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

356. Minutes of an Economic Policy Council Meeting¹

Washington, February 10, 1986, 11:15 a.m.

ATTENDEES

• Messrs. Baker, Block, Baldrige, Brock, Yeutter, Sprinkel, Whitfield, Burnley, Wright, McAllister, Amstutz, Brown, Burns, Davis, Danzansky, Driggs, Gray, Hoffman, McMinn, Mulford, Smart, Stucky, and Wallis, and Ms. Risque

1. Report of the Working Group on Sugar

Secretary Baker proposed that the Economic Policy Council consider recommending to the President that the Administration rely on textile initiatives and in-kind commodity assistance to mitigate the harmful effects of the quota reduction on the CBI countries. Ambassador Yeutter stated that the CBI textile initiative, to be presented to the President next week, would prompt additional growth of up to $150 million a year in the CBI countries, exceeding the $102.5 million loss attributable to the reduction in the sugar quota. Several Council members noted that the Australians are the most efficient sugar producers in the world and that reallocating quotas would harm them and encourage the CBI countries to continue to invest in sugar production, a sector in which they are less efficient than other parts of the world. The Council unanimously agreed to recommend to the President that he assist the CBI countries through the proposed textile initiative and the in-kind commodity assistance proposal.

Mr. Amstutz stated that the Working Group on Sugar had developed four options for reforming the sugar program:

1. Propose legislation repealing the “no forfeiture” provision of the domestic sugar program;

2. Reintroduce our 1985 Farm Bill proposal to gradually reduce the sugar loan rates;

3. Propose legislation basing the loan rate on market prices; and

4. Propose legislation controlling domestic sugar supplies.

He stated that option one was the most practical, option three the most philosophically attractive, and option four the most radical, representing a shift in the sugar program toward the tobacco program.

Secretary Block stated that Congress is most likely to enact option four, although he would not support it. Ambassador Yeutter suggested that only options two and three are viable from the Administration’s viewpoint, and that option two, our previous proposal, was the more logical proposal to send to Congress.

Decision

The Council unanimously agreed to recommend to the President that the Administration adopt option two, reintroduce our 1985 Farm Bill proposal to gradually reduce the sugar loan rate.

[Omitted here is discussion of the Export Enhancement Program.]

1. Source: Reagan Library, Stephan Danzansky Files, International Trade Subject Outline, IX (A) EPC—Minutes 09/19/1985–09/20/1985. Confidential. The meeting took place in the Roosevelt Room at the White House. No drafting information appears on the minutes.