Foreign Relations of the United States, 1964–1968, Volume IX, International Development and Economic Defense Policy; Commodities

228. Information Memorandum From the Assistant Secretary of State for Economic Affairs (Johnson) to Secretary of State Rusk¹

Washington, June 28, 1964.

SUBJECT

• Sugar Legislation

Foreign provisions—quotas—of the sugar legislation expire this year. Prospects seem dim for passage of five-year legislation worked out among the agencies. Much more likely is a simple one-year extension of the Sugar Act, a measure harmful to our foreign policy interests.

Background

Domestic farmers and offshore suppliers of sugar—represented by U.S. refiners—have locked horns. The farmers want to increase their share of this market at the expense of offshore suppliers. For the first time in years, the offshore suppliers appear well enough represented in the Congress, particularly in the House, to thwart the farmers. Particularly, Chairman Cooley of the House Agriculture Committee strongly holds the view that domestic farmers are entitled to no greater share of the market in the future than at present. At most, he would grant them a temporary increase in quotas. This would cover the extra production of sugar which the Department of Agriculture encouraged last year during the period of threatened shortage. However, in the Senate, domestic interests are more powerfully represented.

The Administration worked out a compromise package which, in effect, gives a temporarily larger quota to domestic farmers so that their cutback in allowable acreage will not be too great. It recoups this cutback for offshore suppliers by allowing them to enjoy all the growth in this market over the next five years or so. Tactically this package was to have been submitted to the House Agriculture Committee by Secretary Freeman. However, when Chairman Cooley indicated that he would reject the program, Secretary Freeman retreated. He now considers it unwise for the Administration to advance a proposal likely to incur the wrath of both the House and the Senate, of both the refiners and the domestic farmers. Instead, he wants Chairman Cooley to start hearings without the Administration testifying at the outset. Chairman Cooley is opposed and indicates that he will seek a simple one-year extension of existing legislation. The press of time and the desire of many legislators to avoid a major tussle on sugar this year suggest that a one-year extension may, indeed, be likely.

From our point of view there are substantial objections to this:

1) The beet growers next year will have a better case than today for increasing their quota. They will have not only the excess of production over quotas in the current year but in 1965 as well. This would not happen if acreage controls were imposed on the farmers but Secretary Freeman indicates that he will not so order. Chairman Cooley argues, as do some lawyers, that the Secretary must throw on controls but the Secretary feels he can defy them.

2) The greater the certainty in the market the less volatile prices will be. Uncertainty regarding U.S. sugar policies will tend to keep world prices higher than they would otherwise be, benefiting Cuba in particular.

3) Within several years we may move into a glutted world sugar market. Prices would collapse barring an international sugar agreement establishing floor and ceiling prices. So long as U.S. sugar policies are uncertain, it becomes difficult if not meaningless to negotiate such a world agreement. The sooner we establish our policies the sooner we can effectively help to bring about a world-wide sugar agreement.

4) Offshore suppliers look to a revision of the Act so that the global quota—the Cuban quota—can be divided among them. Indeed, many such suppliers committed sugar to the U.S. late last year at prices well below those prevailing in world markets just so as to establish their claims for higher quotas. They will feel let down if the Administration fails to make the effort now to amend the Act.

Tactics

The Administration could seize the initiative in sugar. The President could order Secretary Freeman to take the Administration program up to the Hill. And he could use his persuasive powers to bring about some settlement between the conflicting sugar interests. There would be a bruising battle. For this reason Mr. Feldman at the White House has sided with Secretary Freeman, although he agrees that a simple one-year extension without acreage controls is also undesirable.

I would judge it unlikely that the President would instruct Secretary Freeman to lead an Administration effort on the Hill to bring about hearings and an intense drive for passage of the Administration’s program. The chances are still less that such an initiative would be successful. Thus, time and events strongly point to a one-year extension.

While it is regrettable, in terms of our foreign policy, that the Administration’s package program is not likely to be acted on this year, I believe that an effort to persuade the President to override Mr. Freeman would be futile, and therefore we are not recommending that you discuss this with the President at this time.

1. Source: Department of State, EB/ICD/TRP Files: Lot 75 D 462, Inco-Sugar, July 1964, United States. Limited Official Use. Drafted by Jacobson on June 25 and cleared by Arthur Wexler (H). A note on the source text reads: “S[ecretary] saw;” another reads: “Superseded by memo of June 29 prepared for lunch w/President.” This memorandum has not been found.