832.61333/5–3146
Memorandum by the Assistant Chief of the Division of Brazilian Affairs (Braddock)45
Summary of this memorandum: The OPA has decided to recommend an increase of three cents in lieu of the existing subsidy. This will contribute little or nothing to a solution of the coffee price problem and will probably irritate the producing countries into cutting off our coffee supply in order to bring OPA to terms. Such a move on their part would be effective, as evidenced by the British determination [Page 516] to raise cocoa prices, but it would not help our relations with the producing countries. We should argue strongly for a 30 percent increase, or a flat five cents a pound increase, over present coffee ceilings.
Coffee: Mr. Bobbins, President of the National Coffee Association, informed Mr. Cale,46 Mr. Havemeyer47 and me this morning that Mr. Baker,48 Deputy Director of OPA, had stated to him on May 29 that: (1) The OPA had made up its mind not to suspend coffee ceilings regardless of the inducement that might be offered in the way of a supply commitment, and (2) that OPA had reached a decision to increase present ceilings by three cents in lieu of the current subsidy and would make an announcement to this effect in the immediate future. Mr. Baker has confirmed to Mr. Cale that OPA is going to recommend a three-cent ceiling increase to Mr. Bowles, but Mr. Baker says no action will be taken until the State Department is heard on the subject.
In the opinion of IR and BA it would not be expedient for the Department to insist on a suspension of coffee ceilings at this time because of the practical certainty of a sharp increase in the price of milds in the event of suspension. An increase in the ceilings beyond three cents, and probably to five cents in line with the Brazilian proposal, is, on the other hand, strongly to be recommended as necessary to meet the just needs and aspirations of the producing countries and to assure the United States an uninterrupted flow of coffee. An alternative to a five-cent increase across the board would be a percentage increase, perhaps 30 percent, which would average out at something less than five cents for all grades.
It is evident that the course contemplated by the OPA is not going to meet the situation. A three-cent increase in the ceiling price in lieu of the subsidy is going to please neither the producing countries nor the American coffee importers. It will so irritate the producing countries, who are already disillusioned over the attitude of OPA with regard to their plight, that they will probably refuse to sell any coffee to the United States at the price suggested and will go about taking their own measures to force a break in the ceilings. This they could do by increasing the minimum export prices in their respective countries or by financing the growers to enable them to hold their coffee until the ceiling is broken.
It is unfortunately only by such drastic measures that the producing countries could bring OPA to the point of providing relief. They [Page 517] will know, if they do not already know, that such measures would be effective. (See discussion under “Cocoa” below.) This is not at all the kind of solution that we want. If a coffee increase is to come, as come it surely will, the United States will get no credit for the increase but only ill-will if it has to be wrung from us by a trade reprisal.
This argument should, I believe, be pressed strongly with OPA, in addition to other efforts to convince them that continuation of the present coffee prices is seriously straining our relations with many of the good neighbors.
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- Addressed to the Assistant Secretary of State for American Republic Affairs (Braden) and to the Director of the Office of American Republic Affairs (Briggs).↩
- Edward G. Cale, Associate Chief of the International Resources Division.↩
- John K. Havemeyer, of the International Resources Division.↩
- Geoffrey Baker, Deputy Administrator for the Price Department, Office of Price Administration.↩