561.35E1/358: Telegram

The Chairman of the American Delegation (Davis) to the Secretary of State

37. 1. I have had constantly in mind the need of assuring the United States that sugar agreement should in no circumstances operate to produce an acute shortage of supplies affecting American consumers. Basic quotas of 3,670,000 metric tons for the next sugar year as against an original estimate of 3,000,100 metric tons required by the free market in the current year together with other terms of the agreement I believe are adequately safeguarded.

Article 3a of chapter 4 provides that during the first 2 years all basic quotas as adjusted by special releases and increases of different countries may be reduced 5%. In later years unanimous consent of exporting countries is required to reduce quotas. Article 2 of the same chapter provides for increases over the basic quotas on decision of the Council which, however, will require a special majority of the Council not yet fixed.

Although the five countries classified as consuming have only 45% of the voting power compared with 55% for the 18 countries classified as producing, many countries of the latter group are definitely interested in policies that make for moderate prices.

On questions of increasing quotas, the efficient cane producers may be counted on to vote with the consuming countries against policies which would result in increased European beet production. Some signatory beet countries classified as producing, France for example, over a period would import perhaps as much sugar as they would export and would be interested in moderate price policies.

In the Executive Committee, which has power under article 13 of chapter 6 to initiate quick action against a sudden rise in prices, the United States and Great Britain will each have two votes and Cuba and Java one each.

Chapter 5 (my number 32, May 2, 6 a.m.23) purports to limit normal stocks of exporting countries to 20% of the annual production of each exporting country but countries insisted that the Council be given power to grant exemptions from the limitation, and Cuba and Java both insisted on special provision for larger stocks. Article 2 of chapter 5, which provides that cane producing countries shall plan their production to have a reserve stock of 10% of their respective export quotas at the end of their marketing seasons was suggested by me. I [Page 942] should not insist on it if the interested countries strongly object. The provision is not made applicable to beet production in view of their already exaggerated quotas and their undesirable cost basis. Cuban exports of preferential sugar to the United States will be limited in no way by the agreement and Cuba is permitted to hold a normal stock of 30% of her exports to the United States.

2. Article 5 of chapter 6 authorizes the International Sugar Council to determine the budget of the Permanent Commission and under article 7 each Government shall pay a share proportionate to the number of votes it has under article 9. Up to this time budget questions have not been discussed in detail but I believe that the share of the United States paying 15% of the total expense would not exceed $7,500 per annum including the cost of the Secretariat and the expense of Council and Executive Committee representation.

  1. Not printed.