Foreign Relations of the United States: Diplomatic Papers, 1942, General; the British Commonwealth; the Far East, Volume I

561.321D1 Advisory Committee/97

The Secretary of State to the Ambassador in Brazil (Caffery)

No. 2026

Washington, January 14, 1942.

The Secretary of State transmits, with reference to the Ambassador’s telegram No. 84, January 8, 1942,⁸ the latest draft of the proposed agreement for sharing the Canadian cotton market. No word has yet been received from the Canadian Government regarding its attitude toward this draft.

[Enclosure]

Draft Agreement for Sharing the Canadian Cotton Market

The Governments of the United States of America, the United States of Brazil and Canada agree as follows:

(1) The Governments of the United States and Brazil shall regulate the annual exports of raw Upland cotton from their respective countries to Canada on the basis of estimated annual requirements by Canada of 540,000 bales of 478 pounds net weight of such cotton, of which the United States and Brazil may each supply not more than 270,000 bales of 478 pounds net weight. At least twice during each agreement year the Joint Cotton Committee, established pursuant to paragraph 7 of this agreement, shall review the estimate of such requirements and make such revision therein as it deems necessary. In the event the revised estimate exceeds 540,000 bales of 478 pounds net, the additional quantity to be supplied shall be shared equally between the United States and Brazil. In the event the estimate is less than 540,000 bales of 478 pounds net weight, the share of each of the exporting countries shall be reduced equally, provided that Brazil’s share shall not be greater than the amount by which such estimate exceeds 250,000 bales of 478 pounds net weight.

(2) If it should appear that either of the exporting countries may be unable to export to Canada its agreed share the Joint Cotton Committee shall investigate the situation and report its findings and recommendations to the participating governments.

(3) If the Joint Cotton Committee finds that one of the exporting countries may not be able to export its agreed share because of inadequate shipping facilities, the other country shall be permitted to supply the deficiency, provided that the quantity so supplied shall, in the following year, be deducted from the share of the latter and added to the share of the former. If the deficiency should be supplied in this manner in the first year of the agreement, the agreement shall not be subject to termination at the end of that year as provided in paragraph (12).

(4) The Government of the United States shall adjust its export payment on cotton exported to Canada so that when such payment is deducted from the spot market price of middling 15/16-inch cotton at Memphis, Tennessee, or from the price at which the Commodity Credit Corporation releases middling 15/16-inch cotton at Memphis, Tennessee for export, whichever is lower, plus the cost of delivery including handling charges to Montreal, the resulting figure shall be a price at least ½ cent but not more than 1 cent per pound higher than the spot price of Brazilian (São Paulo official type 5 28/29 mm.) cotton at São Paulo plus the cost of delivery and handling charges to Montreal.

(5) The Governments of the United States and Brazil shall not maintain prices of raw Upland cotton for export to Canada from the United States and Brazil, respectively, higher than the price at which Upland cotton of the same quality is offered for sale from that country to any other export market.

(6) In converting the price of Brazilian cotton to United States currency, the rate of exchange shall be the official export rate of exchange established by the Bank of Brazil.

(7) A Joint Cotton Committee composed of two representatives of each participating government shall be established for the purpose of supervising and administering the operation of this agreement. The Committee shall make all necessary provision for carrying out its duties.

(8) Meetings of the Committee shall be held in Washington, D. C., unless otherwise agreed.

(9) The Committee shall promptly notify the participating governments of any revisions made in the estimate of Canadian requirements of cotton. Each participating government shall supply to the Committee upon request any information which may be available regarding the sale, arrival, movement and consumption of cotton. All such data shall be held in strict confidence and shall not be released without the permission of the government supplying the information.

(10) The Committee shall submit an annual report to the participating governments not later than one month after the end of each agreement year.

(11) The expenses of the members of the Committee shall be borne by the government which they represent.

(12) This agreement shall become effective on . . . . . and remain in effect for two years thereafter, unless one of the participating governments gives the others at least 90 days written notice of its intention to terminate the agreement at the end of the first year. This agreement may be extended for additional periods by mutual agreement of the participating governments.

(13) The term “annual exports to Canada”, as used in this agreement, shall include all Upland cotton originating in the United States and in Brazil entering Canada during the agreement year, but shall not include linters, waste cotton, or raw cotton returned to countries of origin because of rejection under sale contract. The “agreement year” shall include the 12-month period from . . . . . to . . . . . The term “Upland cotton” refers to the varieties of gossypium hirsutum species commonly grown as annual crops in the United States and Brazil. The term “annual Canadian requirements” refers to the Joint Cotton Committee’s estimate of the quantity of raw Upland cotton which will be imported into Canada from the United States and Brazil during the agreement year.

8. Not printed.