The Ambassador in the United Kingdom ( Winant ) to the Secretary of State
[Received 11:15 p.m.]
1. The UK officials explained their position on their bulk food purchases as follows:
[Here follows discussion in some detail of bulk food purchases.]
2. Regarding the questions in Department’s A–84, January 6, we have first worked out the following more precise statement of the substance of paragraph 4 of Embassy’s 11114, December 15, 6 p.m.34
In respect of any food product coming within the scope of the measure, let X equal the permitted protection which is the degree of protection required to maintain the permitted excess of domestic price over the average world price in the base period. Let P equal the actual protection at any given time. Let Y equal the specified level of production, which is the maximum level to which production is allowed to be raised by the permitted protection. The specified level is arrived at by multiplying average production in the base period by an agreed percentage. Let Q equal the actual quantity of domestic production at any given time. Then if P equals X but Q is less than Y no increase of P is allowed and domestic production must be allowed to remain P unless it can be raised by other than protectionist measures.[Page 14]
On the other hand if P equals X and Q is greater than Y, then P must be reduced until Q is equal to Y.
We think that from the point of view of administrative practicability the term “domestic price” used above in the definition of X would have to be so defined as to include a measure of the effects of subsidies as well as a measure of the effects of tariffs and quotas. UK officials agree in principle that in so far as subsidies are used they shall be limited to the extent necessary to prevent total protection from rising above X but they have not yet committed themselves to a criterion by which this would be accomplished. We think that the term “receipts by farmers per unit of product” would come nearer to what is required than the term “domestic price” as ordinarily understood but this might not catch subsidies at the processing and transport stages. We shall discuss this matter further with the UK officials.
This appears to answer the question in paragraph 5 of your airgram A–84, January 6.
We have referred the first question in paragraph 3 and the question in paragraph 8 to the UK officials for an answer next week.
Following are the answers to the remaining questions. References are to the numbered paragraphs in your airgram.
- The first of the two interpretations is the correct one.
- The procedure would be to get agreement on a list of products which in the UK opinion should include those which you mention.
- second question. These are intended as permanent and not merely transitional measures.
- Precise formulas would be impracticable. Governments would be obligated to take adequate steps and would be judged on attainment of the required results rather than on methods.
- Your interpretation is correct.
- The answer to the first question is yes. The answer to the second question is that the percentage would be fixed in the initial negotiations.