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

359. Information Memorandum From the Acting Director, Office of International Commodities, Bureau of Economic Affairs (Katz) to the Assistant Secretary of State for Economic Affairs (Solomon)¹

Washington, December 6, 1967.

SUBJECT

• Bill changing price support system for extra long staple cotton

On August 17, 1967, the Bureau of the Budget gave a qualified green light (Tab A)² to the Ellender Bill, a bill intended to bring the price support system for ELS cotton more into line with that for upland cotton.³ BOB acted after receiving the somewhat conflicting views of the Department (our letter of August 2) and of USDA (Secretary Schnittker’s letter of August 10).⁴ We found the result acceptable.

As Alex Schnee reports in his memorandum of December 1 (Tab B),⁵ Senator Hayden plans to introduce an ELS bill this week as an amendment to the Commodities Exchange Act.⁶ We have not seen the Hayden bill and apparently will not see it before it is introduced. Since it is being offered as a floor amendment, committee hearings presumably will not be held. Senator Hayden, unlike Senator Ellender, comes from a state producing ELS.

USDA informs us that this is essentially the Ellender Bill, with one substantive change: The Ellender Bill provided for a national marketing quota “not less than the amount of the (Section 22) import quota in effect for ELS cotton …” The Hayden version apparently provides for a national marketing quota of 82,480 bales, without mentioning the import quota. This is an improvement from our point of view. The arithmetic comes out the same unless the import quota is changed.

Since the Hayden amendment will specify a national marketing quota, it is clear that Point 2 in the BOB letter was rejected.⁷ Not having seen the amendment, I do not know whether BOB’s other suggestions were adopted. I suspect that they were not.

USDA agrees with H that once the Hayden amendment becomes law, the Poage Bill (HR–10915, already passed by the House),⁸ will be dead. For this reason alone the Hayden amendment merits our support provided that we can live with it, as I believe we can. Peru objects to any bill lowering the support price for ELS; but we can handle this objection. As a practical matter, it would be very difficult for the Department to muster opposition to a bill, not tied to the import quota, specifying a national marketing quota for domestically-produced ELS. This is particularly true in view of the continuing upward movement of cotton prices and the impending shortage of the longer staples of upland cotton (with which domestic ELS is directly competitive). Opposition would be especially difficult if, as expected, the ELS proposal is offered as an amendment to the Commodities Exchange Act.

Recommendation

I recommend that the Department make no effort to block the Hayden amendment, barring unforeseen developments after it is introduced and its exact wording becomes known.⁹

1. Source: Department of State, EB/FTD Files: Lot 73 D 183, Ellender (Hayden) Bill 1967. Limited Official Use. Drafted by George H. Alexander (E/ORF/ICD/FTD) and cleared by Judith M. Denton (ARA/LA/EP), Jack R. Johnstone (NEA/UAR), Albert Post (AF/AFN), and Harry M. Phelan, Jr. (E/FTD). Katz changed this memorandum from “action” to “info” by hand on the source text.
2. Letter from Wilfred H. Rommel, Assistant Director for Legislative Reference, Bureau of the Budget, to Secretary of Agriculture Freeman, August 17, not printed.
3. The Ellender Bill, the contents of which are generally described in Rommel’s letter (see footnote 3 above), has not been further identified.
4. Neither letter has been found.
5. Memorandum for the file by Alexander Schnee (H), December 1, not printed.
6. H.R. 13094, the Commodity Exchange Act, was passed by the House of Representatives on November 30, but the Senate did not complete action on it during 1967.
7. Point 2 in the BOB letter (see footnote 3 above) reads: “No commitment is made at this time as to the size of the 1968 acreage allotment or marketing quota. We believe it essential to get one or two years’ experience before any significant upward adjustments are made.”
8. Over the opposition of the Johnson administration, the House of Representatives on October 30 passed H.R. 10915, which would have taken away the extra-long staple cotton quota from countries (i.e., UAR and the Sudan) that had severed diplomatic relations with the United States within a year prior to enactment and transferred these foreign quotas to U.S. producers. The Senate did not act on this legislation during 1967.
9. Katz crossed out this paragraph and the approval/disapproval lines and wrote the following note: “Tony: I’m sure you agree we should not take on this losing battle, even if we had reason to, which we don’t. JLK.”