The general provisions are designed to assure nondiscriminatory treatment of United States trade.

ARGENTINA

United States-Argentina trade agreement. The reciprocal trade agreement between the United States and the Argentine Republic, which became effective November 15, 1941, covers a large portion of the trade between the two countries. The general provisions of the agreement provide, among other things, important assurances against discriminatory tariff, quota, or exchange treatment of imports from either country into the other.

The tariff advantages obtained from Argentina under the agreement benefit a long list of American industrial and agricultural products. Concessions affect 1927 Argentine tariff items. In the case of 39 tariff items duties were reduced, and under 88 items present rates were bound against increase for the life of the agreement.

The duty reductions are of three types: (1) Those which become effective in their entirety on the effective date of the agreement; (2) those which become effective in two stages, part immediately, and part when the second concession stage comes into force; and (3) those which do not become effective until the second concession stage becomes operative. In the case of these last-mentioned reductions, present duty rates are bound, pending the effective date of stage II. All bindings become effective when the agreement comes into force.

Stage I concessions become effective when the agreement becomes effective, and stage II concessions become effective promptly after Argentine customs receipts from import duties exceed 270,000,000 paper pesos in any calendar year. The 39 duty reductions obtained include 12 which become effective when the agreement enters into force, 5 which do not accrue to exports until the second stage becomes effective and 22 which are partly effective immediately and in their entirety when stage II becomes operative. The extent of United States export trade in 1940 affected by these three classes of duty reductions, and its relation to total United States exports to Argentina, are shown in the table below. While 127 tariff items are considered to have been subject to concessions, many of these cover groups of products, so that the number of individual products benefiting from the agreement is in reality much larger. In a few instances, subitems have been counted as tariff items since some concessions are not uniform in their effect on all products covered by a tariff item.

PERU

United States-Peru trade agreement.—The trade agreement between the United States and Peru became effective July 29, 1942. Peru granted concessions on products imported from the United States involving 50 paragraphs of the Peruvian tariff schedule. In the case of 35 of these, the agreement provides for rates of duty lower than those now in effect and in the case of 15 for the binding of existing customs treatment during the life of the agreement. The principal products on which Peru granted reductions in duty to imports from the United States are automobiles and trucks; parts for automobiles and trucks; typewriters and calculating machines; certain dried fruits; certain canned vegetables; canned fruits; prepared oats; and fresh apples, pears, and plums.

In December 1941 basic Peruvian import duties (which are specific) were increased generally by 20 percent to compensate for depreciation of the currency; some reductions in duty or bindings under the agreement are based upon rates in effect in 1941 prior to this general increase, others upon the rates existing on the day of signature of the agreement.

Imports from the United States into Peru of products on which concessions were obtained amounted in 1940 to an estimated 43,602,000 Peruvian soles ($7,068,000) or 26 percent of total Peruvian imports from the United States in that year. Of this amount, approximately $5,111,000 represents imports of products which will benefit from duty reductions while about $1,957,000 represents imports of products which receive the benefit of bindings against increase in duty.

URUGUAY

United States-Uruguay trade agreement.—A reciprocal trade agreement between the United States and Uruguay became effective January 6, 1913. In the agreement, Uruguayan tariff concessions were obtained on a long list of United States agricultural and industrial products included in 141 Uruguayan tariff items. Uruguayan import charges are reduced on 81 items. Existing import charges are bound on 47 items. The agreement binds the duty-free status of 13 items.

In addition to providing for more favorable tariff treatment on United States exports to Uruguay, the provisions of the agreement simplify the procedure for determining the amount of duty applicable to merchandise imported into Uruguay upon which concessions were granted to the United States. Except for a relatively small number of items which are dutiable on an ad valorem basis, Uruguayan basic tariff rates and various surtaxes are assessed on fixed official customs valuations which are subject to periodical revision. Furthermore, the Uruguayan tariff law includes a requirement, in effect since 1931, that 25 percent of the duty (50 percent in the case of some items) must be paid in gold or its equivalent in paper currency. At 1941 rates of exchange the effect of this requirement was to increase by 41.85 percent the amount of duty imposed on those items on which 25 percent of the duty must be paid in gold and by 83.7 percent the amount imposed on those items on which 50 percent of the duty must be paid in gold.

Therefore, the actual amount of the duty imposed on a given item had to be determined by applying to the official valuation the rates of duty and of surtaxes and then calculating the effect of the gold-payment requirement in increasing the amount of the duty. However, it was agreed that duties on concession products would be stated in terms of a "total calculated duty" in paper pesos per given unit, so that the computation previously required is no longer necessary.

MEXICO

United States-Mexico trade agreement. The trade agreement between the United States and Mexico became effective January 30, 1943. Tariff concessions obtained from Mexico apply to many United States agricultural and industrial products which are important among Mexican imports from this country. Such concessions affect 203 items in the Mexican tariff. Duties under 76 items are reduced, and existing customs treatment of 127 additional items, including 6 which cover duty-free imports into Mexico, is bound in the agreement against changes to the disadvantage of United States exporters to Mexico.

Mexican imports from the United States of products on which concessions have been made were valued in 1939 at $23,413,000, or 29.2 percent of total Mexican imports from the United States in that year, which was the last before the war disrupted the operation of normal trade factors.

Mexico imported from the United States in 1939 products on which existing customs treatment is bound, to the value of $12,300,000, or 15.3 percent of that country's total imports from the United States in that year. Bindings of Mexican tariff rates against increase are of significant advantage to United States exporters because in recent years many such rates have been considerably increased.

Not only have Mexican customs duties been reduced through the agreement, or assurance given against their increase, but certain customs regulations and formalities have been removed or simplified. Furthermore, the general provisions of the agreement bind against increase all charges in connection with importation of scheduled articles into Mexico.

ICELAND

United States-Iceland trade agreement.-In the agreement, which became effective November 19, 1943, Iceland makes tariff concessions on United States agricultural and industrial products included in 24 Icelandic tariff items. Iceland's imports of these products from the United States in 1939 were valued at $116,000, or 33 percent of the total value of Iceland's imports from the United States in that year. In 1940, the international situation resulted in elimination of Iceland's former sources of supply of many products. That factor, together with the opening of direct shipping lines between the two countries, accounts, in the main, for a subsequent increase in United States exports to Iceland which were valued at $2,254,000 in 1940.

Because of its climate and physical resources Iceland depends largely on other countries for much of its food supply and for many of its nonfood products. Fish, dairy products, meat, and potatoes are the only articles of food normally produced in Iceland in sufficient quantities to meet domestic requirements.

In the past many important products have been imported from the United Kingdom, the Scandinavian countries, and other European countries which maintained direct shipping connections with Iceland. Icelandic trade statistics indicate that in 1939 about $200,000 worth of foodstuffs and about $150,000 worth of nonfood products were imported from the United States. Over 30 percent of this trade is now covered by tariff concessions obtained in the agreement.

IRAN

United States-Iran trade agreement.-Commercial imports into Iran from the United States of products on which concessions were obtained in the agreement (effective June 28, 1943) were valued in 1939-40 at $1,832,000, or 84 percent of total Iranian commercial imports from the United States in that year. Approximately $1,711,000 of the Iranian commercial imports represents imports of products on which the duty has been removed or reduced or the monopoly tax, imposed under the Iranian law of 1931, has been abolished. About $121,000 represents imports of products upon which the duty is bound against increase. In addition, the Iranian road taxes on concession items are bound against increase by the terms of article VI of the agreement. These road taxes were previded for by the Iranian Tariff and Road Tax Law of 1931 and are imposed on all articles imported into or exported from Iran.

Foreign-trade monopolies, which formerly played an important part in Iran's foreign-trade policy, have either been discontinued or modified in recent years, although the Iranian Government still maintains control of foreign trade through the remaining monopolies, exchange-restrictions, and other means. Of special interest to American trade was the automotive-import monopoly. This monopoly has been discontinued, but the monopoly tax, which in effect is an import charge, is still collected. Under the terms of the agreement, automotive products on which concessions were obtained will be exempt from this monopoly tax. Limitations on Iran's external purchasing power and Iranian tariffs and trade controls, were the principal factors affecting American export trade with that country in the years immediately preceding the outbreak of the war. The official measures to control Iranian foreign trade were, on the whole, of general application, but the clearing arrangements between Iran and certain foreign countries had the effect of affording those countries certain advantages not enjoyed by American exporters. Under the present agreement the United States is assured of nondiscriminatory treatment in the application of all Iranian foreign trade and exchange control measures.

PARAGUAY

United States-Paraguay trade agreement. A reciprocal trade agreement between the United States and Paraguay becomes effective April 9, 1947.

Concessions granted by Paraguay on products of United States include concessions on 40 classifications of goods as classified by the Paraguayan tariff. Reductions were obtained on 231 and bindings on 17.

A general increase of 50 percent in the basic rates of duty on imports into Paraguay became effective in November 1934, and a customs surtax or additional duty of 11 percent ad valorem has been applicable to imports into Paraguay since August 1943. However, certain specified products have been exempted by Executive decree from the application of the general increase in the basic rates of duty and of the surtax. An exchange of notes accompanying the agreement provides for the continuation of the customs treatment presently accorded, on a temporary basis, with respect to such products.

Cigarettes, cosmetics, toilet soaps, and dentifrices have each year been exempted by Executive decree from the general 50-percent increase in Paraguayan customs duties. The exchange of notes provides that the lower rates of duty on the products specified therein shall be applicable to imports from the United States while they continue to be exempt from the 50-percent general increase; should they cease to be so exempted, customs duties applicable to those products, when imported from the United States, shall be no higher than those specified.

Cosmetics, prunes, other dried fruits, and raisins are exempted by Executive decree from the customs surtax, and the exchange of notes provides that while the surtax exemptions are continued, products of United States origin specified therein shall remain exempt from the additional duties; in the event surtax exemptions are discontinued, the surtaxes applicable to such products shall be no higher than 11 percent ad valorem.

Mr. REED. Now, was there any discussion with respect to this imperial preference at your conference?

Mr. CLAYTON. I was not at the conference myself. We had a great deal of discussion with the British regarding that matter in the negotiation which resulted in the Anglo-United States Financial Agreement in December 1945. We had a great deal of discussion with the British at that time, and the policy in the matter, as between the

United States and the United Kingdom was fixed then, and that same policy was carried out at London.

Mr. REED. But have they, at any time, in any way, agreed to eliminate the imperial preference?

Mr. CLAYTON. Yes; they have. They have agreed that insofar as tariff negotiations result in the reduction of our tariff barriers to their goods, that they will be handled in such a way as to reduce and eliminate, eventually eliminate completely, the preference.

Mr. REED. I did not get the last part of that.

Mr. CLAYTON. It was agreed that in the negotiation of a reduction of tariffs that the reductions will take place in such manner as to reduce and in time eliminate the preference system in this way:

Suppose that Great Britain has, today, a 30-percent duty on commodity X if it originates from non-Empire sources, and a 20 percent if it originates from Empire sources.

If they agree to reduce that triff in the agreement with us by, say, 30 percent, you get that 30-percent tariff reduced to 21 percent, so that you have practically got an elimination of the preference as between the two origins.

Mr. REED. Why not make it 20?

Mr. CLAYTON. I beg your pardon?
Mr. REED. Why not make it 20?

Mr. CLAYTON. The agreement is that the elimination of preference shall take place in the way in which I have indicated.

Now, if we would get a reduction in that tariff of 33% percent, then it would be reduced to 20, so that the two would be the same.

But you understand, Mr. Reed, that the whole imperial preference system grew out of our high tariff policy. It grew principally out of the Smoot-Hawley tariff, but at a conference which was held in Ottawa in 1932.

Now, the British take the position that since they were compelled by reason of our policy to adopt the imperial preference system because of the raising of tariffs, that they will abolish this system by the reverse process of reducing the tariffs.

Mr. REED. How do Canada and these various countries, New Zealand and Australia, feel about the elimination of imperial preference?

Mr. CLAYTON. Well, I only know in general from what I have heard. Some of them like it and some of them do not. Just as in the United Kingdom itself, some people and some journals, some economists, some Government people like it and some do not like it, just as in our own country.

Mr. REED. There has been some discussion within a very short time now in Parliament with regard to the imperial preferences?

Mr. CLAYTON. They are discussing it quite often. You have people in Parliament who want to continue it and people who want to discontinue it.

Mr. REED. Do the records show how the general weight of sentiment is, one way or the other, in Parliament?

Mr. CLAYTON. I am not able to speak with any authority on that. I just have not followed it in that detail. I know we have an agreement with the British Government.

Mr. REED. The only access I have of information on that subject is the debates on that question as I see them in the press, and I am

not always too sure whether that is accurate or not, but it is quite evident that some very prominent men over there are trying to assure the members of Parliament that the imperial preference will not be disturbed.

Mr. CLAYTON. I know that there are many members of Parliament who take that view.

At the time of the discussion of the Anglo-United States Financial Agreement, there were prominent people in Parliament who were violently opposed to it and largely on account of the fact that it put to an end, or contemplated putting to an end in time, the Empire preference and the sterling bloc system. Their people, of course, as you can understand, there are industrialists in Britain who profit greatly by the continuation of the present system because it gives them a more or less monopolistic control of the trade within the Empire, and naturally they have acquired vested interest in the continuation of that system.

Mr. REED. To what extent will each of these countries, like Australia and Canada, have any say with reference to it in the final analysis?

Mr. CLAYTON. Well, they cannot have any say as regards the tariff into the United Kingdom itself, because we have got an agreement on that, and the United Kingdom has stated specifically in that agreement that it will not permit the existence of any other agreements that it may have with other countries to prevent the carrying out of its agreement with us.

And, I wish to add that, obviously, this is largely a British Empire question that you are asking now, Mr. Reed, and of course I assume that the United Kingdom will have to consult all these countries that are parties to that arrangement, and indeed they have already discussed it at considerable length. I know that.

Mr. REED. Under their system, to what extent will the decision be made, say, by New Zealand or Canada or Australia, by the legislative bodies of those particular parts of the British Empire?

Mr. CLAYTON. Well, I do not think that it is possible that those bodies can upset the agreement what we have with the United Kingdom as regards preference in the United Kingdom itself in tariff arrangements respecting imports into the United Kingdom.

Mr. REED. To what extent does Great Britain resort to quotas? Mr. CLAYTON. Well, they of course resort to exchange controls very extensively at the present time, and they will be compelled to do so for some time because, as you know, they have a great scarcity of foreign-exchange. Their import requirements are of the necessities of life, food and raw materials and fiber, and so on, and they are so extensive that they are compelled to husband and conserve their foreign-exchange resources for the purchase and payment of items of that kind and they obviously would keep control over the power of their nationals to acquire foreign exchange to pay for luxuries and semiluxuries which they can do without.

They have not enough food, let alone these other things.

Mr. REED. To what extent outside of exchange controls do they use the quotas?

Mr. CLAYTON. I think they depend more upon exchange control than they do upon quotas. The exchange control is just as effective,