Memorandum of a Conversation, Washington, July 22, 1955

279. Memorandum of a Conversation, Washington, July 22, 1955[1]

SUBJECT

Sugar Legislation

PARTICIPANTS

Dr. Gabriel Hauge, Economic Assistant to the President

Mr. True D. Morse, Under Secretary of Agriculture

Mr. Lawrence Myers, Chief, Sugar Branch, Department of Agriculture

ARA‑Mr. Holland

H‑Miss Kirlin[2]

IRD‑Mr. Nichols

TAD‑Mr. Weiss[3]

AR‑Mr. Cale

Mr. Holland stated that he had asked that the group meet in order to consider what the Administration's position should be regarding the sugar bill recommended by the House Agriculture Committee.[4] Mr. Holland indicated that it was the State Department's view that the proposed division of their share of the market between Cuba and the full duty countries was too hard on Cuba. He also called attention to the very arbitrary way in which the quotas of the principal full duty countries had been determined. It was agreed that Mr. Holland, on the basis of data to be provided by Mr. Myers and Mr. Cale, would recommend the position that the Administration should ask support regarding the distribution among foreign countries of the foreign share of increases in consumption.

Mr. Morse stated that Agriculture would have to oppose the 90 per cent parity provision in Section 20 of the bill. He also stated that he was of the opinion that the State Department would wish to recommend deletion of the punitive provisions contained in Section 8 of the bill. There was general agreement that the provision in Section 8 which would penalize countries which export sugar to the United States if they reduce their importation of United States agricultural products materially below the level reached during a representative base period should be removed. There was also agreement that the Executive branch should oppose the provision in Section 8 which requires accession to the International Sugar Agreement by January 1, 1957, if countries which export sugar to the United States market are to benefit by increased quotas under the Sugar Act.

There was considerable discussion of the provision in Section 8 which provides that the quota of a country may be reduced if it is not filled as a result of shipment to other markets in which prices may temporarily be higher than in the United States. Dr. Hauge, Mr. Holland, Mr. Nichols and the Agriculture representatives indicated that they considered the provision to be reasonable. Mr. Weiss, on the other hand, argued that the provision would violate the general principle of operating quotas in such a way as to interfere as little as possible with normal competitive processes. He also stated that he was of the opinion that the provision would violate our commitments under GATT. It was the consensus that the Executive branch should favor deletion of Article 8 in its entirety on the ground that the Act should not contain punitive provisions of the type in question. It was understood, however, that no last ditch fight would be made to obtain deletion of the provision under which foreign countries might be penalized for failure to fill their quotas in order to obtain a higher price elsewhere.

Mr. Morse indicated that the Department of Agriculture was of the opinion that the Administration should seek to obtain restoration of the provision which would divide[6] increases in consumption on a 55‑45 basis between domestic and foreign producers. Mr. Cale stated that he had been informed, second hand, that representatives of the domestic industry would not oppose the 50‑50 provision recommended by the House Agriculture Committee. He also pointed out that it would be easier to work out a satisfactory distribution of the foreign share if the 50‑50 division between domestic and foreign were made. Dr. Hauge apparently agreed with Mr. Morse that an effort should be made to obtain restoration of the 55‑45 division previously recommended by the Executive branch.

[1] Source: Department of State, Central Files, 811.235/7‑2255. Limited Official Use. Drafted by Cale.

[2] Florence Kirlin, Acting Deputy Assistant Secretary of State for Congressional Relations.

[3] Leonard Weiss, Assistant Chief of the Trade Agreements and Treaties Division, Bureau of Economic Affairs.

[4] On July 21 the House Committee on Agriculture approved an amended sugar bill (H.R. 7030) which provided for market quotas above 8,350,000 tons to be evenly divided between domestic and foreign producers in 1956, with 48 percent of the latter going to Cuba and the remaining 2 percent to other foreign countries. In 1957, the foreign suppliers would receive a statutory quota of 175,000 tons and an additional 45,000 tons each year thereafter out of consumption increases. Cuba would supply the balance, if any, between the annual increment of 45,000 tons to the full duty countries and the foreign share of increases in consumption.

[6] Cale crossed out the word "develop" and wrote "divide" above it.