394.31/3–2751
Memorandum by the Assistant Secretary of State for Inter-American Affairs ( Miller ) to the Secretary of State 1
Subject: Cuban Foreign Minister2 Intends to Mention GATT 3 Sugar Negotiations during Courtesy Call
Discussion:
Minister of State Dihigo has indicated that during his conversation with you at 5:30 pm on March 27,4 he may refer to our sugar negotiations under GATT with Cuba at Torquay.5
The Cubans have rejected our sugar offer and have requested that negotiations on this matter with them be transferred to Washington or Habana. We have replied that we must continue to rely on our delegation at Torquay to carry on these negotiations and that we cannot agree to having them transferred elsewhere.
The negotiations in question involve not only Cuba but also the Dominican Republic6 and Peru, and the negotiations with all three countries are interdependent from our point of view, a fact of which the Cubans are fully aware. Consequently, it would be impracticable to transfer part of these negotiations from Torquay and to do so would undoubtedly provoke serious and justifiable objections on the part of the Dominican Republic and Peru. The Dominican delegation particularly has been waiting in Torquay since last September for the opportunity of participating in these sugar negotiations.
Recommendation:
It is recommended that you tell Dr. Dihigo that since this matter is now under discussion at Torquay, the United States prefers to have the matter worked out by our delegations there.
Further Background:
The following background information may be helpful in the event that Dr. Dihigo insists on discussing the matter in greater detail.
[Page 1333]As you may recall, it was largely because of disagreement over sugar that the Cuban delegation withdrew from the Tariff Negotiations under GATT at Annecy.7 The present United States duty on sugar is 50 cents per hundred pounds when imported from Cuba and 68–¾ cents per hundred pounds when imported from other countries. At Annecy we offered to reduce the rate on Dominican sugar to 60 cents, but withdrew this offer after the Cuban delegation withdrew from the negotiations.
Prior to the beginning of the Tariff Negotiations at Torquay we had agreed with Cuba, the Dominican Republic and Peru to negotiate on sugar with all three at once with a view to reducing both the Cuban and the full-duty rates. It was understood that the reduction in the Cuban rate would probably be somewhat less than the reduction in the full-duty rate so that the margin of preference on Cuban sugar would be reduced. We had, furthermore, reached an informal understanding with the Cubans that if sugar negotiations were successfully concluded with all three countries the margin of tariff preference remaining to Cuba would not be less than the 20 percent established in the Reciprocity Treaty of 1902.8 That Treaty is now in suspense.
Our delegation at Torquay has been authorized to offer a reduction in the rate on Dominican and Peruvian sugar to 55 cents per hundred pounds and on Cuban sugar to 44 cents per hundred pounds. We are prepared, if necessary, to go as low as 50 cents on Dominican and Peruvian sugar and 40 cents on Cuban sugar. Any reduction is made contingent on the incorporation of a “snap back” provision under which the rates of duty might be raised to $1,875 on full-duty and $1.6875 on Cuban sugar if current legislation9 providing for domestic sugar quotas should expire before or without being replaced by comparable new legislation. (The former rate is the full-duty rate in effect prior to the first reduction under the Trade Agreements Act of 193410 and the latter is that full-duty rate less the present absolute margin of Cuban preference on sugar.)
[Page 1334]The principal purpose and effect of this snap back provision is to place the sugar-supplying countries on notice, and to obtain their approval, in advance, of action which the United States would be forced to take in any event if sugar quota legislation were ever allowed to lapse. In the absence of the snap back provision, the action increasing sugar duties would have to be taken under the provisions of the escape clause of GATT. The Department of Agriculture is very insistent upon the snap back provision, however, because of the added assurance it would give to the domestic sugar industry. The Department of Agriculture maintains that it had the State Department’s commitment to incorporate such a provision into GATT the last time rates of duty on sugar were reduced and will not agree to further reductions without it.
Cuba’s rejection of our sugar proposal at Torquay is apparently based principally on dissatisfaction with the snap back provision, rather than with the rates of duty we have offered. They have pointed out that the snap back would give us freedom of action regarding rates of duty on sugar, whereas they would continue to be bound by commitments made to us on products imported from us. There is some validity in this objection, even though Cuba in this event would be free to invoke the nullification and impairment clause of GATT and to withdraw equivalent concessions from us.
The Cubans undoubtedly know that it is highly probable that United States sugar quota controls will be continued indefinitely and that if these controls were removed, we would be forced to increase the rates of duty on sugar sufficiently to afford protection to our industry. Nevertheless, for political reasons they do not wish to go on record as approving our increase of sugar duties in such a contingency, at least without obtaining something in return. The solution of the problem may lie in incorporating language in the snap back provision which would give the Cubans the basis for prompt withdrawal of concessions from us in the event we make use of the snap back provision on sugar. We believe, however, that the place to resolve this problem is Torquay.
In the meantime, we have instructed our delegation at Torquay to point out to the Cubans: (1) that the pre-Torquay understanding which we had arrived at with Cuba, the Dominican Republic and Peru leaves us free to continue negotiating with the other countries in the event we are unable to reach agreement with Cuba and that any reduction in rate which we agree to with them, in the absence of a reduction in the preferential rate to Cuba, will automatically operate to reduce the Cuban margin of preference; (2) that even in the absence of the snap back provision we would not be precluded from raising our tariff to an adequate protective level, but that there would be no basis for retaining the present 18–¾ cents per one hundred pounds preference for Cuba; (3) that the snap back contemplates the establishment [Page 1335] of a tariff quota for Cuba, but that in the absence of a snap back Cuba would be without any claim for tariff quota protection.
It is believed that our negotiating position vis-à-vis Cuba is strong and that we should not weaken it by agreeing to negotiate with them outside the Torquay framework.11
- Drafted by the Director of the Office of Middle American Affairs, Albert F. Nufer, the Deputy Director of the Office, Edward G. Cale, and Mr. Wellman.↩
- Ernesto Dihigo y Lopez Trigo.↩
- Reference is to the General Agreement on Tariffs and Trade (GATT), concluded at Geneva, October 30, 1947, and entered into force for the United States, January 1, 1948; for text, see TIAS No. 1700, or 61 Stat. (pts. 5 and 6).↩
- A memorandum of the conversation between Secretary Acheson and Cuban Foreign Minister Dihigo, drafted by Mr. Wellman and dated March 27, is filed under Department of State decimal file number 837.2351/3-2751.↩
- The third round of tariff negotiations under GATT took place at Torquay, England, from September 28, 1950, to April 21, 1951. For documentation on the negotiations, see Foreign Relations, 1950, vol. i, pp. 791 ff., and vol. i, pp. 1245 ff.↩
- For documentation on the interest of the Dominican Republic in an increased sugar quota in the United States, see pp. 1367 ff.↩
- The second round of tariff negotiations under the GATT took place at Annecy, France, from April 8 to August 27, 1949; relevant documentation is included in Foreign Relations, 1949, vol. i, pp. 651 ff. There is considerable unpublished documentation on the Cuban sugar preference question in Department of State decimal file 560 AL, and in International Trade Files, Lot 57 D 284, Boxes 108–109, and 128–132 (the 1949 GATT meetings at Annecy, France).↩
- Reference is to the Convention of Commercial Reciprocity, signed at Habana, December 11, 1902, and entered into force December 27, 1903; for text, see Department of State Treaty Series (TS) No. 427, or 33 Stat. (pt. 2) 2136.↩
- Reference is to the Sugar Act of 1948 (Public Law 388), approved August 8, 1947; for text, see 61 Stat. 922. For documentation on matters relating to the enactment of the Sugar Act of 1948, see Foreign Relations, 1947, vol. viii, pp. 604 ff.↩
- For text of the Trade Agreements Act (Public Law 316), approved June 12, 1934, see 48 Stat. 943; for text of the United States-Cuban Reciprocal Trade Agreement, signed at Washington, August 24, 1934, and entered into force September 3, 1934, see Department of State Executive Agreement Series (EAS) No. 67, or 49 Stat. (pt. 2) 3559.↩
- At Torquay the tariff rate on Cuban sugar adopted at Geneva in 1947 was bound for another three years. For further information on United States-Cuban negotiations, see Department of State Publication 4209 (Commercial Policy Series 135), Analysis of Torquay Protocol of Accession, Schedules, and Related Documents (Washington, 1951), pp. 232 ff.↩