278. Telegram From the Mission in Geneva to the Department of State1
TAGG 3275. For Governor Herter from Blumenthal. Subject: GATT Cereals Meeting—July 5 to July 16.
Wyndham White opened meeting and appointed Lucq to chair. US and others had objected to pre-meeting suggestion that Roger Moore (IWC) chair technical sessions, and Moore continued as advisor to chairman.
First day’s discussion absorbed with matters purpose and procedure. EEC suggested purpose of the technical meetings should be to establish amount of support which each country gives its producers and to determine what would be an appropriate level of prices on the international market if support not given. All of EEC’s subsequent questioning bore in this direction. We directed our attention principally to concept of price as incentive to production, since this notion had to be differentiated clearly from the notion of price as a producer of income to establish validity of US loan rate as “US base price at farm level”—definitions set out in item one of US proposal to Cereals Group. Also price is one of the key variables underlying the projection of production in the EEC and we wished to establish that EEC is understating change in return to French producer to result from grains cap.
After considerable discussion it was agreed that meeting should begin with first agenda item dealing with producer returns since this was an integral part of the projections that would be discussed under second item. Remaining discussion would follow order of the agenda. No time limit was set on discussion of returns and it turned out entire two weeks taken up with this item. Because of the upcoming IWC meetings, [Page 703] July 19–22, and the European vacation in August, it was decided to terminate session on July 16.
To facilitate presentation and discussion each delegation submitted a working paper summarizing producer returns in its own country and showing how these were interrelated with other prices reported in each system. Secretariat also distributed summaries of published data on prices. (Copies of the respective submissions and papers are being carried to Washington by hand.)2
Each delegation was subjected to a cross-examination of its submission. Most of the questioning was designed to clarify working of systems, to identify components of returns given or to seek additional items which might increase return to producers above level identified by country in initial submission. For example, the EEC was interested in all forms of subsidies as a basis for MDS and we were asked to provide government costs of storage. We asked for figures on French quantum system.
The two issues that stood apart from the usual line of questioning related to the concepts introduced by the US delegation. These issues were the validity of (1) US contention that production which producer foregoes in order to receive certificates should be subtracted from the returns which he gets for the grain he sells in arriving at average return to producer (US income concept); and (2) that marginal return is the important return to look at when considering producer production adjustments. This concept applies directly to the United States and its loan rates, and to French producer returns for production in excess of 15 tons.
Most others had difficulty with US income idea, but were interested in and to degree sympathetic to it. EEC, however, would not accept it at all. Australia and Canada suggested that there might be something to marginal concept and it should therefore be considered, especially in the case of France. We had calculated a 29.1 percent increase in marginal returns to French producers between 1964–65 and 1967–68, which met with some approval among exporters. The EEC, however, claimed its producers did not consider the marginal principle in making their production decisions, and disputed that our producers did.
Before the end of the session there was considerable discussion on (1) need and format for summarizing results of the current meeting and (2) format to be considered in preparing submissions on projections at the September meetings.
With respect to summary, Australia suggested a table which compared respective producer returns, but this table took no account of divergence between systems—especially between that of US and others. Tried to fit all into same mold designed to show Australia is low cost producer. [Page 704] We objected most seriously to fact that the data and concepts, such as guaranteed prices, actual producer returns and indirect subsidies presented in the Australian summary did not fit our or French case. EEC supported Australia clearly seeking to establish negotiating document which would support its MDS approach. Wanted to put points of agreement and disagreement on what returns were in document. For example, would dispute US loan rate as guaranteed price, entering straight average return to producer instead. Compromise US suggestion that each delegation revise its initial submission in the light of the discussions was accepted; these to be submitted at next meeting along with whatever comments anyone wished to make about others’ papers.
Australia also made proposal regarding an outline for submission on projection. There was substantial agreement that production consumption, import and export data and projections be included in these and discussed in the light of offers made. Projections were to be as specific as possible, allowing for generalization where this necessary. An Australian suggestion of 30 years back and 10 years forward met with some disagreement and a compromise proposal to include a pre-World War II average was accepted. It was also agreed that any projections made would be to 1970 only.
The meeting concluded on Friday, July 16, with a presentation by Roger Moore on the technical aspects of establishing international basing points for pricing grains and on the problems of establishing quality differentials. At the request of Canada, Moore will prepare additional papers on these points and circulate these before the next meeting.
Next meeting to begin on September 20 (we suggested earlier date but no one agreed) and to continue until agenda completed.