261. Telegram From the Department of State to the Embassy in the United Kingdom1
6290. Unless Embassy sees objection, please deliver note along following lines to appropriate officials of the U.K. Government:
Begin text. The U.S. Government acknowledges receipt of the U.K. Government’s note of March 16, 19652 which contained the changes in the cereals guarantee arrangements for the 1965 harvest announced on March 17.
The U.S. believes that the decision to reduce the guaranteed prices for wheat and barley by respectively one shilling one pence and one shilling four pence per cwt. was a step in the right direction.
The U.S. Government regrets however the increase in the standard quantity for both wheat and barley. It estimates that the net effect of the changes in the guaranteed prices, standard quantities, and target indicator prices is to reduce producer returns approximately by 3–1/2 to 4–1/2 per cent. British estimates of the response of production to price changes suggests that a decrease of this small magnitude in cereal returns would [Page 674] restrain U.K. cereal production by not more than 200,000 L.T. if yields did not increase. This should be compared with a short fall in imports of at least 0.8 million tons from the minimum level of imports provided in the Agreement and by as much of 1.3 million tons if the balance between imports and domestic production were maintained. Consequently, the U.S. does not believe that the changes made in the guaranteed prices and other arrangements for cereals will be sufficient to restore cereals imports to the levels foreseen in the Agreement, particularly in view of the fact that yields have been increasing and will likely continue to increase in the future. It is the view of the United States Government that additional corrective measures are required in accordance with paragraph 11 of the Agreement. We therefore request that the U.K. Government consider undertaking promptly further steps to restore imports to the levels foreseen in the Agreement.
Our two Governments are agreed that the Agreement constitutes an important precedent for cooperation among cereal exporting and importing countries, particularly at this critical stage in the development of a broader GATT Cereals Arrangement.
We would hope that more effective procedures for conducting consultations provided under the Agreement could be worked out. To be effective for the purposes of the Agreement such consultation must afford the opportunity to discuss with the U.K. the probable effects of planned changes in programs prior to the U.K. Government making final decisions. Without such a procedure there is in effect no consultation but merely the opportunity to make representations. End text.