267. Note From the Government of the United States to the Government of the United Kingdom1
The Ambassador of the United States of America presents his compliments to Her Majesty’s Principal Secretary for Foreign Affairs and has the honor to state that the Government of the United States acknowledges receipt of the Government of the United Kingdom’s note of March 16, 19652 which contained the changes in the Cereals Guarantee Arrangements for the 1965 harvest announced on March 17, 1965.
The Government of the United States believes the reductions in the Guaranteed Prices for wheat and barley were a positive step forward by the United Kingdom in meeting the spirit of the Agreement.
The United States Government does, however, regret that the stand-ard quantity increase of 250,000 long tons for barley and 100,000 long tons for wheat was instituted. This increase in the standard quantity will have the effect of increasing wheat prices by 0.5 percent and barley prices by 0.85 percent. The net decline in wheat and barley prices will then be 3.6 percent and 4.2 percent respectively. Estimates of the response in production made by British experts indicate that these price reductions will reduce wheat production by about 50,000 long tons and barley by 155,000 long tons, assuming yields do not increase. This should be [Page 682] compared with a short fall in imports of at least 0.8 million long tons from the minimum level of imports provided in the Agreement and by as much as 1.3 million long tons if the balance between imports and domestic production were maintained. Consequently, it does not appear to the Government of the United States that the changes in Guaranteed Prices and other arrangements made for cereal will be sufficient to restore cereal imports to the levels foreseen in the Agreement. The problem will be further aggravated by the fact that yields have been increasing in the past and will continue to do so in the future. This point was made by a Minister in the recent House of Commons debate when it was indicated that the decline in price for barley could easily be offset by increased yields through the use of more fertilizer and better seeds.
It is the view of the Government of the United States that additional corrective measures are required in accordance with paragraph 11 of the Agreement. Our two governments are agreed that the Agreement constitutes an important precedent for cooperation among cereals exporting and importing countries, particularly in this critical stage in the development of a broader GATT cereals arrangement. The Government of the United States believes that the issues raised thus far in the operation of this Agreement must be frankly and fully discussed and ways found which ensure effective consultations on the probable effects of planned changes in programs and not merely an opportunity to make representations. To this end the Government of the United States would look forward to further meetings between representatives of our two governments.
The Ambassador avails himself of this opportunity to convey to Her Majesty’s Principal Secretary of State for Foreign Affairs the assurances of his highest consideration.
- Source: Department of State, Central Files, INCO–GRAINS UK. Limited Official Use. The source text is enclosure 1 to airgram A-2684 from London, April 28, which was repeated to Brussels, Buenos Aires, Canberra, Ottawa, Paris, and Geneva.↩
- See footnote 2, Document 261.↩