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

345. Memorandum From the Under Secretary of State (Katzenbach) to President Johnson¹

Washington, June 30, 1967.

SUBJECT

• International Cocoa Agreement

Recommendation:

That you authorize us to tell the Government of Ghana that we will support an International Cocoa Agreement along the lines of the proposal shown in the enclosure,² if they can convince other producers to go along.

An agreement based on this proposal would stabilize cocoa prices and further our foreign policy objectives. It meets U.S. Government and industry requirements as to how an agreement should operate, but it provides for a minimum price of 20 cents, which is 2 cents higher than the industry has been prepared to accept and 2 cents lower than producers are asking for. Our industry is likely to use the price issue to oppose such an agreement. We believe their argument is not justified since cocoa prices have gone below 20 cents only once in the past 15 years. All other consuming countries, furthermore, are prepared to accept a minimum price of 20 cents. Should we refuse to make this one concession, now that Ghana has accepted our position on all other issues, we would damage our relations with Ghana and the other cocoa producers and bring into serious question our good faith in 10 years of participation in these cocoa negotiations.

We promised to give Ghana our answer within a week. They are holding off their discussions to line up the other producers until they hear from us.³

Discussion:

1. An agreement based on the proposal in the enclosure would stabilize cocoa prices and further our foreign policy objectives. Cocoa is a major source of income to important African economies, providing up to 60 percent of foreign exchange earnings. Brazil is the major Latin American producer. (The enclosed table shows the major producers and consumers of cocoa.)⁴ As you know, a principal recommendation of the Korry Report is to negotiate a cocoa agreement and such an agreement is an integral part of our program for Africa.

2. The U.S. has been blamed for the failure to reach an agreement last year when all consuming countries except the U.S. were willing to go along. African countries in particular charged that our position was negative and inflexible because the U.S. cocoa industry strongly opposed an agreement.

3. The Government of Ghana initiated bilateral talks with us to break the impasse. They accepted all our requirements on how the agreement should operate and came down from 22 cents to 20 cents on the minimum price on the condition that we also accept this compromise. If we accept this price, we would be in agreement with Ghana on the main outlines of an agreement.

4. We have already met with our industry advisory group to discuss the results of our talks with Ghana and to ask for their comments. The Advisory Group consists of manufacturers, cocoa traders, and confectioners; Clark Clifford’s firm is their Washington representative. They have always worked closely with us but they prefer that there be no cocoa agreement. Their preliminary reaction was essentially negative. We do not anticipate any change in their position despite the favorable outcome of our talks with Ghana.

5. Should an agreement be negotiated by the end of the year, which is the earliest possible time, we would seek Congressional approval sometime in 1968. There might not be enough time to complete action before the end of the session.

6. We assume the legislation would have rough going in the Congress. The industry probably would be opposed—either passively or actively. The grounds for their opposition would be weak but they could play on Congressional prejudice against commodity agreements. On the other hand, domestic groups concerned with African political and economic development would support the agreement as a major U.S. foreign policy initiative in relations with developing countries.

7. Acceptance of a minimum price of 20 cents and reaching agreement with Ghana would put us in a favorable position internationally and would place the responsibility for making further progress on the producers. They will have their difficulties. In any event, the U.S. would be relieved of the onus of obstructing an agreement.

8. We believe it is essential that we take advantage of our understanding with Ghana to eliminate a major source of friction in our relations with African countries. Arthur Goldberg believes that our rigidity on the price issue on cocoa has prejudiced the U.S. position at the UN. Since the Ghanaians conceded to us on all the main issues and compromised on the price issue, a failure to move would subject us to widespread and serious criticism. The fact is that the cocoa producing countries are among the more moderate elements in Africa and have supported us on many occasions.

The kind of agreement we can now expect to negotiate would enable us to demonstrate to Congress that we are helping the economic development of producers without injury to the U.S. consumer or the U.S. industry. Even if the Congress initially rejects an agreement, the U.S. would still be in a better position than if the Administration showed unwillingness to accept a reasonable settlement. A major effort may well be required to convince the Congress and the industry of the need for an agreement, but it is of the greatest importance to our relationship with Africa that we make this effort.

Nicholas deB Katzenbach ⁵

1. Source: Department of State, Central Files, INCO–COCOA 4. Confidential. An attached June 30 memorandum from Solomon to Katzenbach indicates that Solomon prepared the attached memorandum in accordance with the decision made at Katzenbach’s staff meeting on June 23 and asks Katzenbach to sign it.
2. Entitled “Basis for U.S.-Ghana Understanding,” not printed here, but a telegraphic text of the same document is printed as Document 346.
3. A typed notation on the source text indicates that Walt Rostow informed John P. Walsh (S/S) on July 7 that the President had approved the recommendation and that E had been similarly advised on the same date.
4. Not printed.
5. Printed from a copy that indicates Katzenbach signed the original.