840.50/1–1745: Telegram

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

580. Hawkins and Penrose yesterday continued their conversation with Liesching, Rady, Robbins and Shackle.

(1) Liesching and Shackle raised the question whether there should not be a clause which would restrain a country from imposing an import duty together with a countervailing internal tax on a given product, and using the revenue from them to subsidize domestic production of the same or a similar product. They suggested that import duties should not be regarded as offset by an internal duty, and therefore as coming within the category of nonprotective, revenue duties, if the proceeds were used to subsidize the same or similar products.

Shackle wondered whether any provision was practicable to prevent protection through the imposition of a prohibitive import duty together with a countervailing excise duty on a product which cannot be produced internally but which is to some extent in competition with another domestic product. Shackle stated as an illustration that Poland at one time had such a duty on citrus fruits to assist domestic apple growers.

(2) The UK officials think that any provision exempting from other provisions of the convention any products that might be “declared to [Page 12] be in world surplus” would give an undue stimulus to the extension of commodity agreements that would tend to bolster up high cost production. Liesching said, “We feel a rather deepseated distrust of such agreements.” He added that they have yet to see a commodity agreement that provides effectively for a shift-over from high to low cost production, and that they do not want the Wheat Agreement repeated with other commodities.28

Liesching then stated with emphasis that US subsidies on cotton and wheat were, to say the least, difficult to reconcile with the spirit or the letter of article VII of the Mutual Aid Agreement.29 He added that US activities in this matter were being followed with much concern in UK. Robbins and Eady underlined Liesching’s statement. The officials expressed the fear that the cotton subsidy provisions of the Surplus Property Disposal Act30 might be used to force a cotton agreement that would have the effect of maintaining high cost producers at the expense of low cost producers. They asked also whether they should take it for granted that the subsidy measures would be allowed to run for three years in any case or whether there was any prospect that they might be modified earlier following an international commercial policy agreement.

(3) Some questions were raised by Liesching and Shackle on the definition of a customs union. They referred to their proposals for reducing preferential margins in connection with tariff reductions, and said that it was only when preferences were treated differently from tariffs that the question of defining a customs union arose. In other words if preferences resulting from tariff reductions were permitted by the convention, those which members of a customs union continued to grant would be automatically sanctioned. However, they admitted that cases of new customs unions would not be covered if no reference were made to the meaning and conditions of a customs union. Liesching raised the question whether, so far as the consent of the international trade organization might have to be obtained for a new customs [Page 13] union, that organization would be the appropriate body to consider the political as well as the economic aspects of the case.

(4) The UK officials raised questions concerning the relations between member and non-member countries of the international trade organization. They asked whether discriminations against nonmembers would be mandatory and whether it would not be difficult to apply them in some cases at least on other than tariff matters.

The questions raised under sections 3 and 4 were exploratory rather than expressions of a set position.

Further conversations will be held next Friday and Monday.31

  1. Reference is to the memorandum regarding international agreement on wheat, initialed at Washington April 22, 1942, effective June 27, 1942. For text and related papers, see Department of State Executive Agreement Series No. 384, or 57 Stat. (pt. 2) 1382. For correspondence prior to the agreement, see Foreign Relations, 1942, vol. i, pp. 501 ff. For text of the public announcement on the agreement, see Department of State Bulletin, July 4, 1942, p. 582. For press releases regarding meetings of the International Wheat Council held in August 1942, provided for by the Draft Convention attached to the Memorandum of Agreement, see ibid., pp. 670 and 688. Concerning subsequent meetings of this body, see R. J. Hammond, Food, vol. i, The Growth of Policy (London, His Majesty’s Stationery Office, 1951), pp. 353–356.
  2. Preliminary agreement between the United States and the United Kingdom regarding principles applying to mutual aid in the prosecution of the war against aggression, signed at Washington, February 23, 1942. For text, see Department of State Executive Agreement Series No. 241, or 56 Stat. (pt. 2) 1433. For correspondence on negotiation of the agreement, see Foreign Relations, 1942, vol. i, pp. 525 ff.
  3. Reference is to the Surplus Property Act of 1944, October 3, 1944; 58 Stat. 765.
  4. January 19 and 22, respectively. The conversations were held, however, on January 20 and 23; see telegrams 725, January 20, 7 p.m., and 834, January 24, 4 p.m., from London, pp. 13 and 15, respectively.