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

368. Telegram From the Mission in Geneva to the Department of State¹

Geneva, June 27, 1968, 1930Z.

3897. Subject: Cocoa Consultative Group. Ref: Geneva 3890.²

1. Chairman today submitted following five-point package to exporters and importers which he commended they accept subject to drafting changes but no changes in substance. Said he had put it together on basis extensive discussions with both sides. Scheduled plenary tomorrow morning to act on package:

“(I) Action if the indicator price remains below the minimum

33(7) proposed revision

(7) If, after one month following a reduction of quotas made in accordance with the provisions of paragraph (6) above, the indicator price is below 20 cents, the Executive Director shall convene a special meeting of the Council within four days, in order to review the situation and to take remedial action. The Executive Director shall present to the Council a report as to the reasons for the failure of the previous quota cuts to raise the price to 20 cents and shall make recommendations to the Council for action. Decision by the Council on any recommendation shall be by special vote. However, if a reduction in quotas is included in the Executive Director’s proposal or in a proposal from any member and if the cuts already approved by the Council in dealing with the price decline total less than 9 percent of the annual quotas, then a cut to bring the total up to 9 percent may be made by a simple distributed majority vote. At no time would quotas in effect be more than 9 percent below the initial sales quotas unless decided otherwise by a special vote. If, one month after such action by the Council the indicator price remains below 20 cents per pound, the Executive Director shall present to the Council a further report and shall make new recommendations. Decisions by the Council on any further action, which may include a further quota cut, shall be by special vote. This action may be repeated so long as the price remains below 20 cents.

(7A) All reduction of annual sales quotas made under paragraph (7) would be automatically restored within two working days of the indicator price moving up to 20 cents per lb.

(II) Treatment of freight and other related changes proposed revision of Article 39 (5)

In purchasing cocoa from exporting members under the provisions of this article, the manager shall, subject to the provisions of the following paragraph, pay 10 cents on delivery of the cocoa. Upon sale of the cocoa to the market by the buffer stock manager for the purpose of defending the maximum, the manager shall subtract from the realized price 10 cents plus storage costs, carrying charges and other related costs. The balance shall be paid to the original source of the cocoa up to 20 cents F.O.B. if the profit is adequate to allow for this. If the profit is not sufficient the Council may, by special vote, decide to make up the difference from the buffer-stocks funds.

(III) Provisions for automatic establishment of quotas

Proposed paragraph for inclusion in Article 29

1A. If the Council is unable to reach an agreement after (-) working days, the Executive Director shall as soon as practicable thereafter submit to the Council his own proposals for annual sales quotas. The Council shall immediately proceed to a decision by special vote on these proposals and, subject to that decision, quotas for the ensuing year shall be determined accordingly.

(IV) Limitations of sales when quotas are not in effect

Percentage for first half year to be 85.

(V) Restoration of quota cut taken at 22 cents (Article 33 (8))

Cuts made at 22 cents are to be restored at 24 cents unless the Council decides, by special vote, to restore the cut at a point lower than 24 cents.

1. The place of delivery shall be decided by the buffer stock manager.”

2. Action requested: Pursuant to Brodie-Jacobs telecon June 27, request authority before 9:00 a.m. June 28 to approve package if it generally supported by exporters and importers. Do not feel we should hold out for unanimity on part all exporters since this might identify U.S. as blocking agreement.³

Tubby

1. Source: Department of State, Central Files, INCO–COCOA 3 UNCTAD. Limited Official Use; Priority.
2. Dated June 27. (Ibid.)
3. Telegram 192851 to Geneva, dated June 28, approved the package outlined, with the understanding that the United States would insist on its acceptance by major exporters. (Ibid.)