The Secretary of State to the Secretary of Agriculture (Benson)1
Dear Mr. Secretary: Your Department has invited comments from this Department regarding your plan to sell feed grains for export at world market prices. This plan, we are told, would provide for a new policy of export subsidies for feed grains and weekly readjustments of the prices at which these grains would be offered for export sale.
The State Department fears that an export program of this type would force world prices down unduly and would have serious harmful effects on the economies of other countries. Weekly readjustments in offering prices and in subsidies, which would be expected and awaited by buyers, would have a depressing effect upon prices and would result in the United States following prices progressively downward. Prices could not rise at any time since the United States would stand ready to sell large quantities at prevailing prices. Except in so far as other governments took steps to withhold supplies from the market, the ultimate effect of this policy would be to force prices down to very low levels.
I am aware that support prices in the United States resulted in the loss of export markets for a number of our agricultural products. I do not wish to object to the sale of these products at prices below domestic price levels. The point I wish to stress, however, with respect to the feed grain plan is that an announcement of a continuing policy to make periodic readjustments of prices, and without an evaluation of the effects of the initial downward adjustment, would doubtless create a grave and justified concern among other friendly countries.
Furthermore, I believe it is important to bear in mind that the question of disposing abroad of government-owned agricultural surpluses was considered of sufficient consequence to be considered by the National Security Council early in April. In this consideration of the security aspects of disposing of agricultural supplies, you will recall that a general caveat was entered to the effect that disposal operations should be carried on in such a manner that “no material injury is done to the trade of friendly countries”. This in effect reaffirmed Administration policy on this matter, enunciated, for instance, in the communiqué issued after the first meeting of the [Page 198] Joint United States-Canadian Committee on Trade and Economic Affairs. Beyond that, the same concept has been affirmed by the Congress in the safeguards contained in the authority given the Executive in Section 550 of the mutual security legislation.2
Extraordinary care must be taken to minimize the ill effects of our special measures on world prices and the usual marketings of other countries. Damage to the economies of these countries must be avoided when this would be contrary to the security interest of the United States. In analyzing the effects of our actions on the economies of other countries consultation is essential. This takes a certain amount of time, and so I hope the Department of State will be notified well in advance concerning any special disposal measures which your Department is contemplating. In the case of reduced prices on cheese and dried milk which were announced recently, the Department requested advance notification of only four working days in order that it might advise other countries of the proposed export price announcement. This short advance notice was adequate in this case only because discussions with interested governments regarding these products had occurred at an earlier date. Ordinarily, however, a substantially longer period of time than four days is essential if consultation is to be meaningful.
I realize that it is difficult for your Department to devise export programs which are effective and which will not, at the same time, have serious effects on our foreign relations. Members of the Department of State will be glad to discuss promptly with representatives of your Department the feed grains problem which I have mentioned and any other special disposal measures which your Department may devise, in an effort to reach an agreed solution of these important problems.
I am sending copies of this letter to Mr. Francis and Dr. Hauge.3
- Drafted by Linville and Turnage; cleared by Evans.↩
- Section 550 of the Mutual Security Act of 1953 (Public Law 116), enacted July 16, 1953, provided that not less than $100 million nor more than $250 million of the funds appropriated under the Act were to be used to finance the purchase of surplus agricultural commodities by friendly countries; for text, see 67 Stat. 1520.↩
- Clarence Francis, Special Counsel to President Eisenhower; Gabriel Hauge, Administrative Assistant to President Eisenhower.↩