550.S1/803: Telegram
The Secretary of State to the American Member on the Organizing Committee for the Monetary and Economic Conference (Davis)25
106. The plans of the Department of Agriculture for administering the farm bill26 are now developing and it is fairly likely that they will decide to impose processing taxes on wheat somewhere around the end of June and on cotton around the end of July.
In accordance with the Act, the Treasury would impose offsetting duties on manufactured products deriving their chief value from these products. There is no intention of imposing any taxation or new tariff duties on indirectly competing products at this time.
Our understanding of the situation is that, in accordance with the Department’s instructions, you explained fully when the tariff truce was under discussion that this legislation and the action outlined above was in prospect, and that all the other Governments who adhere to the declaration of the Organizing Committee of May 12 understood this action as not in violation of the tariff truce.
It of course is apparent that this action is not a new initiative in the sense of the truce and that, furthermore, it in no way creates any additional advantage for domestic producers of these commodities as compared with foreign producers; it merely offsets a new form of domestic taxation because the price of the manufactured products derived from wheat and cotton will be enhanced by the amount of the processing tax.
It may be, though we are not certain, that this action is covered furthermore by the reference to the experts’ agenda in the recommendations.
Please make occasion to mention to Sir John Simon or Runciman that the possibility of this action by the Department of Agriculture is a substantial one so that there can be no misunderstanding when and if the action is taken.
If this prospective action of the Department of Agriculture or this instruction is not in accord with your views, kindly wire us at once. It may be unnecessary in your judgment to mention the matter to Simon, if already sufficiently covered by your previous conversations.