157. Memorandum From the Department of State Executive Secretary (Battle) to the President’s Special Assistant for National Security Affairs (Bundy)0

SUBJECT

  • United Arab Republic Request for PL-480 Sale of Cotton

In response to an inquiry from your office regarding the status of the Title I PL-480 cotton request from the United Arab Republic, I am able to report that it is under consideration among the agencies concerned. The Department believes it is politically important to respond favorably if at all possible. However, the Egyptian request comes at a time when a serious problem of availability has already arisen in connection with earlier requests for cotton from a number of countries, some of them heavily dependent for many years on United States assistance in securing cotton.

Because of heavy crop losses from the severe leaf worm infestation of its current cotton crop, the United Arab Republic has requested [Page 381]350,000 bales of United States Upland cotton of 1 to 1–1/8 inch in length under Title I of PL-480 to meet a shortage of cotton needed for the production of mass-consumption textiles. The United Arab Republic would continue to export its long and extra-long staple cotton but has given assurances that it (1) would refrain from exporting its own medium staple during the current year (other than deliveries on sales made before the extent of the crop damage was understood) and (2) would not export yarn or textiles produced from the PL-480 cotton.

There is no question that the United Arab Republic’s economy has suffered a severe loss from the leaf worm infestation. About 35% of the cotton crop was destroyed. Export prospects are down sharply and the loss in export earnings alone is expected to exceed $100 million. In addition, the availability of cotton varieties for local consumption is substantially reduced, posing the alternative of diverting more expensive longer staples from export markets, or causing consumption of textiles by the mass of the people to be reduced. The United Arab Republic’s weak foreign exchange position does not permit it a third alternative of purchasing medium staple cotton from abroad.

Although the request is for 350,000 bales, we consider this excessive in relation to domestic needs and believe a much lower figure would be more appropriate; i.e. in the range of 50,000 to 100,000 bales. Anything much less than 100,000 bales might be politically unacceptable to the United Arab Republic, while a larger amount might stimulate export pressures. We would expect to include in any agreement with the United Arab Republic on PL-480 cotton appropriate limitations on exports of raw cotton and cotton yarns and textiles.

We have already informed the U.A.R. that the quantity of cotton presently available for Title I programming is entirely committed and that it has not been possible since mid-October to consider additional requests. We have urgent unfilled requirements involving a total of 376,500 bales for Korea, the Republic of China, Morocco, Ethiopia and Bolivia, where for the past several years we have been supplying cotton under Section 402 of the Mutual Security Act. Although the requests of these countries must receive first priority attention, there are also compelling foreign policy reasons for giving favorable consideration to the requests of such other countries as Viet Nam and India, as well as the United Arab Republic, provided normal Title I program criteria are met.

In view of the foregoing, the Department of State is pressing for a review of the over-all question of cotton availability from existing stocks for PL-480 programming during this fiscal year and has recently sent a [Page 382]letter to the Department of Agriculture (a copy of which is enclosed)1 in this regard.

Our consideration of a cotton program for the United Arab Republic has come to the attention of the press, particularly the New York Times. A correspondent from this newspaper has raised the relevance of such a program to an unconfirmed report he has received that the United Arab Republic is about to barter cotton for two new wings of Soviet jet aircraft. We have no confirmation of this reported barter which has been denied by the United Arab Republic Embassy here. The United Arab Republic has since mid-1961 been severely restricting its cotton exports to the Soviet Bloc and hopes to reorient at least 60% of its exports to Western countries.

It may also be of interest that the Department has just received a diplomatic note from the Peruvian Embassy objecting to the possible sale of PL-480 cotton to the United Arab Republic. The Peruvian Government’s concern is that such a sale would enable the United Arab Republic to export larger quantities of cotton. Peru is sensitive about our PL-480 cotton sales in general but in the case of the United Arab Republic the sensitivity is sharpened by the fact that the two countries export similar types of cotton.

This status report brings out various factors and problems which must be considered in the United Arab Republic’s request for Title I cotton, but we hope that, if Title I availability permits, a cotton program for the United Arab Republic can be developed which will be acceptable to all parties concerned.

M.L. Manfull2
  1. Source: Kennedy Library, National Security Files, Country Series, United Arab Republic, 1/62–2/61. Confidential.
  2. The attached letter, from Assistant Secretary of State for Economic Affairs Edwin Martin to Assistant Secretary of Agriculture for Marketing and Foreign Agriculture Duncan, dated December 20, 1961, noted that there had been a number of requests for cotton under Title I of P.L. 480 that exceeded Department of Agriculture October 1961 estimates of available surplus cotton, and indicated that the most urgent requirements were for South Korea, the Republic of China, Ethiopia, Morocco, and Bolivia. The letter also advised that special consideration should be given to making cotton available to South Vietnam, India, and the United Arab Republic.
  3. Manfull signed for Battle above Battle’s typed signature.