Foreign Relations of the United States, 1955–1957, Foreign Economic Policy; Foreign Information Program, Volume IX

81. Letter From Minister of External Affairs Casey to Secretary of State Dulles¹

Canberra, March 13, 1957.

My Dear Secretary Of State: I am attaching a memorandum prepared by my Ministerial colleagues concerning setting out the Australian attitude towards the disposal of United States Agricultural surpluses.

I had hoped for an opportunity to have had a few moments’ discussion with you on this subject, but I am afraid there will not now be an opportunity.

I am,

Yours sincerely,

R.G. Casey²

Enclosure 2

DISPOSAL OF UNITED STATES AGRICULTURAL SURPLUSES

1. The attitude of the Australian Government towards the farm surplus problem has been made known to the United States Administration on a number of occasions over the past two or three years. It may be summarised as follows:

(a) Australia recognises that the problem of surplus production is, in many respects, a result of the great efforts made by United States agriculture to meet the special problems of war and post-war world food shortages.

(b) It is also recognised that, the world having emerged from the position of food shortages, the necessary re-adjustments of the level and pattern of United States farm production pose very great economic, social, and political difficulties for the Administration, as well as for farmers themselves.

(c) The Australian Government appreciates that the United States Administration has made substantial progress towards restoring a reasonable balance between production and market opportunities for a number of commodities. Recent legislation, including particularly the “Soil Bank” programme,³ appears to offer promise that further progress will be made towards solving the fundamental problem of excess production, which gives rise to farm surpluses.

(d) In spite of these developments, however, the fact remains that existing stocks of surplus farm commodities constitute a continuing threat to the stability of world trade in these products.

(e) The Australian Government has never sought to deny these surplus products entry into world trade channels. Nor has it ever sought to obstruct their disposal, on generous concessional terms, for consumption by needy peoples who would not otherwise be able to purchase like commodities under commercial trading conditions. But the Australian Government has striven consistently to ensure that the arrangements made by the United States and other countries for the disposal of surplus stocks on concessional terms should cause the least possible disturbance to traditional commercial trading patterns. It has felt entitled to claim that the legitimate trade interests of Australia, and of other countries, should be respected. Whilst we cannot hope, in respect of each and every transaction, to eliminate the possibility of some damage to our interests, the Australian Government regards as completely reasonable its request that the United States should so arrange its disposal programme that the disruptive effects of individual transactions are reduced to a minimum.

(f) The Australian Government has taken the view that undue disturbance of commercial trade can be avoided only if the parties to a concessional disposal transaction afford other countries, whose interests are likely to be affected, the opportunity for effective consultations. To be effective, such consultations must represent far more than advice that a disposal transaction is being negotiated. They must provide for the transmission of information concerning the proposal in sufficient detail and in sufficient time for the interested country to examine the proposal usefully, and to make known its views to the parties to the proposal. And above all, the whole procedure of consultations can serve no purpose unless the representations made in the course of consultations are given full and genuine consideration by the country disposing of the surpluses.

(g) This view has received general endorsement by all international bodies (F.A.O., G.A.T.T., etc.) which are concerned with the problem of the disposal of surpluses. Indeed, the United States itself has subscribed to the G.A.T.T. Resolution which explicitly recognises the place of consultations in surplus disposal activities.

2. In accordance with the attitude summarised above, the Australian Government has endeavoured to operate procedures for friendly and constructive consultations with the United States on all disposal transactions of interest to us. Considerable material, relating to particular transactions and to the markets and commodities of interest to Australia, has been provided for the use of the United States Authorities. One of the difficulties which we have experienced is that there appears to have been frequent changes of personnel in the branches of the United States Departments concerned with disposal activities. The Australian Government would hope that officers taking over new appointments are acquainted with the material provided by Australia so that full consideration may be given to the representations made from time to time.

It is a matter for regret by the Australian Government that the consultative procedures have not always proved effective. The recent Indian transaction⁴ illustrates the difficult position in which the Australian Government is placed unless the United States, by providing adequate time and information and by giving full consideration to our representations, is prepared to make the consultation technique worthwhile. The Australian Government would hope that the United States will, in the future, pay particular attention to this point.

3. Apart from the question of consultations referred to above, there are two aspects of the United States surplus disposal activities which are of growing concern to the Australian Government. The first is the apparent tendency by the United States to regard a concessional disposal transaction as a means of determining the pattern of commercial imports of a particular country. The Australian Government has no quarrel with the principle that a country obtaining farm commodities on concessional terms from the United States should undertake to purchase on a commercial basis, without distinction as to source, stated minimum quantities of the same products. Provided the level of the “minimum guaranteed commercial purchases” is realistically related to the normal commercial imports of the country concerned, this device could be a very useful safeguard to commercial suppliers. However, it is an entirely different proposition when the recipient country is obliged, as a condition of a concessional arrangement, to obtain a disproportionate share of its commercial imports from the United States. The use of concessional sales techniques to induce importers to thus “tie-up” their commercial purchases for the benefit of the United States is, in the opinion of the Australian Government, contrary to every concept of fair trade practices.

4. The second important point of concern to the Australian Government is the suggestion that it is completely open to the United States to take advantage of so-called “fortuitous” marketing opportunities to move surplus stocks on concessional terms. This point may be illustrated in two ways. It has been suggested that if, for example, Japan requires unusually high imports of wheat in a particular year, other wheat exporting countries should have no ground for complaint if the United States meets the exceptional import demand by supplying surplus stocks on concessional terms, even if in the same year another country (e.g. India) should require substantially less-than-normal imports. Again, it was suggested in discussions on the recent Ceylon transaction that Australia would not be affected by the importation by Ceylon of concessional United States flour, since the United States flour would replace flour which would have been imported from France had not that country suffered crop damage. The Australian Government cannot accept the principle implied in these suggestions that the supply of goods to meet “abnormal” market opportunities such as these should be regarded as the prerogative of the United States disposal authorities. Such “abnormalities” are, of course, characteristic of normal commercial marketing. The “ups and downs” of the market, in different places or at different times, to some extent offset each other. The removal, as a result of United States disposal policies, of the opportunity for other exporters to “make good” reduced trade in one market by additional trade to another, or to compensate low shipments at one time by higher shipments at another time, is a pronounced destabilising factor in world trade in primary products.

5. The Australian Government would hope that the United States will review its attitude on these two specific aspects of its surplus disposal policies.

1. Source: Department of State, Central Files, 411.4341/3–1957. Transmitted to the Department of State as Enclosure 1 to despatch 447 from Canberra, March 19.
2. Printed from a copy which bears this typed signature.
3. Reference is to Title I of the Agricultural Act of 1956 (P.L. 540), enacted May 28, 1956. The soil bank program, by providing financial incentives to farmers to withhold lands from cultivation, was designed primarily to reduce farm surplus production. For text, see 70 Stat. 188.
4. On August 29, 1956, India signed an agreement with the United States at New Delhi to purchase over $360 million of surplus U.S. commodities over a 3-year period. For further details, see Department of State Bulletin, September 17, 1956, p. 454.