[Enclosure]
Memorandum
The note of Mr. Ashton-Gwatkin of January 2, 1936, raised a number of
questions and problems for the consideration of the governments
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which are interested in or
might be invited to a world sugar conference and it specifically
raised the question as to whether the Government of the United
States would be likely to accept an invitation to participate in a
conference along the lines set forth in this note and if so, whether
this Government has any observations to offer on the points
discussed therein. In response to this request it is desired to make
the following observations:
1) It is probable that the Government of the United States would
welcome an invitation to attend an international sugar conference
organized for the purposes and along the lines set forth in Mr.
Ashton-Gwatkin’s note. Recognizing the interdependence between the
American sugar situation and the position of sugar elsewhere in the
world, especially in the so-called “free market”, the Government of
the United States is prepared to support any well directed move
toward stabilizing the production and distribution of sugars
destined for world markets on a basis that would be economically
sound. The Government of the United States considers that it has’
already taken far-reaching steps for the stabilization of the sugar
industry of the United States, and that one of the steps has
resulted in the marketing of greater quantities of Cuban sugar in
the United States than would have been the case had there been no
sugar control program. The Government of the United States desires
to make it clear, therefore, that its participation in the proposed
sugar conference cannot be predicated upon the admission of sugar
from foreign countries, including Cuba, greater than the quantities
which have been admitted under the existing provisions of the
Jones-Costigan Act. During the present calendar year 1936 the basic
quota established for Cuba is 1,982,401 short tons, raw value, and
the basic quota for foreign countries other than Cuba is 27,440
short tons, raw value. The Government of the United States’ also
desires to state as its opinion that even should pending legislation
in the United States to which reference is made below not be enacted
prior to the proposed international conference, the conference could
proceed, since, as indicated hereafter, the broad purpose of
removing surplus supplies and of reducing the amount of protection
to domestic producers’ and producers in areas (except foreign
countries) which supply continental United States has already been
accomplished.
2) The Government of the United States has been engaged in a
farreaching program to attain order and economic stability in the
sugar industry in all principal areas supplying the American market
during the past two years. The program included six main elements:
- (a)
- A reduction in the general rate of duty on sugar from 2½
cents per pound to 1.875 cents per pound. This reduction was
made on June 9, 1934.
- (b)
- A further reduction in the effective duty on sugar (i. e.
the duty on Cuban sugar from which source practically all
foreign importations
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of sugar have been derived for many years) from the rate
of 1.5 cents per pound to .9 cents per pound. This reduction
was accomplished by a trade agreement with Cuba which became
effective on September 3, 1934.17
- (c)
- A limitation upon the amount of sugar admitted from the
Philippine Islands, duty free, to 850,000 long tons. This
limitation upon Philippine sugars was brought about by the
enactment of the Tydings-McDuffie Act (Philippine
Independence Act) on March 24, 1934.18 This limitation
upon the admission of duty free sugars from the Philippine
Islands became effective for the first time for the year
1936.
- (d)
- Establishment of quotas on the importation or receipts of
sugar from all areas supplying the United States market in
order to adjust available supplies to consumption
requirements.
- (e)
- Production adjustment programs in all sugar producing
areas supplying the United States market (except foreign
countries) under which growers were compensated for reducing
production of sugarcane or sugar beets to the level
established by the quotas, with due allowance in each area
for domestic consumption and necessary reserve
stocks.
- (f)
- Regulation of labor conditions in the sugar producing
areas supplying the United States market which are
benefitted by the quota system and production adjustment
payments, and control of the prices to be paid by processors
to farmers for cane or beets.
3) It is believed that the effect of the foregoing policy of the
Government of the United States upon the world sugar market has been
of considerable importance. By making it possible for Cuba to obtain
a market in the United States at a more remunerative price than has
prevailed for many years for a satisfactory quantity of sugar, it
has been possible for Cuba to avoid, since the termination of the
international sugar agreement of 1931, pressing upon the world sugar
market the tonnage which would otherwise have been forced upon it
because of a curtailed market for Cuban sugar in the United States.
By making payments to producers in the Philippine Islands to
compensate them for the transition from the high level of production
attained in the 1933–34 crop year of 1,500,000 long tons to the
level of production established in the Philippine Independence Act,
the excess stocks of Philippine sugars which would otherwise have
accumulated and which might have been forced upon the world market
were eliminated, and the relatively remunerative price established
in the United States as the result of the quotas made it unnecessary
for the Philippine producers to seek an outlet in the world market
for part of its production. The world market has also been favorably
affected by the avoidance of a possible surplus in continental
United States and its sources of supply which threatened the world
and the United States market at the time of the enactment of the
Jones-Costigan Act.
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4) The Jones-Costigan Act which authorized the Secretary of
Agriculture to establish quotas for importations or receipts of
sugar from the insular areas and foreign countries and to establish
marketing quotas for cane and beet sugar produced in the continental
United States was enacted as an amendment to the Agricultural
Adjustment Act. At the time of the United States Supreme Court’s
decision in the Hoosac Mills case on January 6, 1936 (U. S. vs Butler, 56 S.
Ct. 312) there was considerable uncertainty regarding the future
status of the Jones-Costigan Act on which the Government’s sugar
program of marketing quotas and benefit payments to producers had
been based. The Secretary of Agriculture announced on January 7,
1936, that the decision of the United States Supreme Court of
January 6, 1936, in the Hoosac Mills case, which had evidently
invalidated those portions of the Agricultural Adjustment Act
concerned with production adjustment and processing taxes, did not
affect the quota provisions of the Jones-Costigan Act. Further, no
suit to invalidate the quota provisions is now pending in the courts
or is likely to be initiated in time to reach final adjudication in
the Supreme Court during 1936. The present act, however, expires
December 31, 1937, and, although new legislation is now pending in
the Congress of the United States, which if enacted into law, would
continue the power to maintain sugar quotas to the end of the year
1940, it is not possible for the government of the United States to
give assurance at this time that the quotas will be continued after
the year 1936, although it is reasonable to assume that the quota
will be continued at least for the calendar year 1937.
The authority contained in the Jones-Costigan Act to supplement
quotas by far reaching cane and beet production adjustment programs,
under which growers were compensated for maintaining production at
the quota level in the continental United States and insular areas
has been invalidated and it has not yet been determined whether
alternative measures are possible or desirable to accomplish the
same purposes. The Soil Conservation and Domestic Allotment Act
recently enacted19 provides for conditional payments to
producers who comply with a governmental program for rational land
utilization. A far reaching program of economic readjustment in
Puerto Rico has been launched under special legislation which is
aimed in part to reduce the present over-concentration of the
Islands’ economy in the production of sugar. Diversification of
production is receiving increased attention in the Hawaiian Islands
and the expansion of sugar production is not considered probable. In
the Philippine Islands the control of sugar production, administered
at first under provisions of the Jones-Costigan Act, has now been
taken over by the Commonwealth Government under legislation adopted
by that Government. The amount
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of Philippine sugar which may be marketed in
the United States free of duty each year is strictly limited by the
Philippine Independence Act, as has been stated above, and the
objective of the sugar control program of the Commonwealth
Government under existing legislation is
“to limit the production of sugar cane and
sugar in the Philippine Islands to such an amount as would
be sufficient to cover the quota allotted to the Philippine
Islands under the United States laws and the needs of the
local consumption, plus such reserves as may be determined
from time to time in accordance with the provisions of this
Act.”*
5) It is impossible to predict at this time the form which the
pending sugar legislation will ultimately take and whether enactment
of such legislation is likely. It will be noted from the above
summary, however, that the results of the measures already taken by
the Government of the United States in adjustment of sugar supplies,
the reduction of the general duty on sugar and the special reduction
of the duty on Cuban sugar in connection with the trade agreement
with Cuba, the limitation upon the quantity of sugar which can be
admitted from the Philippine Islands free of duty, and the measures
of control which may be instituted under the Soil Conservation and
Domestic Allotment Act should be of material aid in the working out
of an International Sugar Agreement, even if the pending legislation
in the United States affecting sugar should not be enacted.
6) In view of the fact that the Government of the United States
exercises at the present time no control over production of sugar in
the Philippines, it is felt that the Government of the Commonwealth
of the Philippines should be directly represented upon a United
States delegation attending an international conference on sugar.
The contents of your note of January 2, 1936, have been brought to
the attention of Philippine authorities. In the absence of their
views, which will be communicated upon their receipt, the Government
of the United States is disposed to believe that the Philippine
Government will cooperate with the American Government in any
discussions or conferences which may eventuate.
