You are requested to keep the Department informed by telegram of all
important developments at the conference, and to refer to it for further
instructions any matters not covered in the attached Memorandum, with
annexes, or by subsequent telegraphic instruction.
[Enclosure]
Memorandum of Basic Instructions
According to the letter of invitation dated February 6, 1934,
received from the Secretary General of the Monetary and Economic
Conference
“The object of the meeting is to resume the examination of
the sugar question on the lines on which it was begun at the
London Conference by the subcommittee for the coordination
of production and marketing and to ascertain whether the
convening of a subsequent meeting of a wider scope, to which
the principal importing and exporting countries concerned
would be invited, might facilitate the conclusion of a
general agreement for insuring a better organization of the
production and marketing of sugar.”
[Page 671]
The following countries have been invited to take part: Germany,
Belgium, Great Britain, Cuba, United States of America, Hungary,
Netherlands, Peru, Poland, Dominican Republic, Czechoslovakia,
Yugoslavia. In addition the honorary president and the President of
the International Sugar Council have been requested to attend in an
advisory capacity.
This Government has agreed to participate in this Conference on the
understanding that it cannot take any position with respect to an
international agreement until its policy, embracing the areas
supplying the American domestic market, has been developed. By this
is meant in particular action by Congress on certain proposals
supported by the President, which it now has before it. (Copy
attached to Annex 1.) The attached Annex No. 1 with regard to the
sugar situation as it affects the areas supplying the American
domestic market, sets forth the reasons for, and the nature of the
bill16
now before Congress regarding sugar. This bill, if enacted into law,
will provide a method whereby this Government may take steps tending
to control the production of sugar in the various areas under its
jurisdiction. According to the President’s message to Congress,17 a
copy of which is attached to Annex No. 1, this legislation will
facilitate steps by which the marketing of sugar produced in these
areas will be very materially reduced. This program will have the
“three-fold object of keeping down the price of sugar to consumers,
of providing for the retention of beet and cane farming within our
continental limits, and also to provide against further expansion of
this necessarily expensive industry”. In addition, it should
contribute to the economic rehabilitation of Cuba, by allocating to
Cuban sugar a quota in the American market considerably in excess of
marketing during the last two calendar years. The tariff on Cuban
sugar will be reduced substantially, and in order that the Cuban
sugar industry may derive a greater benefit from the sales of its
sugar in the American market the President indicated in his message
to Congress that he is prepared to give “favorable consideration” to
a proposal to increase the existing preferential on Cuban sugars,
“to an extent compatible with the interests of the two
countries”.
As has already been stated, however, the President’s plan has not yet
received the approval of Congress, and until this is forthcoming,
the American Government is unable to enter into any international
commitments.
You should confine yourself, therefore, to following closely the
proceedings at the Conference in order that you may report fully to
this Government. If called upon by the Conference for indications
[Page 672]
as to the preliminary
and tentative ideas of the American Government, you may base your
remarks upon the following observations, but the Conference should
clearly understand that these are subject to change, since they are
entirely dependent upon the outcome of the plan now before
Congress.
I. Provided the legislation before mentioned is enacted into law, it
will permit this Government to pursue the following policies.
(a) Continental United
States. In this area this Government will be able to pledge
that once the plan becomes fully operative production will not
exceed the amount required for consumption as determined by the
Secretary of Agriculture, taking into account supplies from other
areas producing for the American market.
(b) Insular areas (exclusive of the Philippines). This
Government believes that the administration of its sugar plan will
operate so as to bring into equilibrium production and marketings in
the United States of sugars produced in Hawaii, Puerto Rico and the
Virgin Islands, taking into account supplies from other areas
producing for the United States market. As a first step in this
direction, this Government is willing to undertake that production
in Hawaii and Puerto Rico be limited to the 1933–34 crop level.
In the event that the preliminary conference canvasses the
possibility of a tentative agreement for the disposal of surplus
crops (by which is meant the difference between the quotas set for
the abovementioned areas and the amounts produced), and desires to
learn the views of this Government, you are requested to refer the
matter to the Department for instructions.
(c) Philippines.
Instructions will be forwarded by telegram.18
II. This Government believes that the plight that exists in the sugar
industry today arises in large part from the governmental stimulants
to production. The protective and preferential duties, subsidies,
bounties, rebates, et cetera, under which seven-eighths of the world
sugar supply is produced or marketed, have stimulated local
uneconomic production, have diverted and twisted the channels of
international trade in sugar from their normal course, have brought
about differentials in local prices above world prices, but
collectively have depressed the world price so that the effect has
been to lower returns to the industry generally.
It cannot be expected that national action can solve a problem
essentially international in character. For this reason the American
Government strongly urges that steps to curtail the use of these
devices be agreed upon and put into effect as rapidly as possible.
So important is this to the American Government that it is prepared
to proceed immediately and unilaterally, after receiving the
approval of Congress of the sugar plan now before it, to lower its
sugar tariff in order to permit a neighboring country to sell a
substantially greater
[Page 673]
amount of sugar within its confines than during recent years and
insure increased marketings from that country by quota provision. At
the same time, it will make certain payments to sugar beet and cane
sugar farmers in return for the agreement by them to limit
production.
Moreover, this Government believes that at least a partial solution
of the present difficulty lies in a further and more rapid increase
in consumption. In this connection the matter of excise duties on
sugar is important, for even though import duties be lowered, high
excise duties may prevent an increase in consumption. It is pointed
out lowered excise taxes may stimulate sugar consumption, thereby
augmenting and not diminishing revenues derived from these taxes. It
is suggested that the governments concerned may desire to give
careful study to this matter.
III. The American reply to the invitation to participate in the
preliminary conference states in part:
“It is noted that in case it is decided to convene a meeting
of wider scope, the principal importing as well as exporting
nations will be invited.”19
The American Government considers it highly desirable that to
international conferences designed to elaborate plans to control
production to the end that prices may be raised or prevented from
falling, there be invited the principal nations, which would bear
the brunt of such relative or absolute price increases.
In this connection there may be cited the action of the Monetary and
Economic Conference in London last summer in establishing the
principles to which all agreements concerning the coordination of
production and marketing should conform. Particularly under 3 (d) of Section II of the Report of the
Economic Commission, as adopted by the Conference, the following
principle was laid down regarding such agreement:
“(d) It should be fair to all parties,
both producers and consumers, it should be designed to
secure and maintain a fair and remunerative price level, it
should not aim at discriminating against a particular
country, and it should as far as possible be worked with the
willing co-operation of consuming interests in importing
countries who are equally concerned with producers in the
maintenance of regular supplies at fair and stable
prices.”20
There are attached hereto eight annexes, providing factual and
statistical data, and interpretative analysis with regard to both
the world situation and that of the areas supplying the American
domestic
[Page 674]
market. Should
any particular problem arise not covered by these annexes or for
which additional data is necessary, the Department will endeavor,
upon your request, to secure the desired information.
Annexes
- I
- Memorandum with regard to the sugar situation as it affects
the areas supplying the American domestic market, dated February
21, 1934, prepared by the Department of Agriculture.
- II
- Memorandum on sugar prepared for the Economic Committee of the
League of Nations by Dr. Prinson Geerligs, Mr. F. O. Licht and
Dr. Gustav Mikusch, dated, April 15, 1929—Geneva. (Official No.
C. 148.M.57)
- III
- The World Sugar Situation, a report by the Economic Committee
of the League of Nations, July 4, 1929, Geneva. (Official No.
C.303.M.104)
- IV
- Memorandum on the Aims and Provisions of the International
Sugar Agreement of May 9, 1931, prepared by the International
Sugar Council. (Document C. D. 242)
- V
- Documents Relating to Sugar of the International Monetary and
Economic Conference—London, 1933.
- VI
- Report of Secretary of Agriculture on World Trade Barriers in
relation to American Agriculture; June 7, 1933, pages 266–288; (Senate Document No. 70; 73d Congress, 1st
Sess.)
- VII
- United States Tariff Commission Statistics on Sugar—August
1933.
- VIII
- United States Department of Agriculture Tabulations showing
the world production of sugar and international trade of all
important sugar exporting and importing countries, 1928 to 1933
inclusive, and average for years 1921 to 1925. Compiled February
14, 1934.
