611.3731/600
The American Technical Advisers (Donnelly and Turkel) to the Ambassador in Cuba (Caffery)34
Subject: Suggestions for increases in General Rates of Duty.
In response to the Department’s instruction No. 61 of April 3, 1934, directing the Embassy to make a careful study of the different branches [Page 130] of Cuban trade in which it appears that Japanese sales effort and competition in the Cuban market has grown markedly greater in the past two years, there follows a discussion of items in which Japanese products have actually displaced American products. At present there are several representatives of Japanese firms in Habana offering a wide variety of lines competitive with American exports. In addition, Japanese exporters are carrying on extensive correspondence with Cuban and American firms in Cuba, quoting prices far below those of similar American products. Copies of typical letters and quotations are enclosed.35
Our trade contacts state that Japanese exporters are constantly increasing their sales activities and extending the variety of their lines. In self defense, some American firms doing business in Cuba have been forced to purchase Japanese products in order to compete. This is especially so in the case of textiles. The most important textile mill in Cuba—American-owned—has been obliged to place large orders for yarn in Japan in order to reduce the price of its finished products to a level competitive with similar Japanese finished products.
In view of the general policy of the Governments both of the United States and Cuba not to increase general rates of duty, our suggestions for increased general rates have been limited to the outstanding cases of actual competition.
1. Cotton Yarn.
In the cotton section of the textile schedule we have asked for an increase in the general duty only on cotton yarn, from $1.50 to $3.00 per 100 kilograms with a preference of 50 per cent to the United States. While prices of cotton yarn fluctuate considerably, in general, Japanese prices c. i. f. Habana are about 20 per cent below American prices.
No request was made for an increased general duty on cotton textiles since nothing less than the maximum duty with a preference of 60 to 75 per cent would have been satisfactory. Such a request would not only have been deemed excessive by the Cuban delegates but would, if granted, provide so much additional protection as to encourage the establishment of new mills in Cuba.
2. Rayon Yarn.
In the rayon sections of the textile schedule, we have asked for an increase in the general duty only on rayon yarn from $0.20 to $0.85 per 100 kilograms with a preference of 50 per cent to the United States. In general, Japanese rayon prices c. i. f. Habana are quoted at about 50 per cent of the American yarn.
[Page 131]The situation in respect of rayon piece goods is similar to that of cotton yard goods. In order to overcome the tremendous difference in price, it would have been necessary to request an increase to the maximum duty and a preference of from 65 per cent to 75 per cent. With such rates of duty, the cost to the Cuban consumer would be greatly increased, and the development of the rayon textile industry in Cuba would be artificially encouraged. Such a development would be as detrimental to American trade as is the Japanese competition and consequently the request is not being made.
In the cases of cotton piece goods, rayon piece goods and toothbrushes—the three outstanding items of the textile schedule in which Japan has already taken over a large percentage of our trade—we have been repeatedly told by American manufacturers and importers that in their opinion no duty or preferential will be sufficient to offset the price difference on the Japanese goods. As the Department is well aware, these interests have constantly urged the establishment of quotas on these products based on imports from Cuba.
In view of the general antipathy toward the quota system, we felt that the best we could do was to secure as high a preference as possible on the present duties, in the hope that when the general economic condition of Cuba improves, the proximity of the United States and the superior styling of American textiles, coupled with the increased preferentials would enable us to regain some of the former business.
3. Incandescent Bulbs.
In 1930, the Cuban market consumed 1,840,502 lamps valued at approximately $247,693, all of which were imported. On the basis of units, the United States supplied 56 per cent of the total during that year and Japan 4 per cent. Japanese competition became well entrenched in 1931 and continued to increase so that by the end of 1933 its participation amounted to 60.7 per cent of total imports of incandescent bulbs, as compared with 17.1 percent for the United States.
This substantial increase in Japan’s share of the Cuban market for this product is attributed to dumping at prices which are almost ruinous to American trade. At present the Japanese are quoting a rate of $2.72 per 100 lamps (40 watts), c. i. f. Habana, as against an American price of $12.87 per 100 lamps (40 watts), c. i. f. Habana.
This subject has been studied at considerable length by the representatives of the General Electric Company, Westinghouse Company, and the office of the Commercial Attaché. There is in preparation at this time a complete report which will be submitted to the Department within two weeks. In the meantime, Mr. Maurice McGovern, resident manager of the General Electric Company, has left for Washington to place the facts before the Department. His recommendations [Page 132] have been endorsed by the resident manager of the Westinghouse Company.
Representatives of the two above mentioned companies have suggested that the general duty rate be increased to double the present maximum rates which range from $4.00 to $24.00 per 100 lamps with a preferential to the United States of 70 per cent. We suggest to the Department that the general duty should be double the present maximum rates with a preferential to the United States of 50 per cent. These rates are essential if we are to recover our former share of the trade in incandescent bulbs and allied electrical lines. Our contacts believe that if we attain our former position in the sale of bulbs that we will also obtain an equal percentage of the imports of other electrical equipment, which has been gradually turning to the Japanese.
4. Lamp Cord.
Of a total of $562,015 worth of insulated copper wire imported into Cuba in 1929, the United States supplied over 95 per cent. By 1932 the share of the United States had declined to 59 per cent. Lamp cord represents one of the principal types of insulated copper wire sold in Cuba. While no statistics are yet available, inquiries among the trade have disclosed that in 1933, Japanese exporters obtained a large share of this business through underquoting all other suppliers.
For example, American lamp cord (size 181/32) is quoted at $6,835 per 1,000 feet c. i. f. Habana against a Japanese price of $4.50 per 1,000 feet c. i. f. Habana. A general duty of $16.00 per 100 kilograms on Item 64–B, under which lamp cord is classified, is deemed absolutely essential to protect this trade against further diminution.
| Present Duty | Maximum Tariff | General Tariff | U. S. Prf.% | Tariff for U. S. |
| Per 100 Kilos, Item 64–B | $20.00 | $10.00 | 20% | $8.00 |
| Proposed Duty | $32.00 | $16.00 | 50% | $8.00 |
5. Cellophane.
In 1932, the consumption of cellophane in Cuba approximated 20,000 kilograms, of which the United States supplied about 15,000 kilograms and Japan 352 kilograms. In 1933, the consumption increased to 40,000 kilograms, of which 33,000 kilograms were imported from the United States and 4,616 kilograms from Japan.
The advance in imports of cellophane from Japan of 4,264 kilograms in one year indicates that Japan is making a strong bid for this trade. Recent reports show that Japan has further increased her participation during the first quarter of 1934.
At present Japan is quoting at from $11.00 to $12.00 per ream c. i. f. Habana, against the lowest American price of $15.67 per ream c. i. f. Habana. Importers state that the trade is being diverted to Japan and that unless the general import duty is increased Japan will dominate the trade within a short time.
[Page 133]Agents for American manufacturers of cellophane urge that the general duty be increased to 40 cents per kilogram as compared with the present general duty of 10 cents. We feel that our present participation can be maintained by increasing the general duty to 28 cents per kilogram on sheets and 35 cents per kilogram on bags. The higher duty on the bags, pouches, et cetera, is suggested in order to provide protection for the local manufacturers of bags.
Our recommendations are as follows:
| Present Duty Per Kilo. | Maximum Tariff | General Tariff | U. S. Prf.% | Tariff for U. S. |
| Sheets—156–F | $0.20 | $0.10 | 30% | $0.07 |
| Bags—155–M | $0.24 | $0.12 | 30% | $0.084 |
| Proposed Duty Per Kilo | ||||
| Sheets—156–F | $0.56 | $0.28 | 50% | $0.14 |
| Bags—155–M | $0.70 | $0.35 | 50% | $0.175 |
Printed bags are subject to a surcharge of 30 per cent of the duties specified. It is desirable that this note be retained.
6. Iron and Steel. Belgium
Although Japanese competition is of paramount interest, we should not overlook the strong competition from Belgium in iron and steel products. The tonnage and value of the trade are very important. So as to enable our manufacturers of these products to be in a more competitive position with Belgium we are suggesting these additional exceptions to the principle of not increasing general duties.
In 1929, of a total trade of $1,637,895 in bars, plates and shapes, the United States supplied about 30 per cent, while Belgium supplied 58 per cent. Based on imports through Habana for 1933, the share of the United States has declined to 10 per cent while the remainder was supplied almost entirely by Belgium. Belgian exporters are quoting a base price of $1.40 per 100 pounds c. i. f. Habana against an average price of $1.85 from the United States.
The attention of the Department is again invited to the fact that in connection with the agreement for the distribution of the international sales of rails and pipes, the continental and British steel producers recognized in principle that the Cuban market should be supplied by the United States.
The following changes are recommended as being necessary to effect a restoration of our former share of this very important branch of trade:
| Present Duty Per 100 Kilos. | Maximum Tariff | General Tariff | U. S. Prf.% | Tariff for U. S. |
| Bars—36–B | $0.80 | $0.40 | 25% | $0.30 |
| Plates—37–A | $2.80 | $1.40 | 25% | $1.05 |
| Shapes—42–A | $0.88 | $0.44 | 25% | $0.33 |
| Proposed Duty Per 100 Kilos | ||||
| Bars—36–B | $1.50 | $0.75 | 50% | $0.375 |
| Plates—37–A | $5.00 | $2.50 | 50% | $1.25 |
| Shapes—42–A | $1.60 | $0.80 | 50% | $0.40 |
In view of the foregoing instances of actual competition from Japan and Belgium, and in view of the threatened competition as evidenced by the following enclosures and information supplied by the trade, we feel that it is imperative to adhere to the principle of maintaining the value of the preferential. We refer again to the arguments advanced on pages 4, 5, and 6 of our memorandum of April 11, 1934, concerning general provisions in the treaty with respect to the value of the preferential.
The attention of the Department is invited to pages 25 and 26 of the publication of the United States Tariff Commission (1929) entitled “Effect[s] of the Cuban Reciprocity Treaty”, which reads in part as follows:
“An appraisal leads to the conclusion that the concessions granted by Cuba have exerted an influence upon trade which, even in the years immediately following the treaty, accounted for but a minor part of the expansion of United States exports to that island, and which at present (1929) is not the determining factor in any considerable percentage of the total trade.
“On the whole it appears that the guiding principles of the recent revision of Cuba’s tariff have been such as to reduce rather than to increase the value of the preference to the United States.”
In large measure, the failure of the old treaty to benefit American trade may be attributed to the incorporation of the relative preferential plan without bound rates of duty. It is sincerely hoped that the same mistake will not be committed in these negotiations because of theoretical objections to the absolute preferential plan.