Office of the Historian

39. Minutes of the 24th Meeting of the Council on Foreign Economic Policy, Executive Office Building, Washington, July 20, 1955, 4 p.m.1

Washington, July 20, 1955, 4 p.m.

ATTENDANCE

  • Messrs. Hoover, Waugh, Nehmer, Corse, Butz, McConnell, Rhodes, Paarlberg, Humphrey, Burgess, Weeks, Smith, Hollister, Charrette, White, Hutchinson, Weber, Davis, Burns, Hauge, Cooley, Rock, May, Thorp, Wormser, Dodge, Cullen, Galbreath

[Here follows discussion of United States policy regarding the export of rice to Asia (CFEP 505).]

CFEP 529. U.S. Policy With Respect to CCC Owned Cotton.

1.
Agriculture presented for Council consideration a proposed public statement about the sale of CCC owned cotton during the marketing year starting August 1, 1955. The statement was to the effect that the U.S. would establish a two-price system whereby CCC cotton would be sold for export at competitive world prices (without any fixed price or quantity stated) while the minimum price at which it would be sold domestically would remain at the higher of (1) 105% of the current support price plus reasonable carrying charges, or (2) the domestic market price, as determined by CCC.
2.
Agriculture emphasized that the CCC was expected to own about 6.4 million bales of cotton on August 1, 1955 out of a total carryover of 10.7 million bales while on the same date last year the CCC owned 1.75 million bales out of a carryover of 9.7 million bales; the CCC will acquire an additional 1.6 million bales on November 1, 1955 from the 1954 crop; the 1955 crop which is expected to be large, will soon begin to come on the market; current U.S. exports are less than last year; the international price was about [Page 131] 3 cents less than the domestic price; the price was weak due to uncertainty about U.S. policy on export sales as a result of large and growing U.S. stocks overhanging the market. Agriculture’s proposal was to take off the established U.S. policy not to sell cotton abroad below the domestic price; to sell abroad in an orderly manner; not to meet lowest market offers; to assume the Congress will act (Eastland2 or Ellender Bills) to adjust cotton price supports, but if this was not done the international price would have to be restored to the domestic price level.
3.
The discussion revolved around the following problems:
a.
The U.S. one-price system on cotton has been in effect about 9 years. The proposal is a reversal of established policy and is a reentry into an export subsidy system for cotton.
b.
A highly processed product rather than a direct consumption product is involved.
c.
There would be discrimination against domestic textile consumers and producers in favor of foreign producers and consumers. Domestic producers have a large capital investment and employment.
d.
Undoubtedly action would be taken by domestic textile producers for relief under Section 22 of the Agricultural Adjustment Act or Section 7 of the Trade Agreements Extension Act against imports manufactured from the cut-rate cotton made available to foreign producers. There probably would be a demand that the President use the Cordon Amendment to establish an emergency quota on cotton textile imports, pending the Tariff Commission investigations. Increased demands for import quotas on other manufactured products would be encouraged.
e.
There is a conflict with U.S. policy as established by H.R. 1, in that the proposal would produce results contrary to its objectives and the President’s foreign trade program.
f.
The world market price of cotton would be established by the U.S. export price. To maintain their markets, foreign cotton producers could and would have to meet any price. No U.S. floor price being proposed, a price war is possible for which the U.S. would be blamed.
g.
There could be no certainty of substantially increased cotton exports except by an attack on the world markets resulting in a curtailment of foreign production. It would be necessary to adopt the export subsidy policy permanently and go all the way on price reductions and subsidies. If this is not implicit in the proposal the announcement would be merely a gesture.
h.
Re-entry into subsidized cotton exports could have a substantial and adverse effect on foreign producers and exporters and seriously disturb U.S. relations with them (viz. Egypt, Turkey, Pakistan and others).
i.
Export subsidies would not answer the fundamental problem of a support price that has tended to price U.S. cotton out of the world market.
j.
The proposal would make it more difficult to return to competitive prices, and is not likely to encourage the Congress to take appropriate action to lower cotton price supports.
k.
There are possibilities of increasing cotton exports without adopting a two-price system through the more aggressive use of P.L. 480,3 the Mutual Security program and other means.
4.
At the conclusion of the discussion, the Council voted on the proposal by Agriculture to adopt a two-price system for subsidizing cotton exports. The proposal was rejected by all of the members or their representatives present with the exception of Mr. McConnell, the Agriculture representative, who supported the proposal, and Dr. Davis, representing Dr. Burns, who took no position.

[Here follows a briefing on the results of the GATT intersessional meeting and the Chairman’s request for papers on international commodity agreements.]

Paul H. Cullen
Lt. Col., USA
  1. Source: Eisenhower Library, Cabinet Secretariat Records. Confidential. Prepared by Cullen.↩
  2. Presumably S. 2123, introduced on June 1, 1955, by Senator James O. Eastland (D–Miss.), which amended marketing quota and price support provisions applicable to upland cotton.↩
  3. The Agricultural Trade Development and Assistance Act of 1954, enacted July 10; for text, see 68 Stat. 454.↩