The Secretary of Agriculture (Anderson) to President Truman2
Dear Mr. President: Chairman Doughton3 of the House Ways and Means Committee has asked this Department for a report on H. R. 4676, a bill “to provide for future trade relations between the United States and the Philippine Islands.” Chairman Doughton has asked us for our comments and recommendations with particular reference to domestic production in the case of sugar, tobacco and fats and oils and also our opinion in regard to the effect of this bill on sugar producers throughout the Western Hemisphere.
It is my understanding, on the basis of oral discussion with you, that the Administration is committed to the general policy outlined in this bill involving, primarily, a period of eight years of free trade between the United States and the Philippines, to be followed by a period of twenty-five years of declining preferences.
Before replying to Mr. Doughton’s letter, however, I think I should call your attention to certain difficulties that this program creates in regard to agricultural matters, particularly in respect to sugar. The bill contemplates a continuation over a long period of years of a substantially greater preference in the United States market for Philippine [Page 862] sugar than is now true in respect to sugar imported from Cuba. This fact has added significantly to the very considerable difficulties already present in respect to our negotiations with regard to Cuban sugar.
In addition to this, it is my understanding that great stress was laid by the United States participants in the recent discussions with the British in regard to the loan agreement on the necessity for the abandonment of tariff preferences within the British Empire. It was agreed in that connection to include Cuba among the countries with which negotiations would be held next spring, primarily because that is the only country at the present time, other than the Philippines, with which the United States does have preferential trade relations. It seems certain that, in connection with the forthcoming trade agreement negotiations, the United Kingdom, as well as other countries, will call attention to the inconsistency of our maintaining preferential trade relations with Cuba and, if the legislation under review is passed, with the Philippines, while at the same time demanding the abolition of tariff preferences elsewhere.
Cuba can not fail to sense this situation. Consequently she will see herself confronted, on the one hand, with the request for abolition of tariff preferentials as between herself and the United States and, on the other hand, with the proposal to continue over a long period of years an even more substantial preferential system between the United States and the Philippines.
It seems obvious to me that our general position with respect to trade preferences, our current preferential relationship with Cuba, and the proposed relationship with the Philippines, as embodied in H. R. 4676, are highly inconsistent. This, however, is a matter of highest policy which is not primarily within the jurisdiction of this Department.
For the future this dilemma might be solved by entirely eliminating the duties on our sugar imports under existing quota legislation. Probably this should be done in connection with future sugar legislation. This would not harm the domestic producers whose protection rests essentially on the quota system. Quotas determine the volume of domestic production as well as the volume of sugar imports and the share of foreign countries in these imports. Our sugar duties, therefore, operate to decrease the income of foreign producers without benefiting domestic producers.
In the meantime, I should like specifically to suggest in our letter to the Ways and Means Committee that the bill providing for future trade relations between the United States and the Philippine Islands should not make any commitments, actual or implied, which would have the effect of tying the hands of this government in respect [Page 863] to import quota arrangements on sugar which may in the future be developed, either in connection with domestic sugar legislation or in connection with possible future international sugar agreements. I should like to make this point in my report in such a way as to give some assurance to Cuba at this time that her historic position as a supplier of sugar to the United States market is not going to be sacrificed in the interest of sugar from the Philippine Islands.
Do you see any objection to this procedure?