840.50/8–344: Telegram
The Secretary of State to the Ambassador in the United Kingdom (Winant)87
7647. Reurtel 5766, July 20, and 6179, August 3, reurdes 17268, August 3.88 Despite British view that need of insuring adequate supplies of scarce foodstuffs at stable, reasonable prices justifies long-term bulk-purchase contracts, and despite understandable desire of Dominions for dependable markets, and even though products of substantial immediate interest to American exporters or importers may not now be covered by the contracts, we remain concerned over possibility [Page 78] that they run counter to the principles of Article VIII of the Trade Agreement.
To extent shortages of certain products may actually exist after the war, meat and dairy-products importing countries desiring to obtain adequate supplies at stable reasonable prices may feel that the British contracts conflict with their interests.
The possibility if not the probability that the duration of the British bulk purchases will extend beyond the periods of short supply for many, at least, of the products involved causes us special concern. Government bulk purchases, in times of commodity abundance, could become far more discriminatory than tariff or quota preferences. The reported contemplated minimum purchases of bacon from Canada are at three times the rate of United Kingdom pre-war bacon imports from Canada, and the purchases reported in your 6239, August 4,89 seem to be tantamount to long-term freezing of a position for New Zealand in the United Kingdom market regardless of the possible development of lower cost production elsewhere. In a telegram dated September 1 from Buenos Aires it is stated that
“Embassy has just received reliable report to effect that large British house here received cable from home office London stating British Ministry Food informed it that 4-year meat contract would be signed shortly. Local representative Ministry of Food doubts accuracy of report but Department may wish investigate.”
The existence of such long-term contracts might present a substantial handicap to other countries with equally or more efficient production attempting to regain their pre-war position in the United Kingdom market.
In expressing concern with regard to this matter we do not consider that we are reflecting a doctrinaire attitude of opposition to necessary governmental intervention in economic matters, or lack of sympathy with the British Government in meeting the vital problem of British food needs. It seems clear to us, however, that inelastic, long-term government purchase contracts for large quantities are likely in the end to do more to retard than to advance achievement of our two governments’ underlying objectives, set forth in Article VII of the mutual-aid agreement, of expanded world trade on a non-discriminatory basis.
Your 5766, July 20, paragraph 10, states that there is no reason to believe that the measures under negotiation concerning meat and dairy products have any relation to or constitute any precedent for United Kingdom policy on raw materials. In this connection Business Week for July 15 states that [Page 79]
“Ottawa has revealed that British government representatives have arranged with private Canadian interests for the purchase of 2,500,000,000 bd. ft. of lumber to be delivered during the first 2 years after the defeat of Germany. Contracts will soon be signed in London.”
Please inform appropriate officials that we hope that the subject of state trading can be thoroughly explored with the British delegation when Article VII talks are resumed, and convey to them the sense of the foregoing so that they may understand that our opinions on state trading in general and on the criteria for state-trading contracts have not changed in principle from those held during the talks last year. We would appreciate an early report on their reactions.
We are still uninformed regarding many features of the contracts and we should like a report on the following questions: (1) What provision exists in the contracts for their termination or for alteration in the quantities or prices involved in case any product comes into long supply and other countries are in a position to sell on a competitive basis? (2) What is the exact definition of exportable surplus in the agreements? (3) What control, if any, over the use of sterling resulting from the bulk purchases is contemplated in the agreements?
Please send available information on the reported lumber contract with Canada and the reported meat contract with the Argentine referred to above. Also, send by mail copies of any of the long-term contracts which may be available. In general please follow and report promptly all developments in connection with individual bulk purchases or with over-all policy concerning them.
- Text of this telegram quoted to the Ambassador in Canada in airgram A–142, September 27, 5:55 p.m., with instructions to report information obtainable regarding questions asked of London and to send the information and reports requested in last paragraph of the telegram quoted.↩
- Despatch 17268 not printed; it transmitted text of British Foreign Office note summarized in telegram 6179, August 3, from London, p. 64.↩
- Not printed; it reported a 4-year agreement for purchase by the United Kingdom from New Zealand of surplus dairy and meat products.↩