Foreign Relations of the United States, 1964–1968, Volume XIV, Soviet Union

8. Notes of a Meeting¹

Washington, January 23, 1964, 11:30 a.m.

SUBJECT

• Wheat Shipment to the USSR

PRESENT

• Under Secretary Ball, Under Secretary Harriman, Griffith Johnson; Secretary Freeman, Under Secretary Murphy; Secretary Hodges, Robert Giles (General Counsel); Secretary Wirtz; Mr. Moyers, Mr. Feldman, Mr. Bromley Smith²

Mr. Moyers acted as chairman of the meeting which he said had been called because the President wanted to know what difficulties were being encountered in shipping U.S. wheat in U.S. ships.³

Secretary Freeman said that the problem we were facing was the long-term one. The Russians will not pay a shipping subsidy to get U.S. wheat. However, they do want more U.S. wheat in the future. Our problem is to decide what we should do. Uncertainty about the use of U.S. ships is the basic problem. Are we to continue to insist that 50% of the U.S. wheat be shipped in U.S. bottoms?

Secretary Hodges agreed that the basic problem was whether or not we did away with the requirement that 50% of the ships used to move U.S. wheat to the Soviet Union be U.S. bottoms.

Secretary Freeman said the Russians would be interested in buying 1,500,000 tons of wheat next spring, but no one can negotiate with them in view of uncertainty about the shipping problem. There is doubt as to how the Continental deal is coming out.

Mr. Giles said that U.S. exporters set out to lay down conditions which would result in using the least amount of U.S. shipping. Their purpose was to hold down the delivered price of U.S. wheat. The shippers came back with conditions which were quite unsatisfactory to the exporters. The Continental Company is now in a position to say that insufficient U.S. shipping is available to move the grain they are selling; hence, they will be asking Commerce to waive the requirement that 50% of the grain be moved in U.S. bottoms.

Secretary Wirtz said that the understanding reached within the Administration last November was that 50% of the U.S. grain would be moved in U.S. ships. He said the Commerce Department cannot set conditions which rule out the use of U.S. ships and then say that foreign ships can be used to move the wheat.

Mr. Giles said the understanding of last November was that 50% of U.S. shipping would be used, if available.

Secretary Wirtz said the “if available” phrase was added at a later date. He said it was understood that conditions would not be imposed which would result in frustrating the 50% limitation. He said he understood that all had agreed that if we couldn’t get 50% of the grain shipped in U.S. bottoms, the wheat sale to the USSR would not be completed. He added that he was not saying that a waiver of the 50% requirement should not now be made.

Several others at the meeting did not agree that the understanding was as described by Secretary Wirtz. Secretary Hodges said the agreement was to grant a waiver if U.S. ships were not available and he felt that it was possible that only 25% of the wheat sold by the Continental Company would be moved in U.S. bottoms.

In answer to a question by Mr. Feldman as to whether the labor unions would accept a waiver of the 50% shipping requirement, Secretary Wirtz said the unions would agree if the conditions affecting U.S. shipping were fair and if the reasons why the waiver was being granted were explained to the union leaders.

Secretary Freeman called attention to the decision to use smaller ships to move PL 480⁴ wheat which had the effect of taking the smaller U.S. ships out of the shipping pool. He said now that we had cleared the air on the existing wheat contract, he believed that we should state all conditions involved in wheat shipments so that grain dealers can decide whether they should try to arrange future wheat sales to the USSR.

In an exchange between Mr. Giles and Secretary Freeman, an understanding was reached that it would be all right for the Continental Company to bunch up its shipments in February and March at a time when few U.S. ships would be available—hence, grain would be moved in foreign bottoms. Mr. Giles was interested in seeing that U.S. shipping firms benefited from this trade and Secretary Freeman was obviously seeking to keep the cost of shipping wheat down so as to make possible additional wheat sales.

Secretary Wirtz said that the scheduling of the shipping of wheat was being used to alter the 50% policy decision. In effect, he said the position was now that we would use 50% U.S. shipping if the cost was equal to foreign shipping costs. He repeated his belief that the Administration had decided to pass up wheat sales to the USSR if it was not possible to move half of it in U.S. ships. The unions have gone along with U.S. policy when it has been explained to them. Trouble always occurs when they read of a U.S. decision in the newspapers and afterwards have it explained to them. The next time he hoped that it would be possible for the Government to consult the unions in advance of the announcement of any new policy.

Mr. Feldman sought to summarize U.S. objectives as follows:

a. We want to sell wheat.

b. We want to use U.S. shipping, if possible, but the major objective is to sell wheat.

c. We want to help the U.S. maritime industry.

d. We want to convince the American people of the advantages of selling wheat to the USSR.

Mr. Giles worried that the Administration would be conniving to get U.S. ships out of the trade if we require bunching up of wheat deliveries in February and March while the Soviets are willing to accept delivery in April.

The group agreed that Cargill should work out a shipping arrangement with the Russians. It would not be a condition that the delivery be made within a fixed period. The Government would not place a roadblock by requiring that wheat shipments could not be bunched. Cargill would then take the gamble involving the shipping costs.

Secretary Freeman raised again the long-range problem of wheat sales. He said he understood that Secretary Hodges would not waive the 50% shipping requirement on next year’s spring crop. He asked that each Department do a paper on U.S. policy with respect to sales to the USSR of the Ô64 wheat crop. He saw the alternatives as:

a. Putting wheat on the free list, like barley.

b. Working out a deal.

c. A Government-to-Government negotiation.

The purpose would be to avoid the U.S. Government subsidizing U.S. wheat sales to the USSR.

Secretary Wirtz introduced the difficulties he was having with the unions which are active in trying to block Cuban shipping. Mr. Ball explained current U.S. policy toward Cuban shipments. Secretary Wirtz repeated that it would have been easier to deal with the unions if he had been able to tell them in advance how we were handling shipments to Cuba.

Mr. Ball reminded the group that, in discussing future wheat sales to the USSR, the State Department had gone on record with the maritime nations which had protested the requirement to use U.S. ships in the Soviet wheat deal that the wheat sale was a one-shot operation and did not mean that in the future we would discriminate against foreign ships.

Secretary Hodges said Commerce would keep Labor informed currently on all aspects of the shipping problem. Secretary Wirtz was authorized to talk to the unions in advance of Commerce granting a waiver of the 50% shipping requirement.⁵

Bromley Smith ⁶

1. Source: Johnson Library, National Security File, Bundy Files, Box 18, Miscellaneous Meetings, Vol. 1. Confidential. The meeting was held in the Situation Room at the White House.
2. G. Griffith Johnson, Assistant Secretary of State for Economic Affairs; Orville L. Freeman, Secretary of Agriculture; Charles S. Murphy, Under Secretary of Agriculture; Luther H. Hodges, Secretary of Commerce; Robert Giles, General Counsel for the Department of Commerce; W. Willard Wirtz, Secretary of Labor; and Myer Feldman, Deputy Special Counsel to the President.
3. For memoranda of meetings on the wheat sale during October and November 1963, see Foreign Relations, 1961–1963, vol. V, Documents 359, 366, 370, 371, and 375.
4. Formally entitled the Agricultural Trade Development and Assistance Act, enacted July 10, 1954; for text, see 68 Stat. 454.
5. As of February 6, 1964, sales of U.S. wheat to the Soviet Union since the October 1963 authorization of such sales totaled 1,700,000 metric tons. (American Foreign Policy: Current Documents, 1964, p. 633, footnote 11) In a May 24 memorandum to the President, Bundy reported that the outlook for another sale during the next few months was poor, unless Soviet weather turned sour. “Our evidence is that the Soviets found their last trade with us difficult and unrewarding, and will certainly not put us first in their list of possible sources.” (Johnson Library, National Security File, Memos to the President—McGeorge Bundy, Vol. 4)
6. Printed from a copy that bears this typed signature.