Memorandum by Mr. Paul C. Daniels of the Division of the American Republics
Third Pan American Coffee Conference
report on activities up to july 3, 1940
1. Reasons for calling the Conference.
As a result of the war in Europe important coffee export markets for the coffee producing countries of the Americas were totally cut off. This condition not only represented a loss in itself, but led to greatly increased competition in the marketing of coffee in the United States. This in turn has brought about a disastrous decline in coffee prices in the United States market. It was primarily with a view [Page 383] to ameliorating this situation that the Third Pan American Coffee Conference was convened in New York City on June 10, 1940. Fourteen coffee-producing countries were represented by delegates at the Conference. The complete list of delegates is attached hereto (enclosure no. 1).3
2. Preliminary Sessions of the Conference.
The earlier sessions of the Conference were devoted to the organization of committees, discussion of coffee propaganda and an advertising campaign, and the possibility of excluding from the United States non-American coffees, which are generally of the “robusta” variety instead of “arabica”. Committees were established to deal with the following subjects: vital problems of the coffee industry; propaganda; freight rates and marine transportation; inferior coffees; and statistics. A complete list of the committees established on these subjects is attached (enclosure no. 2).3 With respect to the question of excluding “robusta” coffees, a letter was addressed to the Inter-American Financial and Economic Advisory Committee in order to ascertain the views of the United States Government on this matter. It was only after it had become clear that this solution was not practicable that the Conference embarked upon a serious discussion of the possible establishment of quota controls for the American coffee-producing countries.
3. United States invited to send Observer.
Pursuant to a written invitation extended by the Conference in a letter dated June 14, 1940 Mr. Daniels proceeded to New York to be present at the Conference in the capacity of Observer on behalf of this Government. He was present at the meeting on June 18 and all subsequent meetings to date. By being present at the Conference it was possible to establish and maintain close contact with all of the delegates, and it is believed that this gesture of support and sympathy on the part of the United States Government was well received by the Conference.
4. Attitude of the Coffee Trade.
The coffee trade in New York may be said to be, generally speaking, in complete sympathy with the broader objectives of the Coffee Conference. At the same time, concern has been manifested lest any control measures instituted might have the unfortunate effect of interfering with normal trade requirements, procedures, and established channels for doing business. All seem to agree, however, that a reasonable increase in the price of coffee is an objective which would be [Page 384] of benefit not only to the coffee-producing countries but also to the United States itself. The foregoing observations are based on numerous conversations with many representatives of the coffee trade, including the following people:
- Mr. W. F. Williamson, Secretary-Manager, Associated Coffee Industries of America;
- Mr. P. R. Nelson, Vice Chairman, Associated Coffee Industries of America, (Ruffner, McDowell & Burch, Inc.);
- Mr. S. A. Schonbrunn, Treasurer, Associated Coffee Industries of America, (S. A. Schonbrunn & Co., Inc.);
- Mr. C. A. Mackey, President, New York Coffee and Sugar Exchange;
- Mr. J. A. Medina, President, Green Coffee Association of New York;
- Mr. Berent Friele, American Coffee Group;
- Mr. Voelbel, Standard Brands Corporation, (Chase and Sanborn Coffee).
A call was made on Mr. Bernhard Schaefer, Schaefer-Klaussmann Co., Inc., but he had just left to proceed to Colombia.
5. Discussion of quotas on coffee.
The discussions of the Conference relating to the establishment of a total quota on coffee imports into the United States, and the allocation of this quota among the various producing countries, entered a serious phase following the receipt of the letter of June 24, 1940 addressed to Sr. Manuel Mejía, President of the Conference, by the Secretary of State (enclosure no. 3).5 This letter set forth the willingness of the United States to cooperate in making effective a plan to improve the coffee market, contingent on certain stated conditions. Practically speaking, the whole time of the Conference from that time on was consumed in arguing the advantages and disadvantages of various plans proposed for allocating quotas among the producing countries. It soon became apparent that it would be impossible to establish a general and uniform basis for arriving at a fair quota for each country. This was true because of the fact that in the different producing countries different conditions exist. Among the more important considerations brought out in the course of the discussions may be mentioned the following:
- In view of the loss of European markets, many of the delegates felt that consideration should be given to the total coffee production of each country, rather than to its previous exports to the United States.
- At the same time, certain countries (e. g. Colombia) in the past had exported to the United States a much higher percentage of their production than others, (e. g. Costa Rica and Venezuela).
- The types of coffee are different, and American consumers desire a certain percentage of Brazilian coffees as well as the mild coffees from the other countries. This factor has led Brazil to insist on retaining approximately 60 per cent of the American market.
- The dependence of the national economies of the different countries on coffee production varies widely. Some depend almost entirely on coffee, such as El Salvador, and for others, such as Venezuela, coffee is relatively unimportant at present.
- Recent trends in exports of coffee to the United States, particularly during the last nine-month period, in some cases differ materially from shipments over the last five-year average.
Because of the foregoing considerations some of which are of more importance to some countries and others to other countries, a variety of different plans was presented to the Conference representing different points of view. Lengthy arguments ensued, and for several days no agreement was reached. Compromises were elaborated based on arbitrary re-allocations of amounts, but up to Saturday, June 29, no solution had been reached. At the meeting held on that date a subcommittee of three was appointed (Penteado of Brazil, Parga of Colombia, and Alfaro of El Salvador) to thrash out the differences and submit a report to a plenary session to be held on July 2.
6. Agreement of July 2.
On the morning of July 2 the subcommittee submitted its report. After some discussion the plan submitted by the subcommittee was approved unanimously by the delegates to the Conference. Thereupon a resolution (“Acuerdo”) was drafted embodying the approved plan and expressing the agreement of the delegates to submit the plan to their respective governments with the recommendation that it be accepted. A copy of this document is attached (enclosure no. 4).6 The plan provides for total imports into the United States of 15,900,000 bags of 60 kilos, allocated among the producing countries in accordance with the agreement reached. This total is appreciably larger than the annual consumption of coffee in the United States, which has been estimated as being approximately 15,000,000 bags, although greater estimates have been heard.
7. United States control over coffee imports.
No provision is made in the agreement of July 2 for the enforcement by the United States of import quotas on coffee. In the case of colonial coffees, it is of course the unanimous desire of the delegates to the Conference that the United States impose an import quota on such non-American coffees in the amount stated, namely, 353,000 bags. It had apparently been the general understanding that the cooperation of the [Page 386] United States would likewise be requested in implementing the quota system with respect to American coffees also. In view of the lack of clarity on this point inquiries were made on July 2 of the Colombian delegation, Sr. Mejía and Dr. Parga, as to whether in their view the United States Government should impose import quotas on coffee, in accordance with the approved plan. Dr. Parga stated specifically that such procedure would not appear to be desirable; that many of the countries felt that it would be unwise in principle for the United States to impose import quotas on American coffees; and that they felt it would be preferable to have the quotas handled exclusively as export quotas. In response to the observation that it might be difficult to impose quotas on non-American coffees and refrain from imposing them on American coffees, Dr. Parga referred to the provisions of the immigration act under the terms of which citizens of the American republics are exempt from the immigration quotas imposed on other foreigners. He said if that distinction could be made in the case of human beings, why not in the case of coffee beans? No effort was made at that time (July 2) to argue that point further.
Late the same night it became possible to get in touch with Sr. Penteado and the same question was discussed with him. Sr. Penteado took quite the opposite view from that expressed by the Colombian delegation and said that not only did he think that cooperation by the United States in imposing import quotas on all coffees was desirable, but that unless this were done he thought it quite likely that Brazil would be unable to go ahead with the plan. He was urged to get in touch with Sr. Mejía immediately in order that this point might be discussed between them. On July 3 Sr. Penteado telephoned Mr. Daniels and stated that he had discussed the matter with Mejía and that the latter was sending a cablegram to Bogotá to obtain the views of his Government. Sr. Penteado kindly stated that he would report further after hearing again from Mejía.
8. Immediate outlook.
The next meeting of the Conference is to be on Saturday, July 6, at ten a.m. in the offices of the Pan American Coffee Bureau, 120 Wall Street, New York. The hope has been expressed at a previous meeting on July 2 that by that time favorable replies would have been received by all of the delegates from their respective governments. If so, the agreement could be duly formalized and turned over to the Pan American Coffee Bureau for administration.
However, there seems reason to doubt that all the governments will be able to reply so promptly to the questions submitted to them. Furthermore, it is possible that a few of them may withhold approval, possibly Guatemala and Haiti.[Page 387]
With respect to United States cooperation, if Brazil and other countries prevail upon Colombia (and possibly others) to withdraw objections to the imposition of quotas by the United States, it would seem desirable for the Conference to take formal action in this sense before adjournment. In view of the strong position taken by Sr. Penteado in this matter, there seems reason to believe that the Conference may take some action to invite the active cooperation of the United States in the administration of the quota system. Consideration is now being given in the Department to the best procedure which might be followed in bringing this question before the United States Government. At the same time, the legal questions involved are being investigated and the proposed quotas are being compared with the latest statistics in the Department of Commerce.