations for revision agreement are handled properly, American businessmen as a whole should lose no more from levying Philippine import duties than they would gain from lifting controls and 17 percent tax. There would be disadvantage to some American products from loss of preferences, but similarly Philippine exports entering United States which could survive without preferences could be progressively deprived of them in accordance with provisions present agreement; those dependent on preferences could be placed on selective free list.

6. I expect Magsaysay advisors will recommend general endorsement pending proposals, perhaps with minor amendments. If this happens, I urge that United States agree conduct negotiations with Magsaysay on basis those recommendations. Obviously, we cannot be expected adopt all Philippine proposals. Embassy Foreign Operations Administration study group recommended various modification of those proposals in despatch 456. However, it would be serious blow to Magsaysay and to United States stake this part of world if we were to refuse even to negotiate.

Spruance

1. Dated Dec. 4 and 8, respectively, these telegrams deal with the expression of interest by President-elect Magsaysay in proposals made by the Quirino administration for revision of the U.S.-Philippine Trade Agreement and indication by the Department of State that the matter was under study with tentative conclusions expected in approximately one month. (411.9631/12–253; 411.9631/12–853)
2. This is a lengthy and detailed despatch setting forth the comments and recommendations of the Embassy’s Trade Agreement Study Group on the proposals on revision of the Agreement put forward by the Philippine Government in August. If the Agreement were to be revised, the Study Group favored a combination of the progressive duty concept present in the existing Agreement with the selective free trade proposed by the Philippine Government. (411.9631/10–2253)