The Secretary of State to the Chairman of the American Delegation ( Davis )
23. 1) Your No. 25, April 29, 3 p.m.25 There appears to be no reason why the phrase “through subsequent agreement with the Commonwealth of the Philippines” could not be dropped from the last sentence of Section a, Article 2, since reduction of the Philippine quota might conceivably be made by action of this Government without agreement with the Commonwealth Government.
2) Your 26, April 30, 4 p.m.25 There appears to be no need to make an exception of the Philippines in the text of Chapter 7, Article 1.
3) The Department notes the lack of any explicit statement in regard to obligations to maintain adequate supplies of sugar at a reasonable price. It believes this to be an important shortcoming. Other restriction schemes which are now operative, and which have been developed on the British initiative, have all been used to restrict supplies to a point where prices have risen beyond a reasonable level, and it would be most difficult to get the controlling authorities, who are closely in touch with the producing interests, to take necessary corrective steps.
The specific features of the agreement do not give sufficient assurance that undue shortage of supplies might not under certain circumstances result. First, the composition of both the Council and Executive Committee is such that producers’ influence is very likely to be [Page 943] dominant. Second, the provisions strictly limiting stocks will, if they operate as intended, mean that reserve stocks are in the future likely to be decidedly lower than they customarily have been—which may be the intent of various sugar interests.
An acute fall in one or more of the important producing areas caused let us say by drought or a hurricane might create a market shortage if stocks are restricted to the extent envisaged in the agreement that would lead to marked price rise.
The Department believes the dangers will be lessened (a) if the provision (Chapter 5, Article 1, b) regarding stocks is increased from 20–25 percent; (b) if an explicit provision is written in an appropriate place in the agreement somewhat as follows:
“The participating governments agree that it is their policy to direct these arrangements so as always to assure consumers of an adequate supply of sugar at a reasonable price, not to exceed the cost of production, including a reasonable profit, of efficient producers.”
If you find the discussion so advanced that it is impracticable to secure a revision of the figure of stock percentages, you should insist upon the inclusion of the general statement of principle to which the Department believes there can be no valid objection. Lacking some such price guarantee, the agreement may be severely criticized in this country as preparing the way for a substantial increase in the price of an essential, while the Administration’s policy is being directed against unwarranted increases of prices of raw materials.
4) Your 36, May 2, 10 a.m.26 It is assumed that the language under Chapter 1 (5) or elsewhere in no way restricts the right of substitution of sugars exported with benefit of drawback from the United States, as for instance Cuban sugars for domestic sugars.
5) Your 35, May 2, 9 a.m.26 Point (3). A proviso should be appropriately inserted to the effect that although this Government will submit the agreement for ratification at the earliest possible moment, this Government cannot undertake to take this action within a period of 40 days from the date of signature. For your information it may be desirable to withhold action until the outcome of the pending sugar legislation becomes clear.
6) On the understanding that the foregoing alterations and amendments are acceptable and the agreement appropriately amended, you are authorized to sign.
7) At the time of signature you should add below your name the following statement:
“I am instructed by my government to state that in the event its existing legislation imposing quotas upon the importation and [Page 944] marketing of sugar lapses within the life of this agreement, it will be its policy to maintain its tariff on full-duty sugar at no higher rate than that now existing.”