Letter to the President of the Senate and to the Speaker of the House on the Sale of Wheat to the Soviet Union.

Dear Mr. ___________:

In view of previous expressions of Congressional interest and concern, it is appropriate that I report to the Congress the reasons for the Government's decision not to prohibit the sale of surplus American wheat, wheat flour, feed grains and other agricultural commodities for shipment to the Soviet Union and other Eastern European countries during the next several months. These sales would be concluded by private American grain dealers for American dollars or gold, either cash on delivery or under normal commercial credit terms.

The Commodity Credit Corporation in the Department of Agriculture will sell to our private grain traders the amount necessary to replace the grain used to fulfill these requirements; and the Department of Commerce will grant export licenses for their sale, with the commitment that these commodities are for delivery to and use in the Soviet Union and Eastern Europe only. An added feature is the provision that the wheat we sell to the Soviet Union will be carried in available American ships, supplemented by the vessels of other countries as required. Arrangements will also be made by the Department of Commerce to prevent any single American dealer from receiving an excessive share of these sales. This decision, which was communicated in advance to the appropriate leaders of the Congress and the Western Alliance, had the unanimous support of the National Security Council.

The attached Opinion from the Department of Justice makes it clear that this decision neither requires nor is prohibited by any action of the Congress. The Executive Branch in reaching this conclusion has not been unmindful of the July 1961 amendment to the Agricultural Act of 1961 expressing the sense of Congress at that time to be in opposition to the export of subsidized agricultural commodities to unfriendly nations.

Congress has made no attempt to give a binding effect to such a statement of intent, although it had many opportunities to do so in its subsequent consideration of related legislative measures. Moreover, it is pertinent to recall that this general declaration of policy was made in July of 1961, at the height of the Berlin crisis. The author of the amendment argued that the policy it expressed was appropriate "in view of the world situation".

Other statutory provisions with respect to which questions have been raised include those of the Johnson Act, the Battle Act, the Export Control Act and P.L. 480. As noted by the Opinion of the Department of Justice, it is long-settled policy that the Johnson Act--which prohibits American loans to nations in default on earlier obligations to American creditors--does not apply to ordinary commercial credit transactions incident to the sale of goods. Neither the Battle Act nor the Export Control Act prohibits the commercial sale of foodstuffs to any country; and the transactions covered by this decision would not be under P.L. 480.

In view of this statutory framework, there is no reason why the Soviet Union should not be treated like any other customer in the world market who is willing and able to strike a bargain with private American merchants. While this wheat, like all wheat sold abroad, will be sold at the world price-which is the only way it can be sold--there is in such transactions no subsidy to the foreign purchaser. Rather there is a recovery for the American taxpayer on wheat which the Government has already purchased at the currently higher domestic price which is maintained to assist our farmers and is still paying storage on. Although the losses incurred in maintaining the domestic price support program are not deemed realized as a bookkeeping matter until a sale occurs, thereby giving the impression to some that it is the export which is subsidized rather than the production, the net result of export transactions is to reduce the loss to the taxpayer by the amount of the world market price.

I am not, therefore, aware of any reason why our grain trade exporters should not be allowed to sell surplus commodities to the Soviet Union and Eastern European nations at the same world price and by the same methods as they sell to all other nations. The United States has never had a policy against selling nonstrategic goods, including agricultural commodities, to the Soviet Union and Eastern Europe--on the contrary, we have been doing exactly that for many years. Our exports to the U.S.S.R. in 1960, for example, included drugs, chemicals, food-processing equipment, farm machinery and textile machinery, as well as such agricultural commodities as cattle hides and tallow. Having for many years sold to the Soviets farm products which were not in surplus, it would make no sense to refuse to sell those surplus products, such as wheat, on which we must otherwise pay the cost of storage. While distinct foreign policy reasons motivated our sale of subsidized farm commodities to Poland in exchange for local currencies, that practice also indicates the logic of selling such commodities behind the Iron Curtain for dollars.

Such sales, moreover, have obvious benefits for the United States. The sale of 4 million metric tons of wheat, for example, for an estimated $250 million, and additional sums from the use of American shipping, will benefit our balance of payments and gold reserves by that amount. Assuming they do not pay in gold directly, the Soviets are expected to sell gold for dollars in the London market, thus increasing support of the dollar and decreasing the pressure on our gold supply.

In addition, such sales will strengthen farm prices in the United States and bring added income and employment to American shipping, longshoremen and railroad workers as well as grain traders and farmers. It should be emphasized that the sales to be approved under today's decision will be conducted through the normal competitive channels of the private American grain trade in the same manner as all other such exports are handled, with the forces of competition and supply and demand, and the government's control over CCC prices and export licenses and subsidies, ensuring that the benefits of this trade will be distributed widely throughout the economy.

Wheat, moreover, is our number one farm surplus today--to the extent of about one billion unsold bushels. The sale of around 150 million bushels of wheat would be worth hundreds of millions of dollars to the American taxpayers in reduced Budget expenditures. In view of the 700 million bushels or more expected to remain in our carry-over, and the Soviet need to use this wheat for domestic consumption, these benefits will be obtained without displacing any of our regular wheat export markets, or reducing our ability to export to other customers or reducing our stocks to a dangerous or undesirably low level.

In short, these sales will permit American farmers and the American economy to share in the gains which other nations have been reaping for many years in sales of wheat, flour and other farm commodities to the Communist bloc. In recent weeks, Australia and NATO allies have agreed to sell 10 to 15 million tons of wheat and wheat flour to the bloc, including an arrangement to sell several hundred thousand tons of wheat flour which might well be made in large part out of wheat exported by this country to West Germany. We would certainly be foolish to halt the sale of our wheat when other countries can buy that wheat from us today and then sell it as flour to the Communists.

These transactions are not inconsistent with existing U.S. policies on trade with Cuba and the Communist bloc. We have never sought to implement those policies by restricting East-West agricultural trade or embargoing the shipment of foodstuffs to Cuba.

Our country has always responded to requests for food from the governments of people who needed it, so long as we were certain that the people would actually get it and know where it came from. In 1922, under President Harding, Herbert Hoover's American Relief Administration fed an estimated 18 million Russians. I am confident that the Russian people today will know that they are receiving American wheat; and to the extent that their limited supplies of gold, dollars and foreign exchange must be used for food, they cannot be used to purchase military or other equipment.

These transactions advertise to the world, as nothing else could, the success of free American agriculture. They demonstrate our willingness to relieve food shortages, to reduce tensions and to improve relations with all countries; and they show that peaceful agreements with the United States which serve the interests of both sides are a far more worthwhile course for our adversaries to follow than a policy of isolation and hostility.

For this government to tell our grain traders that they cannot accept these offers, on the other hand, would accomplish little or nothing. The Soviets would continue to buy wheat and wheat flour elsewhere, including wheat flour from those nations which buy our wheat--their propagandists would exploit among other nations our unwillingness to reduce tensions and relieve suffering--and their leaders would be convinced that we are either too hostile or too timid to take any further steps toward peace, that we are more interested in exploiting their internal difficulties, and that the logical course for them to follow is a renewal of the Cold War. Moreover, even if the Soviets should encounter difficulties and delays in obtaining these commodities from other countries, it would appear that their most vital requirements can already be largely met by the purchases they have concluded with Canada and Australia.

While this nation should not be unwilling to explore the possibilities of the ways in which these transactions could lead to increased trade, increased opportunities for contact, and increased exchanges of individuals and information, this particular decision with respect to sales to the Soviet Union, which is not inconsistent with many smaller transactions over a long period of time, does not represent a new Soviet-American trade policy. That must await the settlement of many other matters. But, as I stated to the American people last evening, it does represent one more hopeful sign that a more peaceful world is both possible and beneficial to all.

Sincerely,

JOHN F. KENNEDY