1939: Venezuela

After a year of negotiations a reciprocal trade agreement between the United States and Venezuela was signed on Nov. 6, to take effect Dec. 16. The principal concession made by the United States was the reduction by 50 per cent of the import tax on crude petroleum (from ½ to ¼ a cent a gallon), provided the total imports from all countries do not exceed 5 per cent of the crude petroleum processed in United States refineries during the preceding calendar year. Imports in excess of this 5 per cent are to be subject to the full import tax. This concession will be granted to all countries that receive most-favored-nation treatment from the United States, but import quotas are to be set up for this 5 per cent margin. By pro-rating on the basis of imports during the first ten months of 1939, Venezuela has been assigned 71.9 per cent of the total, the Netherlands 20.3 per cent and Colombia 4 per cent. All other countries, including Mexico, share the remaining 3.8 per cent. The dwindling of Mexican oil exports, due to the expropriation of oil properties, practically excludes Mexico from the benefits of this treaty. A policy of encouraging the limited importation of more foreign petroleum, in order to conserve the national oil reserves of the United States, which are somewhat less than 50 per cent of the known world reserves of crude petroleum, may be foreshadowed in this agreement with Venezuela.

This concession is of the greatest importance to Venezuela since the oil industry is the chief factor in the economy of the country, and crude petroleum and fuel oil constitute 85 to 90 per cent of Venezuela's exports. The output in 1938 reached a record total of about 188,000,000 barrels. In return, Venezuela cut the tariffs on thirty-five items imported from the United States, including hog lard, wheat flour, lumber, agricultural and industrial machinery parts, automotive products, etc., and bound present schedules on sixty-one more items. Altogether, these items represent about 36 per cent of United States exports to Venezuela, or $19,000,000 out of a total export trade to that country of $52,000,000. Exports of North American products to Venezuela have more than doubled in the last three years, due largely to the increased activity in the petroleum industry and, also, to substantial purchases of supplies and equipment in connection with the public works program. The United States supplies over one-half of Venezuela's imports (56.2 per cent in 1938, as compared with 11.9 per cent from Germany and 7 per cent from Great Britain).

This trade pact is the twenty-second signed by the United States under the Hull trade policy and the eleventh with a Latin-American country. Negotiations with three other countries of South America have been in progress during the year. Opposition to these last has been so strong from Western agricultural, livestock and copper mining interests that the trade agreements program is under fire; and when the United States Congress convenes in January 1940, a fight is expected in the Senate over the renewal of the Trade Agreement Act, due to expire on June 12, 1940. The present law gives the President power to negotiate trade agreements without Senate ratification; and this constitutional point is likely to become the target in the attack rather than the interests of the cattle-growers, farmers and laborers who fear the competition of commodities now restricted by tariff duties.

One of the first efforts of the Lopez Government to improve the condition of the workers is the profit-sharing law passed in December 1938, and made retroactive to July 1936, which provides a bonus to each employee based on a percentage of earnings for the year. The law applies to the oil companies, which employ about 20,000 workers, and to other business concerns. It institutes a form of compulsory saving, since one-half of the bonus is deposited in a local bank in the employee's name and is cumulative from year to year, resulting in an individual retirement fund.

On invitation of President Lopez Contreras, a Social Action Mission, headed by the president of Notre Dame University, visited Venezuela this year to advise the Government on a social program.