Toward a World Cotton Pool

The deal in cotton which Commodity Credit Corp. made with Peru last week was not just another U.S. subsidy to a Good Neighbor. It was a step, in Claude Wickard's words, toward "the working out of world cotton production and marketing problems after the war." It foreshadowed a day when the growers of the Western Hemisphere, under U.S. leadership, will present a united front to the cotton markets of the rest of the world, and at the same time cooperate to reduce their own dependence on those markets. It was a step toward the internationalization of AAA.

Commodity Credit Corp. agreed to buy up to 200,000 bales of Peruvian cotton this year for about $10,000,000. That is the two-thirds of Peru's crop which she exported before the war; the rest Peru sells to her neighbors. The U.S. will not try to import its purchase, but will leave it in Peru. As its part of the bargain, Peru agrees to try to reduce her cotton acreage, substituting non-surplus crops like flax, rice, beans. For every 1% change in cotton acreage after this year, the U.S. price to Peru will move 1 1/2% in the opposite direction. Just to check up, aerial photographs will be taken of Peru's cotton region.

The Peruvian acreage reduction scheme conforms to the plan which the U.S. Department of Agriculture has followed toward its own farmers for eight years. The U.S. does not want its farmers at the mercy of a volatile international market, which the cheaper cotton of other countries has in any case already copped. It is now U.S. policy to help Good Neighbors declare their independence from this market too.

Besides Peru's 200,000 bales, the um brella already covers Haiti's 20,000 bales, and will be spread to cover Nicaragua's 4-5,000, Paraguay's 30-40,000. In due course it will be extended to Brazil's 2,000,000 bales, the big problem crop which, partly developed by Japanese colonists, has undersold U.S. cotton by 6-c- a lb., even in Canada.

No. 1 U.S. cotton grower is Oscar Johnston, whose 50,000 acres of rich Delta soil got him $363,000 of Government benefit payments in four years. Last month Oscar Johnston was appointed special representative of CCC as a cotton idea-man. He had planned to go to South America to close the Peruvian deal; but Peru sent two able representatives* to the U.S., who signed with Claude Wickard in short order. So Oscar stayed in Washington and meditated on cotton's war and post-war worlds.

For cotton, unlike industry, these worlds are not so very different from each other. CCC men believe that win-the-war policy ought to mesh as closely as possible with win-the-peace policy. For the present, the job is to see that no Good Neighbor sags in its economic joints through loss of its export markets to war. Afterwards, the grand strategy will look something like this:

> The chronic Latin-American surplus, in strong U.S. hands, might be managed. In weak hands it would be dumped, wreck everybody's market, and have to be exchanged for European products at ruinous rates of exchange.

> If the U.S. holds its neighbors' cotton for sale at the best price, they will meanwhile have dollar exchange, which will naturally increase their purchase of U.S. goods.

> The United Nations, if they dictate the peace, might expand the Western Hemisphere cotton pool into a worldwide international cotton agreement.

> Let the undeveloped cotton countries not only switch to more useful crops, but industrialize themselves with U.S. equipment, if they want to. The era of "colonial" policy is over.

* David Dasso, Minister of Finance and Commerce and M.I.T. graduate; Pedro Beltran, Peru's leading cotton man.

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