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

392. Memorandum From Stephan Danzansky and Jose Sorzano of the National Security Council Staff to the President’s Assistant for National Security Affairs (Powell)¹

Washington, March 22, 1988

SUBJECT

• Sugar

Issue

Should the NSC support implementation of the Inouye amendment?

Background

Senator Inouye attached a provision to the 1988 Continuing Resolution requiring USDA, separate from the sugar quota program, to import 400 thousand tons of sugar from the Philippines and CBI countries at U.S. prices (18 cents/lb.), refine it, and re-export it at world prices (8 cents/lb.). USDA has concluded that the provision does not provide adequate legal authority to implement the program. Inouye’s objective was to shield CBI countries and the Philippines from damage caused by the 25 percent cut in the U.S. sugar import quota in 1988. Backers of the amendment are seeking ways to enact clarifying legislation, perhaps as part of the trade bill.

We need to resolve the issue by Wednesday² morning, since ambassadors from CBI countries will be in Thursday³ to meet with you and Senator Baker.

Options

1. Support the USDA legal ruling; do not attempt to fix the statute; channel pressure toward reform of the sugar program. (Danzansky recommendation)

— Difficult to second-guess USDA’s interpretation of its statutory authorities.

— Inouye amendment makes reform harder to achieve—piling distortions upon distortions.

— The Inouye amendment was included in the President’s March 10 “pork list” of provisions in the 1988 CR that should be rescinded.

— Supporting a legal fix would favor CBI and the Philippines over other sugar suppliers, causing loud protests and GATT problems. It would also be seen as contrary to our “standstill” pledge on agriculture in the Uruguay Round.⁴

2. Find a way to make the Inouye amendment work, if necessary through a statutory fix. (Sorzano recommendation. Dick Childress concurs).

— While the Administration opposed this as bad public policy it is nevertheless now a statute. It is also the only tool we have to deal with a critical problem.

— The central issue is the Congressionally-mandated sugar support price which is a major problem not likely to be resolved by this Congress.

— CBI and Philippines are high foreign policy priorities. Successive sugar quota cuts are adding to economic deterioration. The foreign aid cupboard is bare.

— The amendment could provide CBI countries up to $40 million in foreign exchange earnings in 1988; almost half would go to the Dominican Republic.

— A substantial amount would go to other hard-pressed allies in the region such as El Salvador, Honduras and Jamaica and basket cases such as Haiti.

— President Balaguer of the Dominican Republic meets with the President on Friday.⁵

State continues to accept the Administration position opposing the Inouye amendment. However, ARA favors working with Inouye to get immediate benefits. State is also attempting to identify USDA surplus commodities that could be made available to CBI countries.

RECOMMENDATIONS

Option 1: Support the USDA legal ruling; do not attempt to fix the statute; channel pressure toward reform of the sugar program.⁶

Option 2: Alternatively, find a way to make the Inouye amendment work, if necessary through a statutory fix.

1. Source: Reagan Library, Stephen Farrar Files, Chronological File, Farrar Chron March 1988; NLR–177–7–36–11–7. Confidential. Sent for action. Prepared by Farrar. A stamped notation on the memorandum reads: “Deputy Natl Sec Advisor has seen.”
2. March 23.
3. March 24. See footnote 2, Document 393.
4. See footnote 2, Document 387.
5. Reagan hosted Balaguer at the White House on Friday, March 25. (Reagan Library, President’s Daily Diary)
6. Negroponte initialed his approval of Option 1 on March 23. Under the recommendations, he wrote: “N.B. Since White House on record as recently as 3/10, it is difficult to see how our approach could be reversed between now and tomorrow—as suggested in para 2 of Background. JDN.”