Office of the Historian

389. Memorandum From the President’s Assistant for National Security Affairs (Powell) to President Reagan1

Washington, March 7, 1988

SUBJECT

  • Sugar Re-Export Program

The sugar program mandates that imports be restricted as necessary to maintain a high domestic price (about 18 cents/lb.). The import quota for 1988 is 25% below the 1987 level.

The 1988 Continuing Resolution contains a provision (Sec. 583) requiring USDA to import sugar at U.S. prices from the Philippines and Caribbean Basin countries, refine it, and re-export it at world prices (about 8 cents/lb.). At least 400,000 tons would be imported and re-exported under this authority over and above quota levels.

The provision, sponsored by Senator Inouye, represents an effort to shield important countries from the harmful effects of the cut in the sugar quota. The Administration opposed the Inouye provision last year as a further distortion of the U.S. sugar program. However, the provision does have the advantage of providing needed foreign exchange to vitally important countries.

Secretary Lyng has been advised by legal counsel that Sec. 583 provides neither the legal authority nor the funding to implement the program.2 Aware of USDA’s concerns, Senator Inouye and Congressman Murtha have asked that I bring to your attention two letters from Congressional supporters of the provision (Tab A).3 They emphasize the importance of sugar export earnings to U.S. foreign policy objectives in the Philippines and the Caribbean Basin.

In addition, Congressman Murtha has asked that I bring to your attention a letter he received from the Chairman of the Philippines Sugar Regulatory Administration asserting that the program is needed [Page 944] to fight the communist threat in sugar-producing regions of his country (Tab B).4

USDA’s legal concerns are serious and I believe should be respected. I have written to Secretary Lyng asking that he give high priority to obtaining legislation reforming the U.S. sugar program to put it back on a market-oriented basis, as you have proposed.

My responses to Senator Inouye and Congressman Murtha are at Tab C.5 I have endorsed the goal of supporting the Philippines and the Caribbean Basin countries while respecting the need to resolve legal questions.

  1. Source: Reagan Library, Stephen Danzansky Files, Subject File, Sugar 11/27/1987–03/22/1988; NLR–733–13–22–6–3. No classification marking. Sent for information. Drafted by Stephen Farrar. Copies were sent to Bush and Baker.↩
  2. In a March 10 memorandum to Risque, Lyng outlined the USDA position’s that it had no legal authorization to implement the program proposed by the Inouye Amendment. Lyng concluded: “From a broader policy perspective, everyone needs to be reminded that the Reagan Administration has tried to reform the current sugar program over the last several years. Implementation of the sugar reexport program would only foster a continuation of the existing sugar program.” (Reagan Library, Stephen Farrar Files, 1987–1988 International Economic Affairs Directorate Outline File, Sugar 03/10/1988–03/23/1988)↩
  3. The February 20 and February 29 letters are attached but not printed.↩
  4. The February 18 letter from Arsenio Yulo is attached but not printed.↩
  5. The responses, dated March 7, are attached but not printed.↩