Foreign Relations of the United States, 1969–1976, Volume E–11, Part 1, Documents on Mexico; Central America; and the Caribbean, 1973–1976

444. Telegram 88820/Tosec 91 From the Department of State to Secretary of State Kissinger in Alexandria¹

Washington, May 1, 1974, 0007Z.

88820/Tosec 91. Subject: Jamaican Bauxite. For the Secretary and Maw from Eagleburger.

1. Yesterday Tom Enders, Mark Feldman and I met separately with Jamaican representatives and company lawyers (who had heard we were meeting with Jamaicans and asked to come in) to hear both sides review current bidding in bauxite negotiations. Negotiations between companies and GOJ will resume Thursday for at least a two-day non-stop bargaining session. Company Chief Executives are now meeting, possibly to come up with a new proposal. Prospect of imminent rupture therefore appears reduced, but will very much depend on how companies handle themselves on Thursday.

2. Company lawyers told us that basic issue is a “genuine, fundamental” difference of opinion over true value of Jamaican bauxite to the U.S. market. They explained that revenue issue remains the key matter in dispute, with the sides still differing by a factor of 2½–3 times. Companies appear considerably more relaxed as to secondary issues of participation and expanded production. Their latest proposal—offered “ad referendum”—provides for a total estimated GOJ annual revenue of U.S. $80 million versus U.S. $48 million under initial offer. Jamaicans have rejected this offer. They are pressing for annual revenues of about U.S. $220 million based on a price of U.S. $23 per ton of bauxite. (In contrast the companies insist that the current fair value of bauxite is only $11–12 per ton.)

3. I told company lawyers that you urged that both sides continue to negotiate in good faith, and that artificial constraints such as unilateral actions or legislation be avoided. I said we regard the matter as one between the companies and the Jamaican authorities. I repeatedly stressed that we are not involving ourselves in any way with either side, but were merely passing along to you the views of each. We are, however, concerned that the interests of U.S. consumers receive their proper weight.

4. The Jamaicans, headed by Matalon—as eloquent as ever—reviewed with us their version of recent negotiating history, with an emphasis on claims of statistical “duplicity” and confusion on the part of the companies. They agree with the companies, however, that the value of bauxite is the key issue. They also believe that they may be close to obtaining agreement from the companies to the concept of a sliding scale of taxation based on the market price of the metal. But they concede (and the companies confirm) that they remain far apart on the percentage rate of taxation that should be applied.

5. I told the Jamaicans—as I earlier told the company lawyers—that our only interest is in continued good faith negotiations and that we were merely listening to each side’s views. I noted your hope that legislation could be avoided. They replied that Prime Minister Manley would “bend over backwards” to meet your desires. But, Matalon said, the GOJ must soon submit and defend its budget, and the Minister of Finance must be able to describe where revenue will come from. He emphasized that any great delay in presenting the budget would present real political problems to GOJ and that this process might compel them to impose legislation (relating only to the revenue issue) if agreement not reached in near future. Nevertheless, said Matalon, GOJ “may be prepared” to delay budget submission if companies show “genuine interest” in reaching agreement when talks reopen. We have since learned that the Jamaicans have told ARA they will wait an additional two weeks as a “courtesy” to you before introducing any legislation.

6. Comment: Relations between the GOJ negotiators and the companies have clearly worsened, with each side evidencing to me increased irritation with the other. I am not particularly sanguine about the immediate future, and am inclined to think that we are—at least for the short term—in for a rough time.

7. We have picked up comment by company representatives—probably inspired by Jamaican misrepresentation—suggesting that existence of a special channel through me to you indicates State Department sympathy to the Jamaican case.

8. Thus, I believe it is time we gently sought to shift these informal briefing sessions away from your immediate office to Enders and Maw; we need to put some distance between you, the companies, and the Jamaicans or we may see you (through me) embroiled in the details of the negotiations. Should this happen it will be much more difficult to use your influence to mediate between the parties at the critical junctures.

9. If you agree, I will seek to persuade both the companies and the Jamaicans to shift their focus to EB and L, while preserving your commitment to Manley that I be available for urgent private messages. Ken Rush agrees that this is the proper course to take.

Rush

1. Summary: After informing Kissinger and Maw of separate discussions with Jamaican Government officials and aluminum company representatives regarding the state of negotiations on the future of the bauxite industry in Jamaica, Eagleburger suggested that the parties’ future contacts with the Department should be shifted away from the Secretary’s office so that Kissinger would not become “embroiled in the details of the negotiations.”

   Source: National Archives, RG 59, Central Foreign Policy File, D740103–0572. Secret; Immediate; Exdis. Drafted by Adams; cleared by Rush, Enders, and Feldman; and approved by Eagleburger. Kissinger was in Egypt engaging in shuttle diplomacy between Egypt and Israel. In telegram 78/Secto 145 from Alexandria, May 4, Kissinger approved the approach suggested by Eagleburger. (Ibid., D740113–0944) In telegram 92365/Tosec 252 to Kingston and Jerusalem, May 4, Eagleburger reported that he had informed the Jamaicans and the aluminum companies that Kissinger did not wish to become directly involved in negotiations but that he hoped both parties would keep Maw and Enders informed of developments. (Ibid., D740108–0435) In telegram 1557 from Kingston, May 3, the Embassy reported that the Jamaican Government and the aluminum companies had suspended their negotiations. (Ibid., Nixon Presidential Materials, NSC Files, Country Files—Latin America, Box 786, Jamaica, Vol. I)