The Department of State to the Agency General for India


The Department of State has received the memorandum of December 4, 1944, of the Agency General for India concerning the relative positions of the United States and India in cotton export markets and the effect of the present United States policy of assisting the export of cotton by subsidy. It is noted that the Government of India requests “that the Government of the United States may see its way to reduce the export subsidy of 4 cents per pound so far as that subsidy applies to qualities Middling ⅞” staple or [and] lower.”
The facts regarding the cotton export program of the United States are as follows:
Section 21(c) of the Surplus Property Act of 1944 (P.L. 457, 78th Congress, 2d Session, approved October 3, 1944) authorizes the Commodity Credit Corporation, an agency of the War Food Administration, to dispose of surplus United States agricultural products in world markets at competitive world prices. This section reads as follows:

“Surplus farm commodities shall not be sold in the United States under this Act in quantities in excess of, or at prices less than, those applicable with respect to sales of such commodities by the Commodity Credit Corporation, or at less than current prevailing market prices, whichever may be the higher, unless such commodities are being disposed of, pursuant to this Act, only for export; and the Commodity Credit Corporation may dispose of or cause to be disposed of for cash or its equivalent in goods or for adequately secured credit, for export only, and at competitive world prices, any farm commodity or product thereof without regard to restrictions with respect to the disposal of commodities imposed upon it by any law: Provided, That no food or food product shall be sold or otherwise disposed of under this subsection for export (1) if there is a shortage of such food or food product in the United States or if such sale or other disposition may result in such a shortage, or (2) if such food or food product is needed to supply the normal demands of consumers in the United States.”

On November 11, 1944 the War Food Administration announced a program to facilitate the exportation of cotton in accordance with the above-quoted provisions of law (copy of announcement enclosed). Initial export prices and differentials were announced on November 15 (a copy of this announcement and a copy of a release of the War Food Administration on “Terms and Conditions of Cotton Sales for Export Program” are also enclosed83).
The reduction in payment on cotton exports of qualities Middling ⅞” staple and lower, as requested, would render the program largely ineffective.
The cotton export program of the United States is a corollary of the present domestic program of assistance to American cotton growers. The occasion for the export program arises from the fact that the United States maintains, through crop loans and other price supporting measures, a domestic price for cotton substantially higher than would be the case if the price were to be freely determined by competitive forces. With a domestic cotton price above the general world level little, if any, exports could take place in the absence of an export program. This export program is intended only to permit United States cotton to maintain a reasonable share of the world cotton market.
It was made clear in the War Food Administration announcement of November 11 that it was not the intention of the Government of the United States to enter into a competitive cotton price war. It is believed that the actual operation of the cotton program in its few weeks of existence substantiates this statement, and it is expected that actual operations in the future will continue to bear it out.
The Government of the United States considers it highly desirable that the problems involved in the present cotton situation be dealt with on the basis of international cooperation. In this connection Mr. Acheson, Assistant Secretary of State, made the following statement on December 5 before a Special Subcommittee of the Committee on Agriculture, House of Representatives, meeting to consider and recommend future programs and policy with regard to cotton:

“Burdensome commodity surpluses should be dealt with on a basis of international cooperation in such a way as to avoid the development of unfair trade practices and unhealthy international rivalry. If provision is made for the orderly liquidation of world surplus stocks no one country will dispose of its surplus in a fashion detrimental to the interests of other countries who are also burdened with large accumulations. Furthermore the fear of disorderly world markets will be removed and trade will be carried on in an atmosphere of mutual respect for the rights of other exporting countries. In such an atmosphere there will be hope for the expanded world trade which is so necessary for the attainment of high levels of employment and income.”

The proposed meeting of the International Cotton Advisory Committee is primarily for the purpose of drawing up a recommendation to governments in regard to possible international collaboration in respect of cotton. If the Committee should recommend that an international cotton conference be held, it is the view of this Government that the representation should be as wide as possible under existing conditions; and that representatives of importing as well as exporting countries should be present. The Committee can, and it is believed should, take full account of the interests of importing countries in its deliberations.
For the further information of the Agency General for India there are enclosed copies84 of the statements by Mr. Claude R. Wickard, Secretary of Agriculture, and Mr. Acheson before the Special Subcommittee referred to above, which discuss the cotton problems, domestic and international, facing the United States.
  1. Neither attached to file copy.
  2. Not attached to file copy.