393. Summary of a Meeting1
INTERAGENCY MEETING ON SUGAR
SUMMARY
1. Reason for Meeting
To follow up on Howard Baker’s commitment to Ambassadors from CBI countries and the Philippines to seek ways of reducing the near-term impact on these countries of the U.S. sugar import program.2
[Page 952]2. Inouye Amendment
USDA (Chris Hicks) reported that several drafts attempting to fix problems in the Inouye Amendment to the Continuing Resolution are circulating on the Hill. The strongest contender, which could be attached to the trade bill, would require that sugar be exported under the Export Enhancement Program (EEP), thereby creating a supply shortfall that would be filled with sugar from the CBI countries and the Philippines. These fixes are not attracting sponsors because they would use EEP resources now available for other commodities, notably wheat. Even if enacted, USDA questioned whether these fixes would be sufficient to implement the sugar re-export program.
Next Steps: The Administration will continue to monitor and evaluate fixes to the Inouye Amendment and their impact.
3. Legislative Reform
USDA reported that draft legislation that would reform the sugar program by amending the Bradley bill is nearly completed. The draft would modify the Bradley bill to eliminate GATT problems by letting the import quota level rather than the domestic price be the variable. No agency believed that there is a realistic chance of obtaining legislation this year. Nevertheless, OMB and others emphasized the importance of keeping up the pressure for reform.
Next Steps: The legislation will shortly be reviewed by the EPC.
4. Sec. 416 Food Aid Compensation
USDA reported that the sugar compensation program has been discontinued because wheat and dairy products, the commodities preferred by receiving countries, are no longer available. However, USDA is prepared to look case-by-case at countries where a need might exist for available commodities, primarily corn and sorghum.
Next Steps: USDA will consider requests for using Sec. 416 in sugar-producing countries.
5. Sugar-Containing Products
USDA reviewed the background of the issue, citing growing imports of sugar-containing products as market forces work to evade the sugar quotas. USDA has authority under Sec. 22 of the Agricultural Adjustment Act to restrict imports of sugar-containing products if necessary to implement the sugar program. Imports come mainly from Canada and the European Community.
Last December, the President decided against restricting imports at the time, but agreed to re-examine the possibility of placing restrictions on sugar-containing products after consultations with Canada [Page 953] regarding Cuban sugar imports and the signing of the Free Trade Agreement.3 USDA observed that the U.S./Canada FTA deals with this problem by prohibiting restrictions on products containing less than 10% sugar—far below the content level of products squeezing out sugar imports.
While all acknowledged that the U.S. will be forced to restrict imports of sugar-containing products in the future if the import quota for sugar vanishes, most agencies had serious reservations from a trade policy perspective with imposing restrictions now. In their view, broader restrictions would allow distortions to spread and diminish the pressure for reform of the sugar program. In USDA’s view, restrictions on sugar-containing products are the best means for providing near-term benefits to the CBI countries and the Philippines.
Next steps: Question should be reviewed again by the EPC given the lack of consensus.
6. Cuban Sugar
State (Al Larson) reviewed the history of USG attempts to dissuade Japan, Canada, and Egypt from buying Cuban sugar. The problem with Japan and Egypt has been in finding alternate suppliers. The Philippines was not able to supply Japan when the issue was last raised. Egypt, which demands refined sugar, gets Cuban sugar refined below-cost in Bulgaria. State said that it is doing what it can to deny sugar markets to Cuba, but there is likely to be little benefit for CBI countries. John Negroponte suggested that it may be useful to study the market for Cuban sugar.
Next Steps: CIA preparing a paper on Cuban sugar trade, for interagency review in next 10 days or two weeks.
7. Increased Sugar Quota
State raised the possibility that the existing 750,000 ton sugar quota could be raised by 100,000 tons because of firming of sugar prices and the relative shortage of sugar.
Next Steps: USDA will study the possibility of increasing the quota.
8. Commerce Study
The Commerce Department’s recent study of the sugar program4 was praised. All agreed that its conclusions should be used in building support for the Administration’s legislative reform proposal.
[Page 954]9. Participants
NSC
John Negroponte (Chair)
Steve Danzansky
Steve Farrar
Dick Childress
Kim Flower
Alison Fortier
White House
Jay Stone
State
Al Larson
Treasury
Bob Cornell
Agriculture
Chris Hicks
David Lyons
Commerce
Ralph Ives
OMB
Dave Gibbons
Joel Kaplan
Bob Bostick
AID
Jim O’Meara
EPC
Bill Maroni
- Source: Reagan Library, Stephen Farrar Files, Chronological File, Farrar Chron April 1988; NLR–177–8–4–4–9. No classification marking. The meeting took place in the White House Situation Room. Meeting minutes were not found. The summary was sent under an April 12 covering memorandum from Farrar to Negroponte, in which Farrar requested that Negroponte approve the circulation of the paper to the agency representatives who attended the meeting.↩
- Baker’s meeting with the Ambassadors from the Philippines and sugar-producing countries in the Caribbean Basin took place on March 24. According to a March 23 memorandum from Danzansky to Powell, the Ambassadors of the CBI countries wrote Baker on February 9 requesting a meeting “to discuss USDA’s refusal to implement a new sugar re-export program intended to help their countries and the Philippines.” (Reagan Library, Stephen Danzansky Files, Subject File, Sugar 03/23/1988–07/18/1988; NLR–733–13–23–1–7) The February 9 letter as well as talking points and a background paper for the March 24 meeting are attached to the memorandum. Documentation on the Caribbean Basin Initiative is scheduled for publication in Foreign Relations, 1981–1988, vol. XVII, pt. 1, Mexico; Western Caribbean.↩
- See Document 385. Reagan signed the United States-Canada Free Trade Agreement on January 2, 1988.↩
- Not found.↩