The current draft has been accepted by the United States Department
of Agriculture, and has been submitted to the Brazilian
representatives, but their reply has not yet been received.
If the Canadian Government contemplates sending a representative to
Washington to conclude the negotiations, it would be appreciated if
he could plan to be here on Monday or Tuesday of next week, since it
is understood that Mr. Dantas, of the Brazilian delegation, is to be
out of the city during the latter part of the week.
[Enclosure]
Excellency: I have the honor to make
the following statement of my understanding of the agreement
reached through recent conversations held at Washington between
representatives of the interested agencies of the Governments of
Brazil, Canada and the United States regarding exports to Canada
of Upland cotton from Brazil and the United States.
Annual exports to Canada of raw Upland cotton from the United
States and Brazil will be regulated on the basis of estimated
annual requirements by Canada of 540,000 bales of such cotton,
of which the United States and Brazil may each supply not more
than 270,000 bales. At least twice during each agreement year
the Joint Cotton Committee provided for hereinafter will review
the estimate of such requirements and make such revision therein
as it deems necessary. In the event that the revised estimate
exceeds 540,000 bales, the exports from Brazil and the United
States will be regulated so that the quantity supplied by each
of them to the Canadian market will be increased by the same
amount. In the event that the estimate is less than 540,000
bales, exports from Brazil and the United States will be
regulated so that the quantity supplied by each of them to the
Canadian market will be reduced by the same amount, provided
that the quantity supplied by Brazil will not be greater than
the amount by which such estimate exceeds 250,000 bales.
If it should appear that either of the exporting countries may be
unable to export to Canada such quantities of raw Upland cotton
as are agreed to between them pursuant to the provisions of the
preceding paragraph, the Joint Cotton Committee shall
investigate the situation and make recommendations.
However, if the Joint Cotton Committee finds that one of the
exporting countries may not be able to export to Canada the
quantity of raw Upland cotton agreed upon with the other
exporting country pursuant to the above provisions because of
inadequate shipping facilities, the country unable to export
such quantity will permit the [Page 584] other exporting country to supply the
deficiency provided that the quantity so supplied is in the
following year deducted from the share of the latter and added
to the share of the former. If the deficiency should be supplied
in this manner in the first year of the agreement, the agreement
shall not be subject to termination at the end of that year as
hereinafter provided.
The export payment on cotton originating in the United States;
and sold for export to Canada will be so adjusted that when such
payment is deducted from the spot market price of Middling 15/16
inch cotton at Memphis, Tennessee, or from the price at which
the Commodity Credit Corporation releases Middling 15/16 inch
cotton at Memphis, Tennessee for export, whichever is lower,
plus the cost of delivery, including handling charges to
Montreal, the resulting figure will be a price at least one-half
cent but not more than one cent per pound higher than the spot
price of Brazilian (São Paulo official type 5, 28/29 mm.) cotton
at São Paulo plus the cost of delivery and handling charges to
Montreal.
No higher prices will be maintained for raw Upland cotton
exported to Canada from the United States or Brazil than the
prices at which Upland cotton of the same quality is offered for
sale in that country to any other export market.
In converting the price of Brazilian cotton to United States
currency, the rate of exchange will be the official export rate
of exchange established by the Bank of Brazil.
A joint Cotton Committee composed of two representatives from
each country will be established for the purpose of supervising
and administering the operation of this agreement. The Committee
will make all necessary provision for carrying out its
duties.
Meetings of the Committee will be held in Washington, D. C.,
unless otherwise agreed.
The Committee will promptly notify the interested agencies of the
Governments of Brazil, Canada and the United States of any
revisions made in the estimate of Canadian requirements of
cotton. The Committee will be furnished quarterly official
statements showing the average monthly prices at which raw
Upland cotton has been exported from the United States and from
Brazil to each country of destination. The Committee will also
be furnished upon request any information from official
government sources in Canada, Brazil and the United States which
may be available regarding the sale, arrival, movement and
consumption of cotton. All such data will be held in strict
confidence and will not be released without the permission, of
the agency supplying the information.
[Page 585]
The Committee will make an annual report not later than one month
after the end of the agreement year.
Nothing in this agreement should be construed as imposing any
obligation on the Canadian Government to purchase or cause to be
purchased any specified quantities of cotton from either the
United States or Brazil, nor should anything in this agreement
be construed as requiring the Canadian Government to take any
action regarding the importation of raw cotton which is
inconsistent with its treaty obligations to countries not party
to this agreement, nor should anything in this agreement be
construed as imposing any obligation on the Canadian Government
or any agency of the Canadian Government to be guided in
regulating the importation of raw cotton, whether by direct
purchase or otherwise, by considerations other than price,
quality, marketability and terms of sale which would ordinarily
he taken into account by a private commercial enterprise
interested solely in purchasing any product on the most
favorable terms.
This agreement will become effective on March 1, 1942 and remain
in effect for two years thereafter unless one of the
participants gives the others at least 90 days’ written notice
of its intention to terminate the agreement at the end of the
first year.
The term “annual exports to Canada”, as used in this agreement,
means all Upland cotton originating in the United States and in
Brazil, entering Canada during the agreement year, but does not
include linters, waste cotton, or raw cotton returned to
countries of origin because of rejection under sale contract.
The term “agreement year” means the 12-month period from March 1
to February 28. The term “Upland cotton” means the variety of
gossypium hirsutum species commonly grown as annual crops in the
United States and Brazil. The term “annual Canadian
requirements” means the estimate made by the Joint Cotton
Committee of the quantity of raw Upland cotton which will be
imported into Canada from the United States and Brazil during
the agreement year. The term “bales” means bales of 478 pounds
net weight, and the prices of both Brazilian and United States
cotton shall be calculated on a net-weight basis.
If the foregoing is acceptable to the Government of Brazil, this
note and your reply thereto will be regarded as placing on
record our agreement concerning this matter.
Accept, Excellency, the renewed assurances of my highest
consideration.
Very truly yours,
