611.4231/1227½
Memorandum by the Assistant Chief of the Division of Western European Affairs (Hickerson) to the Secretary of State
We have just received the President’s memorandum of yesterday.10 asking that you speak to him about a letter, dated August 26, from Representative Coffee10 before any further commitments are made in regard to the Canadian Trade Agreement relating to cattle.
On July 31st last, Mr. Sayre11 and Mr. Grady discussed our proposed concessions to Canada with the President. At that time the President stated that he would like to have us make an investigation of the possibility of linking up a reduction on live cattle with parity prices for cattle as compiled by the Department of Agriculture. On August 21st Mr. Grady and Mr. Hickerson again discussed this matter with the President. At that time the President approved an offer to Canada in the following terms: [Page 21]
- (1)
- No reduction in the present duties on live cattle when prices are below 90% of parity.
- (2)
- When cattle prices are between 90 percent and 105 percent of parity, we will permit the entry of a quantity of cattle equal to 1¼% of the average annual total slaughter from 1928 to 1933 inclusive (equal to 154,287 head) at a duty of 1½ cents per pound, as compared with the present duty of 3 cents per pound, provided such cattle weigh 700 pounds or more each. This quota of 1¼% would cover imports from all countries into the United States and would thus reserve 98¾% of our domestic consumption from the effect of any tariff reduction. Any imports above 154,287 cattle would pay duty at the present rate of 3 cents per pound.
- (3)
- When cattle prices are over 105% of parity imports of cattle weighing over 700 pounds would be admitted without numerical restriction at the lower duty.
As you know, we began our trade agreement negotiations with Canada on Monday, August 26th. At that time we told the Canadian Minister and his associates of this offer. The Canadian Minister expressed great disappointment at this and other offers which we were able to communicate to him and said that he did not know whether they afforded a basis for a satisfactory trade agreement between the two countries. He left for Ottawa, Canada, Monday night to discuss the whole question with his Government with the understanding that when a decision was reached he would get in touch with us.
As regards the above-mentioned offer on cattle, I may say that Mr. Grady discussed this proposition at great length with Secretary Wallace12 who entirely approved it; he also discussed it with Senator Hayden, who approved it and agreed that there was no basis for any fear of excessive imports.
In considering the value of this offer on cattle to Canada for bargaining purposes it should be borne in mind that any reduction applies only when cattle prices are at least 90% of parity, a figure which, under average feeding conditions, enables our producers to make a profit. The formula for parity involves average cattle prices from 1909 to 1914 and a consideration of the purchasing power then and now of cattle in terms of other products. The base period tends to favor cattle producers more than other farm products, according to experts of the Department of Agriculture, since it coincides with a period of relatively high cattle prices. From 1920 through January, 1935, cattle prices were above 90% of parity only during the following periods; the years 1927–1928–1929 and the first seven months of 1930. From July, 1930 until February 1935, cattle prices did not reach 90% parity. Since February prices have been above that figure but have not exceeded 103%; the last month they were 95% of parity.
[Page 22]Canadian stocks of cattle are too small to have any appreciable effect on our prices.
The tariff reduction is limited to cattle weighing over 700 pounds and our Department of Agriculture estimates that probably 90% of the imports allowed under this classification would come from Canada, the remainder coming from Mexico.