310. Memorandum From the Assistant Secretary of State for Economic Affairs (Solomon) to the Under Secretary of State for Economic Affairs (Mann)1
SUBJECT
- Outcome of Coffee Council Meeting2
Brazil held out adamantly against any reduction in the Brazilian share of the basic export quotas3 set up under the 1962 Agreement.4 However, in a last day’s compromise, Brazil agreed to grant 1.4 million bags of special waivers which will permit African and Mild coffee producers to ship additional quantities this year, but will not increase Brazil’s entitlement.
The two-weeks’ meeting was educational to all involved. The general complaints about sacrifice and retention of coffee turn out to have been gravely exaggerated—very few countries have surpluses which could be considered burdensome on any realistic basis. The African countries, in particular, seem to be more aware of how Brazil’s former firm price policy has kept their prices up. The Central Americans unfortunately still seem to believe that the purpose of a coffee agreement is to permit them to sell all they produce at high prices. While Colombia and Mexico were prepared to see their share of basic quotas somewhat reduced, they fought hard to make Brazil share the cost of any increases in other countries’ quotas—there was more open dispute between Colombia and Brazil than has been seen for many years in the coffee world.
The eleventh-hour compromise, which increases many countries’ annual export quotas for this year considerably more than could conceivably have been negotiated if their basic quotas had been revised, left [Page 767] most everyone happy for the moment. Brazil was able to go home claiming that her share of basic quotas is unaltered and that the waivers for others will remain in effect only so long as the others keep their prices close to Brazil. The other loudest claimants—Ivory Coast, El Salvador, Guatemala, Dominican Republic—have all gone home with larger entitlements for this year.
The basic issue of permanent shares of the market has, however, only been delayed and we will have to face it again, either in the Spring of 1966 or when we set annual quotas in August for the 1966–67 year.
The Council agreed to a rather weak resolution on enforcement under which we should be able to help the Colombians cut down on smuggling through Aruba. We laid the groundwork for, but did not actually obtain, controls over shipments which either actually or reportedly come from or through non-member producing countries like Guinea or Honduras.
The most hopeful augury for the future lies in the Council’s approval of a study to set up terms of reference for a diversification fund to be financed by an export tax, administered by IBRD and hopefully augmented by IBRD financial participation.
- Source: Department of State, EB/ICD/TRP Files: Lot 79 D 354, Coffee Memoranda, 1966–67. No classification marking. Drafted by Jack B. Button (E/OR/ICD/TRP) and cleared by Edward R. Fried (OR) and George R. Jacobs (ICD). The date is the drafting date. This memorandum, although initialed by Solomon, was apparently not sent, because the introductory address lines have been crossed out and the following handwritten note added: “Mr. Solomon briefed Mr. Mann orally on this. He expanded the briefing book item for the Secretary a bit to cover his commitment to inform him of the outcome of the meeting.”↩
- The International Coffee Council met in early December 1965.↩
- Basic export quotas are set out in Annex A of the Agreement. Brazil’s basic quota, for example, is 18 million bags of the total of 45.8 million bags. Annual quotas are set each year as a percentage of basic quotas. Quotas for 1965–66, for example, are set at 94 percent of basic quotas. [Footnote in the source text.]↩
- See Foreign Relations, 1961–1963, vol. IX, pp. 807–808.↩