Yesterday afternoon Messrs. Willoughby and Nyhus78 of the US Embassy met in my office with a group of officials from the various departments concerned here to inform us of action which was being considered in Washington regarding the tariff quotas negotiated at Geneva.
2. As you will be aware, up to 200,000 head of cattle weighing under 200 pounds each and up to 400,000 of non-dairy cattle weighing 700 pounds each or more may be admitted into the United States during a 12-months period beginning on April 1 of any year at a duty rate of only 1_¢ per pound. This compares with the normal rate of 2_¢ per pound. In the case of the cattle weighing 700 pounds or more it is also stipulated in the concession negotiated at Geneva that, of the 400,000 admissible at the lower rate of duty, not more than 120,000 head can be admitted in any one quarter of the 12-month period. You will probably also recall that these quota limits were temporarily suspended until the termination of the unlimited national emergency proclaimed in 1941 and until the "abnormal situation" in respect of cattle and meats has also terminated.
3. Willoughby explained that the unlimited national emergency had been officially terminated about a year ago and that, in the view of US officials, the abnormal marketing situation envisaged in the original suspension had also come to an end. The general shortage of cattle and meat had now more or less disappeared as evidenced by the decline in beef prices in the United States. Accordingly, the International Trade Agreements Committee in Washington had come to the conclusion that the suspension of the quota limits could no longer be justified and they proposed to submit a recommendation to the President today (February 26) that he should declare the termination of the "abnormal situation" referred to in connection with this tariff item.
4. The point on which Willoughby and Nyhus particularly wished to consult us related to the timing of the announcement of any decision by the President on this matter. In certain quarters in Washington there is an inclination to have this announcement made at the same time as (or possibly a day or two before) the announcement regarding the opening, of the US border to Canadian cattle (i.e. March 1 -- or possibly February 28 or March 2 since the 1st of March is a Sunday). The termination of the suspension would then become effective 30 days thereafter which would come very near to the beginning of the quota year on April 1. Others in Washington feel that the coincidence of these two announcements might lead to misunderstandings and to charges that, while the US was opening the door with one hand, it was closing it with the other. It also seems to them to be unwise to associate an announcement concerning quarantine measures with an announcement relating to commercial policy. They consider that the US should get the full benefit from its decision to open the border before incurring criticism for reimposing tariff quotas. On balance, however, opinion in Washington appears to favour the issuance of the quota announcement separately from but simultaneously with -- or shortly before -- the other announcement. Those who have been concerned about the possible linking of these two actions, which might appear somewhat contradictory, are apparently coming around to the view that, while there may be some arguments against simultaneous announcements, a postponement of the quota announcement would be likely to have even more undesirable effects. The mere delay of the announcement would not really be successful in dissociating it from the opening of the border. In fact, if the quota announcement were to be made after the border had been opened, it would probably be represented by unfriendly critics as something done in response to pressure from US cattle interests who were beginning to feel the effects of the open border. If the two announcements were made about the same time the quota announcement would probably be overshadowed by the other.
5. The general feeling on the Canadian side was that the US would be justified by the facts of the situation and by the terms of the Geneva agreement in bringing the suspension of the tariff quotas to an end in present circumstances. It was also generally felt that it would be preferable to have the two announcements made on the same day but that it might be not too unsatisfactory if the quota announcement were to be made a day or so in advance. It was agreed that it would be most unfortunate to delay this announcement until after the border had been opened for some time (although we would certainly not wish to see the opening of the border postponed in order to allow time for the preparation of a simultaneous announcement regarding tariff quotas). The Canadian officials felt that in any explanation here of the US action on tariff quotas it would be desirable to point out that:
(a) These tariff quotas bear no resemblance to the import quotas applied by the US to dairy products, particularly since even after the limits of the quotas have been passed cattle would still be admissible at a rate of duty which would not be prohibitive.
(b) The right of the US to reimpose these tariff quotas in circumstances such as those which now existed was specifically recognized in the schedules to the General Agreement on Tariffs and Trade.
(c) The quota limits accepted by the US in the Geneva agreement are considerably more liberal than those in effect before that agreement was negotiated (in the case of heavy cattle some 400,000 head compared with 225,000 head previously).
(d) Quotas on the present scale are not likely to be exhausted by the limited volume of imports which can be expected for some time after the re-opening of the border; (the 400,000 head ceiling is likely to be adequate to accommodate normal sales to the US although in the latter part of the year some slight difficulty may result from the quarterly limit of 120,000 head).
(e) There is no tariff quota or other type of quota on imports of beef which are admissible at a moderate rate of duty. (Cattle can therefore be sold to the US freely as beef if they cannot all be sold on the hoof).
6. Willoughby undertook to give us as much advance notice as possible of the eventual timing of their announcement concerning the tariff quotas in order that steps may be taken to provide guidance to the press here. The Department of Agriculture, in consultation with Trade and Commerce, will prepare a statement or press release incorporating some of the points listed above.
7. Pearsall79 asked whether the quotas would be divided among Canada, Mexico and other suppliers as they used to be. Willoughby said that, according to the information which he had, the quotas would be kept general for the first quarter and probably no attempt would be made to divide them by sources at least until the third quarter of the first 12-month period.
A.E. RITCHIE
