832.5151/686
The Chargé in Brazil (Scotten) to the Secretary of State
[Received August 10.]
Sir: I have the honor to refer to the Embassy’s telegram No. 161 of June 19, and to previous correspondence regarding the injury caused to American trade on account of the compensation system in existence between Brazil and Germany.
From conversations which I have had recently with members of the American Chamber of Commerce in Rio de Janeiro, it appears that the impression is prevalent among the latter that once the Trade Agreement and Exchange of Notes between the United States and Brazil come into force, the compensation agreement between Brazil and Germany must automatically cease, as its continuance would constitute an infraction of the most-favored-nation clause regarding exchange embodied in Article VI of the Trade Agreement, and the Exchange of Notes clarifying the latter.
Inasmuch as it now seems likely that the Trade Agreement will be ratified by Brazil within a month, I consider it highly important that the Department inform the Embassy as soon as possible whether this interpretation placed by the members’ of the Chamber of Commerce upon Article VI of the Trade Agreement, be true. From a careful study of the Exchange of Notes, I am personally unable to perceive that the latter contemplates a compensation mark system, but as the Trade Agreement and Exchange of Notes were negotiated in Washington, I am unable to find in the files of the Embassy anything bearing definitely upon this point.
I am of course aware of and in complete accord with the contents of the Department’s telegraphic instruction No. 114, of June 21, 6 p.m., with especial reference to point two of the latter. Nevertheless, the Department’s telegraphic instruction does not indicate specifically that a continuation of the compensation mark system would constitute a legal infraction of the Trade Agreement, but rather it would appear to imply that the continuation of this system would constitute an evasion of the spirit of the Agreement. It appears [Page 382] highly desirable and necessary therefore that the Embassy know exactly where it stands in future discussions of this matter with American business men as well as with the Brazilian authorities.
Respectfully yours,