Foreign Relations of the United States, 1964–1968, Volume IX, International Development and Economic Defense Policy; Commodities

198. Memorandum From the Special Representative for Trade Negotiations (Herter) to President Johnson¹

Washington, January 28, 1964.

SUBJECT

• U.K. Cereals Negotiations

I have previously reported to your Office that the U.K. Government desires to obtain the cooperation of major grain exporting countries in a U.K. plan to establish minimum import prices for cereals as a part of the changes in her domestic cereals program aimed at limiting price supports to specified quantities of production and hence limiting the exchequer outlays for domestic cereal price supports.² The U.S. and the other exporters have taken the position that in exchange for cooperating in this endeavor we should be provided firm access assurances to the U.K. market based on exports to the U.K. market in a recent representative period, plus a share in the growth of the U.K. market in future years.

A multilateral meeting was held in London last week between the U.K., the U.S. and other major grain exporters. This meeting resulted in a significant narrowing of the differences between the position of the U.K. and the grain exporters.³ At the conclusion of the meeting the U.K. Government handed the exporters the U.K.’s draft of a letter of understanding, a copy of which is attached.⁴ Representatives of the other delegations, Australia, Canada and Argentina, indicated privately to the U.S. Delegation that they were prepared to recommend to their respective Governments that the U.K. note be accepted.

We believe there are still important modifications which should be made in the note before it is accepted. Our proposed changes have been forwarded to London today for delivery to the U.K. Government. A copy of the cable is attached.⁵ Briefly, the issues which still divide us are as follows:

1) The U.K. Government has stated that an objective of the changes in its cereals policy is to maintain a fair and reasonable balance between home production and imports. We want this balance defined specifically on the basis on which the U.S. market was supplied from domestic production and cereals imports in a recent representative period, plus a clear recognition that overseas suppliers are to share in any growth.

The U.K. Government is reluctant to be too specific on these points for fear of antagonizing producers and rendering more difficult the task of obtaining parliamentary approval of the changes.

We think the final changes we have proposed meet minimum U.S. needs and represent something the U.K. Government can accept.

2) We want firm assurances that remedial action will be undertaken if the objectives stated above are not realized. Again, in order that there may be no future misunderstanding we propose that the base period be specified as the average of cereals imports during the three years ending June 30, 1964, combined with wording that clearly recognizes the right of overseas suppliers to share in growth. To date the U.K. Government has only been willing to give a commitment to undertake corrective action if imports fall below the base period and only if the decline is related to the implementation of the changes in their cereals policy.

Our proposed new wording in the attached cable is intended to strengthen this commitment to take corrective action. Again we believe we have suggested changes which the U.K. should find it politically possible to accept.

We are convinced that if the agreement can be modified along the lines of our proposals it would represent an arrangement mutually beneficial to the U.S. and to the U.K. It would provide overseas cereals suppliers with meaningful access assurances to the U.K. market and would establish a useful precedent which should be valuable in the forthcoming negotiations with the EEC in the Kennedy Round. If we hold firmly we think the U.K. Government will agree to our latest proposals.

Christian A. Herter

1. Source: Johnson Library, National Security File, Subject File, Trade General, Vol. I [1 of 2], Box 47. Limited Official Use. A handwritten note at the top of the source text reads: “Hold for response to P[rime] M[inister] letter.” For this response, see Document 200.
2. Presumably a reference to a January 22 memorandum from Herter to Buddy. (Johnson Library, National Security File, Trade—General, Vol. I [1 of 2], Box 47)
3. Reported in telegram 3470 from London, January 24. (Department of State, Central Files, FT 3 GATT)
4. Not found.
5. Not found.