561.311F1 Advisory Committee/1060: Telegram

The Secretary of State to the Ambassador in the United Kingdom ( Winant )

5446. Your 5432, November 13.

The discussions at the wheat meeting have now reached a point at which it is clear that no agreement satisfactory to the exporting countries can be concluded on the basis of the position which the United Kingdom delegation has adopted. The divergence between the views of the wheat-exporting countries on the one hand and the United Kingdom on the other is basic in that the former desire most earnestly to conclude an agreement containing sufficient substance to offer real prospect of materially relieving the wheat problem while the United Kingdom apparently favors at this time only an agreement on vague general principles. The United Kingdom seems to feel that the finding of solutions for many of the difficult practical problems involved in producing a workable agreement should be left for the indefinite future. In our opinion, practicable solutions of a number of the essential questions presented can and should be worked out now. This will not be possible, however, unless there is a basic change in the United Kingdom position. These meetings will fail unless the British delegation receives instructions to this effect.
Failure of this meeting to conclude an agreement which will make a significant contribution to the solution of the wheat surplus problem and which is really a test of the prospects of international economic cooperation in general, would be a matter of major importance not only from the standpoint of the subject immediately in hand, but from a broader viewpoint as well, since such a failure would adversely affect the attitude in this country with respect to other matters of major importance in the field of Anglo-American cooperation. For these and other reasons, this Government feels that the successful conclusion of an agreement is of great and immediate importance.
It is believed that with one exception the particular objections of the United Kingdom to the provisional draft have now been fully met. With respect to the objection that the agreement might be regarded as an attempt to dictate the agricultural and import policies of the countries of continental Europe, this Government on November 19 proposed that the agreement provide in principle that the importing countries adopt policies conducive to the greater importation of wheat and that, in recognition of their problem of finding exchange to pay for such imports and of providing alternative sources of [Page 546] employment, the exporting countries negotiate agreements involving reductions in trade barriers to provide larger markets for the products of the wheat-importing countries. We believe that such a provision would effectively meet the Prime Minister’s view that the agreement should not appear coercive and thus afford a basis for hostile German propaganda on the Continent. Indeed, we believe that the approach indicated above would have positive advantages from a propaganda standpoint.
Another related difficulty which it is believed is now effectively met arises from the unwillingness of the United Kingdom to help assure the signatory exporting countries their fair share of the world market by embargoing imports from nonsignatory wheat-exporting countries which had filled their world quota as established by the Wheat Council. On November 19 the United States delegation proposed that this difficulty be met by an undertaking on the part of each importing country to take such action as might be necessary to enable the signatory exporting countries to supply together a share of its total wheat imports equal to the share supplied by them in a previous representative period. The exporting countries feel strongly that some undertaking of this sort by the signatory importing countries is essential to a workable agreement. While our suggestion does not go as far as would be desirable, it would be preferable to no undertaking at all. It is believed there could be no valid objection to our proposal from the standpoint of the relations of the United Kingdom with nonsignatory exporting countries in view of the fact that it merely provides as part of the wheat agreement for action which would not be inconsistent with previous British policy and would disappear as soon as other wheat-exporting countries become parties to the agreement.
While the United Kingdom delegation has not indicated whether these proposals meet its viewpoint, the fact that they have been made is evidence of the desire of the United States delegation to take account of the difficulties of the United Kingdom and to go as far as possible to meet its position.
There remains the question of price. The exporting countries feel strongly that the agreement cannot succeed unless provision is made now for the specific determination of prices. It is obvious that there must be agreement with respect to what constitutes a fair price. This would be so even if there were no specific provision for the maintenance of a particular price in the agreement, since such a conception would be essential in any case in the determination and administration of the quotas. This point must be recognized by the United Kingdom before there can be any hope of a workable [Page 547] wheat agreement. Our doubts as to the seriousness of the United Kingdom intentions toward entering into a workable agreement either now or after the war arise from their ideas regarding prices. Those mentioned by the United Kingdom delegation are so low as to be below any reasonable estimate of the average cost of production in all four exporting countries. They appear, however, to be unwilling to undertake any commitments in regard to prices mainly because of uncertainties concerning such future developments as possibly large changes in exchange rates. The United States delegation is prepared to meet this latter point by including a provision for a review of the entire price provisions in the event of extraordinary circumstances arising which in the view of any country may have made them unworkable and a further provision to operate after 2 years of experience by which a country which considers that a price determined by the Council is too high may resort to an appellate Board and may withdraw if not satisfied by the action of that Board.
A further objection just recently raised by Salter to the inclusion now of a provision in the agreement for the determination of prices is that such provision would be coercive from the standpoint of nonsignatory countries in the sense that they would have no part in its formulation. It is obvious that there would be no objection on the part of the nonsignatory exporting countries to a more remunerative price than unquestionably would prevail in the absence of this agreement. It may be pointed out that in the 1933 wheat conference10 the importing countries were insistent that in the interest of their wheat farmers the world price should not be too low.
In general, it is clear to us that the difficulties in detail arise from divergence in the basic conception and approach of the United Kingdom, and that, if this attitude were altered, the specific issues could soon be cleared up. You should, therefore, urge most strongly that the United Kingdom delegation be instructed to make every effort to join the exporting countries in working out now the practical provisions of a workable agreement. This Government feels strongly that the most difficult problems involved in working out an agreement should not be left to some indefinite future time when the situation may have become much more complicated and the policies of the several countries may have become so divergent as to make an agreement impossible.