Foreign Relations of the United States Diplomatic Papers, 1935, The British Commonwealth; Europe, Volume II

611.48A31/40

The Secretary of State to the Minister in the Union of South Africa (Totten)

No. 235

Washington, November 22, 1935.

Sir: Reference is made to your despatch No. 936 of July 24, 1935, in regard to the enforcement of the South African three-column tariff adopted on May 10, 1935. The information contained in the despatch under reference and the questions raised in the penultimate paragraph thereof have received thoughtful study in the Department.

With reference to the question of counter measures, the Department believes that the time is not opportune for taking retaliatory action, such as withholding from the Union of South Africa the benefit of concessions made under trade agreements with other countries. In the first place, your analysis of the probable effects on American trade of the imposition of the third-column rates recently proclaimed in respect of a limited number of items would tend to support the view that present discriminations against American trade are relatively slight. In the second place, it seems not unlikely that any counter-measures which might be taken, before attempting to come to some mutually satisfactory agreement, might accelerate rather than retard the utilization of the penalty rates provided for in the South African tariff.

With reference to the question of trade agreement negotiations with the Union of South Africa, it may be pointed out that the trade agreements organization is heavily burdened with current negotiations and that negotiations with a number of countries are expected to be undertaken soon. Moreover, the Department believes that the present situation in the United States is such that it would not be advisable to initiate trade agreement negotiations with the Union of South Africa in the near future.

Although the Department is not now disposed to adopt counter measures against South African trade and does not believe the time opportune for opening trade agreement discussions with the Union of South Africa, it is of the opinion that an effort should be made at once to avoid the development of a situation in which the only recourse would be to counter measures such as the withholding of concessions made under trade agreements or, possibly, the use of Section 338 of the tariff act,⁴ as a step toward the removal of reciprocal discriminations. It is proposed, therefore, to suggest to the Government of the Union of South Africa that a simple most-favored-nation agreement be concluded at an early date with a view to stabilizing commercial relations between the United States and South Africa pending the conclusion at some future time of a trade agreement involving reciprocal concessions. This proposal is contained in the draft note enclosed with this instruction. You will, if you perceive no objection, present this note in proper form, at the earliest suitable occasion, to the appropriate officer of the Union government.

In presenting the note, you may wish to refer at greater length than is done in the note itself to this government’s trade agreements program and to the policy being followed in regard to the generalization of concessions granted under trade agreements (See Department’s Instruction No. 222 of June 27, 1935, with enclosure). You may wish to point out that although as yet no duties have been reduced on products of any great importance to South Africa, cacao beans, gingerroot and sisal fiber, of some interest to the Union, have been bound on the free list under the trade agreement with Haiti;⁵ and that it is not at all unlikely that concessions of considerable interest to South Africa will be made in connection with agreements now in process of negotiation or contemplated. The Department believes that it would be inadvisable for you to initiate any discussion of existing minor discriminations against American trade. If the South African officials bring up the subject, you are authorized to say that although your Government regrets exceedingly that the South African Government has seen fit to place American trade at a disadvantage in respect of the tariff rates on the products in question, several of which are of some interest to the United States, it is awaiting developments in regard to such tariff disadvantages before giving serious consideration to withholding trade agreement concessions from the Union of South Africa in accordance with the fair and reasonable policy laid down by the Trade Agreements Act.⁶

You may take occasion also to state that the Government of the United States feels that when the larger picture of the trade of the United States with the British Empire and the rest of the world is viewed, there stands out in bold relief the indisputable fact that the large purchases by the United States of products from other British and foreign political units make available in London and other centers credits which are used in part for the purchase of South African products. In other words, the purchasing power of the United States contributes largely to the prosperity of the Union of South Africa, even though its direct purchases therefrom may appear to be below what is desired.

The Department fully realizes that the odds are against acceptance of a most-favored-nation proposal by the Union government, since the apparent object of the three-column tariff law is to force countries such as the United States and Japan, which export much more to than they import from the Union of South Africa, to grant reductions in nondiscriminatory rates in return for the mere removal of artificial penalty rates. Nevertheless, it is believed that the proposal to enter into a simple most-favored-nation agreement, even though the proposal is rejected, will strengthen rather than weaken the position of the United States in the event it should be decided, later on, if South African discriminations should become serious, to adopt counter measures.

If you have any doubts as to the advisability of proposing a simple most-favored-nation agreement, the Department would greatly appreciate being informed of what they are and your reasons therefor. Your advice is also sought in regard to the form such an agreement should take in the event the proposal, if made, is favorably received by the South African Government. In this connection the question of how to deal with Empire preferences naturally arises. Perhaps it would be possible to avoid a general commitment to accord most-favored-nation treatment with a specific exception covering Empire preferences, by providing, on the part of the United States, merely for the extension of concessions granted under trade agreements, or minimum tariff rates, in return for the application of South Africa’s second-column rates, or minimum rates on products from “foreign [i. e. non-British]⁷ countries”, to American commerce.

Very truly yours,

For the Secretary of State:

Francis B. Sayre

[Enclosure]

Draft Note to the South African Prime Minister and Minister for External Affairs

Excellency: I have the honor to refer to the efforts which my Government is making to promote a revival of international commerce by means of reciprocal trade agreements authorized by the Trade Agreements Act of June 12, 1934. Such agreements have been concluded with a number of European and Latin American countries and negotiations with a considerably larger number of countries are in various stages of progress. Eventually it is hoped to conclude trade agreements with all the important commercial countries.

In accordance with the established policy of my Government to accord most-favored-nation treatment to all countries which accord such treatment to American commerce, concessions granted under trade agreements are extended to all countries which treat American commerce no less favorably than they treat the commerce of any other foreign country. The procedure which has been adopted for the purpose of carrying out the provisions of the Trade Agreements Act in respect of the generalization of concessions was explained in a mimeographed press release of April 1, 1935, a copy of which is enclosed with this note.⁸ There is enclosed also a copy of the President’s letter of October 7, 1935,⁹ in regard to the application of the customs duties proclaimed in connection with the trade agreements with Belgium,¹⁰ Haiti, and Sweden.¹¹

As a result of this policy of generalizing concessions, the Union of South Africa has been listed among the countries which enjoy the minimum tariff rates imposed in the United States. As the trade agreements program of the United States advances, the Union of South Africa may benefit importantly from the extension of trade agreement concessions to its commerce. It is not unlikely that the tariff rates on a number of products of considerable importance to the Union will be reduced in connection with trade agreements now pending or contemplated.

Later on, after trade agreement negotiations now in progress and others in regard to which tentative plans have been made have been concluded, my Government is desirous of exploring the possibility of entering into negotiations looking toward the conclusion of a trade agreement, involving reciprocal tariff concessions, with the Union of South Africa.

Having in mind the possibility of trade agreement negotiations at some favorable time in the future, my Government has instructed me to propose to your Government that a simple agreement providing for reciprocal most-favored-nation treatment be entered into at an early date, with a view to stabilizing commercial relations between the United States and the Union of South Africa pending the conclusion of a mutually satisfactory trade agreement.

My Government would greatly appreciate an early response to this proposal.¹²

Accept [etc.]

4. Tariff Act of 1930; 46 Stat. 590.
5. For text of agreement signed March 28, 1935, see Department of State Executive Agreement Series No. 78 or 49 Stat. 3737.
6. Act of June 12, 1934; 48 Stat. 943.
7. Brackets appear in the original.
8. Vol. i, p. 536.
9. Not printed.
10. For text of agreement signed February 27, 1935, see Department of State Executive Agreement Series No. 75 or 49 Stat. 3680.
11. For text of agreement signed May 25, 1935, see Department of State Executive Agreement Series No. 79 or 49 Stat. 3755.
12. This note was presented to the South African Prime Minister on January 25, 1936, and was acknowledged by him on February 4, 1936 (611.48A31/42). No further reply was received.