DEPARTMENT OF STATE Memorandum of Conversation
Date: February 14, 1949
Subject: International Wheat Agreement
Participants: Secretary Acheson Sir Oliver Franks, British Ambassador Mr. Anderson, Head, United Kingdom Delegation, International Wheat Conference Mr. _______ Mr. _______
Copies to: ???????
Mr. Acheson indicated that he had asked the British Ambassador to call because of our concern over the possibility that the International Wheat Conference now in session might be unsuccessful. He said that the United States believes that it is important that the Conference be successful. Two of our principal reasons for this attitude which he believes to be of importance to the United Kingdom as well as to the United States are:
a. Our desire to avoid serious disorganization in the international markets for raw materials, our belief that it may be possible to use intergovernmental agreements as one means of avoiding such disorganization, and our conviction that failure to reach an agreement on wheat would seriously interfere with, if not preclude altogether, efforts that might be made to reach agreement on certain other primary commodities of major importance.
b. Our belief that reaching agreement with respect to wheat would make it easier to withstand pressures, which will be strong in any event, looking toward the ___ __ ___ for purposes other than those for which it was originally intended.
He stated that the main difficulty to successful negotiation of the wheat agreement appears to be disagreement over price and that the United States and the United Kingdom were apparently the countries which would play the principal roles in deciding whether or not it would be possible to agree on price. He added that the United States is reexamining its position regarding price with a view to making whatever concessions it can in the direction of narrowing the gap between ourselves and the British and that we should like very much for the United Kingdom also to re-examine its position with a view also to helping to bridge the gap. He said that the President himself is very much interested in the successful outcome of the Wheat Conference.
The British Ambassador said that he would be pleased to take up the matter with London in the hope of obtaining instructions which would permit their delegation to the Wheat Conference to adopt a somewhat more generous attitude on prices. Mr. Anderson stated that his instructions at present are to press for a ceiling price of $1.65 in the first year, $1.60 in the second year, $1.50 in the third year, and $1.40 in the fourth year, and for floor prices beginning at $1.40 in the first year and declining by 10-cent stages to $1.10 in the fourth year. He pointed out that these floor prices are equivalent to the floor prices that could have applied to the particular years in question had the wheat agreement negotiated last March gone into effect last July. He also said that he believed it was not equitable to expect the importers to agree to increase these floor prices by the same amount that the ceiling prices are reduced, since the importing countries have lost the very substantial benefit that would have accrued to them under the 1948 agreement of purchasing wheat at $2.00 per bushel for the current year had the agreement gone into effect. He indicated that he felt an equitable adjustment, in view of this loss, would be to increase the floor price by 1 cent per bushel for each decrease of 3 cents per bushel in the ceiling price. He held out some hope, however, of reaching a compromise somewhat more favorable to exporters than this 1 to 3 ratio would imply.
Mr. Acheson said that he was not in a position to discuss specific terms and that the decision was one, in any event, which would be made by the Department of Agriculture. He indicated that the Department of Agriculture was consulting with certain Congressional leaders regarding the matter and would, he was sure, be as helpful as possible, but that considerable help would also have to come from the importer side.
Mr. Anderson pointed out that the Conference is likely to run into considerable difficulty on the question of quantities even if the price problem can be resolved. Mr. _____ suggested that this should not be so serious a problem as prices, since he believed that the quantity of wheat which the importing countries would be prepared to take from the three exporting countries that signed the 1948 agreement would be substantially the same as in 1948 even if the USSR were not to participate in the agreement. He said that India and Brazil might, in fact, be prepared to take larger quantities if the USSR should decide not to participate. He also said that, on the other hand, he believed the United Kingdom and certain of the other European countries might take somewhat larger quantities if the Soviet Union were in the agreement.
Mr. Anderson concurred in these opinions and indicated that he had recently participated in an informal meeting with certain representatives of other countries for the purpose of helping resolve the quantities problem. He said that he had not known until the very end of this meeting that a representative of Czechoslovakia was also present, that he was sure this representative had informed the Soviet Delegation of the meeting, and that he himself wondered what the results might be. It was his opinion that the net effect might be helpful from the viewpoint of the exporting countries. During this discussion Mr. Anderson expressed the opinion that it might be possible for certain of the importing countries to commit themselves to slightly larger import figures than they have indicated previously.
To Mr. Acheson's question as to what the effect of non-participation of the Soviet Union in the agreement would be, Mr. ____ pointed out that it would leave them in a better position to sabotage the agreement by offering wheat to signatory importing countries at less than the floor prices if the price within the agreement should drop to the floor price during later years. Mr. Anderson said that it would also place the Soviet Union in a position to force the agreement prices down to the floor by offering to sell wheat for less than the exporting countries would otherwise be willing to supply it under the agreement.
The meeting adjourned with the understanding that the British Ambassador would take the matter of prices up with London and that the United States would explore the concessions that it could make in the hope of reaching a mutually satisfactory compromise.