197. Paper Prepared in the Office of the Special Representative for Trade Negotiations1
U.K. NOTE ON ITS GRAINS PROPOSAL AS REDRAFTED BY U.S.
The United Kingdom Government have informed the United States Government that they intend to make certain changes in their production and trade policies relating to cereals. In framing their proposals the United Kingdom Government had in mind not only their responsibility for maintaining conditions under which a stable and efficient agricultural industry in the United Kingdom can develop its prosperity but also their responsibility as one of the major importers of cereals in the world towards their overseas cereals suppliers.
- The United Kingdom Government have also taken into account that they, and other countries who are major importers and exporters of cereals, are at present taking part in discussions in the Cereals Group convened under the auspices of the General Agreement on Tariffs and Trade, with the aim of establishing an international agreement for cereals. It was not their desire or intention to put forward proposals which might in any way hamper that work but rather to introduce arrangements so designed as to further the main objectives which both the United Kingdom and United States Government desire to achieve in these discussions dealing with the longer-term situation.
- These are that the world market for cereals should be improved through the establishment of a better equilibrium between world supplies and commercial demand, and that within this improved framework there should be a significant development and expansion of world trade in cereals; the provision of acceptable conditions of access into the [Page 552] traditional world markets for cereals and the creation of greater stability in the levels of international prices for the main cereals, cereal products and by-products. These objectives would be sought in such ways as would take into account the interests of both importing and exporting countries.
- Pending the conclusion of any long-term international cereals agreement, the United Kingdom Government have declared their intention of introducing adaptations into their existing cereals policy designed to promote greater stability in the United Kingdom cereals market, and to maintain a fair and reasonable balance between home production and imports as defined by the proportionate shares of domestic consumption supplied in a recent representative period from domestic cereal production and from cereals imports into the United Kingdom. Accordingly, both domestic cereals growers and overseas cereals suppliers would share in the growth in domestic consumption of cereals. It will, of course, be necessary to review from time to time the balance aimed at between domestic cereals production and total cereals imports into the United Kingdom in the light of unusual weather conditions.
- The measures which the United Kingdom Government intend to introduce for securing these objectives are first to restrain financial assistance to domestic cereals production so that it is not encouraged to increase above a level consistent with the above objectives, and second, to operate in cooperation with their principal overseas suppliers a system of minimum import prices for the main cereals, cereal products and by-products.
- As regards the first, the United Kingdom Government has determined initial standard quantities of “x” million tons of wheat and of “y” million tons of barley (these being the quantities which the United Kingdom Government have decided, in the national interest, it is desirable to produce in the United Kingdom).The guaranteed prices and the mechanisms by which these will be applied to wheat and to barley are those which are set out in the White Paper on the Annual Review of the Economic Conditions of the Agricultural Industry for 1964–65. Domestic consumption of grain for 1964–65 is expected to be — million tons. Making allowance for production of grains other than wheat and barley of — million tons total net imports of grain are estimated at — million tons.2 Similar data will be supplied each year during the review procedures.
- As regards the second, namely the minimum import price system, the range of the commodities to be covered initially together with the levels of the minimum import prices to apply to these commodities have been determined by the United Kingdom Government after consultation with the United States Government, as per annex, and subsequent [Page 553] changes will also be the subject of consultation. In addition, the United Kingdom Government will not make any significant change in the general level of minimum import prices except after consultation and agreement with the United States Government and other cooperating governments.
The United Kingdom Government will take any necessary action to maintain the general level of the prescribed minimum import prices by such levies on imports as may be necessary for this purpose. Subject, however, to your formal confirmation of the United States Government’s willingness to cooperate in these arrangements, the United Kingdom Government will exempt from levies all imports of cereals, cereal products and by-products and other related products which are exported and consigned from the United States of America to the United Kingdom except in the following circumstances:
- When the general level of United States offering prices for any commodity specified by the United Kingdom Government at any time an offer to the United Kingdom market is (after taking into account any customs duty chargeable) below the appropriate prescribed minimum import price for that product, the United Kingdom may, after notifying the United States Government, apply a levy to that commodity for so long as such conditions make it necessary. Any such levy will be determined on a country basis by reference to the difference between the appropriate minimum import price and the offering prices for the commodity concerned exported and consigned from the United States of America to the United Kingdom; and
- In the event of it being necessary to prescribe for any commodity specified by the United Kingdom Government a levy determined on each individual parcel by reference to the difference between the price paid for that parcel and the minimum import price, the United Kingdom may apply such a levy to any parcels of the commodity concerned exported and consigned from the United States of America to the United Kingdom.
(Consideration to be given to some arrangements for forward contracts and in-transit shipments.)
In the circumstances described in (i) and (ii) above, such levies may be applied by the United Kingdom Government notwithstanding the commitments of the United Kingdom Government under the General Agreement on Tariffs and Trade.
The United Kingdom Government will in consultation with the Governments of the United States and other countries cooperating in the minimum import price system review in advance of the Annual Review each year the extent to which the objectives set out in this letter are being achieved, and in advance of the beginning of each crop year commencing July 1st, the effect of the operation of minimum import prices. The United Kingdom Government will take prompt and effective corrective [Page 554] action if the proportionate share of imports in domestic consumption of wheat, wheat flour, and coarse grains in a recent representative period declines, or if the operation of the minimum import price system results in a significant distortion in the normal trade patterns in such products with the United Kingdom as between supplying countries.
- The United Kingdom Government believe that the introduction of these measures would further the prospects of attaining the longer-term objectives of an International Cereals Agreement. Any arrangements contained in this exchange of letters are without prejudice to, and indeed are intended to facilitate, the negotiation of such an international agreement embodying commitments such as access assurances for overseas suppliers and domestic price and production policies by all participating countries, whether exporting or importing.
- In the light of all these considerations, the United Kingdom Government invite the cooperation of the Government of the United States in securing the observance of minimum import prices prescribed for cereals, cereal products and by-products or other related products subject to the terms and conditions set out in this letter.
- This letter and your formal confirmation shall constitute an Agreement between the Governments of the United Kingdom and the United States of America and shall enter into force forthwith. It shall apply as soon as the United Kingdom Government has specified, and prescribed a minimum import price for, any commodity to which it extends. It may be terminated with effect from the 30th June in any year by either Government giving two months’ notice in writing to that effect. It is understood that, in deciding whether or not to give notice of termination of the agreement, the United States Government would regard as a determining factor whether the share of imports in domestic consumption has been maintained and whether normal trade patterns are not significantly distorted by the system.
I acknowledge receipt of your letter of today’s date relating to the United Kingdom Government’s intention to make certain changes in its cereals production and trade policies.
As the United Kingdom Government is aware, the United States does not view the establishment of minimum import prices as of any benefit to it, and would consider the imposition of levies in support of minimum import prices as an impairment of its GATT rights.
The United States is nevertheless prepared, in the light of the objectives and undertakings of the United Kingdom Government contained in your letter, to cooperate to the extent possible in the operation and observance of the minimum import price system to be introduced by the United Kingdom Government. It is understood that all rights under the General Agreement on Tariffs and Trade are fully maintained, and that [Page 555] the Government of the United States reserves the right to invoke its contractual rights relating to negotiated concessions on grains and deriving from the general obligations of the General Agreement on Tariffs and Trade.
- Source: Johnson Library, National Security File, Subject File, Trade—General, Vol. I [1 of 2], Box 47. Limited Official Use. The U.S. amendments to the text were given to British representatives in Washington on January 10 and also to Canadian, Australian, and Argentine representatives on January 13. These amendments, along with a U.S. explanatory note, were transmitted in telegram 4288 to London, January 16. (Department of State, Central Files, INCO–GRAINS UK)↩
- A — indicates blank spaces on the source text.↩