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Canal, with the avowed object of relieving such ships of the burden of tolls which competing ships are obliged to pay, would change the present status whereby the Canal is used by vessels of all countries on an equal footing. The Government of the United States would view with concern any step which would tend to substitute for the present regime of equality in the use of the Canal one of special advantage. You may discuss this matter in the above sense with the appropriate authorities. If these authorities should refer to mail payments to the Grace Line by the Government of the United States, you may indicate that these payments have no relation to Canal tolls and that similar payments are made by the Government of the United States to lines operating in other parts of the world.

For your information. The Department understands that payments to the Grace Line for carrying United States mail to the west coast of South America during the fiscal year ending June 30, 1927, amounted to $284,801, and to the Chilean Line, the Compañía Sud Americana de Vapores, whose ships it is proposed to subsidize, $50,883. The Grace Line employs four ships and has approximately two sailings a month, while the Chilean Line employs two ships and has one sailing a month. Possibly it was the disparity in such payments which prompted the recommendation of a subsidy to the Chilean Line. It may be useful in this connection to ascertain the payments by the Chilean Government to the two companies for carrying the mail.

On the basis of its present information regarding point 4 the Department perceives no grounds for objection.

It is the desire of the Department to conclude a general commercial treaty with Chile containing provisions for reciprocal national treatment of shipping. On August 19 instructions were mailed to you.16 Kindly employ especial diligence to prevent the adoption of a policy so gravely at variance with United States treaty aims.

Inform Department fully of any action by you. In case you discuss the question with your colleagues, you should be careful to avoid any suggestion of joint action. You should not threaten retaliation in any discussions with Chilean officials.

CASTLE

825.85/43 : Telegram

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

SANTIAGO, September 1, 1927–3 p. m.

[Received 4:45 p. m.] 118. Supplementing my 115, August 30, 3 p. m. Proposed law omitted paragraph 2 of commission's recommendations because section

Ante, p. 517.

17 of nitrate law already gives President power to pay bounty to producers who ship on Chilean ships. Much anxiety amongst diplomats of shipping countries, all cabling their Governments for instructions.

COLLIER

825.85/44 : Telegram

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

SANTIAGO, September 2, 1927—5 p. m.

[Received September 3—6:10 p. m.] 120. James Heavey, Chilean manager Grace Line, called today. Believes nationalistic movement in Chile will result in passage of ship subsidy law substantially as reported. Says there will be probably many purchases of new boats. Braun and Blanchard, owners of existing service between Valparaiso, Punta Arenas and Buenos Aires, already have plans ask Government for guarantee of loan for purchase of at least four new ships for European and North American trade. He also said Government member of nitrate board contemplates immediately putting into effect section 17 of nitrate law authorizing additional (subsidies?] to Chilean ships that carry nitrate. Moreover all shipping interests are greatly agitated by provision in the report of joint committee appointed to study revision of tariff which authorizes President to grant additional reduction of duty equal to 25 pesos per ton on several classes of merchandise including structural steel, vehicles, agricultural machinery and many other articles. Heavey estimates this represents at least 70 percent of American exports to Chile. Foreigners, especially British, greatly agitated by this provision claiming that inasmuch as existing Chilean lines to foreign countries only touch American ports this will give great advantage to American exporters. Undoubtedly this proposed tariff provision as well as all features of shipping law would stimulate American export trade at least until Chile purchases new ships and establishes services to Europe. This provision should be carefully considered by the Department but I assume that you wish your instructions in your cipher telegram 37, August 31, 6 p. m., complied with and I will do so unless otherwise instructed.

COLLIER

825.85/42: Telegram

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

[Paraphrase)

WASHINGTON, September 14, 1927—2 p. m. 41. Department's telegram No. 37, August 31, 6 p. m.

(1) The Department has noted the considerations set forth in your telegram No. 120, September 2, 5 p. m., but, nevertheless, it desires that every effort be made to dissuade the Government of Chile from applying discriminatory import duties in favor of Chilean ships.

(2) Your telegrams No. 118, September 1, 3 p. m., and No. 120, September 2, 5 p. m. Bounties contemplated under section 17 of the nitrate law if paid to shippers would apparently be similar in effect to preferential import duties. You should, therefore, try to dissuade the Government of Chile from applying the former measure on the same general grounds as the latter, namely, that neither Chilean ships nor their cargoes are subjected to discriminatory treatment in ports of the United States as compared with American ships.

Grace and Company has informed the Department that the National Nitrate Council has passed a measure, to become effective upon the approval of the President, providing for a payment of 7 pesos per metric ton in favor of Chilean ships for nitrate carried to Canada, Cuba, and the United States. Grace and Company consider that this measure, in conjunction with preferential import duties, will seriously affect their interests.

Inform the Department whether the payments referred to by the Grace Line would be made to shippers or to shipowners. The Department is giving consideration to the question whether representations should be made regarding payments to Chilean shipowners based on quantity of cargo carried and distance transported, but you should take no action with regard to such measures without specific instructions.

(3) Your telegram No. 119, September 1.16 It is not entirely clear to the Department whether the mileage subsidy of 2 pesos per ton of coal transported in Chilean ships for each one thousand kilometers would be payable to shippers or to shipowners. If payable to shippers, its effect would be similar to the discriminatory measures mentioned above and appropriate representations in the same sense should be made.

Telegraph as soon as possible as to the probable effect of your representations, also, whether the representatives of other countries have made representations, and if so, to what effect.

KELLOGG

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825.85/49: Telegram

The Ambassador in Chile (Collier) to the Secretary of State SANTIAGO, September 17, 1927–11 a. m.

[Received 2:21 p. m.] 133. My telegram number 118, September 1, 4 [3] p. m. President of Chile yesterday issued decree under sections 17 and 33 of nitrate law granting to Chilean ships carrying nitrate to foreign countries the following bounties per metric quintal: To countries (south!] of the Panama Canal, 50 Chilean centavos; to countries north of Panama Canal, including Cuba and the Antilles, 70 Chilean centavos; to countries on Atlantic seaboard, 1 Chilean centavo. Decree goes into effect as soon as published in Diario Oficial. Bounty is paid to ship and not to producer. Correct the error in point 2 of my telegram 111, of August 25, 4 p. m., and my 118, of September 1, 3 p. m. Error was due to incorrect newspaper report of law.

COLLIER

825.85/50 : Telegram

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

SANTIAGO, September 20, 1927–11 a. m.

[Received 9:15 p. m.] 136. Your 41, September 14, 2 p. m. Supplementing my 133, September 17, 11 a. m. Yesterday I had separate conversations with regard to ship subsidies with the President of the Republic, Minister of Foreign Affairs, Under Secretary, Chief of Diplomatic Section, prominent Senator, prominent Deputy on committee to which bill has been referred, German and French Ministers, Dutch and British Chargés. First four apparently much impressed by my representations; diplomats mentioned have also made representations. Principal British opposition is due to their belief that preferential duties will favor American export trade. However, owing to bad effects of proposed bill on British service between Valparaiso and New York, they have same reasons for opposition to bill as Grace Line. I am informed from other sources that British Foreign Office called Chilean Minister to Great Britain to its office and made very strong representations to him. Possibly such action by you with Dávila 1: would be helpful especially if there is a possibility of increase of duties by us to counteract effect of Chilean discrimination and bounties. I believe all persons connected with the Foreign Office

" Chilean Ambassador at Washington, Oct. 6, 1927.

believe bill as drafted most unwise. Under Secretary says he took my note 18 in which I made strong representations against repayment Panama Canal dues and tariff preference and bounties to Minister of Finance who has promised him to reconsider bill. He made same promise to me when I saw him at suggestion of President of Republic. I am soon to have another long talk with him. I also talked with Delcourt, head of the Nitrate Bureau, and Simon, head of the Budget Bureau, both of them members of commission that recommended ship subsidy bill. Senator and Deputy with whom I talked believe bill as drafted very faulty ... I feel confident before final passage provisions as to Canal tolls will be stricken out and there is strong probability that preferential duties will be eliminated and possibly bounties to ships and that instead there will be a lump sum subvention with provisions for diminution in case companies do not drum up commerce and get full cargoes. If section 317 of customs law 10 is applicable, may be well for Department to let Dávila know of its existence even if inexpedient to intimate that it will be put into effect. I shall not relax my efforts although I have repeatedly urged reciprocity of treatment and have not hinted at reprisals even to counteract unfair discrimination.

COLLIER

825.85/52: Telegram

The Ambassador in Chile (Collier) to the Secretary of State
SANTIAGO, September 21, 1927–6 p. m.

[Received 11:45 p. m.] 141. Have made further representations to Minister of Foreign Affairs as to proposed law favoring mercantile marine, calling attention to principles of Geneva convention 1923 20 (see Trade Information Bulletin 202, stating that even if Chile has not ratified it, it should not be forgotten as expression of its delegate as to principles that should govern, and that the United States in fact adopts this liberal practice wherever reciprocal treatment is not denied to it.

Minister of Hacienda lunched with me today privately. I discussed matter fully with him and I am assured by him that he will give personal reconsideration to bill and redraft it and that provision

18 Note No. 802, Sept. 12, enclosed with despatch No. 1184, Sept. 13, not printed ; this note was based on Department's telegram No. 37, Aug. 31, 6 p. m., p. 528.

19 42 Stat. 944.

* Convention and statute on the international regime of maritime ports and protocol of signature, signed at Geneva, Dec. 9, 1923; League of Nations Treaty Series, vol. LVIII, p. 285.

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