38. Memorandum of a Conversation, Department of State, Washington, July 14, 19551
SUBJECT
- Agriculture Department decision on 1955–56 cotton export price policy
PARTICIPANTS
- Assistant Secretary of Agriculture McConnell
- Assistant Secretary Waugh
- Mr. Nehmer, IRD
Mr. McConnell visited Mr. Waugh to tell him of his conclusions on the question of the U.S. Government cotton export price policy for the coming marketing season beginning August 1. Mr. McConnell said that considering the attitude of Congress on this question, the Executive Branch had to take action or else legislation would be passed at the next session of Congress which would be much worse than what the Executive Branch could do at this time. Accordingly, he said, Agriculture planned to put out a press release shortly which would say that the United States was going to be competitive in its exports of cotton and that no commitment would be made with regard to an export subsidy during the coming cotton year. Then, he said, about August 1 the Commodity Credit Corporation would make an announcement that it will sell its stocks for export on a competitive bid basis. Mr. McConnell said that the program would be so administered by the Agriculture Department that foreign producers should have no fear because world market prices would not be seriously disrupted through this arrangement.
Mr. McConnell said that he envisaged the task of reducing CCC’s cotton stocks to be a three-year job. He said he expected that within two years U.S. cotton producers would be forced to accept a reduction in price supports on cotton of perhaps five or six cents. In the meantime he expected a bill such as the Ellender Bill2 to be enacted at the next session of Congress which would change the basis for cotton price supports from 7/8” to 1” cotton, and thereby reduce supports by two to three cents.
Mr. Nehmer asked Mr. McConnell whether bids would be accepted only if they are at or above the support level. Mr. McConnell said that bids would be accepted below the support level if necessary. Mr. Nehmer then said that considering the fact that the world supply of cotton was so much in excess of the world demand, [Page 129] it would appear that the Agriculture Department program would have the effect over a period of time of bringing down world cotton prices. Mr. McConnell said that this would not result because Agriculture did not plan to administer this program in that way. He repeated the point that foreign producers would not have to worry about this program.
Mr. McConnell said that a bigger problem than the question of complaints from foreign producers was the possibility of complaints from the domestic cotton textile industry because the program would involve making raw cotton available to foreign textile mills at a lower price than to domestic mills, and therefore, placing foreign mills at a competitive advantage over domestic mills. Mr. McConnell said that probably what was needed here was either a negotiated understanding with the Japanese Government that they would keep down their cotton textile exports to the United States or Section 22 action on cotton textile imports. Mr. Waugh said that the problem of the American cotton textile industry was certainly a very serious one but that he hoped that restrictions on imports of cotton textiles could be avoided. Mr. Nehmer asked Mr. McConnell if it would be preferable to make raw cotton available to U.S. mills at the export price to the extent of the domestic mills’ requirements for raw cotton for the production of cotton textiles for export, instead of limiting cotton textile imports. He said that he did not know if the Agriculture Department had legislative authority to do this. Mr. McConnell agreed that Mr. Nehmer’s suggestion might be preferable to import quotas on cotton textiles. He thought Agriculture did have the legislative authority.
Mr. Waugh asked Mr. McConnell what the timing was with regard to an announcement by the Agriculture Department. Mr. McConnell said that he had hoped to have an announcement out on Monday; however, he said, he recognized the fact that there was going to be a tremendous clearance problem involved in getting such an announcement out. Mr. Waugh asked Mr. McConnell if the State Department could have a look at the draft press release since it would be most desirable, considering Mr. McConnell’s assurances that world prices would not be reduced significantly, that words be used in the release to allay the fears of foreign governments and foreign cotton producers. Mr. McConnell agreed that a release would be shown to Mr. Waugh for State Department comments. He said, however, that he would not wish to see any words used which would have the effect of committing the Agriculture Department in advance not to do various things with regard to selling our cotton. He promised to get a draft release to Mr. Waugh.
Mr. Nehmer asked if Mr. McConnell planned to discuss this question in the Dodge Council. Mr. McConnell replied that he saw [Page 130] Mr. Dodge at the White House earlier in the day and he gathered that the Agriculture Department was under a commitment to discuss it again in the Dodge Council.
Mr. Waugh thanked Mr. McConnell for coming to his office to discuss the problem.