Office of the Historian

273. Information Memorandum From the Assistant Secretary of State for Economic and Business Affairs (Hormats) to Secretary of State Haig1

Washington, April 30, 1982

Subject

  • Sugar Quotas

Larry Eagleburger and Tom Enders do not agree with me, but I want to ensure that you understand the full adverse implications of sugar quota preferences for the Caribbean Basin:

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Basin preferences would cut tonnages substantially to some of our closest friends and allies. These include Australia,2 The Philippines,3 Thailand, Brazil and Colombia, all of whom would be [Page 685] infuriated. Adverse reaction overseas to the rumor of preferences has already been very sharp. The Australians are taking it up with the Vice President during his current visit.4 EA has told me there is bound to be serious fall-out in a number of areas of major concern to us such as Philippine base negotiations and the stability of the Fraser government.
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There would be a dramatic effect on some smaller countries where we also have significant interests. These include Mauritius (facing important elections in June), Zimbabwe, Peru and many other developing countries. These countries are more dependent on sugar than many Basin countries. The credibility of our concern for their stable development would unavoidably suffer. So would our urgings that they develop through the free market system.
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Preferences would flatly contravene our obligations under the GATT. It is highly doubtful that we could secure a waiver, given strong opposition from the several dozen countries which would be adversely affected. It could well gut our eventual later effort to obtain a GATT waiver for the Caribbean Basin Free Trade Area.
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Domestic refiners will almost certainly bring a suit against quota imposition. Preferential allocation would make the Administration’s case more difficult to defend. If the refiners succeed with a preliminary injunction, the Administration’s ability to protect the domestic sugar program would be seriously hampered. Significant, unplanned budget outlays (up to $1.5 billion in FY 83) could result.
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Special preferences for the Basin—or for anyone—would return us to discredited former practices when sugar quotas were manipulated according to political influence. Some countries are already lobbying for special Basin-state preferences. This could easily snowball, causing the Administration significant embarrassment.
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Reaction on the Hill could in fact undercut what should be our central focus for the Basin—the CBI. There is strong reason to believe that the Congress will see quota preferences as administratively establishing a discriminatory system of trade concessions before CBI legislation is considered.

I continue to believe strongly that these serious cuts in so many areas cannot be justified by the additional [illegible] million or so which might flow to the Basin under [illegible] proposal. The non-preferential USDA proposal—around which all other agencies have rallied—gives the Basin countries a better market share (38 percent) than they have now [illegible] percent). I believe that this treats the Basin more than equitably and meets the President’s commitment while preserving very important interests elsewhere.

  1. Source: Department of State, Bureau of Economic Affairs, Office of Economical and Agricultural Affairs Files, Official Economic Summit Files, 1975–1991, Lot 93D490: 1982 Versailles Summit Cabinet 1982. Confidential. Drafted by Mark Lore (EB/ORF/ICD/TRP); cleared in EB/ORF. Printed from an uninitialed copy. Haig wrote at the top of the memorandum on May 1: “Larry, I’m impressed w/ Bob’s argument. Let’s all discuss. AMH.” An unknown hand wrote at the top of the memorandum: “Stoessel will attend Cabt. Council Mtg on Tues (Pres. will chair).” Large portions of the memorandum were highlighted.↩
  2. An unknown hand wrote in the right-hand margin: “Amb. says GOA will be very upset. Raised with VP.”↩
  3. An unknown hand wrote in the left-hand margin: “See attached letter.” The letter is not attached.↩
  4. Bush visited Singapore April 27–29, Australia April 30–May 3, New Zealand May 3–5, and China May 7–9.↩