840.50/5–2545: Telegram

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

5245. Embassy’s 4118, April 21, 9 p.m. and preceding messages in the series. UK officials have given us the following informal memorandum concerning the points made in the memorandum of the Subcommittee on Agricultural Policy2 which discussed the UK agricultural proposals:

“The United States’ comment on our agricultural proposals.

This comment seems to rest upon fundamental misconception. So much so indeed that before discussion can be fruitfully resumed it is clearly necessary to go almost back to the beginning.

2.
Broadly speaking, our original proposal may be put as follows:
(I)
No method of affording protection to the producers of foodstuffs of types which enter into international trade whether it takes the form of tariffs, levies or quantitative regulation imposed under private or state trading should be used to a degree which would raise the price of any food to domestic consumers over a period of years by more than X percent above the world level.
(II)
If a country’s production of any group of foodstuffs of types which enter into international trade calculated at an average over a given number of years exceeded by more than Y percent a given level, say the average level of the same country’s production during a given number of prewar years, then that country would be obliged gradually to reduce the degree of protection or financial assistance given to its producers.
3.
The US comment on this proposal proceeds upon the assumption that X and Y would be different for different commodities and for different countries. This is a complete misunderstanding. We suggested that closely drawn exceptions might be allowed if sanctioned y the International Trade Organization acting in conjunction with the Food and Agricultural Organization.3 But in general, it was intended that both X and Y should be the same for all products and all participants in the convention4 and we thought that we had laid considerable stress upon the importance which we attached to this uniformity.
4.
The US comment appears to assume that our proposal in some way restricts production in low cost producing countries. This is not so. The basic principle of our proposals is that they put no direct restriction on production. They only restrict assistance to production. If a country’s production is beyond 100 plus Y percent of the datum [Page 51] level then while that state of affairs persists, assistance whether by means of protective devices or subsidies has to be gradually reduced. There is, however, no limit to unassisted production.
5.
It is argued that our proposal does not contemplate any adjustment of production toward a pattern corresponding with comparative international advantage. This is precisely the opposite of our intention. It is true that provision (I) permits protective devices within the limit of X percent. To this extent the pattern of international advantage may be interfered with. But provision (II) the obligation to [reduce protection once a?] certain level of production has been passed sets a limit to the extent to which both the devices permitted under provision (I) and subsidies may be resorted to. To this extent the agricultural proposals go further than the proposals contemplated elsewhere in the convention. Our proposals do not of course involve the absence of all protective devices, but they do say that once protective devices have secured a volume of production not greater than prewar by more than Y percent, then this kind of support or support by subsidies shall diminish. In an expanding world system this would mean that in low cost countries where assistance is unnecessary, production would expand but in high cost countries there would be a definite limit to the expansion of production.
6.
Finally it is perhaps worth observing that our proposals applied equally to importing and exporting countries. The suggestion in the US comment that the rules should be different, e.g. 6d ‘that there is no X limit placed on the market prices maintained in exporting countries’ would seem to raise grave difficulties and certainly to be out of harmony with the desideratum that production should be adjusted towards ‘a pattern corresponding to comparative international advantage’.”

Winant

[On May 28, 1945, British Prime Minister Winston S. Churchill sent a telegram to President Truman concerning the possibility of reduction of lend-lease supplies to the United Kingdom; for text, see Foreign Relations, The Conference of Berlin (The Potsdam Conference), 1945, volume I, page 807, footnote 5. For further documents relating to United Kingdom lend-lease matters and the need for Anglo-American financial discussions, see ibid., pages 805820, and ibid., volume II, pages 11771187.]

  1. Not found in Department files.
  2. For documentation on the United Nations Conference on Food and Agriculture, May 18–June 3, 1943, and the establishment of the Interim Commission on Food and Agriculture, see Foreign Relations, 1943, vol. i, pp. 820 ff.
  3. Draft multilateral convention on commercial policy, October 1944, not printed.