Foreign Relations of the United States, 1981–1988, Volume XXXVIII, International Economic Development; International Debt; Foreign Assistance

358. Minutes of an Economic Policy Council Meeting¹

Washington, February 11, 1986, 11 a.m.

ATTENDEES

• The President, Messrs. Baker, Shultz, Weinberger, Meese, Block, Baldrige, Brock, Regan, Miller, Yeutter, Sprinkel, Poindexter, Kingon, McAllister, Daniels, Svahn, Amstutz, Brown, Chew, Dawson, Khedouri, Danzansky, Mulford, and Stucky, Ms. Dole, and Ms. Risque

Secretary Baker stated that the Economic Policy Council was presenting three issues—textiles, sugar, and the Export Enhancement Program—for decisions by the President.² He noted that the initiatives proposed by the Council would help promote the economic development of the Caribbean Basin Initiative (CBI) countries and fulfill the promise the President made to correct the deficiencies in the 1985 Farm Bill, when signing the bill.³

[Omitted here is discussion of CBI Textile Policy.]

2. The Sugar Program

Mr. Amstutz noted that when the President signed the 1985 Farm Bill, he stated his intention to seek remedial changes in the sugar provisions. He pointed out that since 1980 per capita consumption of sugar has declined twenty-five percent. He explained that the decline is a result of the Federal policy of supporting high domestic sugar prices, thus creating an incentive for substituting other sweeteners for sugar. Mr. Amstutz stated that because the law requires the Federal Government to balance domestic and international supply with domestic demand, the decline in sugar usage requires limits on the amount of sugar that can be imported into the U.S.

Mr. Amstutz explained that last September, the President approved the unanimous recommendation of the Economic Policy Council to establish a fiscal year quota of 1.72 million, rather than the 1 million tons that would have balanced domestic and international supply with domestic demand.⁴ He stated that as a result of the Administration’s action, the Congress mandated in the 1985 Farm Bill that the quota be reduced or extended, and the sugar program operated with no forfeitures in FY 1987.

He stated that the Economic Policy Council had developed two sets of options for the President’s consideration: short term and longer term approaches. He explained that the short term options were:

1. Do not try to mitigate the effects of the sugar quota, but rely on other independent initiatives to help CBI countries;

2. Provide, at least in the short term, in-kind commodity assistance to CBI countries and other lesser-developed countries; and

3. Reallocate country sugar quotas in favor of CBI and other lesser-developed countries.

Mr. Amstutz stated the Economic Policy Council unanimously recommends option 2, providing in-kind assistance. He noted that reallocating country quotas violates our obligations under GATT and would require the U.S. to provide “compensation” to adversely affected trading partners.

Mr. Amstutz reviewed the longer term options:

1. Propose legislation repealing the “no forfeiture” provision of the domestic sugar program;

2. Resubmit our Farm Bill proposal to gradually reduce the sugar loan rate; and

3. Propose legislation basing the loan rate on market prices.

He stated that the Economic Policy Council unanimously recommends resubmitting our 1985 Farm Bill proposal. Secretary Block stated that the outlook for our Farm Bill sugar proposal was not very good, but that was the best course the Administration could pursue. Several members of the Council emphasized the harm that the U.S. sugar quota inflicts on lesser developed countries that produce sugar.

[Omitted here is discussion of the Export Enhancement Program.]

1. Source: Reagan Library, Stephen Danzansky Files, International Trade Subject Outline, IX (A) EPC—Minutes 09/21/1985–09/29/1985; NLR–733–6–43–2–1. Confidential. The meeting took place in the Cabinet Room. No drafting information appears on the minutes.
2. The Economic Policy Council sent a decision memorandum dated February 10 to Reagan on the sugar program. For the decision on “Mitigating the Effects of the Sugar Quota,” Reagan initialed his approval of “Option 2: Provide, at least in the short term, in-kind commodity assistance to CBI and other lesser-developed countries.” For the decision on “Reforming the Sugar Program,” Reagan initialed his approval of “Option 5: Resubmit our Farm Bill proposal to gradually reduce the sugar loan rate.” (Reagan Library, Stephen Danzansky Files, International Trade Subject Outline, IX (A) EPC—Minutes 09/19/1985–09/20/1985)
3. See footnote 5, Document 354.
4. See footnote 6, Document 344.