Foreign Relations of the United States, 1958–1960, Foreign Economic Policy, Volume IV

71. Memorandum From the Deputy Under Secretary of State for Economic Affairs (Dillon) and the Assistant Secretary of Agriculture (Paarlberg) to the Chairman of the Council on Foreign Economic Policy (Randall)⁰

CFEP 571/1

June 13, 1958.

SUBJECT

• Renewal or Replacement of the International Wheat Agreement

The Problem

The United States has been a member of the 1949, 1953 and 1956 International Wheat Agreements.¹ The current Agreement will expire July 31, 1959. At the session of the Wheat Council which convenes on June 25, 1958, it is expected that a recommendation will be proposed calling for arrangements for a conference to consider possibilities of renewal or replacement and for the drafting of a proposed Agreement. If later a conference is held and an Agreement formulated, the United States would be free at that time to decide whether the terms were satisfactory and whether it wished to adhere. However, a policy decision at this stage on United States participation is necessary in order that any part which may be taken in connection with the Wheat Council’s recommendation or in an international conference may be in consonance with the policy, and in good faith.

Facts Bearing on the Problem

It is estimated that the United States carryover of wheat on July 1, 1958, will be around 900 million bushels and that, additionally, the oncoming crop may total 1,200 million bushels. Annual domestic requirements are only 600 million bushels. The Wheat Agreement is not specifically a means for the disposal of surpluses such as indicated, but it does function in the area of international trade in wheat and it does have favorable implications in connection with all wheat moving into world markets both inside and outside the Wheat Agreement.

Discussion

Since the United States can only compete in the world wheat market by means of export subsidies, the International Wheat Agreement provides a convenient framework within which our export subsidy program can be operated in an atmosphere of international cooperation. In effect the Agreement gives international acceptance and approval of our export subsidy program, for it is operated to implement the provisions of an internationally agreed marketing arrangement. This fact has important political implications, for it removes an important area of our export trade from potential controversy. Unilateral action by the United States would be a constant source of charges that we were impairing the markets of others and depressing world wheat prices. As our current arrangements have international sanction, the export subsidy program is not a source of irritation among friendly competitors. The International Wheat Agreement thus makes a positive contribution to our foreign economic policy and good political relations.

Major exporting countries other than the United States market their wheat through Government agencies, and also a few importing countries purchase wheat in this manner. In addition, all countries exercise regulatory powers over the importation and utilization of wheat. In the light of these direct interests of governments in trade in wheat, there is ample opportunity in Wheat Council contacts for fixing in the international consciousness the position of the United States as a leading wheat and flour exporting country, and for the furtherance of good will with customer countries.

Likewise, participation in international discussions on wheat matters on a continuing basis has been very beneficial as related to relationships generally with competing exporting countries. U.S. officials who are concerned with the export marketing of wheat feel that these contacts assist them in accurately appraising the U.S. competitive position in the world market and in pulsing the competitive situation so as to better judge probable reactions to U.S. competitive moves.

There is inherent in the Wheat Agreement a multilateral trade principle which is desirable as a counterinfluence to bilateralism. This might prove to be of greater importance now that a common market has been established in Europe.

Recommendation

It is recommended that the Council give approval in principle to the continued participation of the United States in an International Wheat Agreement, in the expectation that the United States would participate in any negotiating conference which may be held, working toward a revised Agreement which in the judgment of the Executive Departments concerned would be in the best interests of the United States.²

0. Source: Washington National Records Center, CFEP Files: FRC 62 A 624, Renewal of International Wheat Agreement, CFEP 571. Official Use Only. Attached to a June 17 memorandum from Cullen to the CFEP.
1. For text of the 1956 International Wheat Agreement, signed for the United States at Washington May 18, 1956, and entered into force July 16, 1956 (Parts 1, 3–5), and August 1, 1956 (Part 2), see 7 UST 3275.
2. CFEP 571/2, June 27, notified the Council that the recommendation had been approved on June 20. (Washington National Records Center, CFEP Files: FRC 62 A 624, Renewal of International Wheat Agreement, CFEP 571)