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

390. Action Memorandum From the Acting Assistant Secretary of State for Economic and Business Affairs (Larson) to Secretary of State Shultz¹

Washington, March 18, 1988

SUBJECT

• Circular 175: Request for Authority to Accede to the 1987 International Sugar Agreement

ISSUE FOR DECISION

Whether to grant authority for the United States to accede to the 1987 International Sugar Agreement (ISA),² pending the enactment of Congressional authorization of U.S. participation in the agreement, and to sign the associated Declaration of Provisional Application (Tab A).³

ESSENTIAL FACTORS

The most important issue in considering accession to the ISA is our inability for at least the next year to pay our assessment to the International Sugar Organization (ISO). Debate over this has delayed a consensus in the Trade Policy Staff Committee. All other agencies have now agreed to proceed with accession, based on an understanding that other ISO members are eager enough that we participate to tolerate our late payments.

Under Circular 175 authority granted September 3, 1987, the United States participated in the 1987 UNCTAD conference on sugar. The conference completed a new ISA to succeed the 1984 ISA, which will expire on April 1, 1988.

The new agreement, like its predecessor, is an administrative agreement with no economic provisions. It maintains the ISO, created in 1968, to collect statistics on sugar trade and provide a forum to discuss sugar issues. Exporting members value the ISO as a symbol of and forum for international cooperation on the problems of the world sugar market. U.S. participation is a statement of our desire to cooperate on those problems, and a recognition of our partial responsibility (via our domestic sugar program) for world market conditions.

United States participation is crucial to the future of the ISA. The ISA has not yet received sufficient adherences to bring it into force, and is unlikely to do so without U.S. participation. Other members believe the absence of the U.S. devalues the ISO. If the ISA does not enter force by the time the ISO’s financial reserves run out in April, it is likely the ISO will be liquidated, an action which LDC sugar exporters will regard as the result of U.S. indifference to their economic problems.

As with the 1984 agreement, the U.S. will join the 1987 agreement as an executive agreement, not a treaty, and will therefore not submit it to the Senate for advice and consent to ratification. We cannot accede, however, until we obtain statutory authorization for U.S. participation. In the meantime we will apply the ISA only provisionally. The Memorandum of Law (Tab B)⁴ concludes that the Executive has adequate legal authority to conclude the agreement.

Funding of U.S. participation is a crucial issue. Under the 1984 ISA we never got intended statutory authorization for U.S. participation which would have permitted funding the U.S. contribution from the Department’s Contributions to International Organizations (CIO) appropriation. We paid our contribution from the International Conferences and Contingencies (ICC) appropriation for the life of the agreement. As the ICC appropriation became increasingly underfunded, we had difficulty paying our contributions on time.

With the 1987 agreement, we are taking steps to improve funding prospects. In negotiating the agreement, we reduced the U.S. share of the assessment from 13% to 11%. We will pursue vigorously legislative authorization to permit funding from the CIO appropriation.

However, we must fund our contribution from the ICC appropriation until such authorization is obtained. After payment of 1987 arrearages, less than $38,000 remains in the ICC appropriation for the ISO, against a potential 1988 assessment of $165,000. The ISO is included in the ICC budget request for fiscal year 1989 at an approved OMB request level of $111,000, which is far short of requirements. Prompt legislative action will permit funding from the CIO account for FY90.

Not joining would also involve expenditures. The ISO has projected that our share of liquidation costs would exceed $180,000, more than our 1988 assessment. Also, the International Wheat Council would have to assume the full cost of some facilities it shares with the ISO, which would be passed on to us as an increased assessment.

RECOMMENDATION

That you grant authority to accede to the 1987 International Sugar Agreement, pending Congressional authorization of U.S. participation in the agreement, and sign the attached notice of provisional application of the agreement (Tab A) (recognizing, however, that available resources will be inadequate to pay fully our assessment). This recommendation has been cleared and approved by the Trade Policy Staff Committee.⁵

1. Source: Department of State, Executive Secretariat, S/S Files, 1988–1989 Official Office Files for (E) Economic Affairs Allen Wallis, Lot 89D154: Through Memoranda March 1988. Unclassified. Drafted by J.D. Mueller (EB/TDC/OFP/FPD) on March 9; cleared in draft in IO/EX, IO/SB, L/EBC, L/T, EB/TDB/OFP/FPD, EB/TDC/OFP, EB/TDC, E, H, M/COMP/BP, D/P&R, EAP/EP, EAP, ARA/EPC, and AF/EPS. Sent through Wallis. DH initialed for Wallis. A stamped notation reading “GPS” appears on the memorandum, indicating Shultz saw it.
2. Attached but not printed at Tab C is a copy of the 1987 ISA.
3. The signed copy is attached but not printed.
4. Attached but not printed.
5. Shultz checked the “Approve” option on March 19. Telegram 7194 from London, March 29, reported that the 1987 ISA was brought into force on March 24 and the U.S. deposited its instrument of provisional application on March 23. (Department of State, Central Foreign Policy File, Electronic Telegrams, D880269–0217)