693.113 Cereal Products/120: Telegram

The Acting Secretary of State to the Ambassador in China (Johnson)

87. American flour exporters are pressing this Government for a further approach to the Chinese Government in an effort to secure reduction [Page 644] of the tariff on wheat flour. They stress particularly the fear that the large differential between the tariff on wheat flour and the tariff on wheat will result in stoppage of all or practically all importation of foreign flour and they regard this situation as contrary to the spirit of the commitment of the Chinese Government, in the R. F. C.47 cotton and wheat loan agreement, to place no embargo on the importation of American flour.

This Government is considering whether the matter should be placed before the Chinese Government and will appreciate a full report by naval radio covering the general question of existing Chinese tariffs on wheat flour and wheat, especially with relation to the following points:

Is the wide differential between the rates on wheat flour and wheat maintained by the Chinese Government for the definite purpose of encouraging the domestic milling of all flour required?
Is the milling industry in China at present capable of meeting all domestic requirements?
Is there any program for expansion of the milling industry and is expansion probable if the present tariff differential is maintained?
To what extent have imports of foreign flour during the past 2 or 3 years been limited to the by-product known as “clears” as opposed to straight and patent flour and what is the present situation? What factors govern the demand for foreign “clears”?
How great is the present demand for foreign flour in China and what grades or classes are required?
Should the differential between the duties on wheat flour and on wheat be reduced to 1⅓ times and should American wheat and flour be in a position to meet world price competition, to what extent might American wheat as wheat and American wheat flour be able to reenter the Chinese market?
In view of present high wheat and flour prices in China, is it felt that the Chinese Government might consider favorably a reduction in the wheat and flour duties and particularly a reduction in the differential between these duties?
In your opinion, what effect upon the situation might result from friendly representations by this Government?

It is suggested that you request Dawson48 and Arnold49 to cooperate fully in supplying you with pertinent information.

  1. Reconstruction Finance Corporation.
  2. Owen L. Dawson, Agricultural Attaché in China at Shanghai.
  3. Julean Arnold, Commercial Attaché in China.