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dollars in the first two years of the agreement, apart from the consideration that if the maximum price under the agree- ment is Parte 10f 888instead of $1.75, thePage990ff we gat bought outside the agreement might be higher than it other- wise would have been. The question for decision is whether we should break off negotiations unless we can secure a maximum price of $1.75. In my judgment, always provided that we can secure the other conditions referred to below, and especially a firm undertaking that the Economic Co-operation Administra- tion will finance our Canadian wheat purchases at any rate for the remainder of the current year and in 1949/50 - we should agree to pay $1.80 rather than break on a difference of 5 cents a bushel. We should, however, instruct our representa- tives to make a final effort to secure acceptance of our maximum price of $1.75.

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I have considered whether in order to secure a $1.75 maximum we should offer to make some additional con- cession at the minimum price range - e. g. to agree to, say, a minimum price of $1.25 in the last year of the agreement. do not, however recommend this course. The proposed minimum price range of $1.50 falling to $1.20 is, as I have already said, above the range accepted in last year's agreement, and if wheat prices are going to fall heavily in the next four years it would be wrong for us to accept a high minimum price in the last year of the agreement at a time when Marshall Aid will have stopped and our balance of payments difficulties with the dollar area may consequently be even more difficult than today.

(b)

Quantities.

The exporters have sought to stipulate that importers as a whole should undertake to purchase a total quantity of wheat under the agreement of 550 million bushels. Representa- tives of the importers have made it clear that, with the best will in the world, the maximum figure which they could guarantee would be 510-512 million bushels.. We originally offered to guarantee 180 million bushels, but subsequently, and with a good deal of reluctance, increased that offer to 190 million bushels subject to the conclusion of a satisfactory agreement on prices and to the inclusion of a substantial export quota for Russia. The exporters have so far not indicated how their proposed figure of 550 millions is to be split up between the various exporting countries. It is, of course, absolutely essential that this should be made clear, since unless Russia is given a substantial quota within the exporters' total the importers might find themselves committed

If to taking very substantial quantities of dollar wheat. Russia were given a quota of, say, 75 million bushels it is arguable that we could safely put up our figure beyond 190 million bushels, and in a separate telegram our representatives at the Conference have urged that we should be prepared to do this. But if we agree to take 190 million bushels we shall be committed to taking slightly over 80 per cent of our estimated import requirements under the agreement. No other importing country has offered to commit so high a percentage of its import requirements and few followed our example in putting up their offers when Russia joined the Conference. Given the essential need for us to be free to buy a proportion of our requirements outside the agreement, I consider that we ought not to commit ourselves beyond 190 million bushels, and should repeat our stipulation that we have only agreed to 190 million bushels on condition that Russia is a party to the agreement with a substantial export quota. We should only agree to modify this attitude (i) if the other importers are prepared substantially to increRageth of Amitments and (ii) if Rageil of 48&ven a substantial quota of not less than 75 million bushels within

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