262. Memorandum of a Conversation, Department of State, Washington, March 16, 1955[1]

SUBJECT

Sugar Legislation

PARTICIPANTS

Agriculture

Mr. McConnell, Assistant Secretary

Mr. Myers, Director, Sugar Division

State

Mr. Holland, ARA

Mr. Cale, AR

Mr. Armstrong, ITR

Mr. Callanan, IRD

Mr. Holland began the conversation by saying that before taking his present position he had virtually no knowledge of the sugar industry. Since taking office he had studied the record with an open mind and had come to the conclusion that the best interests of the United States would be served if the terms of the present Sugar Act were not changed before 1957. He felt that the Sugar Act with its four‑year term was a moral obligation of the United States, and to change it before it expired would lessen the confidence which foreign countries have in the United States. Never again would they feel they could place the same degree of reliance on any kind of a time commitment from this government in the sugar field or any other field. He believed therefore that we should stand firm on this question. Our position would be an honorable one which he could defend and which would bring credit to the Administration at home and abroad.

Mr. Holland indicated that he would be prepared to see the domestic industry receive larger quotas in 1957, if the terms of the present Act could be maintained for its duration. Cuba could be told that we had made you a commitment, we will fulfill it, and now it is time for a new appraisal of the needs of our domestic industry. Cuba would have almost two years in which to prepare for a smaller participation in this market.

Mr. Holland said he felt that a large part of our present difficulty results from the unrealistic price support sugar receives in relation to the price supports on other commodities. He remarked that if the price of sugar were cut a cent a pound there would be much less incentive to grow sugar and the balance would be restored between sugar and other agricultural commodities. Mr. Holland went on to say that although he felt his original position was the correct one, he had been persuaded to accept 8.5 million tons as a compromise figure. He believed he could undertake a defense of an 8.5 figure although still believing that his original position was the correct one. A little later he had been persuaded to accept 8.4 as the level over which increases in consumption would be shared. He regretted now that he had accepted this, and although he would try to defend it, it would be with the personal conviction that the arguments made against him were the correct ones. He did not want to impair Cuba's present position in this market but was willing to see the rate of increase flattened out for the benefit of the domestic industry. However, he needed the support of Cuba in many ways and firmly believes he would lose that support at any level under 8.4.

Mr. Holland described to Mr. McConnell how an action taken with respect to sugar would be translated immediately into a number of other fields both in Cuba and in other Latin American countries. He recited the large number of international organizations where the United States needs the support of Cuba on issues of vital importance to our welfare. He said it would be unwise for this country to make it more difficult for Batista to function in Cuba as a constitutional president, which he now is. Batista's personal inclinations are to be a dictator and an action taken by the United States which creates serious political difficulties for him would very easily force him to dictatorial actions which come to him by instinct. Mr. Holland repeated that if Cuba could be given two years warning of what its position was going to be in 1957 he could much more easily defend reducing its quota than if we were to disregard our moral commitment to Cuba and injure them without warning.

Mr. McConnell said that he understood the logic of Mr. Holland's position and could subscribe to his arguments. It was necessary, however, for him to take into account other practical considerations which affect both the Department of Agriculture and the Administration. He believes that unless something is done for the sugar industry the Administration could easily be in very serious trouble. Senator Ellender[2] is pressing to introduce sugar legislation and Senator Ellender as Chairman of the Senate Committee on Agriculture is a key man in the fight to retain flexible price supports. Flexible price supports had been won after a very difficult fight in the Congress. There is a strong movement under way now to do away with flexible supports and go back to the old system. It is important to the Administration that this move be defeated, and if the Administration is successful it would bring great credit to the Administration. As the sugar people have tremendous political strength there is grave danger they will make a deal with the proponents of the old rigid price support system. He therefore did not consider it wise to fight them at this particular time.

Mr. Holland reminded Mr. McConnell that the President had told Congressional leaders that while he was not opposed to sugar legislation at this session of Congress he did not want such legislation to do violence to our commitment to Cuba. Mr. Holland said he did not believe the President would budge an inch from this position. Mr. McConnell quickly agreed with this and said he was sure the President would only change his mind if State and Agriculture persuaded him that there was a better course. Mr. Holland said he recognized the seriousness of Agriculture's problem and knew that there would be trouble for them in accepting our proposal. He added that there was also trouble for us in our proposal. In all decisions of this kind there were rocky roads in all directions. One could only try to pick out the road with less rocks, which at the same time would not prejudice the best interests of the United States. Any decision that was taken would create irritation in both foreign and domestic political groups.

Mr. Myers commented that although he was constitutionally opposed to devices which interfere with the free flow of trade it is necessary to recognize that the sugar industry of the United States has always been protected and always would be protected. In this respect the United States is in a much more defensible position than any other country in the world. He had been defeated in his efforts in the International Sugar Agreement to get other countries to agree to as liberal an import policy as the United States. With regard to Mr. Holland's comment about prices, Mr. Myers said he had been giving this serious thought for some time. Over the past year or so sugar prices had come down from 6.25 to 5.80. This had not been enough to discourage production but in any event last year was no time for depressive price actions when the battle over flexible price supports was on, else he would have driven the sugar people to the support of the advocates of 90 percent of parity. With regard to Mr. Holland's contention that it would be better to cut Cuba back more severely two years from now, Mr. Myers said that Cuba would complain just as loudly then as it would now. He pointed out that any bill before the Congress this year could easily be amended to strike out 1957 and insert 1955. Mr. McConnell agreed this was a danger and said there was no way the administration could stop this unless, of course, the President would veto the bill. Mr. Holland said he certainly assumed the President would veto a move of this kind and that the Administration should plan in advance on a White House veto of a bill containing undesirable amendments.

Mr. McConnell thanked Mr. Holland for the clear expression of his position and said that he and Mr. Myers would go back to Agriculture to think it over.

[1] Source: Department of State, Central Files, 811.235/3‑1655. Confidential. Drafted by Callanan.

[2] Allen J. Ellender (D.‑La.).