Foreign Relations of the United States, 1955–1957, Western Europe and Canada, Volume XXVII

372. Memorandum of a Conversation, Canadian Embassy, Washington, July 24, 1957¹

Washington, July 24, 1957

SUBJECT

• United States–Canada Wheat Disposal Problems

PARTICIPANTS

• Ambassador Robertson² of Canada
• Mr. Mitchell Sharp, Deputy Minister for Trade and Commerce, Canada
• Mr. A.E. Ritchie, Minister, Canadian Embassy
• Mr. R.G.C. Smith, Commercial Minister, Canadian Embassy
• Mr. Gwynn Garnett, Department of Agriculture
• Mr. Willis C. Armstrong, E
• Mr. John M. Leddy, E
• Mr. C.W. Nichols, OR

This was an informal and exploratory discussion at the Canadian Embassy. The Ambassador, as well as Messrs. Sharp and Garnett, emphasized that they were uninstructed and that the discussions should be completely confidential and frank.

The issues which were posed for Canada by the U.S. disposal programs have clearly been sharpened by the Canadian election. The Canadian Government is faced with the necessity for having an “active” disposal program of its own. Mr. Sharp mentioned a possible objective of exporting 50,000,000 bushels more in 1957–58 than in the previous year. Some increase of Canadian exports, possibly as large as 50,000,000 bushels, might grow out of developments which are already occurring or factors which are already at work such as the tightening by the United States of the administration of its barter program and the limited amount of additional Title I authority in the extension of Public Law 480 for another year.³

The U.S. barter program has been brought to a virtual halt by the recent adoption of a requirement that the Department of Agriculture must be convinced of additionality. It is clear even in advance of PL 480 legislation that the $1,000,000,000 new authority for Title I would not sustain a volume equal to that in the past year in the case of wheat, especially when consideration is given to the need for emphasizing sales of other surplus commodities such as feed grains and oils.

The Cooley Amendment to PL 480⁴ was described to Mr. Sharp and discussed as a new element which is likely to make Title I sales less interesting to some importing countries.

Mr. Sharp was not inclined to be so optimistic as others regarding the promise which these other factors have for increases in Canadian exports during the coming year although, of course, the assistance they yield will be most welcome. He spoke principally of the likelihood of better harvests in importing countries which are likely to reduce the total of international trade in wheat below the rather high figure of the past year. He recognized, however, that Canada might not feel the brunt of a decrease in European imports as much as some other wheat exporting countries.

Messrs. Sharp and Garnett commented at length on the desirability of maintaining the present general level of prices and were fully agreed upon the importance of doing this, as well as the absence of any benefit to Canada or the United States obtainable through action which would significantly undermine the approximate level of prices now existing.

Mr. Sharp thought that the subsidy on flour which Canada instituted earlier this year had made Canadian flour approximately competitive temporarily. He stated that Canadian flour exporters had expressed themselves as believing that they were not fully competitive but that the Canadian subsidy at the outset had been barely sufficient, or almost so, taking account of other advantages which they believe they have in competing against United States flour in principal foreign markets. Sharp said, however, that the price differential had recently become wider. Garnett said that he had personally tried to analyze this problem and had become convinced that the type of arrangement the U.S. has is reasonable in principle. He pointed out that much of the wheat which is used in milling U.S. flour for export is premium priced wheat, and this premium has to be reflected. Garnett stated, however, that he has found it very complicated to determine the exact correctness of the subsidies in terms of all different grades and locations of wheat and flour. He suggested that the Canadian Embassy should keep in close touch with Mr. Garthoff of the Department of Agriculture and try to work out with that office detailed figures which would be adequate to judge this question. He hoped that agreement could be reached upon the methods of analysis and that coordination in this matter would not be too difficult when United States and Canadian officials were using the same figures and were satisfied concerning their accuracy. Mr. Sharp seemed generally discouraged about the possibilities of coordinating in connection with the flour export subsidies, but agreed that it would be useful to maintain the contact which Garnett had suggested.

Garnett thought that the issue of U.S. marketings being made a condition of PL 480 agreements could be kept small and manageable. He thought that in general the requirements of the law and of the policy objectives could be satisfied mainly by requiring that quantities be purchased on a global basis since the United States would have an opportunity to compete in satisfying such requirements. It was pointed out in the discussion that the United States assumption underlying the negotiation of these provisions has been that the quantities would be purchased competitively on a commercial basis. The introduction of concessional programs by Canada or other wheat exporting countries would of course be a new element requiring some consideration in this connection.

Sharp said that the thinking in the Canadian Government as to the types of new disposal measures had not proceeded far. His own thinking included the possibility of gifts, and he mentioned particularly such countries as India, Pakistan, and Ceylon. He is concerned by the danger that special programs will be difficult to insulate from commercial exports and therefore appeared to have in mind that gifts to Commonwealth countries within the Colombo Plan area might be relatively easier to justify and less dangerous in their effect upon the attitudes of buyers in important commercial markets. He also thinks in terms of credit sales based on credits which might extend as long as five years, but he hoped that these would be at commercial rates of interest.

Sharp takes the personal view that it will be important for the United States and Canada to consult frequently and coordinate closely in connection with special wheat export programs. He stated, however, that neither he nor the other career officials in Canada are intending to take the initiative in suggesting continuation of the special wheat consultations which have been taking place over the past couple of years. He though that it would be useful if the U.S. felt disposed to make a suggestion for consultation along the line of current conversation.

He believed that Secretary Dulles might have a favorable opportunity to do this in his meeting with the Prime Minister during the coming week-end.⁵ There was some discussion that the United States might well make clear in suggesting the advisability of further talks that U.S. officials would be prepared to come to Ottawa for the next meeting. If arrangements were in fact developed along that line, some opportunity probably would arise for the U.S. officials to become acquainted with some of the present Canadian Ministers. It is likely that this acquaintance and the discussions which could be expected to grow out of it would serve the purposes of better mutual understanding and protection against contradictory and conflicting actions by the two Governments.

It is not clear just when the U.S. Senate may act on the bill to extend PL 480, but the enactment of this legislation will quickly make it necessary for the United States to plan much of the coming year’s operations. This is a subject of particular interest to Canada which could well be included in the agenda for the next meeting. Mr. Sharp recognized that the Canadian Government needs to develop in greater detail and more authoritatively its views toward new types of export programs and these would be of considerable interest to the United States.

The discussion was concerned almost entirely with wheat problems but did turn at one point to GATT; the prospects for continued cooperation by the United States and Canada in support of liberal policies for international trade; and the recent restrictions by Canada on imports of turkeys and other fowl.⁶ Mr. Sharp assumed that the U.S. intends to remind the Canadian Government of its international obligations which were not observed in announcing the restrictions on poultry. He was told that this is the intention of the United States and that the emphasis in the U.S. representation is expected to be on the international obligations and the importance of their fulfillment.

1. Source: Department of State, Central Files, 411.4241/7–2457. Confidential. Drafted by Nichols on July 25.
2. Norman A. Robertson, the new Canadian Ambassador, presented his credentials on May 17.
3. Reference is to the substance of an amendment to Public Law 480, August 13, 1957; for text, see 71 Stat. 345.
4. An amendment proposed by Congressman Harold D. Cooley (D.–N.C.) was accepted and became part of Public Law 128. Under this provision, 25 percent of foreign currencies acquired under the farm surplus disposal program was earmarked for loans to U.S. or foreign firms to promote expanded markets for American products abroad.
5. Dulles visited Ottawa, July 27 and 28. See Documents 374–377.
6. The Canadian Government, without prior consultation, had imposed an embargo on U.S. turkey and other fowl. (Telegram 63 from Ottawa, July 22; Department of State, Central Files, 442.004/7–2257)