348. Memorandum of the Meeting of the Joint U.S.-Canadian Committee on Trade and Economic Affairs, Government House, Ottawa, September 26, 1955, 9:30 a.m.1
- United States
- Secretary of State Dulles
- Secretary of Treasury Humphrey
- Secretary of Agriculture Benson
- Secretary of Commerce Weeks
- Ambassador R. Douglas Stuart
- Mr. Walter Radius
- Mr. J. Stewart Cottman, Jr.
- Mr. L.B. Pearson, Secretary of State for External Affairs
- Mr. Howe, Minister of Trade and Commerce and Defense Production
- Mr. Walter E. Harris, Minister of Finance
- Mr. James C. Gardiner, Minister of Agriculture
- Ambassador Arnold D. Heeney
- Mr. Plumptre
- Mr. A.E. Ritchie
- Mr. Peter M. Towe
[Here follow the U.S. and Canadian opening statements.]
General Commercial Policies and Prospects
Mr. Pearson asked if Secretary Weeks had any comments on the first agenda item.
Secretary Weeks briefly reviewed the legislative history of HR 1.3 He said that the bills relating to adherence to OTC and customs simplification had not yet passed the Congress. The hope was that they would be taken up early in the next session. He said that HR 1 represented a modest advance toward the goal of liberalized trade policies in the form of reduction of duties. He explained that the “liberalization” of the Escape Clause procedures provided a safety valve. Only 61 Escape Clause actions had been brought up, of which 13 were acted favorably upon by the Tariff Commission. In the light of these statistics, Secretary Weeks suggested that the impact on trade of liberalized Escape Clause actions was more emotional than real. Secretary Weeks said that during his recent trip to Europe he had asked a number of persons whether they would prefer to have a high level tariff with no “Escape Clause” safety valve, or a low tariff level and a [Page 858] “safety valve”. He explained that this question summed up in the briefest form the alternatives which were available in dealing with the tariff question.
Secretary Weeks said that although recourse to Escape Clause procedures had been liberalized, he did not consider that this would injure the total trade picture.
[Here follows discussion of other matters.]
Uncertainties in U.S. Policy—Canadian View
Mr. Pearson then called on Mr. Howe. He said that on balance Canadian trade figures were favorable. He pointed out, however, that the Canadians had made no effort to balance trade with each country, but the overall pictures were good. He said that uncertainties as to [U.S.]policy caused the Canadians some concern. For example, delay in the implementation of customs simplification would not [now?] be of great benefit to Canadian producers since it would give them a firm planning base for projected operations.
Mr. Howe said that he had noted with some alarm the US Tariff Commission procedure in Escape Clause actions which allowed a case, once dismissed, to be raised and reheard the following year. This situation seemed to be a form of “double jeopardy” which interfered with positive long range planning by prospective exporters to the US. A case in point was that pertaining to unprocessed fish which was now before the Tariff Commission for the third time in three years. He expressed hope that we in the US could take some steps to avoid this “annual review”, and that Escape Clause provisions could be invoked only when overall injury to an industry was proved.
He said that there was some concern by the Canadians over the possible effects of the “national security clause”. He pointed out that national security interests in the US and Canada frequently overlapped. Oil resources, in Canada, for example, were as available for the defense of North America as were those in the US. A new oil development project in Western Canada with a potential market in the US Pacific Northwest could be hampered by restrictions of oil imports by the US.4 Mr. Howe pointed out that these oil reserves could be considered a part of the strategic reserves of North America and hoped that US imports of Canadian oil could be set apart if restrictions were applied.[Page 859]
In response to Secretary Weeks’ “hypothetical alternative of higher tariffs and no Escape Clause, for [or] lower tariffs with Escape Clause provisions,” Mr. Howe said that he would personally choose the higher tariffs to the uncertainty of escape clauses. Mr. Pearson said, of course that depends on how much higher.
Mr. Howe said that Canada appreciated the reaching of a decision to remove import quotas on oats and barley.5 Secretary Benson said that this was an instance where the situation no longer required protective measures and was pleased to note that there had been little domestic exception to the removal of these quotas. Mr. Howe interpreted this move as indicating that the US is not retaining restrictions when they are not necessary.
Secretary Humphrey said that he would like, at this point, to mention two items. He thought that the Customs Simplification Bill6 would be passed, with amendments, early in the next session of the Congress. He explained that this bill had been held up by a favorable committee which feared that a filibuster at the end of the last session would have undone many months of hard work on this bill, and delay other necessary legislation. The Committee was prepared to push the bill very rapidly upon the reconvening of the Congress.
The second point was that under the security clause the North American Continent was considered by US planners as a strategic unit, and that their judgments had been made on this assumption.
Secretary Weeks said that Canada need have no fear that the President would look to the security clause to the exclusion of basic economic issues when passing on Escape Clause applications. Secretary Dulles, referring to the domestic US political situation, said that US exporters should be encouraged to develop some effective means of political influence to match the pressure of importers.
Secretary Benson said that HR 1 had received backing from all important US farm organizations, agricultural groups, having been moving toward a “freer trade” policy, [sic] Mr. Howe suggested that the existence of surpluses might have been a significant factor. Secretary Benson agreed, but added that agricultural groups have backed free trade in fields other than those directly affecting surpluses. Secretary Dulles said that in the past the South Eastern States had a one-crop economy. This situation was changing with more diversified planting and industrialization. As a consequence, the political spokesmen [Page 860] from this area are supporting new measures for protection. In response to Mr. Pearson’s question, both Secretary Dulles and Secretary Humphrey said there was no chance of the Bill’s being passed without the amendments.
[Here follows discussion of other matters.]
Mr. Pearson asked for views on Agenda Item 3.
Mr. Howe stated that both countries had surpluses in wheat, oats, and barley. The Canadians market their grains without subsidy. They do make an advanced payment to the farmers at the time of marketing, but storage and other charges are paid by the producer. Mr. Howe said that Canada produces about 400 million bushels of wheat a year, 100 million bushels of which are consumed domestically, leaving 300 million for export. The Canadians have attempted over the year to seek markets to take care of this expected excess of wheat. He added that although the carry-over of wheat had been cut last year, bumper crop expectations indicate that Canada will be faced with an increased surplus this fall. The Canadians have made an effort to maintain a stable price in line with the world price of wheat, but pressure on prices has developed during the last six months and exports have dropped.
Mr. Howe discussed the causes for this decline. During this period the US has disposed of some 50 million bushels of wheat, some of this has gone to Italy for relief purposes. The Canadians are particularly concerned since Italy had traditionally been a market for Canadian wheat. The US had made sales of wheat for local currencies, but these sales could not be considered as straight commercial operations. For example, Brazil received 500 thousand tons of wheat to be paid for in local currency, 30% of which was reserved for US expenses in Brazil, and 70% allocated for a 40-year development loan. Mr. Howe noted that we were also bartering agricultural surpluses for strategic materials. In many of these deals he said that the materials were valued at a high price while the wheat was, at best, valued at the world market price.
Mr. Howe said that the disposal of lots of grain on a bid basis was considered serious from the Canadian point of view. He said that on July 26, for example, one million bushels of rye had been offered for sale on a sealed bid basis, and had gone for 68 or 70 cents a bushel. The cash price at the time of sale was 1.05 a bushel, and the futures were 1.02. Mr. Howe cited a number of similar occurrences during the past six months. These programs are having the effect of displacing Canada in her traditional world markets. At this time of the year the Canadians usually have a considerable number of forward sales already arranged. Because of the imminence of “bargain sales” of grains [Page 861] in the US, the Canadians have no such sales arranged now. The bargain sales, give-aways, and other forms of indirect subsidies tend to destroy confidence in the US prices. Mr. Howe questioned whether this situation was in our mutual interest and asked that confidence be restored in the markets. (Paper submitted by Canadians attached.)7 He requested that arrangements be made for continuing prior consultation between U.S. and Canadian experts on the disposal of surpluses.
Secretary Benson agreed to arrange for such consultation with the Canadians. He said that the US surplus situation was critical. The storage bill for grain ran $1 million a day. He appreciated that the US price support system which was designed to ease post-war transition has outlived its usefulness, and has put an umbrella over world prices. The US has lost its old markets by holding prices too high. For example, cotton exports have dropped almost 50%. The pressure to move the surplus material has been terrific. The US has tried to adhere to the FAO basic principles: it has sought to increase consumption and reduce production; it has sought to arrange for surplus disposal in an orderly fashion; in PL 480 deals the US has endeavored to secure assurances from other countries that grain delivered under this act will be in addition to the normal grain requirements; and finally the US has endeavored to establish a system of consultation. However, the US has held back too long on taking some action to alleviate the problems caused by excess agricultural production. We must sell surpluses and must cut back until production and consumption are roughly in balance in the US.
The farm problem is a number one political issue in the US. Secretary Benson promised that he will resist pressure to dump surplus goods on the world market, but pointed out that certain US experts do not consider that the US has a fair share of world agricultural markets. Secretary Benson added that the statistics he has seen indicated that Canada is not suffering too badly from agricultural problems.
Mr. Howe said that the continuation by the US of disposal of surpluses through the bid system could wreck Canadian grain markets. He said that instead of creating new markets, grain buyers are awaiting the next bargain sale, to supply their normal customer demand.
[Here follows discussion of other matters.]
U.S. Political Pressures
Secretary Dulles said that he and Secretary Benson may not always agree on every issue, however, Secretary Benson’s vision and courage in tackling the basic problem should be recognized. The real [Page 862] trouble stemmed from a rigid price support policy which has become a serious political problem in the US. The resistance to abolishing rigid price supports has not diminished, and is in fact being reenforced by partisan politics. Secretary Benson needs all the support he can muster in his efforts to deal effectively with the agriculture problem. An exchange of views on basic problems is necessary and desirable.
He hoped the Canadians would be tolerant of minor troubles in the interests of the broad program which Secretary Benson was attempting to push through. Mr. Pearson commented that he appreciated the problem which the US faced. He said that the Canadian problem with surpluses is perhaps greater relatively than that of the US, and that any action by the US which was not carefully planned and examined could cause major trouble for the Canadians. He agreed that Secretary Benson was doing a magnificent job. Secretary Dulles said that it was well to resume closer advance consultation.
Mr. Howe said that he wished to explain that his previous exposition should not be taken as a complaint on the behalf of the Canadians. He explained that he was trying to present the picture clearly, and emphasized the fact that Canada wanted consultation with the US on surplus problems. Mr. Howe indicated that the Canadians did not approve the bid price competition. Secretary Benson said that overall direction of the program toward increasing flexibility is important. The Public Law 480 is a new tool and was an alternative to Congressional proposals to direct sales at any price—dumping. He said that the US and Canada should collaborate closely, particularly on wheat.
After circulating a draft communiqué, Mr. Pearson adjourned the meeting at 1:00 p.m.8
- Source: Eisenhower Library, White House Central Files. Confidential. Prepared in S/S. A covering note and a note on the source text indicate that this memorandum was reviewed by Walter A. Radius, U.S. Secretary of the Joint Committee, but it was not cleared with any other participant. No agenda for the meeting was found.↩
- Public Law 86, known as the Trade Agreements Extension Act of 1955. (69 Stat. 162) Among other things, the law liberalized the Escape Clause operation and authorized the President, on advice of the Office of Defense Mobilization, to limit imports of any product entering the United States in such volume as to threaten to impair national security.↩
- See Document 341.↩
- The Canadian Embassy was informed on September 7 that U.S. import quotas on oats and barley would terminate on September 30. (Telegram 91 to Ottawa, September 7; Department of State, Central Files, 411.426/9–755)↩
- The bill was not passed until 1956. For text of the Customs Simplification Act of 1956, see 70 Stat. 943.↩
- Not found.↩
- When the meeting reconvened at 3 p.m., the following topics were discussed: text of the communiqué, fraudulent Canadian securities, Canadian copyright law, and import valuation through U.S. foreign trade zones. The communiqué, issued at Ottawa on September 26, is printed in Department of State Bulletin, October 10, 1955, pp. 576–577.↩