Office of the Historian

320. Memorandum From Douglas McMinn of the National Security Council Staff to the President’s Assistant for National Security Affairs (McFarlane)1

Washington, September 13, 1984

SUBJECT

  • Reduction of the U.S. Sugar Import Quota for Fiscal Year 1985

Under our congressionally legislated sugar program, the U.S. Government must set the size of its import quota each fiscal year. The real purpose of the quota is to defend/maintain the domestic price for sugar at a level high enough to avoid Federal Government purchases of sugar. This level is known as the market stabilization price (MSP). The MSP for FY 1985 is 21.57 cents per pound.

Essentially, three factors affect our ability to maintain the MSP:

○
U.S. domestic production of sugar;
○
U.S. domestic use (consumption) of sugar; and
○
Imports of foreign sugar.

In FY 1985, U.S. production will be up and consumption down. As a result of this, our FY 85 import quota is to be reduced by 400,000 short tons [Page 785] of sugar over last year. This reduction is necessary in order to ensure that the domestic price of sugar remains at or above the MSP of 21.57 cents per pound.

A reduction in the import quota will mean a loss in export earnings to a number of important developing countries, including the Dominican Republic, Brazil, the Philippines, Honduras, El Salvador, Colombia, Costa Rica, Panama and Guatemala.

Agriculture must announce the FY 1985 quota by September 15. Therefore, Agriculture is planning a release for tomorrow, Friday, September 14,2 after the commodity markets close (3:00 p.m.). The 400,000 short ton reduction in this year’s quota has been agreed to by State, Agriculture, OMB, Commerce, CEA, Treasury and USTR, based on a review of production and usage forecasts.

Needless to say, our sugar program is a terrible piece of public policy arrived at solely on the basis of domestic politics. It is enormously expensive to U.S. consumers, is highly protectionist and adversely affects some of our most important and needy foreign partners. While there is little we can do immediately to change our sugar program, the Farm Bill will come up in 1985 and we have an opportunity in that context to try to improve the current program.

  1. Source: Reagan Library, Douglas McMinn Files, Subject Files, Sugar; NLR–369–8–9–1–4. Confidential. Sent for information. Copies were sent to Wettering, Laux, Childress, North, and Tillman.↩
  2. On September 14, the Department of Agriculture announced a new sugar import quota of 2.55 million tons for fiscal year 1984–1985.↩