Foreign Relations of the United States, 1955–1957, Foreign Aid and Economic Defense Policy, Volume X

211. Memorandum From the Under Secretary of Agriculture (Morse) to the Council on Foreign Economic Policy¹

Washington, November 17, 1955.

SUBJECT

• International Sugar Agreement

Attached is a statement on the International Sugar Agreement prepared jointly by the Departments of State and Agriculture. It is expected that the recommendations will have the full support of the Department of State as soon as there is time for the necessary consideration within that Department.² In view of the urgency, however, we wish to present the matter at this time.

The International Sugar Agreement runs for five years with provision for review and amendment during 1956, the third year of the Agreement. Naturally, the individual member nations will be free to accept or reject any amended Agreement. The proposed amendments may be considered at a meeting called by either the International Sugar Council or the United Nations.

Preparations for studying the effects of the Agreement and procedures for the 1956 conference will be discussed at the meeting of the Council which will begin in London November 28, 1955. It will be necessary for the United States Delegation to participate in these arrangements and in the 1956 conference. The recommendations in the attached memorandum make it clear that the United States Government will be free to consider and accept or reject the amended Agreement.

For further information there are attached copies of President Eisenhower’s report³ to the Senate recommending the adoption of the present International Sugar Agreement.

True D. Morse⁴

[Attachment]

INTERNATIONAL SUGAR AGREEMENT

Problem

The International Sugar Council will hold its next meeting on November 28. Preparatory meetings of certain committees of the Council will begin on November 23. The Council will establish a procedure to review the workings of the International Sugar Agreement and to consider amendments to the Agreement. As a result of this examination governments will undoubtedly be asked to renegotiate the Agreement in 1956. Although under the terms of the Agreement, governments are free to withdraw at the close of 1956 without participating in the negotiations, it is presumed they will participate and then decide whether to accept or reject the revised agreement. Although the United States will not be required to commit itself in any way at the November meeting, the extent to which we express our views on procedure for prompt renegotiation of the Agreement will be taken by other governments as indicative of our interest in continued participation. The delegation to the meeting should therefore be instructed as to whether this government is willing to participate in the renegotiations next year and then to decide whether or not to adhere to the revised terms of the Agreement.

Discussion

Early in 1953 the Departments of Agriculture and State were requested by the domestic sugar industry to use their best efforts to secure a new international sugar agreement. Cuba and the Dominican Republic considered that an international sugar agreement could be of great value to their sugar economies, and they requested the support of the United States. At that time the International Sugar Agreement of 1937 was inoperative, and a negotiating conference called by the United Nations was scheduled for July 1953. The domestic industry and the foreign producers in the Caribbean were assured of the Administration’s support, and the United States subsequently played an active role in the negotiations which resulted in the International Sugar Agreement of 1953. The Agreement was approved by the Senate by a vote of 60–16 and ratified by the President on April 29, 1954. Twenty-three nations, including fifteen exporters and eight importers, are now members of the Agreement.

Although the Agreement was negotiated for a five year period, it is in effect a three year agreement. Its terms provide that it will be open for amendment in the third year, and any participant may withdraw from the Agreement at that time. It is known that a number of countries are desirous of changes in the Agreement and a conference to negotiate substantial amendments will undoubtedly be held in 1956. At the meeting of the Council this month preliminary steps will be taken to arrange for such a conference. It is possible that the Council may decide to dispense with its own review of the workings of the Agreement and ask the United Nations to call a worldwide conference as soon as possible. This would have the additional purpose of attracting countries not now members of the Agreement.

The International Sugar Agreement attempts to stabilize the world sugar market within a specified price range by assigning each exporting country a basic export quota and then adjusting these quotas to the needs of the market whenever the world price falls below or rises above the desired minimum and maximum price. The Sugar Agreement thus differs substantially from the International Wheat Agreement. Whereas the Wheat Agreement is a multilateral contract to buy and sell specified quantities at minimum and maximum prices, the Sugar Agreement contains no such obligations. It looks to balancing supplies with market requirements in order to keep the world market price within a range agreed as fair to both producers and consumers. While exporting countries undertake substantial obligations under the terms of the Agreement, the principal obligation of importing countries such as the United States is to limit imports from non-participating countries from gaining advantages at the expense of participating countries.

During its first two years the International Sugar Agreement has been successful in stabilizing world market prices, but only at or slightly below the minimum level sought by the Agreement. Many factors account for this. It will suffice to say that despite the Agreement world supplies of sugar have continued far in excess of consumption requirements. The Agreement is however still regarded by most participants as a desirable instrument through which countries can work together to avoid chaos in the marketing of a commodity important in world trade. Many countries are dependent on the export of sugar as a principal means of livelihood. The International Sugar Agreement in its exploratory stages has not accomplished all that was hoped for. It has however come to be recognized in the marketplace as a constructive force of substantial authority.

The United States has important interests in the world’s great sugar producing and exporting areas in the Caribbean. The security of our considerable trade and investment, our sources of necessary raw materials and our military bases in that area depend upon the maintenance of a reasonable degree of political stability and closely related economic well-being. A sharp depression of prices and mounting world sugar surpluses would cause extreme economic stress and severe political unrest in this area. The United States, therefore, has a significant stake in any international action which would help to eliminate the recurring crisis which would upset this world-wide industry. An important consideration for the United States is the fact that the International Agreement does not change the pattern of our trade in sugar. Our domestic sugar legislation will continue to regulate the volume and source of our imports as it does at the present time. It is the view of our domestic industry that an international sugar agreement is important to their welfare as a means of preventing mounting surplus in the Caribbean and resultant pressure on this market. The case for an international sugar agreement is thus based on both domestic and foreign policy considerations, and the Departments of Agriculture and State cooperated closely to help bring the present Agreement about.

Recommendation

It is recommended that the delegation to the November meeting of the International Sugar Council be authorized to take an active role in the preparation for a negotiating conference next year, and secondly that when such a conference is called the United States should plan to participate and work toward a revised agreement which in the judgment of the departments concerned can make the best contribution to the solution of a problem in international trade which affects the livelihood of many countries important to the United States and which, therefore, involves directly the national interest of the United States.⁵

1. Source: Department of State, E–CFEP Files: Lot 61 D 282A, U.S. Participation in International Sugar Agreement—CFEP 534. Official Use Only. Circulated under cover of a memorandum by Cullen, November 19.
2. In a memorandum of November 17 to Hoover, Herbert V. Prochnow recommended that the Under Secretary support the paper submitted by the Department of Agriculture on the basis that the continued interest of the United States would be “helpful in our relations with the Latin American countries” and could “make a contribution to the solution of a problem which directly affects their national welfare.” (Ibid.) Hoover approved the paper.
3. Not printed.
4. Printed from a copy that bears this typed signature.
5. At its meeting on November 22, the CFEP agreed that the U.S. Delegation to the meeting of the International Sugar Council should be authorized to take an active role in a pending negotiation conference with a view toward continued U.S. participation in the International Sugar Agreement. The International Sugar Protocol was concluded at London on December 1, 1956, and it entered into force for the United States on September 25, 1957; for text, see 8 UST 1937.