561.311F1 Advisory Committee/1063a: Telegram

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

5738. Your 5861, December 411 and 5767, November 29.

In regard to your reference to our paragraph 2 (Department’s 5446, November 26), we concur that the agreement should stand on its own merits. The United Kingdom has participated in all previous wheat meetings and apparently recognizes the benefits to be derived from an improvement in international economic relations which may be expected to result from a wheat agreement. Hudson, as reported in your 5588,12 point 5, states:

“If after the war we look forward to a revival of international exchange and are to depend for the employment of large numbers of people on the revival of the export trade our greatest interests must be to see that the great consuming countries who buy our goods are prosperous and they are primarily agricultural countries. They can be prosperous only if we are willing to pay them a decent price for the food they send us to enable them not only to cultivate their land but also to maintain it in a proper state of fertility.”

It is not believed that the United States, the United Kingdom or any other country should take advantage of the war situation to [Page 551] obtain a wheat agreement on more favorable terms than would otherwise be possible. The proposals now under consideration do not go as far as those of earlier conferences. The United Kingdom delegation, however, has argued against almost every proposal which has been put forth at this meeting involving any definite commitment on the part of the United Kingdom on the grounds that it would be coercive in respect of unrepresented countries. This argument has been directed even against our recent proposal referred to in our paragraph 4 which merely seeks to assure the signatory exporting countries a fair share of the markets of signatory importing countries on the basis of a previous representative period. A similar assurance of fair treatment in respect of the allocation of quotas is contained in our trade agreement with the United Kingdom. The suggestion that the proposal be broadened to assure specifically the nonsignatory exporting countries a previous representative share as well also fails to satisfy the United Kingdom delegation. The United States delegation has considered sympathetically, and has tried to meet every objection which has been raised, and if the United Kingdom would do the same, solutions could be found.
In regard to the proposal referred to in our paragraph 3, it may be pointed out that it is meant to take the place of Article VI in the provisional draft agreement to which the United Kingdom delegation especially objected on the grounds that the provisions of that article would seem to be an attempt to dictate the agricultural policy of continental Europe and also that ability to carry them out would depend upon the availability of exchange. The proposal in question has encountered some further objection and is being redrafted, but it can be said and should be emphasized to the British that the new text completely meets their objections on grounds of coercion. Since reduction of barriers to importation of wheat is so obviously essential to a solution of the wheat problem, it is believed that the agreement should at least indicate that this is an ultimate objective and provide for further consideration of the problems.
In regard to your reference to our paragraph 4, the United Kingdom delegation has presented the following counter proposal which they are sending to London for consideration and which we have tentatively accepted but regard as unsatisfactory:
“The signatory countries recognize that the effective operation of the agreement might be impaired by uncontrolled exports from countries that had not adhered to it, and they agree that international trade in wheat should be distributed on a fair and equitable basis among all exporting countries. The present signatories and such other countries as may hereafter adhere shall accordingly cooperate in taking, on the advice of the council, such practical measures as may be necessary to attain this end.”
The phrase, “distributed on a fair and equitable basis”, means little or nothing unless it is defined as a previous representative period, for it might be argued, and has in fact been intimated in the discussions, that the fair share of a nonsignatory exporting country might be larger than that of a previous representative period (due, for instance, to an upward trend in its wheat production). If this phrase is left open to various interpretations, the signatory exporting countries can place little if any reliance on it for obtaining effective operation of the agreement.
As to the preference expressed by the British authorities in London for the original proposal (paragraph 11, Article IV, provisional draft) and their suggestion in this connection of fixing the allowances on a reasonable basis, it has already been proposed that the share of the nonsignatory exporting countries in the world wheat trade be determined by the council on the basis of a previous representative period, but the United Kingdom delegation has objected to the proposal as coercive.
As to their further suggestion in regard to the original proposal that the nonsignatory exporting countries be consulted regarding their allowances, it may be pointed out that all such countries will be invited to join the agreement and that the only likely reason for any of them not doing so would be unwillingness to agree to a reasonable quota. It may be doubted therefore that consultation would prove effective in getting them to agree to their allowances. It is believed that the only feasible solution to the problem of administering the allowances of the nonsignatory countries is to agree that the signatory exporting countries should have a fair share of the market, based on a previous representative period, and to provide that the signatory importing countries will assist them in every way possible to obtain it. If this were done, there would seem to be no need of the council fixing allowances for the nonsignatory exporting countries and no question of coercion could arise. However, unless definite assurances of such assistance are contained in the agreement, the nonsignatory exporting countries would be in a position to take undue advantage of the agreement at the expense of the signatory countries and would have an incentive for not joining.
In regard to your reference to the figure of 500,000,000 bushels, there apparently is a misunderstanding. There is no provision that 500,000,000 bushels or any other amount is “to be reserved by the four big exporting countries”. The provision is solely that as between themselves the percentages of the four exporters shall be as agreed unless and until the total amounts exported by all of them should reach the figure stated at which point different percentages as between themselves [Page 553] go into effect for the purpose of releasing accumulated stocks. (Article IV, paragraph 4, provisional draft.) The reason for agreeing to such a large figure in this connection is to meet Australia which now has no excess stocks and would not in such circumstances get a supplementary quota. Hence, if conditions should permit the four exporting countries to obtain a market for as much as 500,000,000 bushels, Australia might hold out to its wheat farmers the prospect of obtaining a possible export quota of say 92,500,000 bushels (18.5 percent of 500,000,000).
In regard to your reference to our paragraph 6, the United States delegation is prepared to take fully into account the views of the United Kingdom in regard to the determination of prices and to meet them in so far as might be possible. The objections which the United Kingdom would probably have to any method of price determination; namely, uncertainties concerning such future developments as possibly large changes in exchange rates, seem to us to be met by the proposal indicated in our paragraph 6 for review, appeal, and withdrawal. The difficulty, however, in discussing prices with the United Kingdom delegation is that they have no authority under their present instructions to discuss the matter and have refused so far to recognize the necessity, pointed out in the paragraph under reference, of an agreement in regard to prices.
In regard to your reference to our paragraph 7, the intention is merely to indicate that an agreement in respect of price would not be coercive, unless, of course, its effect were to depress prices which might be opposed by some nonsignatory importing countries as well as by the nonsignatory exporting countries. An agreement, however, which did not result in better prices than would otherwise prevail would fail to serve its purpose. It is pointed out in our paragraph 6 that the prices mentioned by the United Kingdom delegation are below estimated average costs of production in all four exporting countries. An attempt to solve in part the United Kingdom problem of foreign exchange at the expense of wheat producers is not in accordance with the principle of fair prices envisaged in the proposed agreement, nor in accord with interests of the United Kingdom as indicated in Hudson’s speech referred to above. You need not, however, mention the point of our paragraph 7 unless you consider it advisable to do so.
The meeting is not able to proceed further with the discussion of the main points until the British delegation receives further instructions. It is hoped that action to this end may be expedited.
  1. Not printed.
  2. Telegram No. 5588, November 21, not printed; it transmitted a summary of a speech made in the House of Commons by R. S. Hudson, the British Minister of Agriculture (841.61/143); for full text of speech, see Parliamentary Debates, House of Commons, 5th series, vol. 376, p. 406.