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

400. Action Memorandum From the Assistant Secretary of State for Economic and Business Affairs (McAllister) to the Under Secretary of State for Economic and Agricultural Affairs (Wallis)¹

Washington, November 10, 1988

SUBJECT

• Circular 175; Request for Concurrence to Enter into Negotiation of an Agreement to Establish an International Tin Study Group

ISSUE

Your concurrence is required for U.S. participation in the negotiation of an agreement to establish an international tin study group. The Trade Policy Staff Committee has agreed that we should do so. The conference is scheduled for November 21 through December 2 in Geneva.

ESSENTIAL FACTORS

The United States had not been a member of earlier tin agreements but joined the Fifth International Tin Agreement (1976–81) and its executive body, the International Tin Council (ITC). Fortunately, we did not join the Sixth International Tin Agreement, in place since 1982. ITC efforts to support tin prices through buffer stock purchases and other market intervention led to a collapse of the London tin market in October 1985 and the organization’s decline and impending dissolution, now expected to take place on June 30, 1989.

In July 1986, anticipating the demise of the ITC, the Association of Tin Producing Countries (Australia, Bolivia, Indonesia, Malaysia, Nigeria, Thailand and Zaire) proposed that an international tin study group be established to carry on only the statistical and analytical work being done by the ITC but not its market intervention functions. This proposal was considered at UNCTAD meetings in November 1986 and April 1988 in which U.S. delegations participated. At the April meeting it was agreed that the proposed study group would have no legal or administrative link with the ITC and that a negotiating conference would be held. The U.S. delegation reserved our position on whether we would participate in the negotiating conference, subsequently scheduled for November 21 through December 2 in Geneva.

This issue has important foreign policy implications. The formation of a tin study group is strongly supported by key friendly developing country producers including those in ASEAN. Malaysia, the world’s largest tin producer, sees the creation of a tin study group as an essential replacement for some ITC functions and has taken the lead in ASEAN, and bilaterally, in approaching the USG on this issue. A U.S. decision against participating in the group would have a very unfavorable impact on U.S.-Malaysian relations. The Malaysians would find this hard to accept especially given our participation in other study groups involved with lead, zinc, tungsten, rubber and agricultural products. Indonesia and Thailand also strongly support the formation of a tin study group and U.S. participation in it.

The U.S. is the world’s largest consumer of tin. U.S. tin consumers and traders were consulted prior to our joining in the preparatory meetings and they support continued U.S. participation in the negotiating process. Of concern to some producing countries, we are also potentially a major tin supplier; the National Defense Stockpile contains nearly the equivalent of a year’s world production, most of which is in excess of current needs, and there is currently a limited disposition program underway. In this regard, one benefit of U.S. membership in a tin study group would be the opportunity it would provide for us to refocus international attention away from our stockpile disposals and toward the far more significant market impact of increasing tin production by Brazil and China.

The Trade Policy Staff Committee has agreed that the U.S. should participate in the negotiating conference but should state clearly that no decision has been made on joining a study group and that such a decision would have to take into account the availability of funds as well as the degree to which such a body would be consistent with U.S. policy regarding study groups. Although the attached Memorandum of Law² notes that, as a matter of law, a contribution can be paid from the International Conferences and Contingencies account for up to one year without any specific line item for such a contribution, that account is too underfunded to absorb such added costs. The preferable method, therefore, for handling the funding problem is for us to announce our intention to join subject to the Congress authorizing U.S. accession and appropriation for U.S. assessed contributions which would probably not be before FY 1991. Our refusal to join the Sixth ITA has given us substantial negotiating leverage—producers know we are willing to forego membership in commodity groups if they do not meet our criteria. This should enable us to ensure that the new body would be, in fact, a pure study group along the lines of the International Lead and Zinc Study Group, of which we are a satisfied member.

RECOMMENDATION

That you concur in U.S. participation in the negotiation of an agreement to establish an international tin study group, with an announcement that, if the United States decides to join, actual U.S. accession would be subject to Congress authorizing U.S. membership and appropriations for U.S. assessed contributions.³

1. Source: Department of State, Executive Secretariat, S/S Files, 1988–1989 Official Office Files for (E) Economic Affairs Allen Wallis, Lot 89D154: Action Memoranda November 1988. Confidential. Drafted by Samuel Keller (EB/ERP/ECD/ISM) on November 1; cleared in EB/ERP, EB/ERP/ICD, EB, E, L/EBC, EAP/EP, EAP/IMBS, IO/EX, IO/S, and USTR/TPSC.
2. Attached but not printed.
3. Wallis initialed the “Approve” option on November 17. UNCTAD held negotiations on an international tin study group in Geneva from March 29 to April 7, 1989.