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

321. Telegram From the Mission to the United Nations to the Department of State¹

New York, June 23, 1966, 0355Z.

5389. Cocoa Conference. Cocoa Conference adjourning June 23 with US being charged with breakdown negotiations this session. Ghana, speaking for all producers at Executive Committee meeting, June 22, said US Government wanted agreement but unable to negotiate because of opposition US industry. Other producing countries consistently stressed that US alone held up agreement because of unwillingness accept negotiating range 19–21 cents for minimum price. No delegations came to US support. However, producer criticism obviously not meant to break off negotiations as every speaker referred to need make arrangements continue work toward agreement. We expect Conference will make arrangements Thursday for continued work on reaching cocoa agreement. In discussing Conference with host government officials you may draw on following:

1. There should be no questioning of US motives and US interest in wanting cocoa agreement. Industry views important to US but not overriding.

2. It has now become clear that many difficulties arose from fact that basic negotiating document which of unexpected complexity was not available to governments until two weeks before start of Conference. US emphasis on need for workable mechanism and agreement consist-ently misconstrued as attempt obstruct negotiations.

3. US was most vulnerable however on price issue. No one could understand why US as richest country in world should have lower position on price than other consumers. Fact is we view minimum price as integral part of mechanism and not as price at which bulk of cocoa would be sold on market. Too high a minimum price could put excessive strain on buffer stock quota mechanism and cause agreement breakdown. Furthermore, our assessment future supply-demand prospects based on FAO analysis generally more pessimistic in regard to price market would be able to support than that of producers or other consumers. We consistently emphasized that agreement should be based on conservative, prudent assumptions to reduce risk it would break down under pressure first serious surplus. Producers preferred assume optimistic view that surplus year always followed by shortage. Their assessment failed take into account effect of agreement. Nor is it consistent with FAO projections.

4. In effort break deadlock US supported informal compromise proposal floated personally by Secretary General Prebisch and Chairman of Conference Ali. Prebisch told us he genuinely convinced this proposal would have settled major issues Conference and permitted rapid conclusion cocoa agreement. Producers refused consider Prebisch proposal without first knowing whether US prepared accept it. To demonstrate sincerity our negotiating effort US accepted Prebisch proposal without reservations. Proposal required US increase its minimum price offer to 19 cents and accept deferred payment concept which we had always opposed. In addition, US suggested to Prebisch that funds remaining in buffer stock at liquidation should be used wholly for benefit producing countries through contributions to African Development Bank and Inter-American Bank. After two days’ consideration proposal was rejected by producers, not apparently on basis of substance but on grounds there was inadequate time to consider what they maintained were entirely new concepts. Prebisch proposal thereupon withdrawn, has no official existence, and will not be mentioned in conference records.

5. Conference greatly narrowed differences and achieved agreement on market shares among producing countries. Agreement on permanent financing for buffer stock, which was major breakthrough of Conference, was based on US proposal and adopted through US initiative.

6. US prepared participate in resumption negotiations either through working group or other organizational arrangement leading to resumption negotiating conference.

Goldberg

1. Source: Department of State, Central Files, INCO–COCOA 3. Limited Official Use; Priority. Repeated to Abidjan, Accra, Addis Ababa, Geneva, Lagos, Lome, London, Rio de Janeiro, Yaounde, and Paris for USOECD.