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

349. Memorandum From the President’s Assistant for National Security Affairs (Poindexter) to the Chief of Staff to the President (Regan)¹

Washington, December 11, 1985

SUBJECT

• Foreign Policy Aspects of the Proposed Farm Bill

Secretary of State Shultz has raised a number of major foreign policy concerns with the farm bill (State memo at Tab A).² Secretary Shultz, the Department of Agriculture and the Office of Management and Budget have described those concerns to appropriate leaders of the House and Senate and have argued for elimination of the offending provisions from the 1985 Farm Bill. At this critical juncture, both the Secretary and I feel that the President should not support a new farm bill if it contains the following particularly destructive elements:

— No net cost provision for sugar. This would amount to a reversal of the President’s recent sugar decision³ and have the deleterious effect of drastically reducing sugar quotas for CBI countries and the Philippines. Such a measure would dangerously destabilize the economies of many strategic countries in order to provide greater benefits for some U.S. producers and to allow moderate budget savings.

— A requirement that the Administration spend $2 billion on the export enhancement program. Although the Administration committed itself to this program last May, a requirement that it be funded at this level over three years denies the Administration needed discretion in administering this complex program. Although the Administration previously agreed to spend up to $2 billion, mandated spending levels will deny us the ability to target the program to countries where there is clear evidence that other producers are subsidizing their exports. If this program is not managed in a highly disciplined manner, it could cause significant harm to a number of our most important international relationships. USDA also informs us that it would be almost impossible to fund the program at the $2 billion level without extending subsidies to the USSR or impacting Thailand on rice.

— The use of 416 authority and CCC commodities. Mandatory levels for 416 grants for short-term humanitarian assistance would be contradictory in nature since humanitarian, emergency related assistance should be the result of a demonstrated need rather than a target. Such targets could lead to inefficiencies in the AID programs, mismatches of food types to needs and depressed prices for farmers in affected countries. The use of 416 authority for “Food for Progress” funding would be less efficient than using P.L. 480 authority. The barter provisions for petroleum or strategic materials would be used to procure materials and oil above Presidentially established goals. The Administration has embraced barter on a case by case basis only when it can be demonstrated that it is more “efficient and effective” than open market transactions.

— Provisions on ethanol imports. Like the sugar provisions, such provisions would disrupt the exports of friends like Brazil and be contrary to GATT while it largely favors a single domestic producer. The suggested stockpile for ethanol is not needed from a national security standpoint.

— Prohibitions on US Agricultural Development Assistance. This would prohibit US aid to countries which export agricultural commodities competing with U.S. products. Another provision would seek to curtail funding to multilateral development banks under similar conditions. Such language would be difficult to implement and might severely harm sub-Saharan African countries.

— Dairy promotion language. This would involve the U.S. in subsidized commodity export sales to the detriment of non-subsidized exports and world prices. This provision could severely impair our relations with New Zealand.

These elements must be substantially modified by the conferees. Of course, the high cost of the proposed bill, given our budget targets, may also create pressure for further inappropriate reductions in the Defense budget.

In order to assist State, USDA and OMB in changing or removing the noted provisions from the farm bill, the NSC at the behest of the agencies is calling and writing House and Senate members to alert them to the foreign policy problems. If appropriate changes are not made, however, foreign policy concerns would strongly argue against the acceptability of the farm bill.

1. Source: Reagan Library, Stephen Danzansky Files, Subject File, Africa (Debt Strategy); NLR–733–9–4–12–1. Confidential. A copy was sent to Miller.
2. Attached but not printed is Tab A, a December 10 memorandum from Platt to McFarlane.
3. See footnotes 5 and 6, Document 344.