This question was recently considered by the Council and further
consideration was expected at approximately this time. Recent developments,
in the view of the Department of State, make it a matter of urgency that the
Council should consider a modification of existing policy.
The Department recommends that United States policy should allow surplus
agricultural commodities to be exported to Eastern European countries when
political developments, in the opinion of the Secretary of State, indicate
that it is in our national interest for these commodities to be exported for
dollars at world market prices.
The Department believes that this recommendation is in accord with the views
of the members of the Council. The prompt approval by the Council is sought.
Upon such approval and following such consultation with Congressional
leaders as may be determined to be appropriate, the Department would
instruct the American Embassy in Warsaw to inform the Government of Poland
that the United States is prepared to discuss some of the commodities in
which Poland has recently expressed an interest. The change of policy would
also place the Administration in a position of readiness to take prompt
advantage of other opportunities which might arise in Eastern Europe.
The attached comments on the problem and the recommendation are offered to
indicate briefly the considerations and objectives which require the
attention of the Council at this time.
[Enclosure]
3
SALES OF SURPLUS AGRICULTURAL COMMODITIES TO BLOC COUNTRIES AT WORLD PRICES
The Administration has been concerned for some time with the problem of
establishing adequate means to exploit opportunities for advantageous
placement of surplus commodities in Eastern Europe. This problem has
been given particular urgency by the current interest of Poland in
acquiring United States cotton and other agricultural and
non-agricultural products if they are available at world market
prices.
The Administration emphasized to the last Congress the need for
flexibility in arranging transactions with Eastern European countries if
full advantage is to be taken of special circumstances arising from time
to time which cannot be foreseen in detail. The importance of being in a
position to capitalize on opportunities for the employment of surpluses
to foster foreign policy objectives has become even more evident.
Title II of Public Law 480 can be used in cases of famine or other
emergency. Title III can be used for donations through private
organizations or international agencies. These authorities, however, are
not well adapted to all of the cases in which the interests of the
United States could be promoted by the use of surplus commodities.
At a later time it may be possible to arrange barter transactions or
sales for foreign currencies, but those programs are prohibited by
statute as regards countries in the Soviet Bloc at this time. Some of
the opportunities in Eastern Europe, however, call for prompt
action.
There is legislative authority for sales of surplus commodities for
dollars at export subsidy prices. Such exports to satellite countries
are not prohibited by any statute, but they are not allowed under the
existing policy of the Executive Branch. Modification of this policy to
allow sales at the same prices which apply to U.S. exports to other
destinations could be accomplished quickly if the Administration were to
consider this to be advantageous.
[Page 215]
The current interest of Poland in cotton illustrates an opportunity of
which advantage could well be taken through a modification of the dollar
sales policy. Poland appears to be interested in purchasing
15,000-20,000 metric tons of U.S. cotton. This transaction would involve
$10 million or somewhat more at world market prices. The indications are
that the Government of Poland would need deferred payment terms, but
would also insist that the transaction should be designed along
commercial lines and not be accompanied by any political strings.
The National Security Council has decided that economic assistance in
moderate amounts should be made available to Poland. It is felt to be
highly desirable that the U.S. place itself in a position to explore
with the Government of Poland practical ways by which assistance could
be extended in meeting this requirement for cotton.
As a prerequisite to the undertaking of detailed discussions with Poland,
the United States would need to be prepared to sell cotton at world
market prices and to have some means of providing financing if credit is
required. Section 401 of the Mutual Security Act could be employed to
finance this sale, although the funds made available by that Section
would not be sufficient to finance similar transactions with satellite
countries on a continuing substantial scale.
This Section would not be drawn upon for the Polish transaction if
another source of credit were available. Because of the provisions of
the Battle Act, however, there does not seem to be another source of
credit readily available for the transaction immediately in view.
A modification of the existing dollar sales policy seems desirable in the
particular case of cotton for Poland, and it also seems desirable to
take the occasion to obtain a broader change of policy which would apply
to any of the European satellites. This would avoid the necessity for
obtaining separate exceptions if opportunities should arise later in the
case of Rumania, Hungary, or some other Eastern European satellites.
We believe that the change of policy for Eastern Europe need not apply to
the Soviet Union. There is no clear prospect of sales to that country.
The change of policy could be accomplished by administrative action and
therefore need not create a formal public differentiation which would
threaten to prevent countries in the current situation of Poland from
feeling able to enter into the type of transaction envisaged. The Far
Eastern Communist countries are not likely, for the present at least, to
present advantageous opportunities. We conclude that the existing policy
should remain in effect for them.
