561.321D1 Advisory Committee/104
Memorandum of Conversation, by Mrs. Jean H. Mulliken of the Division of Commercial Policy and Agreements
| Participants: | Mr. Wheeler, Dept. of Agriculture, F. A. R.10 |
| Mr. Dantas, Cotton Classification Service, Brazil | |
| Mr. Gouthier, Brazilian Embassy | |
| Mr. Norris, Dept. of Agriculture, F.A.R. | |
| Mr. Wyckoff, Department of Agriculture, S.M.A.11 | |
| Mr. Bohart, Department of Agriculture, S. M. A. | |
| Mr. Farrington, Department of Agriculture, C. C. C.12 | |
| Mrs. Mulliken, Department of State |
A meeting was held in Mr. Wheeler’s office to discuss the steps to be taken in obtaining Canada’s consent to the proposed cotton agreement. It is becoming imperative that the question be settled, since the Commodity Credit Corporation is approaching its legal limitation on sales for this year. The Corporation is limited to sales of 1.5 million bales in any one year, of which no more than 300,000 bales may be sold in any one month, and whatever amount is reserved for Canada must be deducted from this total.
The Canadian Government has had the agreement under consideration for almost two months and has not yet indicated what its attitude will be, but the delay would seem to indicate that the reply may be unfavorable. Under the circumstances the Brazilian representatives are pressing for the conclusion of a two-party agreement, to be signed by the United States and Brazil. They asked whether the State Department would have any objection to such an agreement and I replied that since the question had never been raised I was not in a position to say, but that I believed our view would depend on the attitude of the Canadian Government. If Canada had no real objection to the arrangement, but preferred not to be a signatory, I thought a two-party agreement was a possibility. I suggested, however, that the next step was to press Canada for a reply, and added that I believed, judging from our conversation with representatives of the Canadian Price Control Board, that Canada might find the present agreement acceptable if a maximum price clause were added.
Mr. Gouthier replied that the Brazilian Embassy had wired the Canadian Government nine days ago to ask what they would consider a fair price, and had received no reply.
I inquired whether the Brazilian Government was willing to indicate what their maximum offering price might be. Mr. Dantas replied [Page 575] that since the Brazilian cotton loan is established at 8.13 cents a pound for the current year his Government, he believed, could establish a minimum export price of 10.5 cents, and that this could also be made a maximum price for sales to Canada, but that he would prefer an agreement which did not contain a maximum price clause.
If the Brazilian price should be established at 10.5 cents for São Paulo type 5, the landed price in Canada would be in the neighborhood of 13 cents. This is 1.5 cents above the price which Canada was paying for Brazilian cotton in December, but the Brazilian price was then depressed somewhat by our subsidy. The Commodity Credit Corporation’s release price for exports of cotton this year will be about 13.75 cents per pound, Memphis. Freight charges added, the delivered price in Montreal would be near 14.75 cents, and to obtain our share of the Canadian market we would, therefore, have to maintain a subsidy of between 1 and 1.5 cents per pound. The existing subsidy is 2.5 cents, so there would be a definite advantage to the United States in having the Brazilian export price set as high as 10.5 cents. And since the average price of São Paulo type 5 in São Paulo over the past ten years is 10.6 cents, Canada could scarcely object that this price is too high.
It was agreed that we should first ask the Canadian Government for a statement of its attitude toward the agreement in its present form, and, if the reply is unfavorable, ask Mr. Mahoney, of the Canadian Legation, to convey to his Government the willingness of the Brazilian Government to guarantee a maximum price for the first year of the agreement of 10.5 cents f. o. b. São Paulo. Should the Canadian Government still prefer not to sign, the State Department was asked to consider the possibility of making the agreement effective between the United States and Brazil.