But the market will be in a highly vulnerable position given the possible exhaustion of stock. Consequently, higher prices than we have known in the past years of glut are to be expected. We're in a seller's market, not a buyer's market. And buyers will always pay more for fresh coffee than for "stored" coffee from stocks.

Some say that quotas are a factor, albeit minor, in the price rise. The fact is that exporters had a system of quotas in effect in the year following the negotiation of the agreement. Nevertheless, coffee prices continued to decline and reached new lows in August and September 1963. Basically, that was because quotas were too large and production was overabundant.

When the Brazilian situation appeared to be turning the market around an effort was made to raise quotas, but, because market developments could not be clearly foreseen, no action was approved. However, now we have a background of rapid rise in prices and large buying for inventories as a safeguard against still higher prices. Accordingly, a little over 2 weeks ago the Council of the Coffee Agreement raised quotas. Another 2.3 million bags of coffee will legally be available for export. In our judgment that will assure that the quotas will not be a factor in future price rises, if any. If further quota increases seem necessary, we are confident that producers would again agree with us and action would be taken. After all, look at the vote on the recent quota increase: importers voted unanimously for the increase, and exporters voted 842 out of 955-including Brazil and Colombiafor the increase also. That is an impressive record of nearly unanimous agreement.

Price stability is what we are after, and quotas should be used for this purpose. But on one thing we are all agreed-exporters and importers-and that is that the quota system should not act to keep available supplies from coming to the market. If natural factors force prices up, that is one thing; we do not want export quotas to bring this about. This has not happened so far, and we are sure we can prevent it in the future as well. If not, the agreement would not be doing its job and we would, I assure you, reconsider our role in it.

But we should have no illusions about what quotas can do. Coffee is roasted-not quotas. And quota increases will not put one more berry on a coffee tree. We have to face the fact that we are in for a period of tight supply and that prices are bound, therefore, to be above their depressed levels of recent years.

Mr. Chairman, in this tight market our membership in the agreement may be of decided advantage to us. We have now a large international forum in which governments face each other to discuss their

For a statement of Jan. 10, 1964, by the Department of State, on its intention to recommend to the International Coffee Organization's Executive Board, Jan. 27, 1964, "a radical upward adjustment in [coffee] export quotas," see the Department of State Bulletin, Jan. 27, 1964, p. 143. The International Coffee Council subsequently approved a 5 percent rise in exports for a total of 48,120,044 bags at 132 lbs. per bag during the period Oct. 1, 1963-Sept. 30, 1964, to counter price increases, Feb. 12, 1964 (The New York Times, Feb. 13, 1964). The Council subsequently adopted resolutions allowing for export of an additional 1 million bags of coffee, May 1, 1964 (ibid., May 2, 1964).

mutual problems concerning coffee. The exporters made very clear in the very recent depressed days for coffee that they needed our help to stem a sharp price decline. In the same way, we have now made very clear that we expect exporters to make coffees available to the market as fully as practicable. If they fail to do this and if as a result prices rise, they would not be acting in the spirit of the agreement, which is to seek stability in coffee markets. We would not hesitate to say this or to act upon it. Indeed, members of our trade have told us that, but for our presence in the agreement, it is likely prices could even be higher than today. Our presence in the agreement is a decided advantage to us and to other consumers in dealing with the tight supply situation we face.

I strongly urge enactment of H.R. 8864. Without the implementing legislation, the United States will be unable to carry out its obligations with respect to certificates of origin and import control, essential elements of the agreement. The legislation will expire October 1, 1965. The next year and a half will tell us whether the agreement is doing its job and if, therefore, it should remain in being.

I cannot overstate the importance to our political relations with the developing countries, and with Latin America in particular, of our continued active participation in the International Coffee Agreement. For many low-income countries, what we do to ameliorate the conditions of their commodity trade is far more important than what we do about aid. In fact, the sharp price fluctuations in primary commodity trade often more than offset our development aid. These countries want to be able to earn their way through trade and not have to rely on aid alone. Coffee as the single most important agricultural commodity in the trade of the low-income countries is a test case. The good faith of this administration and the credibility of our efforts to help the developing countries raise their living standards is involved. It would not do for us to back away from the agreement just because prices are up. Indeed, we would be called fair-weather friendsinterested in "stability" only when prices are really low but uninterested when prices rise because nature has played its trick on production. Stability is not a short-run matter; it takes time to bring it about, and with time the agreement will help do just that.

Failure of the United States to continue as an active member of the agreement would be a most damaging blow to our relations with the developing countries, especially of Latin America, and to the Alliance for Progress. The United States helped to bring the agreement into being; it must not be responsible for its demise."

The Senate Committee on Finance reported H.R. 8864, 88th Cong., but adopted an amendment designed to protect U.S. consumers against "unwarranted increases" in domestic coffee prices. (See S. Rept. 941, 88th Cong., Mar. 12, 1964.) The Senate passed the bill, but it was returned to the House of Representatives July 31, 1964, for consideration of Senator Dirksen's amendment authorizing Congress to pass withdrawal legislation if an unwarranted price increase ensued. The House of Representatives rejected the bill by a vote of 194-183 and it was returned to a congressional conference, Aug. 18, 1964. Consideration of H.R. 8864, 88th Cong., 2d sess., during 1964 ended in a deadlock, Oct. 3, 1964. (See post, doc. XI-24.)

Document XI-21

Support for Expansion of Domestic Consumption of United States Upland Cotton: PUBLIC LAW 88-297, APPROVED APRIL 11, 1964 10

Document XI-22

Limitation of Certain United States Meat Imports to 725,400,000 Pounds a Year, Beginning in 1965: PUBLIC LAW 88-482, APPROVED AUGUST 22, 1964 11

Document XI-23

United States Intention To Keep Cotton and Wool Textile and Apparel Imports From Disrupting the Domestic Textile Market: STATEMENT BY THE PRESIDENT (JOHNSON), ISSUED AT PROVIDENCE, R.I., AND PORTLAND, MAINE, SEPTEMBER 28, 1964 12

Document XI-24

United States Intention To Carry Out Its Responsibilities Under the International Coffee Agreement Within the Limits of Existing Legislation: STATEMENT BY THE SECRETARY OF STATE (RUSK), ISSUED OCTOBER 3, 1964 13

I regret that the Congress did not act this session on legislation to implement the International Coffee Agreement." I think it highly

10 78 Stat. 173. "As a result of this measure, domestic mills were no longer required to pay a higher price for raw cotton than foreign users of U.S. cotton. The measure, unless renewed, will expire in mid-1966 [-July 31, 1966]. The administration will seek to continue one-price cotton and hopes to obtain early legislative action." (Statement of Dec. 1, 1964, of Mr. Nehmer, cited post, doc. XI-25.)

"78 Stat. 594. Secretary of State Rusk had opposed passage of this legislation because it did not affect the kind of U.S. beef whose price had recently fallen-the reason for the legislation-and because it created "some very severe obstacles to the promotion of American trade." (Quotation from Secretary of State Rusk's news conference of July 31, 1964; the Department of State Bulletin, Aug. 17, 1964, pp. 226-227.)

12 Public Papers of the Presidents of the United States: Lyndon B. Johnson, 1963-64, vol. II, pp. 1143-1144. This program of Government assistance to the textile industry was launched by President Kennedy, May 2, 1961 (see Public Papers of the Presidents of the United States: John F. Kennedy, 1961, pp. 345346). The foreign trade elements of the program included the multilateral LongTerm Arrangements Regarding International Trade in Cotton Textiles of Feb. 9, 1962 (see American Foreign Policy: Current Documents, 1962, pp. 1411-1422), and a number of bilateral agreements concerning trade in cotton textiles. During 1964, such agreements were concluded with China, Greece, India, Jamaica, the Philippines, Portugal, Spain, Turkey, and Yugoslavia (texts in 15 UST, pts. 1 and 2). In addition, legislation was enacted permitting domestic cotton textile mills to buy cotton at world prices (ante, doc. XI-21); and efforts were made to close tariff loopholes to certain wool textile imports. Department of State Bulletin, Oct. 19, 1964, p. 554.

14 See ante, doc. XI-20.

important that this measure be promptly enacted when the new Congress convenes in January.15 Meanwhile, the United States will carry out its responsibilities under the agreement within the limits of existing legislation.

Document XI-25

United States Participation in the Long-Term Cotton Textile Arrangement, 1963-1964: STATEMENT MADE BY THE U.S. REPRESENTATIVE (NEHMER) BEFORE THE COTTON TEXTILES COMMITTEE OF THE GENERAL AGREEMENT ON TARIFFS AND TRADE, GENEVA, DECEMBER 1, 1964 16

D. Export Controls and Policy

Document XI-26

International Tin Council-United States Consideration of the United States Long-Range Plan for Surplus Tin Disposal From Its Strategic Stockpile: ANNOUNCEMENT ISSUED BY THE DEPARTMENT OF STATE, FEBRUARY 14, 1964 1

Document XI-27

The Use of Trade in Promoting United States Objectives in Communist Countries: STATEMENT MADE BY THE SECRETARY OF STATE (RUSK) BEFORE THE SENATE COMMITTEE ON FOREIGN RELATIONS, MARCH 13, 1964 (EXCERPT) 2

In my observations today I have tried to emphasize three points: First, trade can be a useful instrument of policy in the contest with communism and in affecting Communist policies, provided it is adapted to the particular situations presented by different Communist countries.

Second, trading policies suited to one period in our relations with a

15 Congress subsequently enacted the required legislation as Public Law 89–23, approved May 22, 1965 (79 Stat. 112).

16

Department of State Bulletin, Jan. 11, 1965, pp. 49-56. For the text of the Long-Term Arrangements Regarding International Trade in Cotton Textiles, see TIAS 5240 (13 UST 2672; 471 UNTS 296).

1Department of State Bulletin, Mar. 9, 1964, p. 379. A delegation from the International Tin Council met representatives of the U.S. Government at Washington, Feb. 12-14, 1964.

2

Ibid., Mar. 30, 1964, pp. 474-484.

For additional portions of this statement, see ante, docs. V-2 and VI-6.

particular Communist country may not be equally appropriate at another period.

Third, our national purpose can be served either by the denial of trade or the encouragement of trade, depending on circumstances. Furthermore, the denial of trade may be either total or selective, again depending on circumstances.

Let me add one further point. The use of trade with Communist countries for national purposes is a matter for national decisions. The volunteer efforts of individuals or organizations to impose their private notions on our overall trade policy can only frustrate the effective use of this essential national instrument.

Above all, let us avoid the doctrinaire extremes that seem to flourish in this field.

On the one hand, let us be quite clear that, in spite of some opinions to the contrary, trade with Communist countries should not be conducted purely on the basis of commercial considerations and as though there were no political and military issues dividing East and West.

On the other hand, let us be equally clear that trade with the Communist world cannot be effectively used as a blunt instrument. It must be flexibly adapted and flexibly applied on the basis of political, military, and economic realities. And this requires that we make distinctions among Communist countries.

We must not permit ourselves to be frozen in an arbitrary stance that ignores these realities and lumps all Communist countries together without such distinctions. To do so would make us the prisoners of a dogma, rather than the commanders of a policy.

Document XI-28

United States Limitation of Credit to Five Years in Trade With Communist Countries: REPLY MADE BY THE SECRETARY OF THE TREASURY (DILLON) TO A QUESTION ASKED AT A NEWS CONFERENCE, TOKYO, SEPTEMBER 11, 1964 *

4

We feel that in the trade with Communist countries, we should follow normal trade practices which mean a normal time for credit, depending on the type of item involved, but in no case extending beyond five years, which has generally been the accepted standard of medium term credit that was set in Europe by the Berne Union to which we belong, and we feel anything beyond that begins to partake Department of the Treasury files. See footnote 20 to doc. XI-6, ante.

6

. As of mid-February 1965, the Department of State estimated that Belgium, Italy, Japan, and the United Kingdom had granted long-term credits (i.e., repayment terms extending longer than 5 years) totaling about $180 million on about 12 export contracts valued at $227 million to Bulgaria, Czechoslovakia, Hungary, and the U.S.S.R. See ante, doc. VI-10.

The Berne Union, the popular name of the International Union of Credit Insurers, founded Jan. 1, 1934, and seated at Berne, is an association of credit guaranteeing institutions of 18 countries which serves as a forum for questions regarding export credit and agrees on desirable credit standards for the prevention of unsound international competition in export credit terms. The countries repre(Footnote 6 continued on next page)