Foreign Relations of the United States: Diplomatic Papers, 1942, General; the British Commonwealth; the Far East, Volume I

811.61321/172

Memorandum of Conversation, by Mrs. Jean H. Mulliken of the Division of Commercial Policy and Agreements

[Washington,] January 19, 1942.

Participants:	Mr. S. R. Noble, Canadian Price Stabilization Board
	Mr. Blair Gordon,   ”  ”  ”  ”
	Mr. Horton,   ”  ”  ”  ”
	Mr. A.F.W. Plumptre, Canadian Legation
	Mr. Merchant Mahoney, Canadian Legation
	Mr. H. A. Scott, Canadian Legation
	Mr. Gouthier, Brazilian Embassy
	Mr. Norris, Department of Agriculture
	Mr. Wyckoff, Department of Agriculture
	Mr. Hawkins, State Department
	Mr. Stinebower, State Department
	Mr. Carr, State Department
	Mrs. Mulliken, State Department

Mr. Noble, of the Canadian Price Stabilization Commission, opened the discussion by stating that the Commission was interested in maintaining the existing price situation in so far as possible. It appeared to them that the proposed agreement for sharing the Canadian cotton market would operate to change that situation. He added that the Canadian Commission was prepared to enter into negotiations immediately for the purchase of future supplies of cotton at an agreed price.

Mr. Norris stated that negotiations for purchasing cotton in large quantities could be carried on under the terms of the agreement.

Mr. Noble replied that the Commission would prefer to make its price contract simultaneously with the signing of the agreement in order to know what to expect as to future prices.

Mr. Gordon suggested that a basic price might be agreed upon which could be adjusted for changes in the domestic price structure resulting from the war if that proved necessary.

Mr. Wyckoff expressed a belief that the prices which Canada would obtain under the terms of the agreement would be lower than any price obtainable outside that agreement for the reason that the Commodity Credit Corporation could not make an offer at less than its “release price”, about 13¼ cents, whereas the agreement provided, in addition, for the payment of whatever subsidy was required to bring the price of American cotton in Canadian markets to within one cent of the Brazilian price. It was pointed out that, under the agreement, the price of Brazilian cotton exported to Canada could not exceed the price of such cotton exported to any other country.

Mr. Noble commented that there was nothing in the agreement, however, to prevent the price of Brazilian cotton from rising to or above the present Commodity Credit Corporation release price.

Mr. Wyckoff agreed that Brazilian prices would probably rise somewhat, since they had fallen to a sacrifice figure after imposition of the United States’ subsidy, and expressed his belief that in the long run it would be to Canada’s interest, as well as to the interest of the producing countries, to provide for the orderly marketing of cotton at a price which would be fair to all concerned.

Mr. Noble replied that the term “fair price” was somewhat vague in its meaning, and that he believed it would be helpful to limit the range of fluctuation by means of a price ceiling. He inquired whether or not a clause might be inserted in the agreement which would provide that if the price of Brazilian cotton rose above the Commodity Credit Corporation’s release price, Canada would have the option of purchasing her requirements in the United States at the release price.

Mr. Wyckoff pointed out that this would infringe the agreement, since the United States would be selling more than one-half of the market.

Mr. Norris expressed the belief that Brazil would agree to the inclusion of such a clause, since the Commodity Credit Corporation’s release price is higher than any price that had been envisaged in the course of the discussions. He emphasized the fact that the price aspects of the cotton agreement were of minor importance compared with the long range potentialities of such an agreement as an instrument for cooperative action.

Mr. Noble returned to the point that the Canadian representatives would be glad to see written into the agreement some stipulation that cotton should continue to be available to Canadian buyers at a price not to exceed the Commodity Credit Corporation’s release price, and that they would be interested in knowing at what price they might now engage a supply for future use.

Mr. Gouthier stated that he would be obliged to get a commitment from the Bank of Brazil as to what minimum price might be expected, since the Bank handles all foreign exchange transactions.

Mr. Wyckoff said that the Commodity Credit Corporation would have to be approached for a price on American cotton.

Mr. Stinebower called attention to the fact that if a clause should be inserted in the cotton agreement giving Canada the option to purchase American cotton at the Commodity Credit Corporation’s release price if Brazilian prices should rise above that level, two questions should be settled:

(1) whether or not the Commodity Credit Corporation would be bound by the agreement to release its cotton.

(2) if the Commodity Credit Corporation were not so bound, would the United States be obliged to increase its subsidy to such a figure as to make commercial cotton available to Canada at the Commodity Credit Corporation’s release price.

At the suggestion of Mr. Hawkins the meeting adjourned with the understanding that the representatives of the Canadian Price Stabilization Commission, Mr. Gouthier, and representatives of the Department of Agriculture would meet on the following day for further discussion of the questions raised.⁹

9. No memorandum of this January 20 meeting found in Department files.