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[interested?] is now in as good shape as can be hoped for. Political situation again tranquil.

Have been invited to make trip on Thursday this week to Buenos Aires, Paraguay and Iguassu. Will be gone about 15 days but can return immediately if occasion should arise. I am greatly in need of rest and request immediate cable permission so as to make arrangements. Hofer will be in charge.

COLLIER

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711.252/4

The Secretary of State to the Ambassador in Chile (Collier) No. 788

WASHINGTON, November 2, 1927. SIR: There is transmitted herewith for submission to the Foreign Office for negotiation between the United States and Chile a draft of a treaty of Friendship, Commerce and Consular Rights which already has been the subject of preliminary instructions. A copy of the draft is enclosed for the use of the Embassy.

Detailed instructions in regard to each article of the draft will be sent to you by an early pouch. The following statements in explanation of the more important differences between the enclosed draft and the Treaty of Friendship, Commerce and Consular Rights signed by the United States and Germany, December 8, 1923, are made for your information and for use in explanations to the Chilean authorities.

The reservation concerning statutes relating to the immigration of aliens made by the Senate of the United States in giving its advice and consent to the ratification of the treaty between the United States and Germany is incorporated in the draft as the last paragraph of Article I. The reservation making provision for the termination at the end of one year of the paragraphs of Article VII relating to the treatment of vessels and Articles IX and XI (Articles X and XII of the enclosed draft) is not included in the enclosed draft. Further reference will be made to this reservation.

The fourth paragraph of Article VII is designed to assure equality of treatment in respect of licenses, quotas and contingents for the importation or exportation of restricted goods. In practice it has been difficult to obtain such equality of treatment for the commerce of the United States in certain European countries in which systems prohibiting or restricting the importation or exportation of certain goods have been in force, and from which prohibitions or restrictions abatements are made by contingents or licenses.

18 Not printed.

This Government desires that the paragraph be included in the treaty with Chile as it is undertaking to have it included in all the treaties of Friendship, Commerce, and Consular Rights, which it is now negotiating.

Stipulations in regard to prohibitions, restrictions and licenses are contained in the International Convention Relating to the Simplification of Customs Formalities signed at Geneva, November 3, 1923, in Article 9 of the Anglo-Austrian Treaty of May 22, 1924, and in a provision contained in the second paragraph of Exchanges of Notes signed by the United States with a number of countries, namely,—

Poland, February 10, 1925, Treaty Series No. 727; Finland, May 2, 1925, Treaty Series No. 715; Esthonia, March 2, 1925, Treaty Series No. 722; Rumania, February 26, 1926; Treaty Series No. 733; Latvia, February 1, 1926, Treaty Series No. 740; Lithuania, December 23, 1925; Treaty Series No. 742; and Haiti, July 8, 1926, Treaty Series No. 746.

The seventh paragraph of Article VII providing for equality of treatment of vessels with regard to bounties, drawbacks and other privileges, although not contained in the treaty between the United States and Germany is included in a number of the older treaties to which the United States is a party, and this Government desires to have it included in the treaties of Friendship, Commerce, and Consular rights, which it shall sign hereafter with maritime countries.

The sentence at the end of the second paragraph of Article XIII “If such consent be given on the condition of reciprocity the condition shall be deemed to relate to the provisions of the laws, National, State, or Provincial, under which the foreign corporation or association desiring to exercise such rights is organized” is designed for use in treaties with countries in which the right of a corporation organized under the laws of the United States to engage in business is conditioned on reciprocity. This provision would have the effect of obtaining for American corporations in Chile in the event that the laws of Chile in relation to the right of a foreign corporation to engage in business contain a condition of reciprocity, the right to engage in business according to whether the laws of the State of the United States under which such corporation is organized extend the right to engage in business to foreign corporations.

The reservation making provision for the termination of paragraphs and articles relating to shipping made by the Senate in giving its advice and consent to the ratification of the treaty with Germany is included in the Treaty with Esthonia as the third para

graph of Article XXIX. As stated above on page 2 of this instruction no corresponding reservation is included in the enclosed draft. The Department will instruct you by telegram whether to include such a paragraph in the draft before submitting it to the Chilean Government or at any time during the negotiations.

If it be included it will be added as the third paragraph of Article XXX. The words “Except as provided in the third paragraph of this Article” will be inserted at the beginning of the first paragraph of Article XXX and the new paragraph will read as follows:

“The sixth and seventh paragraphs of Article VII and Articles X and XII shall remain in force for twelve months from the date of exchange of ratifications, and if not then terminated on ninety days previous notice shall remain in force until either of the High Contracting Parties shall enact legislation inconsistent therewith when the same shall automatically lapse at the end of sixty days from such enactment, and on such lapse each High Contracting Party shall enjoy all the rights which it would have possessed had such paragraphs or articles not been embraced in the Treaty”.

Further comment in regard to the differences between the enclosed draft and the treaty of the United States with Germany will be included in the detailed instructions.

When presenting the draft to the Foreign Office please state that this Government reserves the right to propose changes therein throughout the course of the negotiations. Please inform the Department by telegram of the receipt of this instruction. You will, of course, not present the draft to the Foreign Office, until the Department sends you a further communication authorizing you to do so. I am [etc.]

FRANK B. KELLOGG

REPRESENTATIONS TO THE CHILEAN GOVERNMENT REGARDING PROPOSED LEGISLATION FAVORING CHILEAN MERCANTILE MA. RINE

625.003/101 : Telegram The Ambassador in Chile (Collier) to the Secretary of State

SANTIAGO, August 22, 1927–11 a. m.

[Received 12:35 p. m.] 109. Chilean Government special commission appointed to study problem of promoting merchant marine is considering the recommendation of preferential customs duties on importations in national vessels. This will greatly injure Grace Line which has asked my assistance in pursuance of informal representations as to injury this is likely to do commercial interests but would appreciate specific instructions.

COLLIER

825.85/41 : Telegram

The Ambassador in Chile (Collier) to the Secretary of State

SANTIAGO, August 25, 1927—4 p. m.

[Received 8:30 p. m.] 111. Supplementing my 109, August 22, 11 a. m. Government's proposed law for American [Chilean?] national mercantile marine has been published. Synopsis is as follows:

1. Chilean Government to repay steamers amount of Panama Canal tolls. This will give steamers l'eno and Aconcagua practically $115,000 United States gold yearly. The commission which reported bill is said to have declared that this subvention is to offset "a direct compensation paid by the American Government equivalent to tolls”.

2. Shippers of nitrate in Chilean vessels are to receive a premium.

3. Ten percent reduction in customs duties to be allowed on imports in Chilean vessels.

4. Minister of Hacienda is empowered to raise loans for account of Chilean companies for the purchase of new vessels, such loans to be granted by the Government and vessels to be mortgaged to the Government and companies' dividends in excess of 10 percent to be equally divided between stockholders and Government.

5. Law if enacted to go into effect January 1st, 1928.

British and other European shipowners have asked their Governments to make protests before Chilean Government especially with regard to points 1 and 2.

Manager of Grace Line to make protests before Chilean Government especially with regard to points 1 and 2.

Manager of Grace Line asks me to aid and says proposed measures would be decisively detrimental to Grace Line and appears to be especially directed against its service between Chile and New York, inasmuch as there are no established Chilean lines between Chile and European ports.

I request instructions and respectfully suggest that in view of strong movement for promoting national objects mere representations as to general desirability that nothing at all be done to hurt mutual commercial interests will not be sufficient. [Paraphrase.] If we are to secure moderation of Chile's present mood, I think more concrete representations will be necessary, such as would be used between business competitors. I do not mean, however, to recommend—and not at all under present conditions—anything suggestive of retaliation, although I have a feeling that a firm policy of defense by the United States is necessary. I shall take no action until I receive instructions. [End paraphrase.]

COLLIER

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828.85/42: Telegram

The Ambassador in Chile (Collier) to the Secretary of State

SANTIAGO, August 30, 1927—3 p. m.

[Received 6 p. m.] 115. Government has sent to Congress project of law embodying all points of my 111, August 25, 4 p. m., except point 2. Omission of latter will probably greatly diminish opposition to bill by British shipowners and eliminate that of other nations. Grace Line is seriously and almost solely threatened. I renew request for instructions by cable.

COLLIER

825.85/42: Telegram

The Acting Secretary of State (Castle) to the Ambassador

in Chile (Collier)

(Paraphrase)

WASHINGTON, August 31, 1927-6 p.m. 37. Embassy's telegrams: No. 109, August 22, 11 a. m.; No. 111, August 25, 4 p. m.; No. 115, August 30, 3 p. m.

1. It is the feeling of the Department that objection may properly be raised by the Government of the United States with respect to point 3 in Embassy's synopsis of proposed law and also with respect to preferential export duties or bounties of similar effect should measures such as those contemplated in point 2 be brought up again.

You should try in every proper way to dissuade the Government of Chile from applying the above discriminatory measures, pointing out that Chilean ships and their cargoes pay the same duties and charges in American ports as American ships and their cargoes, and that the failure of Chile to accord reciprocal treatment to American ships would be viewed by the Government of the United States with the greatest regret. You may say also the policy of national treatment of shipping has become almost universal and that according to available information only two nations at the present time depart therefrom. Almost invariably such discriminatory policies lead controversies with other states.

2. The following is for your information and guidance. The two nations to which reference is made above are Mexico and Portugal. In the case of the latter, representatives of maritime nations have made strong representations.14

3. As to point 1, while the Government of the United States does not question the legal right of nations to subsidize shipping, yet it must point out that the granting of subsidies to ships using the Panama

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