You will also request the Consulate General at London to obtain information and prepare a list of all American consular officers in the United Kingdom having automobiles with the amount of tax paid thereon annually.

A full report with regard to this matter is desired.
Very truly yours,

For the Secretary of State:

WILBUR J. CARR

702.0641/84

The Ambassador in Great Britain (Bingham) to the Secretary

No. 182

of State

[Extract]

LONDON, September 7, 1933. [Received September 21.]

SIR: I have the honor to refer to the Department's instruction No. 58 of August 15, 1933, directing me to take up informally with the British authorities the question of the taxes on automobiles operated by American consular officers stationed in Great Britain and Northern Ireland, with a view to ascertaining whether exemption is granted to any foreign consular officers stationed in Great Britain and whether exemption would be granted to American consular officers from taxes on their automobiles, on a reciprocal basis.

This matter was taken up informally with the appropriate Foreign Office official on August 29, and I enclose a copy of a letter dated September 6 87 which the Embassy has received in reply. This letter explains that no exemptions are granted to foreign consular officers in the United Kingdom with respect to the payment of annual taxes on automobiles, and also gives the Foreign Office's view that it would not be possible to make any arrangements for the exemption of United States Consuls from payment of these taxes, on a reciprocal basis.

Respectfully yours,

For the Ambassador: RAY ATHERTON Counselor of Embassy

87 Not printed.

CANADA

PRELIMINARY DISCUSSIONS RESPECTING A TRADE AGREEMENT BETWEEN THE UNITED STATES AND CANADA

611.4231/784

The Chargé in Canada (Boal) to the Secretary of State No. 1300

2

OTTAWA, March 29, 1933. [Received April 3.]

SIR: I have the honor to refer to my despatch No. 1080, of October 20, 1932,1 regarding the Ottawa agreements, as well as to previous reports upon that subject, and to my despatch No. 1243 of February 21, 1933,1 reporting a debate in the Canadian House of Commons regarding the possibility of reciprocal trade arrangements with the United States.

In order that the Department may have at hand material from this Legation to supplement its study of the possibility of some form of trade and other agreements with Canada I recently asked Mr. Meekins, the Commercial Attaché of the Legation, Mr. Harrington, American Consul here, and Mr. Bonbright, Third Secretary, to work together upon the preparation of data for this purpose. This has been prepared in the following form: &

Memorandum dealing with general provisions and with Canadian exports to the United States.

Memorandum dealing with United States exports to Canada.
Tentative outline of agreement.

I wish to make it clear that in the absence of more definite information as to the method under which our Government might be prepared to proceed, it has been rather difficult to base these studies upon the probability of the adoption of any particular method. Current press reports indicate that consideration is being given to the possibility of legislation which would enable the President to conclude Executive agreements possibly embodying the method used in the Argol agree

1Not printed.

The trade agreements concluded during the Imperial Economic Conference at Ottawa in 1932. For complete texts of the agreements and attached schedules, published by the Canadian Government as annex V to the report of the Conference, see Imperial Economic Conference 1932: Report of the Conference, Supplementary Volume (Ottawa, 1932); the texts are also printed in British and Foreign State Papers, vol. cxxxv, p. 161.

'The following papers enclosed with this despatch are not printed.

ments. From the Canadian point of view this might be open to the objection that such agreements might be terminated by unilateral action at any time. Possibly a means may be devised to obtain authority for Executive agreements which would make it possible for the President to conclude such agreements with assurance that they would endure for a fixed period. I note, for instance, that in Executive Agreements, Series No. 37, which relates to the Chinese courts in the international settlement at Shanghai, Article X states that

"The present agreement and the attached notes shall enter into effect on April 1st, 1930, and shall continue in force for a period of three years from that date, provided that they may be extended for an additional period upon mutual consent of the parties thereto."

As an annex to this despatch will be found an outline embodying a series of agreements.5 In submitting this outline I wish to make it clear that it is not intended to represent anything but a part of the study in an elementary form. It is my thought that it would be more convenient for the Department to deal with a specific form and text, even though this may not correspond to the Department's ultimate policies and general plan of action. This outline is based upon two assumptions: one, that it is now timely to conclude a trade agreement with Canada and that it is therefore an opportune time to complete agreements with Canada on other subjects; two, that fixed tariff rates, intended to remain unchanged for a considerable period of time, cannot be put into an agreement because of A, the uncertainties surrounding the future of international trade and the consequent difficulty of determining the probable course of Canadian-American trade over any period. greater than one year, and B, the acute problems presented by the overproduction of natural commodities in the United States which may, however, be relieved rapidly as the result of national and international action. The attached outline contains provisions for the employment of the International Joint Commission as the agency through which these difficulties can be met. If this method is incompatible with the policies of procedure formulated by the Department in conjunction with the other interested Departments that part of the enclosure can be disregarded; the remainder, however, will be found to contain data

The "argol agreements" were negotiated under section 3 of the Act of 1897. In conformity with the provisions of the first part of section 3, two series of agreements, known from the first article specified on the list as "argol agreements", were concluded. During President Theodore Roosevelt's administration, the United States negotiated a second series of "argol agreements". See United States Tariff Commission, Reciprocity and Commercial Treaties (Washington, Government Printing Office, 1919), pp. 205,209 ff. and 435 ff. See also U.S. Tariff Commission, Dictionary of Tariff Information (Washington, Government Printing Office, 1924), p. 619.

5 Not printed.

which should prove of value in negotiating any type of agreement with this country.

I have also endeavored to give due weight to the very strong and general feeling in Canada that some guarantee must be given Canadian industries and natural producers that the benefits of any agreement arrived at will not suddenly be removed from them, leaving on their hands a series of enterprises developed for the American market with no market to which to send their produce.

I have gone on the assumption that present United States tariff rates can in many instances be considered to be higher than desirable. It is obvious, however, that during the past year American tariffs with Canada have been lowered through the operation of the exchange rate between the currencies of the two countries. Part II, Article 3, by providing that the trade agreement between the two countries should be based upon the assessment of duty at par of exchange, would effectively lower duties now paid on American exports to Canada, since, as explained in the Commercial Attaché's memorandum, these are now calculated much higher than the regular rates because they are figured on the basis of the present disparity in the currencies.

Another feature of the enclosed outline is the provi[sion] in Article V, Part II, dealing with the elimination of the troublesome Canadian valuation system, which is discussed at some length in Mr. Meekins' memorandum. This system of valuation has been the cause of most of our trade difficulties in Canada and has been a far greater bar to normal trade than tariff rates in themselves.

It may appear surprising to the Department that the enclosed outline should stress the purposes of the proposed agreement and should leave so much to the future in the form of adjustment in rates during the life of the agreement. I am convinced, however, by such experience as I have had here with the Canadian point of view and the trade difficulties which have arisen that the main objective to be reached is to obtain a change in the Canadian mentality with regard to the degree of safety involved in trading extensively with us. They must be assured that we are not attempting to absorb them economically or to dominate them financially and that we will be as conscientious in seeking to make this agreement operate to their national advantage as to our own. I believe that a satisfactory agreement should undertake to attain these objectives and should make provision for flexible tariff operation which can be simply and expeditiously adjusted from time to time when the result of the agreement's operation is an obvious deviation from the attainment of these objectives. I am inclined to think that an agreement which does not contain the quality of flexibility and easy adjustment is

likely to fail in its purpose through changes of circumstance or to fail in negotiation because of objections in one or the other country.

It may be noted that the maxima for rates are indicated in schedules called "Schedules A" and "B", which are attached to the outline and are intended to be the only part of the agreement dealing with specific rates. These schedules would permit not only of the fixing of duties between these maxima and minima rates, but also of adjustment on a period basis in order that the graduation from present high tariffs to lower ranges might be arrived at progressively instead of abruptly. This would give time for adjustment to certain industries which might otherwise be seriously affected. It would seem advisable to consult the affected producers in connection with the fixing of the rates in these schedules.

The proposal contained in Part II, Article II, of the outline to entrust the solution of current operating problems and such adjustments as may be necessary during the life of the proposed agreement to the International Joint Commission may cause some surprise. However, the language in Article IX of the Treaty of January 11, 1909, relating to boundary waters and questions arising along the boundary between Canada and the United States would appear to be broad enough to cover "any other questions or matters of difference arising between them (United States and Canada) involving the rights, obligations or interests of either in relation to the other or to the inhabitants of the other along the common frontier". Since, as is shown by experience with the Ottawa agreements, the operation of a substantial trade agreement between the United States and Canada would be followed by the necessity for a continuous study and adjustment, it would seem desirable that some medium for such adjustment should be provided which would be somewhat removed from the immediate pressure of politics in both countries. As its membership is evenly divided between the two countries the Joint Commission cannot make a joint recommendation to both governments on the basis of a majority finding unless at least one American member sides with all the Canadians or vice versa. Furthermore, in the language of the treaty, the Commission's reports shall not be regarded as "decisions of the questions or matter so submitted either on the facts or the law and shall in no way have the character of an arbitral award". The Commission's procedure would not be along the lines of those of a legal body such as a court of law, but rather along the lines of a policy body. It could be equipped with technical assistants, could obtain the assistance of Commercial Attachés or other members of the Legations of one or both countries when necessary, could refer certain technical questions for study to the tariff boards of 6 Foreign Relations, 1910, p. 532.