561.321D1 Advisory Committee/64: Telegram
The Secretary of State to the Ambassador in Brazil (Caffery)
804. 1—The decline in exports of American cotton to Canada during the past 2 years is viewed with serious concern by the Government of the United States, and it is considered necessary to adopt appropriate measures to restore the Canadian market for American cotton.
[Page 137]2—Accordingly, the Department of Agriculture has decided to inaugurate at an early date an export program designed to revive the exportation of American cotton to Canada.
3—This decision is based primarily on the following considerations:
The United States has traditionally supplied practically all of the requirements of Canadian cotton mills. In the marketing season ending July 31 this year it supplied less than one-half. In view of the present disparity in prices between United States and Brazilian cotton it seems certain that, failing action by the United States Government, the United States share of the market in the current marketing year will be negligible.
4—While it is necessary to proceed at once with the program indicated, this Government is prepared to discuss with representatives of the Brazilian Government the immediate problem of fair participation by both countries in one of the few cotton markets still open to them. At the same time it continues to believe that a joint approach to the world cotton problem by the principal countries concerned offers the only likely prospects of reaching ultimately a satisfactory solution. It is encouraging to note in this connection that the Brazilian Government is participating through its representation on the cotton subcommittee of the Inter-American Financial and Economic Advisory Committee as well as through the International Cotton Advisory Committee in discussions looking toward the negotiation of an international cotton agreement.17 Such agreement would represent a marked advance toward improvement of basic economic conditions in this Hemisphere as well as other parts of the world.
5—You are requested to communicate the substance of the above to the appropriate Brazilian authorities and to say that this Government is prepared to enter immediately into discussions regarding the matter. We would be glad to send a competent officer to Rio for this purpose but it might be preferable, in view of the interest of the Canadian Government in the subject, for the Brazilian Government to send here a competent official who is familiar with the problem. Since Mr. Garibaldi Dantas on his previous visit here discussed this subject informally with our officials and in view of the fact that he is Brazil’s representative on the International Cotton Advisory Committee, the Brazilian Government may wish to detail him for this purpose.
[Page 138]For Your Background Information:
- A
- —In the past the United States has provided virtually all of the Canadian market for cotton, supplying during the 5 years ending 1939–40 an average of approximately 300,000 bales a year. Since the fall of 1940 the spread between prices of cotton in the United States and in Brazil has been such as to encourage large shipments of Brazilian cotton into Canada with the result that in the last marketing year, ending July 31, the United States shipped only 194,000 bales of cotton to Canada, whereas Brazil appears to have shipped approximately 450,000 bales to Canada. Thus far in the current marketing year, beginning August 1, there have been virtually no sales of United States cotton to Canada, whereas substantial sales of Brazilian cotton to Canada have been reported.
- B
- —At the present time the price of American cotton laid down in Canada is approximately 19.25 cents a pound, whereas it is understood that Brazilian cotton is being laid down in Montreal for 12.5 cents. While it is believed that Canadian spinners are willing to pay a slight premium for American cotton over Brazilian, it is evident that they are unwilling to pay such a difference as indicated by the above figures. The price of United States cotton laid down in Montreal a year ago was 10.75 cents.
- C
- —The Department of Agriculture proposes to put into effect two programs. It is proposed first of all to announce that cotton owned by the Commodity Credit Corporation as a result of loans on the 1937 crop will be offered for sale for export at its cost to the United States Government. This represents approximately 12½ cents a pound. It is proposed secondly to announce from time to time rates of payment on cotton moving for export calculated to be sufficient to bring United States cotton laid down in Canada on a par with Brazilian.
- D
- —As an indication of the seriousness with which the loss of the Canadian market for American cotton is regarded in this country reference may be made to a Bill, S–1831,18 now pending on the Senate calendar which prohibits the use of Federal funds for the acquisition of any raw cotton of foreign origin or of any articles containing such cotton and would make void any existing contract for the acquisition thereof with such funds. Its practical effect would be to prevent the use of defense funds for the purchase of any article manufactured in whole or in part from Brazilian cotton.
- E
- —In view of the increasing pressure on ships for essential Brazilian-United States services, it is becoming increasingly difficult to explain the use of space for carrying cotton to Canada from such a far-distant source.
- In April 1941 representatives of the Department of State and the Department of Agriculture participated in informal conversations with officials of the British Embassy and with José Garibaldi Dantas, Brazilian representative on the International Cotton Advisory Committee. The result of these conversations was the preparation of a memorandum outlining the possible bases for an international cotton agreement which was submitted to the cotton subcommittee of the Inter-American Financial and Economic Advisory Committee as a proposal of the United States.↩
- Congressional Record, vol. 87, pt. 6, p. 6963, and ibid., pt. 7, p. 7115.↩