Foreign Relations of the United States, 1958–1960, Foreign Economic Policy, Volume IV

299. Memorandum From the Deputy Assistant Secretary of State for Economic Affairs (Beale) to the Under Secretary of State for Economic Affairs (Dillon)⁰

June 4, 1959.

SUBJECT

• CFEP Discussion of Sugar Legislation for June 5

Problem:

The CFEP has been asked to recommend whether the Executive Branch should press for extension of the Sugar Act,¹ which expires December 31, 1960, at this session of Congress or whether consideration should be delayed until early 1960. The State Department’s position must be expressed at the CFEP meeting June 5.²

Discussion:

The domestic beet and cane, Puerto Rican, and Hawaiian sugar growers agreed in December that they would join in support of an indefinite extension, without amendment, of the present Sugar Act. The Department of Agriculture also supported such an extension and the President’s farm message to Congress recommended that sugar legislation be considered this year.³

The Department did not formulate a final view as to whether or not it would support the unamended extension of the Act. The Philippines, in particular, have pressed for an opportunity to participate in expanded United States consumption, and have cited an undertaking by the President when he signed the 1956 legislation committing the Executive Branch to give consideration to the Philippine request when new amendments are being prepared. Several Latin American countries have also requested increases in their quotas in the United States market. Domestic refiners favor an amendment which would increase foreign participation (principally Cuban) in the reallocation of deficits.

Certain actions of the Castro administration after its coming into power made it seem advisable in the Department’s opinion not to press ahead with attempts to assure Cuba’s share of the United States market until the implications of various revolutionary measures could be studied. Subsequently, on May 17 a proposed Agrarian Reform law was announced in Cuba and large scale expropriation of American-owned properties in Cuba appears imminent. United States owners of Cuban sugar properties have urged the Department to adopt a stern public posture toward the confiscatory provisions of the Agrarian Reform law, suggesting that Cuba be warned that the Sugar Act might be amended to Cuba’s detriment.

There have been reports in recent days that the Cuban Government plans to delay for one or two years the implementation of the Agrarian Reform law as it applies to sugar. These reports have not been confirmed officially by the Cuban Government. The Department of Agriculture does not dispute the validity of our contentions as they relate to foreign affairs. Agriculture argues however

a) that sugar growers need to know well in advance the provisions of the legislation in order to make planning decisions;

b) that sugar legislation should not be considered in an election year because

(i) domestic interests might press for increased shares at the expense of foreign countries,

(ii) the Administration’s difficulties in obtaining approval of other farm legislation will be increased.

Agriculture at one time favored extension of the Sugar Act this year with an amendment which would empower the Secretary of Agriculture to revise foreign quotas upon a finding that U.S. supplies were likely to be endangered. State argued that Executive Branch sponsorship of such a provision might be interpreted in Cuba and other countries in Latin America as an obvious attempt to intervene in Cuban internal affairs. Agriculture has apparently dropped this proposal and now suggests inclusion in the legislative history of an undertaking on the part of both houses of Congress to take speedy action to revise quotas if Cuban supplies decline. This approach would seem also to open up possibilities of misinterpretation by Latin American countries.

It should also be noted that the fears of the Department of Agriculture cited in CFEP 584/1⁴ appeared to be based on the assumption that enactment of sugar legislation might not take place prior to January 1, 1961. Such an eventuality seems extremely unlikely in a year when Congress will be adjourning early for elections. Comments on other points in CFEP 584/1 are attached.⁵

The following considerations seem to argue for the delay until next year of our consideration of the Act.

a) It is still too early to evaluate accurately the impact of all the measures the Castro regime may undertake.

(i) We should seek to avoid any action which could be interpreted in Cuba and throughout Latin America as indicating United States approval of the steps taken in Cuba.

(ii) We should also seek to avoid the situation in which domestic sugar groups or foreign countries might exploit the present uncertain situation as regards Cuba to push through legislation which would worsen Cuba’s present position, or which would contain provisions which Castro would interpret as a threat of U.S. intervention.

b) It can be anticipated that there would be a sharp domestic reaction to any action which appeared not to take cognizance of the actions of a Government which had just threatened to expropriate American property in several fields without adequate compensation. The effect on U.S. investors who might be contemplating investment abroad should also be considered.

In advancing these considerations the Department representative to the CFEP may wish to assure the Department of Agriculture that the State Department would be prepared to participate in the preparation of the Administration position on sugar legislation with a view to introduction of a bill early in 1960. By that time a much fuller appraisal of political and economic developments in Cuba will be possible.

Since Agriculture’s main preoccupation appears to be with future planning for domestic growers, the Department might agree not to press for any change in the section of the Act under which domestic areas receive 55 percent of increases in consumption over 8,350,000 tons. Such an assurance should help Agriculture and the domestic growers make more definite plans for the future. (The Department should not at this time undertake to seek an amendment to the deficit reallocation provisions.)

0. Source: Department of State, E/CFEP Files: Lot 61 D 282A, Extension of the Sugar Act. Confidential. Drafted by Jack B. Button of the of Commodities Division, Office of International Resources, Bureau of Economic Affairs. Cleared in draft with Robert M. Carr, Director of the Office of International Resources; Robert A. Stevenson, Officer-in-Charge of Cuba Affairs; Florence Kirlin of the Bureau of Congressional Relations; Francis G. Jarvis, Officer-in-Charge of Economic Affairs, Office of Southwest Pacific Affairs, and cleared in substance with Jean H. Mulliken, Officer-in-Charge of Commodities and Commercial Policy, Office of Inter-American Regional Economic Affairs.
1. The 1948 Sugar Act, approved August 8, 1947, as amended. (61 Stat. 922)
2. The Department of State’s suggestion to postpone requesting Congress to renew the Sugar Act was approved by the CFEP at its June 5 meeting. (Minutes of CFEP Meeting, June 5; Eisenhower Library, CFEP Records, Office Series, Council Minutes)
3. The President called for an extension of the Sugar Act in his Annual Budget Message to Congress, January 19, 1959, and the President attached a memorandum from the Secretary of Agriculture, January 19, calling for Congress to examine the Sugar Act to his Special Message to Congress on Agriculture, January 29, 1959. (Public Papers of the Presidents of the United States: Dwight D. Eisenhower, 1959, pp. 91 and 146)
4. CFEP 584/1, “Extension of the Sugar Act,” June 2, is attached to a memorandum from Cullen to the CFEP, June 3. (Department of State, E/CFEP Files: Lot 61 D 282A, CFEP 584, Extension of the Sugar Act)
5. Attached but not printed.