CAB129-52 — Page 71

CABINET OFFICE RECORD COPY

71

Page 71

(THIS DOCUMENT IS THE PROPERTY OF HER BRITANNIC MAJESTY'S GOVERNMENT)

CONFIDENTIAL

C. (52) 170

21st MAY, 1952.

CABINET

COPY NO.

GO

IMPORTS OF AMERICAN COTTON

Memorandum by the President of the Board of Trade and

the Chancellor of the Duchy of Lancaster.

An immediate decision is needed on the amount of American type cotton, dollar and non-dollar, to be imported during the coming season. Entitlements have to be issued under the Hopkins Scheme early next week, and the Cotton Commission must also receive the directions on which to base its programme.

2.

For some months past Lancashire spinners have been receiving a proportion of 57% of American dollar cotton. We are convinced that it would be economically undesirable and politically disadvantageous to reduce this proportion. The Lancashire Cotton Trade and the Trade Unions have pressed strongly upon us that the present proportion should be greatly increased. They have asked that there should be complete freedom to buy dollar cotton. This claim is based partly on the ground that Lancashire should be able to import the cotton of the quality and price best suited to its needs, but still more on the importance of abolishing the premium which Brazilian cotton enjoys over United States dollar cotton. This premium is today 3d. to 4d. a 1b; but it has been very much larger in the past and Lancashire fears that if any revival comes in the world cotton trade, the margin will widen again if they are unable to buy United States in place of Brazilian, The Cotton Commission averages the price of American and Brazilian so as to sell all American type cotton at a uniform price. This is accepted as a necessary practice; but, if there is any considerable premium on Brazilian cotton, this means that Lancashire has to pay more for its United States dollar cotton than its competitors in other countries pay.

3.

We accept that with our present precarious balance of payments we cannot ask for freedom for Lancashire. Short of complete freedom, a proportion of 66% of dollar cotton would probably suffice to wipe out the premiumn and prevent it recurring. We are advised that anything less than 60% of dollar cotton would be insufficient to remove the premium which might well widen if demand grows. If the Cabinet consider that the difference between 57% and 60% must be saved in order to fortify the balance of payments, we must tell Lancashire that they must be content with their present ratio..

4.

In order to secure the 60% or 57% we are prepared to Paluce the amount of stock carried to a six months' su

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