Office of the Historian

338. Telegram From the Department of State to the Embassy in the United Kingdom1

Washington, November 30, 1966, 3:49 p.m.

93601. Joint State/USDA/STR Message. Subject: Annual Review of UK Cereals Agreements.

1.
Anderson2 and Hartman as designated US representatives should, at appropriate point during December 1 review, state the US position as follows:
a.
The Government of the United States wishes to reiterate its views that the UK Government is not fulfilling its obligations under the bilateral cereals arrangements. Positive remedial measures are required to restore imports to the level the UK is committed to maintain under the agreements.
b.
Cereals imports into the UK during each of the past two years have failed to reflect the balance with home production which was originally contemplated. Overseas suppliers have been unable to share in growth of the UK home market in a fair and reasonable way; although UK home consumption has risen steadily from a base period level of 19.5 million tons to an estimated 21.6 million for 1966/67, imports have actually [Page 812] fallen. Imports should have increased, given the increases in exports which have also occurred, to approximately 9.5 million tons in 1964/65, 10.3 in 1965/66, and about 10.5 million in 1966/67. Actual imports during the first 3 years will have fallen roughly 5.3 million tons short of these targets.
2.
The US representatives may draw upon the following for additional comment as appropriate:
a.
Regarding UK Document RCA/66/1, November 22,3 paragraph 12 (ii): The UK states that the original standard quantities were fixed too low since the subsequent wheat and barley harvests were higher by 1.3 million tons. It is our understanding, however, that the standard quantity mechanism was introduced as disincentive measure aimed at achieving parallel growth of production and imports. Although that objective had not been achieved, either through the standard quantity or adjustments of guaranteed prices, the UK in early 1965 and again in 1966 proceeded to raise the standard quantities. The US regards these actions as clearly inconsistent with the undertakings of the UK in the bilateral agreements; and would so regard any suggestion that these standard quantities might again be raised in 1967.
b.
Delegation should note that UK Government seems to be in accord with position taken by US and other exporters that agreements are not working out in way originally contemplated. Material contained in UK paper in no way excuses the UK from its obligations to take effective remedial action to maintain imports. Data on UK production-consumption trends merely confirm what exporters have repeatedly said, namely that the disincentives applied thus far are clearly inadequate and additional measures are required to achieve the objectives of the Agreements.
c.
The Delegation should express disappointment that the UK Government, despite the acknowledged failure of the agreements to meet these objectives, still has not come forward with effective remedial meas-ures. Failure to fulfill these obligations cannot but worsen the prospects for concluding a broader cereals arrangement in the Kennedy Round which the UK Government has said it favors. In the exchange of notes which constitutes the present bilateral agreement, it was mutually agreed between the two governments that the arrangements “shall be without prejudice to, and indeed are intended to facilitate the negotiation of more comprehensive commitments by all participating countries.” It is difficult to see how this intent can be realized if the UK Government fails to carry out its obligations under the present agreement.
d.
Indications that UK reconsidering basic premise of the agreements is matter of serious concern. UK still is high-cost producer; increased efficiency should make it possible to reduce level of support. Nor do we agree that relaxation of production restraints in the US, designed to meet food aid requirements of LDC’s, justifies expanding uneconomic production for the commercial market in Europe.
Katzenbach
  1. Source: Department of State, Central Files, INCO–GRAINS 4 UK-US. Limited Official Use; Priority. Drafted by D. Novotny (Agriculture/FAS) and Irwin R. Hedges; cleared by Julius L. Katz, James T. Johnson (EUR/RPE), and Raymond A. Ioanes; and approved by Fred H. Sanderson.↩
  2. Robert N. Anderson, Agricultural Attache at the Embassy in London.↩
  3. Not found.↩