Foreign Relations of the United States, 1964–1968, Volume IX, International Development and Economic Defense Policy; Commodities

270. Telegram From the Department of State to the Mission in Geneva¹

Washington, June 4, 1965, 6:20 p.m.

GATT 2861. Cereals Group Meeting June 10–19. This meeting of the Cereals Group should be used to ask searching questions and elicit more detailed explanations of several grains proposals submitted by members. To that end, summary statements of the proposals are being prepared. (Papers will be hand-carried Geneva by USDel members, together with list of questions to be asked.) Similarly, supplemental information to aid in answering anticipated questions on U. S. proposals has been prepared. Proceeding in this manner, the negotiating countries will be in better position to start intensive grains negotiation at next meeting.

Interrogation of other exporters should be objective and friendly with effort to avoid dialogue on basic differences. As in other agricultural negotiations attitude EEC will be crucial. U.K not likely to be too helpful in way of positive proposals. On other hand, neither is it likely reject measures which EEC can be persuaded to accept. Will be desirable, therefore, to focus discussions in first instance largely on EEC proposals. Following will provide delegation with additional guidance on specific points.

Access

U. S. efforts should be directed toward focusing discussions initially on measures to achieve objective of satisfactory access arrangements into importers’ markets. Unless positive and meaningful offers can be induced from major importers a basis for negotiating a grains arrangement will not exist. While not prejudging final results, neither EEC nor U.K. proposal in present form requires such basis.

World Base Price

As delegation aware some elements of U.S. position—particularly proposal for world base price—put forth for tactical reasons having in mind likely form and content EEC proposals. Delegation should try avoid this device being exploited by EEC as endorsement of reference price and MdS system. U.S. proposal put forward strictly for tactical reasons to highlight high EEC price supports and unacceptability EEC proposal limited to freezing existing disparate levels domestic price supports. Its purpose limited to being yardstick for measuring reduction in protection high price support countries should undertake.

Supply/Demand Balance

Present EEC paper implies responsibility of exporters correct imbalance supply/demand. U.S. delegation interventions should be directed to establishing point exporters and importers jointly responsible present unsatisfactory situation, and hence must jointly contribute solution. Should emphasize effective supply restraints by importers and exporters major U.S. objective on which other essential features—i.e. prices, depend.

International Prices

Delegation should avoid at this meeting being drawn into discussion of desirable level international prices or price range. Unlike Australia, the U.S. is not seeking higher international prices as an essential objective of the Arrangement. As pointed out in meetings with exporters, U.S. accepts desirability of establishing an international price range for wheat which is both realistic and remunerative for efficient producers. This price range cannot be determined independently of the supply/demand balance created by a grains arrangement. There can be no meaningful discussion of realistic minimum prices until we have indication regarding (1) assurances on improved access which the importers are willing to offer and (2) the improvement in supply/demand balance that would result from collective efforts of both exporters and importers.

Exporters’ Shares and Quality Differentials

An exporter share principle will cause serious presentational problems domestically. As to fixed quality differentials, our experience under U.K. Grains Arrangement and IWA convinces us application of fixed quality differentials may adversely affect competitive position U.S. wheat. Difficult to see how fixed quality differential could be considered independently of market shares among exporters. This issue will require detailed and searching examination and U.S. could only finally determine position in light of measurable benefits to be derived from WGA. Market sharing arrangement for feed grains in any case likely against U.S. long run interests. If other provisions of arrangement justify, however, U.S. might consider market shares for wheat.

Food Aid

Delegation should keep in mind U.S. food aid proposals are integral part of measures to improve supply/demand balance, and provide access to importers’ markets. U.K. apparently will be extremely critical U.S. proposals (see GATT 2839)² and some of our friends in Community have indicated they regard U.S. food aid proposals as unhelpful and loaded in favor of French position. If other critical of our food aid ideas, our effort at this time should be to press them for meaningful alternatives to improve supply/demand balance. Delegation should avoid food aid being regarded as panacea and alternative to responsible production policies. Obvious there are limits to possible expansion present overall levels food aid.

Rusk

1. Source: Department of State, Central Files, INCO–GRAINS GATT. Limited Official Use. Repeated to Bonn, Buenos Aires, Brussels for the Embassy and USEC, Canberra, The Hague, London, Ottawa, Paris, Rome for the Embassy and USOECD, and Tokyo. Drafted by Irwin R. Hedges (STR) on June 4; cleared by Carl W. Schmidt (OT/GCP), Barbara F. Thomson (EUR/RPE), and Gerald A. Friedman (OR/FD) (all in draft); and approved by William M. Roth.
2. Dated May 28. (Ibid., POL 7 UK)