December 8, 1952
Mr. Foster, Deputy Secretary of Defense, telephoned the Secretary this morning on the subject of Egyptian cotton. Mr. Foster said that while he did not have a final report, he would pass along what he had on the situation. He mentioned that we already had the story on the stock-pile situation. We have in stock about 240,000 tons. We have reduced our purchases partly because of the availability of other types of fibers, including synthetics. The latter have cut down our cotton requirements and, in addition, under the incentive program we are getting a greater yield out of the U.S. crop. The incentive program has had another impact. We asked the Department of Agriculture to increase production as quickly as possible in the U.S. They went into the price offered - $1.05 per pound - with the idea of increasing it and also asked us to guarantee a market (if it wasn't moved in the commercial market) for somewhere between 50 and 55,000 bales which runs well over our stock-pile. We have looked carefully at the expected level. The only way we would have room in stock-pile for purchases from outside is if we could get out of the stock pile commitment to Agriculture. We don't want to let them down.
The second method, and it has some possibility of success, is through our own American purchases of Egyptian cotton. The quota is 91,000 tons and so far 60,000 tons have been procured. There is a provision in our appropriation, something like the O'Mahoney statute on wool, which is designed to require us to buy domestic long-staple cotton. We are attempting to arrive at the Department's legal position on this, and I have asked that this determination be accelerated. If that comes out favorably on the basis where we can buy foreign cotton at a price which is equivalent to parity price plus a certain percentage - if this comes out as I think it should, there might be a possibility between now and the end of the quota year in February, of the procurement of something around 20,000 to 25,000 bales. That runs to around $12,000,000. I have asked Charlie Coolidge to bring that determination to a conclusion as quickly as possible. While that is not a specific or definite amount, I think we may be able to do something within the next sixty days. I will push that and see what we can get.
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The only other thing is to get the Department of Agriculture to release that other commitment which is one chance in ten thousand. There is just a faint glimmer of light in the direct purchase plan. However, I don't want to put too much light on as of this moment.
Mr. Foster asked about the World Bank loan aspect of this matter. The Secretary replied that he thought the Bank was working on the matter, but that didn't affect the main point. The Egyptians are going ahead with the loan application. They will move this cotton before the next crop comes up, but they want to begin to move it as quickly as possible. The Government has taken over some. The Germans and British will buy, but they are all holding off right now because they have cotton on hand. Discontent is growing among the small farmers who are being forced to sell at low prices in a sluggish market, and this is putting great pressure on the Naguib Government. Naguib is having other internal economic difficulties and we desire to do everything possible to assist him and maintain stability, particularly while we are working out MEDO and other security arrangements.
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