Memorandum of Conversation, by Mrs. Jean H. Mulliken of the Commodities Division

Participants: H. G. Smith, CP86
Willard Barber, CCA87
E. G. Cale, F. A. Linville,88 Jean Mulliken, CD

Mr. Linville stated that he had called the meeting in order to inform himself regarding the views of the interested divisions of the Department with respect to proposals which would be advanced by the Department of Agriculture in the forthcoming sugar negotiations. These proposals are, briefly:

A one-year purchase, 1946 crop only.
Price not to exceed $3.67 per cwt.89 (the equivalent of the price to be paid for the 1946 Puerto Rican sugar crop).
No guarantee of fixed export prices on foodstuffs shipped to Cuba, and no commitment on the part of this Government to supply Cuba with rice, lard or wheat flour.
U. S. >to purchase 1946 blackstrap molasses, but to make no offer for Cuban alcohol.
Permit retention by Cuba of 250,000 tons of sugar for domestic consumption.
Retention by Cuba of 50,000 tons of sugar for export.
Elimination of escalator clause.

The consensus of the meeting was that the Department’s position on the above points should be as follows:

1. A one-year contract, while advantageous to the U. S. Government for political reasons, offers Cuba no assurance regarding her future [Page 942] in the U. S. market, and may be unacceptable for that reason. Cuba is in a better position to obtain concessions in this market at the present time than she is likely to be again, and the Department should make no effort to influence her to sign a one-year contract unless the Department of Agriculture will agree to a commitment on the part of the executive branch of the Government that, if the quota system is continued, it will support legislation to give Cuba an increased share of the U. S. market, on a proportional as well as on an absolute basis.

2. The Department of Agriculture committed itself during the June negotiations to giving Cuba the equivalent of the Puerto Rican price. This should be both the initial and the final offer. If Cuba should receive a higher price than Puerto Rico there would be pressure for an increase in the Puerto Rican price; on the other hand, any effort to shave the price below 3.67 might be to our ultimate disadvantage in loss of good will.

3. Since the purchase price is being materially increased, this Government is under no further obligation to guarantee a fixed price on foodstuffs shipped to Cuba.

As long as our domestic prices are controlled, Cuba is protected, since export prices are tied to domestic price ceilings. If the Emergency Price Control Act89 should not be extended after next June, a commitment on the part of this Government to maintain fixed prices on exports to Cuba might: (1) involve heavy expenditures by the CCC, and would (2) constitute preferential treatment of Cuba.

As regards our previous commitments to provide Cuba with specified quantities of rice, lard and wheat flour, this, too, amounts to preferential treatment and should be discontinued. This will entail no great hardship to Cuba, since the supply situation should improve rapidly after the first quarter of 1946.

4. The Department should not press for government purchase of alcohol.

Molasses and alcohol prices (if any is bought) should not exceed last year’s figure and should probably be reduced, since the supply situation has eased for both commodities. No subsidy is being paid on domestically produced alcohol and supplies are adequate at the ceiling price, which is appreciably below the price paid for Cuban alcohol this year.

5. While 250,000 tons of sugar for domestic consumption is generous it is probably not feasible to attempt to reduce it, since the excess over household consumption has been the basis of an expanding and highly lucrative confectionery industry.

6. Cuba’s exports of sugar to the other American Republics during the years 1935–1941 averaged 26,000 long tons and never exceeded 73,000 tons. Nevertheless, Cuba will undoubtedly ask for at least 150,000 tons of sugar for export. As a compromise between the Cuban position and that of the Department of Agriculture the Department might suggest that 100,000 tons be earmarked by the CCC for sale to [Page 943] deficit areas in this hemisphere if they are unable to procure their requirements elsewhere at a reasonable price.

7. The escalator clause should be abandoned, since it might result in payment of a higher price to Cuba than to Puerto Rico.

Mr. Barber pointed out that, in view of the numerous changes in the situation affecting the June offer, it would be advisable, as an initial step, either to obtain from the Cubans a refusal of the initial offer or to have it clearly understood that it was withdrawn in toto, and that the second offer at a higher price replaced it. It was the consensus that this procedure should be followed.

  1. Division of Commercial Policy.
  2. Division of Caribbean and Central American Affairs.
  3. Francis A. Linville, Acting Assistant Chief of the Commodities Division (CD).
  4. Price of 3.67 cents per pound.
  5. For text of this Act of January 30, 1942, see 56 Stat. 23. For amendments extending the application of this Act from June 30, 1943, to June 30, 1946, see 56 Stat. 767 and 59 Stat. 306.