Foreign Relations of the United States, 1952–1954, General: Economic and Political Matters, Volume I, Part 1

811.20/11–1454

Memorandum of Conversation, by Paul E. Callanan of the Agricultural Products Staff

confidential

[Washington,] January 14, 1954.

• Subject:
• Disposal of Surplus Dairy Products At World Market Prices

• Participants: Agriculture: Messrs. Morse, Davis, Gordon, Roberts, Richards, Burmeister, Whipple, Ioanes, Wells¹
• State: Messrs. Waugh, Kalijarvi, Raynor, Linville, Frank, Barger, Callanan²

Mr. Davis conducted the meeting and began by outlining once more Agriculture’s program to offer surplus dairy products for export at world market prices.³ He stressed the following points:

1. An opportunity must be created for private operators to find markets and make deals involving dairy products, as they have successfully done in other commodities.

2. Agriculture had no desire to beat world market prices down.

3. The fact that no offerings have been made for the past year is the best evidence foreign countries could have of our consideration for their welfare.

4. Agriculture must have some program to avoid Congressional criticism. There was also the danger that Congress might seize the initiative and pass mandatory legislation which would have serious effects on other countries.

5. There was really nothing new about this proposal, they merely wanted to add dairy products to the present list of commodities available for export.

Mr. Waugh said he did not see why the program was so urgent that a decision had to be made almost immediately. He asked what advantage there would be in view of the contention that the program would not move any substantial quantities of the surplus. Mr. Gordon said any delay would render the program futile. This was the low point in the production cycle in Western Europe, and markets might be available now which would be unavailable later. Some of the stocks on hand were a year old now and a year and a half was as long as they could be held without serious deterioration. It was difficult to rotate stocks as they were marked with brand names.

Mr. Raynor pointed out that a great deal of harm could be done to our relationships with countries in Western Europe by any disposal program which injured their trade. He stressed the importance of trade in dairy products to the economies of these countries and the fact that the United States was pressing for larger defense commitments and limitations on trade in strategic items with the Soviet Bloc. The continued cooperation of these countries was essential to the success of NATO, EDC, and other international undertakings important to the United States. He also mentioned that Vice President Nixon on his return from the Far East had stressed the serious political repercussions of what the United States did in the economic field and urged that this be constantly kept in mind when we considered specific actions affecting other countries.

Other representatives from State commented on various aspects of the proposed program. The following were the principal points made:

1. The United States was not a significant exporter of butter and cheese in the pre-war period, and it could not be claimed that we were only trying to maintain our position in the markets. By subsidizing sales of dairy products we would displace others from their normal markets and face friendly countries with new competition.

2. Markets for dairy products in Europe were limited and demand already appeared satisfied. The market was so “thin” that the mere announcement of the program might be enough to depress prices, as buyers would be wary of any forward commitments.

3. There is the danger, noted by all the affected countries as their major concern, that if the surplus dairy products do not move at the original offering prices, terrific pressure to lower the prices will develop and may prove to be irresistible.

In the discussion of sales prices, Mr. Davis several times said that the offering prices would be at the median of the range. In previous meetings Agriculture representatives including Mr. Davis had said they would be at or near the top of the range.

Mr. Waugh suggested that all present “sleep” on the proposal over night, and that if it could not be resolved between the two agencies that it be sent to the White House for decision. Mr. Gordon pleaded for a prompt decision and the meeting adjourned.

1. Representatives from the Department of Agriculture are: True D. Morse, Under Secretary of Agriculture; John H. Davis, Assistant Secretary of Agriculture; Howard H. Gordon, President of the Commodity Credit Corporation; Richard H. Roberts, Director of the Trade Programs Division; Preston Richards, Vice President of the Commodity Credit Corporation; Gustave Burmeister, Assistant Administrator for Market Development; Clayton E. Whipple, Acting Administrator of the Foreign Agricultural Service; Raymond A. Ioanes, Administrative Officer of the Foreign Trade Programs Division; and Orvis V. Wells, Administrator of the Agricultural Marketing Service.
2. Representatives from the Department of State, in addition to Assistant Secretary Waugh, Deputy Assistant Secretary Kalijarvi, and Linville, are: G. Hayden Raynor, Director of the Office of British Commonwealth and Northern European Affairs; Isaiah Frank, Adviser to the Director of the Office of Economic Defense and Trade Policy; Harmon H. Barger, Chief of the General Policy Branch of the Commercial Policy Staff; and Paul E. Callanan, member of the Agricultural Products Staff.
3. Representatives from the Departments of State and Agriculture had met previously on Dec. 22, 1953 to discuss the surplus disposal issue. Several of the points listed in this memorandum had been brought up at the earlier meeting (memorandum of conversation, Dec. 22, 1953, 811.312/12–2253). Study of the problem of agricultural surpluses was simultaneously undertaken in late 1953 and early 1954 by the Cabinet Committee on Agricultural Surpluses created by President Eisenhower to investigate the subject. This interdepartmental group was headed by the Secretary of Agriculture and included representatives from the State and Treasury Departments, the Bureau of the Budget, the Foreign Operations Administration, and the White House. Documentation on the deliberations of this group is in Department of State files 398.03 FAO and 811.20.