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3.

Most of the other importers could accept the United States price proposals without going back for further instruc- tions and we believe that the United States now knows this. For the present we might be able to persuade them to stand by us on the basis prices of $1.75 maximum and $1.20 minimum. But the view which we now hold is that this will only be for the moment, and that if other issues are settled the United Kingdom will be isolated on the price issue.

4.

Since yesterday we have consulted further with importers and exporters about the possibility which we suggested yesterday of securing a minimum of $1.15 as quid pro quo for a maximum of $1.80. Our revised view is that there is less chance of getting $1.15 minimum than of getting $1.75 maximum, primarily because the pressure from the farm groups is being directed towards a higher minimum.

5.

The background to all the discussion about prices of which we are continually made aware is the possibility that the United States may use E. C. A. as a means of providing an assured market for its wheat.

See my telegram No. 1209 Frame. Even though the Secretary of Agriculture does not determine in accordance with Section 112 of the E. C. A. Act 1948, that the supply of wheat is in excess of domestic requirements, he may state that the price at which U. S. D. A. is willing to sell wheat is at least no higher than the price we are now paying to the Canadians. In such circumstances E. C. A. would have no alternative but to refuse authority for the purchase of Canadian wheat with its funds. Although formal communication has not yet reached us, there is a suggestion that the U. S. D. A. is already bringing pressure on E. C. A. and that the latter may in the next day or two reject requests for authorisation of additional wheat purchases from Canada in respect of the first quarter of 1949. We are trying to obtain confirmation of this suggestion. So far as the United Kingdom is concerned, to make it more difficult to finance Canadian wheat purchases would presumably not mean that a market would be provided for United States wheat at least so long as the United Kingdom-Canadian contract operates. For the United States to continue to finance United Kingdom-Canadian purchases might leave both the U. S. D. A. and E. C. A. in a very embarrassing position.

6.

To sum up, although the success of the Conference is by no means yet assured on other issues, we feel that if we are to reject the United States proposals we run the gravest risk of breaking up the Conference on the price issue, and it would then be almost certain and not merely possible that we should run into difficulties with E. C. A. Supported as she is by Australia, the United States would not give ground even to the extent that we hoped when paragraph 2 of telegram No. 1200 was drafted.

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