840.50/4–245

The Deputy Director of the Office of European Affairs ( Hickerson ) to the Canadian Ambassador ( Pearson )

Dear Mike: You may recall that when Norman Robertson74 and you had a discussion with Harry Hawkins and me some weeks ago we promised to send Norman the views of our experts on the British proposal [Page 32] with regard to agricultural policy clauses in connection with the proposed multilateral approach for the reduction of trade barriers.75

I now enclose two copies of this memorandum. Will you be good enough to send a copy to Norman. I am sure that Norman and you will appreciate the tentative and informal charager [character] of the views expressed in this memorandum.

Yours sincerely,

John Hickerson
[Enclosure]

Some Views of United States Experts on the British Proposal With Regard to Agricultural Policy Clauses of a Multilateral Agreement for the Reduction of Trade Barriers

1.
It is understood that the British are giving serious consideration to a proposal that, in an international agreement for reducing trade barriers, contracting states be permitted to deal with special problems of agricultural price or income support, affecting a list of “primary foodstuffs” to be set out in the agreement, by any methods of intervention they wish to use, provided:
(a)
that their domestic production of these commodities does not exceed Y percent of a pre-war base; and
(b)
that their domestic (presumably wholesale) market price of these commodities does not exceed the world market price by more than X percent, the values of X and Y to be negotiated and specified in the agreement. If a state’s production of a commodity were to rise beyond the Y level of the agreement, the government would be obliged to modify its intervention accordingly.
2.
The following observations appear to apply to this proposal:
(a)
It recognizes that provisions that will permit agricultural support policies must be included in the multilateral agreement.
(b)
It suggests that importing countries must be permitted to maintain a certain level of agricultural production even though, to the disadvantage of exporting countries, this probably would result in the trade barriers on certain agricultural products being reduced by the agreement to a smaller extent than trade barriers on other products. Moreover, it would seem impracticable to negotiate with regard to a separate list of products for each country or a single list for all countries and, therefore, a formula would undoubtedly have to be developed [Page 33] that would be generally applicable wherever certain definable conditions are met; e.g. a provision, applicable to any product, under which a country could, provided it restricted its production to a fixed agreed on percentage (say 75% or 100%) of production in a specified period, use whatever trade barrier it wished provided the domestic price of the products did not exceed the world price by more than an agreed-on percent. In this connection, a problem arises because of the fact that some importing countries had pushed their pre-war agricultural production to uneconomic levels to a much greater degree than had others.
(c)
It does not seem to envisage the possibility of eventual adjustment of importing-country production toward economic levels when generally improved international conditions may permit.
(d)
It leaves open the possibility for world prices of important agricultural products to be driven to abnormally low levels by competition among exporting countries for what remains of the market after the supported production in the importing countries has been absorbed.
(e)
If it were applied to exporting countries, the British proposal would involve export subsidies equivalent to the value of the X percentage.
  1. Canadian Under Secretary of State for External Affairs.
  2. Presumably Mr. Hickerson is referring to a conversation at the Canadian Embassy on March 10 at which he, Messrs. Robertson, Pearson, Hawkins, and others, were present. In a memorandum of the conversation, dated March 14, Mr. Hickerson stated that there took place “a considerable amount of general conversation about post-war economic policy”. Mr. Hickerson’s memorandum did not contain mention of a promise to forward the document referred to, but this may have been because he listed only the salient points of the discussion, and because he wrote his memorandum 4 days after the event (840.50/3–1445).