840.50/12–1544: Airgram

The Secretary of State to the Ambassador in the United Kingdom (Winant)

A–84. To Hawkins from Haley.18 Reurtel 11114, December 15.19 Clarification of the following points regarding tentative British views on agricultural policy would be helpful to the interdepartmental Subcommittee on Agricultural Policy:

Is it the intention that the proposed special provisions would apply solely to primary food products, or do the British have in mind [Page 6] provisions of a more general nature which, in their case, would probably be invoked only in respect of primary food products?
If the provisions would be restricted to primary food products, or even to primary agricultural products, how would such products be defined? Would they include such British products as bacon, dairy products, pork, beef and potatoes?
Reference is made to the objectives of price stability and production stability. How would the former be achieved under the proposed special provisions, which contemplate the imposition of a ceiling on the differential between domestic and world prices? With regard to stability of (domestic) production, is it the British view that this would be recognized in the proposed convention as a permanent and accepted objective of economic policy? Specifically, would they be inclined to resist the inclusion of accompanying provisions making it clear that measures against imports imposed on the grounds of promoting stability would be merely of a transitional character and looking toward the relaxation and ultimate removal of such measures as soon as practicable? (For example, see following provisions of draft multilateral convention20 which Mr. Hawkins took to London:
“Proposed redraft of paragraph 2 (d) of Article XVII [XVIII]”, dated October 12, 1944. Numbered paragraph 3 of this paper is pertinent.
Paragraphs 3 and 4 of Article XXVII, Section F, as set forth in the Report of the Committee on Trade Barriers dated October 9, 1944 (ECEFP D–65/44–STB D–9/44).[)]
In cases in which tariffs or quotas are used for the purpose of stabilizing production (reurtel paragraph 3), how would the reduction of protection be determined if the production target were exceeded and to what extent would protection be reduced (reurtel paragraph 4)? It seems clear that in the case of subsidies, as illustrated by the pre-war United Kingdom wheat act,21 the British have in mind that appropriate reduction would be achieved by limiting the subsidy in effect to a goal quantity. It is not clear how this would be done if tariffs or quotas were used in lieu of subsidies.
In the case of subsidies, under the special provisions proposed by the British what would prevent countries from regularly promoting production in excess of the target quantity by means of subsidies which are limited to the target quantity but are larger per unit than necessary to achieve the target? For example, it seems to us that under the Wheat Act the British could have raised the guaranteed return from 10 shillings per cwt. to 13 shillings per cwt. (thus in effect further stimulating production) and this would not be in violation [Page 7] of the proposed special provisions so long as the deficiency payments were limited to 136 million cwt. In other words, there does not seem to be under the British proposals a limit on the use of subsidies which would be effective in practice. Such a limit would be provided, of course, if in such cases the production or marketing of the domestic product were subject to quantitative restrictions. This, however, does not appear to be contemplated.
With regard to the moving average (reurtel paragraph 4), it is assumed that this refers to a moving average of the world price, and not to a moving average of the percentage. Please correct our impression if we have misunderstood.
With regard to the permitted percentage differential between domestic and world prices (reurtel paragraph 4): would this percentage be uniform for all products? It is stated that this percentage would be the subject of international agreement. Does this mean periodic international agreement, or merely that it would be fixed in the proposed convention, and would, like the rest of the convention, have to be negotiated?
Do the British proposals envisage provisions which would eliminate export subsidies on the products subject to the special provisions they have in mind?

The Embassy’s comments would be appreciated as to the extent to which our draft proposals, particularly those relating to quotas in conjunction with domestic restriction measures and those relating to domestic subsidies, might meet the problems which seem to be worrying the British. [Haley.]

  1. Bernard F. Haley, Director of the Office of Economic Affairs and Vice Chairman of the Executive Committee on Economic Foreign Policy. This committee was established in April 1944 “to examine problems and developments affecting the economic foreign policy of the United States and to formulate recommendations in regard thereto for the consideration of the Secretary of State, and, in appropriate cases, of the President.” Its membership was interdepartmental in character. For further information, see Department of State, Postwar Foreign Policy Preparation, 1939–1945 (Washington, Government Printing Office, 1949), pp. 218–220.
  2. Foreign Relations, 1944, vol. ii, p. 102.
  3. Not printed; but see footnote 9, p. 1.
  4. Reference is to the Wheat Act of 1932; 22 & 23 Geo. V, Ch. 24.