Foreign Relations of the United States, 1981–1988, Volume XXXVIII, International Economic Development; International Debt; Foreign Assistance

336. Memorandum From Roger Robinson of the National Security Council Staff to the President’s Assistant for National Security Affairs (McFarlane)¹

Washington, July 18, 1985

SUBJECT

• EPC Meeting on Friday, July 19, at 3 p.m. in the Roosevelt Room

We received notice this morning that an EPC meeting will be held tomorrow at 3 p.m. on the following three agenda items:²

1. Implementation of the President’s Section 301 Citrus Decision

2. Multifiber Arrangement Negotiations

3. Common Fund

[Omitted here is information not related to the Common Fund.]

Common Fund

The ideas motivating the Common Fund are that price-stabilizing commodity agreements are desirable and that commodity organizations can borrow more cheaply as a group (from one another and commercially) than as individual entities. The Common Fund’s intent then is to facilitate the financing of price-stabilizing buffer stock agreements and to help mobilize funding of “other measures” to improve the market position of commodities. To this end, the Common Fund’s First Window is designed to lend money to the buffer-stock operations of associated commodity agreements. The sources of the funds would be pooled assets of associated agreements and funds borrowed commercially.

The Fund’s Second Window would finance commodity projects aimed at improving structural conditions in commodity markets and at enhancing the competitiveness of commodities.

Entry-into-force requires ratification by 90 countries accounting for two-thirds of $470 million of direct contributions (to be used as collateral to secure commercial borrowing), and 50 percent of $280 million of voluntary contributions to the Second Window. As of the end of June, 85 countries had ratified the Common Fund, accounting for 51 percent of direct contributions. The Second Window requirement for entry into force has already been met. The last deadline for entry into force was January 1, 1984; this deadline was not met but it has been extended de facto.

The U.S. position has been that we would consider taking steps to ratify the Common Fund Agreement when several eligible commodity agreements are prepared to associate with the Common Fund. This position is based on the premise that the Common Fund makes no sense without commodity agreements able to associate with it. The United States has declined to pledge resources to the Second Window of the Fund and our position is not affected by arguments that the Second Window should be allowed to operate even if the First Window never does. The United States has also rejected the notion that we should ratify because other countries have done so.

The options paper attached (Tab II)³ lays out three courses of action: (1) ratify, (2) reject ratification and (3) no change in present position. At the last EPC meeting, the discussion concerned that the U.S. position should be hinged, in large part, on what the Soviet position is likely to be.⁴ [less than 1 line not declassified] the discussion was discontinued. Although the results of the Agency’s findings are not reflected in the EPC paper, the U.S. position should be promulgated on the basis of mitigating the risk of U.S. embarrassment if the Common Fund is ratified even without U.S. participation—thereby potentially providing the Soviet Union with a symbolic/public affairs victory among Third World nations. The answer to which option best serves U.S. interests will have to be determined in the course of the EPC discussion. In my view, it is only the Soviet angle to this issue that engages NSC’s interest as it is technically not particularly relevant to us.

[Omitted here are information and recommendations not related to the Common Fund.]

That you approve our support for a position on the Common Fund which best mitigates the risk of a Soviet symbolic/public affairs gain among Third World nations.⁵

1. Source: Reagan Library, David Wigg Files, Subject File, Economic Policy Council (5 of 11). Confidential. Sent for action. Copies were sent to Fortier and Wigg.
2. According to a July 18 memorandum from Porter to the Economic Policy Council, the agenda for the July 19 meeting was revised to no longer include a discussion of the Common Fund. (Reagan Library, Roger Robinson Files, Subject File, Economic Policy Council (EPC) 07/09/1985–07/21/1985; NLR–487–2–23–11–2). Discussion of the Common Fund was deferred to a July 31 meeting of the Economic Policy Council. For minutes of this meeting, see Document 337.
3. The options paper on the Common Fund is not attached. A copy of the options paper is in the Reagan Library, Roger Robinson Files, Subject File, Economic Policy Council (EPC) 07/09/1985–07/21/1985; NLR–487–2–23–6–8.
4. See Document 333.
5. McFarlane did not indicate approval or disapproval of the recommendation. He wrote underneath the recommendation: “But also which leans closest to pressure toward market principles and away from commodity agreements generally.”