Volume #26 - 68.|
UNITED NATIONS AND OTHER INTERNATIONAL ORGANIZATIONS
INTERNATIONAL WHEAT AGREEMENT
Memorandum of Instructions|
to Canadian Delegation
November 20th, 1959|
CANADIAN OBJECTIVES IN A NEW INTERNATIONAL WHEAT AGREEMENT|
TO BE NEGOTIATED AT THE SECOND SESSION OF U.N. WHEAT CONFERENCE100
The principal purpose of the International Wheat Agreement is the assurance of markets to exporting countries and of supplies to importing countries at prices fair to both producers and consumers. From the stand-point of the exporting countries the Agreement should provide for an effective assurance of markets through the commitment of importing countries to purchase the maximum of their import requirements from exporting member countries within a price range acceptable to both exporting and importing countries. This is the most important objective to Canada. The I.W.A. should afford an assurance to Canada to sell commercially about 250 million bushels (7 million metric tons). In this connection, it is very important that the Canadian Delegation should endeavour to collaborate with representatives of the United Kingdom in arriving at a common approach towards an International Wheat Agreement which will ensure the participation of the United Kingdom. Having regard to these objectives, the Canadian Delegation should proceed along the following lines:
(i) Importing countries should undertake to obtain, so far as possible, all their import needs from exporting member countries. It should be recognized, however, that certain importing countries have contracted, or are likely to enter, into arrangements whereby they would be committed to import part of their requirements from exporting non-member countries, and that the currency of these arrangements may overlap with the term of the I.W.A. To ensure protection for the exporting countries' interest, therefore, importing countries should -
In the case of either of these alternatives, importing countries would notify the Council at the beginning of each crop year of their total commercial requirements from the exporting countries for that crop year. If these commercial requirements are realistically estimated they should not fall below a total of 750 million bushels (20 million metric tons).
(ii) Obligations of Importing and Exporting Countries. The obligations of importing countries should take effect when prices are below the maximum price; when prices are at the maximum, the obligations of the exporting countries would be limited to the average of total commercial purchases of the importing countries from the exporting countries during the previous three crop years and would be divided on a pro rata basis.
(iii) In the event of any importing country being prevented by the necessity to safeguard its balance of payments or monetary reserves from carrying out its undertaking in a particular crop year, it may apply to the Council for relief from the whole or a part of this undertaking on the submission of all the relevant facts and any other additional information which may be required by the Council. In dealing with such applications the Council shall seek and take into account, together with all the facts which it considers relevant, the opinion of the International Monetary Fund, as far as the matter concerns a country which is a member of the Fund.
Importing countries have been critical in the course of discussions at the First Session of current export pricing policies. As evidence indicating inadequate price flexibility, importing countries pointed to the fact that in the face of very heavy stocks, prices at which international transactions take place were not allowed to fall to the minimum. As a safeguard against price maintenance by exporting countries, importing countries will seek, therefore, either to secure a lower price range or some provision which would provide for greater price flexibility.
It should be pointed out that from Canada's standpoint export prices have not been inflexible: for instance, the average price of No. 1 Manitoba Northern wheat fell from (U.S.) $1.91 in 1953/54 to about (U.S.) $1.66 in the first half of 1958/59; in the same period the spread between No. 3 and No. 1 Manitoba Northern widened from 8 cents to 13 cents, and the spread between No. 4 and No. 1 Manitoba Northern widened even further from 13 cents to 24 cents.
The price question should be considered in its two aspects: first, the price range; and, secondly, the movement of prices within the range.
(i) On the Price Range; There should be no change from the present, namely maximum price $2.00, minimum price of $1.50 Canadian currency per bushel at the parity established by the IMF on March 1, 1959. It should be noted that with appreciable increases in costs and the prices of other goods and services, the current price range is at a lower level than in 1956 and should represent a concession to importing countries.
During the course of the discussions on prices with reference to the Report of the Technical Committee on Price Equivalents, consideration might be given to No. 3 Manitoba Northern as the basic grade and to the implications of its use.
(ii) On the Level of Prices Within the Range; As the obligations of importing countries in a new Agreement would apply below the maximum price, importing countries may argue that they should be protected against price maintenance by the exporting countries and insist, as they did at the First Session and in the meetings of the Preparatory Committee, on a provision to ensure adequate flexibility of prices. To meet this point a provision could be included whereby a complaint may be submitted to the Executive Committee of the Council. The Executive Committee may then refer the complaint to the technical compe-tence of the Committee on Price Equivalents which in such cases may be authorized to examine the supporting evidence and call for any other additional information. On the basis of the report and recommendations of the Committee on Price Equivalents, the Executive Committee shall, at the request of any of the parties concerned, report on the matter and, if necessary, make recommendations to the Council. The Council shall then review the case, hear any further evidence and hold consultations between the importing and exporting countries concerned.
If no agreement with the importing countries can be reached on the basis of the above, a further provision may be inserted whereby, if consultations fail, an importing country could apply to the Council for relief from part or the whole of its obligations in respect of its purchases under the Agreement in a crop year, and the Council shall decide on such application. In view of the insistence of the importing countries at the Preparatory Committee meetings in London for the right of withdrawal, as a last resort consideration may have to be given to the inclusion of a further provision to this effect after all other possibilities have been exhausted.
(c) The Recording of Transactions.
On the assumption that the importing countries undertake to transact the highest proportion of their import requirements under the Agreement, member countries should undertake to notify the Secretariat of all transactions relating to the export or import of wheat and flour. Transactions recorded to the Secretariat might be registered in four principal categories as follows:
(i) Commercial transactions between exporting and importing member countries;
(ii) Non-commercial, or "special" transactions or arrangements entered into between exporting and importing member countries;
(iii) Commercial transactions between exporting member countries and importing non-member countries and between importing member countries and exporting non-member countries; and
(iv) Non-commercial, or "special" transactions or arrangements entered into between exporting member countries and importing non-member countries, and between importing member countries and exporting non-member countries.
(d) Assurance of the Highest Possible Level of Trade on Commercial Terms
In order to safeguard the stability of the commercial sector of the international trade in wheat,
(i) Participating countries should undertake as part of their obligations that any non-commercial transactions in wheat and flour shall be made without harmful interference with normal commercial patterns of international trade.
(ii) Exporting countries will undertake to export as much as possible of their supplies each crop year, and importing countries will endeavour so far as possible to purchase the maximum of their annual requirements, on a freely competitive commercial basis.
(iii) If the obligations of importing countries are in any way expressed in terms of guaranteed quantities, the fusion of commercial with non-commercial transactions should be opposed on the grounds that the distinction between normal commercial and non-commercial transactions be preserved in order to safeguard the commercial sector of the international wheat trade and ensure that non-commercial transactions represent a net addition to normal commercial purchases of importing countries.
(e) Safeguards Against "Unfair" Practices and the Restrictive Effects of Bilateral Arrangements
It is important that the interest of exporting countries be protected against "unfair" practices and limitations placed on free competition. Such practices would include the resale by importing countries of imported wheat as flour at concessional prices, and the sale by exporting member countries of wheat and flour at prices below the minimum, both of which are likely to pre-empt normal commercial sales of wheat and flour. This protection may be ensured by the inclusion of provisions whereby:
(i) All countries undertake not to enter knowingly in any transaction with member countries which may be inconsistent with the minimum price or detrimental to the purposes and objectives of the Agreement except in the case of gifts or donations in the event of famine, critical food shortages or any similar emergency.
(ii) Exporting and importing member countries parties to bilateral agreements or "special" arrangements concluded prior to the entry into force or during the currency of this Agreement shall specify in an Annex (B) to this Agreement the individual quantities to which they are committed for each year during the period of this Agreement.
(iii) Consideration may be given to the desirability of exporting countries foregoing any predetermined sharing of the commercial sector of the market. Any exporting country entering into bilateral arrangements shall thereby forfeit its right to compete in the uncommitted and freely competitive residual part of the market to the extent of those quantities that are committed under such arrangements.
(iv) Gifts and Donations - Any exporting country wishing to extend on an individual basis any gifts or donations to any participating country shall ensure that such gifts or donations would represent net addition to normal commercial marketings.
(f) Irregular Exporting/Importing Countries
(i) Member countries should state in the Agreement whether they will be exporting or importing countries for the whole duration of the Agreement and for the purpose of its administration.
(ii) Any country which has declared itself an importing country for the period of this Agreement and which wishes to sell wheat and/or flour to either member or non-member countries in any crop year during the life of this Agreement should undertake not to transact any such sale at prices which are inconsistent with the price range.
(iii) Any country which has declared itself an exporting country for the period of this Agreement and which wishes to purchase wheat and/or flour in any crop year during the life of this Agreement should undertake to purchase all its requirements from exporting member countries within the price range and on a freely competitive commercial basis.
(g) Annual Review of National Wheat Policies
The inclusion of a provision authorizing the Council to hold an annual review of national policies as affecting production, prices, stocks and trade should be strongly supported. It should be recognized, however, that both exporting and importing countries are apt to be politically sensitive to national wheat policies and are likely to resist any exposure to criticism in, or by, an international body. The annual review will, therefore, lack authority to recommend changes but should nonetheless afford opportunities for exchanging views on national or regional measures and developments, (e.g., uneconomic production in importing countries, regional restrictive practices in the European Common Market), which may have adverse effects on the operation of the Agreement or on the commercial sector of the international trade in wheat and flour. In this context, it would be appropriate for the Council to review the relative proportions of trade transacted on commercial and "special" terms between member countries as well as between member and non-member countries.
The duration of a new Agreement should be not less than, and no longer than, three years.
100Le 19 juin 1958, le Cabinet a autorisé la délégation du Canada au Conseil international du blé à exprimer la volonté du Canada de participer à une conférence internationale pour renégocier l'Accord international sur le blé. En octobre de la même année a eu lieu une brève conférence où l'on a surtout discuté de principes et de questions concernant les accords existants et les accords proposés. Des instructions ont alors été rédigées en vue de la deuxième session, qui allait s'ouvrir en janvier 1959. Le Cabinet n'a pas eu le temps de délibérer sur ce mémoire avant le début de la conférence; le ministre du Commerce a proposé que la délégation suive les instructions des ministres concernés plus particulièrement.