561.311F1/115: Telegram

The Chairman of the American Delegation to the Monetary and Economic Conference ( Hull ) to the Acting Secretary of State

54. For Wallace from Morgenthau. At meeting today including Bennett, Bruce, Le Breton, Morgenthau and experts Morgenthau attempted to bring negotiations to a head. Each delegate was asked to state his position on each principle involved in the proposed international agreement it being understood that the experts would work out the detailed figures. Bennett agreed to the principle of acreage reduction in all four countries of an amount sufficient to clear surplus stocks in North America and to the principle of controlled marketing of surplus stocks. Bruce would make no definite commitment. His tactics to date have been to evade committing his country and to place the responsibility for failure of agreement on one of the other countries. One of the reasons given by him for his inability to agree was that the Canadian position was not clear. Mr. Bennett removed this obstacle by his very clear statement of the Canadian position. Bruce then pointed out that he must have a practical plan to recommend to his Government. He suggested export maxima for Australia and the other three countries with the understanding that Australia might not necessarily reduce production but as a substitute measure would agree to dispose of the excess wheat on the domestic market. He suggested that the excess supply might be denatured by dyeing which would limit its use to animal foodstuff. Would such an arrangement for Australia be satisfactory, he asked, if it becomes impossible to secure an agreement to reduce production? Le Breton stalled and said he thought that before he could commit his Government he would first have to know if Russia and the importing European countries would cooperate. [Page 801] Morgenthau insisted that the four overseas exporting countries must get together first and meet the importing and other exporting countries with a united front and agreed to and did after the meeting adjourned discuss cooperation informally with Litvinoff who indicated that Russia would agree to restriction of exports.

Morgenthau again called attention to the United States policy if no agreement was reached and what this would mean in terms of wheat prices to the three other countries. He also pointed out that the Farm Act provided a solution for the problem of the American wheat farmer irrespective of any international agreement. Bennett made a very strong statement obviously directed to Bruce and Le Breton saying that they must recognize that the new farm legislation in the United States has injected a fundamental change into the world wheat situation particularly if no international agreement reached. He discussed the prospect for wheat prices for Australian, Argentine and Canadian wheat if United States embarked on a program of competitive marketing of their excess wheat supply. He called attention to the disorganized wheat markets when Russia was dumping wheat at extremely low prices. Bruce then agreed to cable his Government tonight saying that he would emphasize the unfavorable prospect for wheat prices if no agreement were reached. Le Breton asked for 2 days time before stating a definite position. He evidently wants further authority from his Government.

Prime Minister MacDonald asked the four countries concerned to meet with him this afternoon in order to get a picture of the situation and to urge progress. At that meeting both Le Breton and Bruce said definitely that they had cabled their Governments recommending action but that it might well be several days before they received word. [Morgenthau.]

Hull