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

376. Action Memorandum From the Assistant Secretary of State for Economic and Business Affairs (McMinn) to the Under Secretary of State for Economic and Agricultural Affairs (Wallis)¹

Washington, February 26, 1987

SUBJECT

• Circular 175: Request for Concurrence to Enter into Negotiation of an Agreement for the Intergovernmental Producer-Consumer Forum on Copper

ISSUE

Your concurrence is required to enable a U.S. delegation to participate in negotiations for an agreement for the creation of an intergovernmental Producer-Consumer Forum (PCF) on Copper in accordance with a decision of the Trade Policy Committee.

ESSENTIAL FACTORS

In early 1986 the Trade Policy Review Group (TPRG) approved a U.S. initiative to explore the possibility of establishing a Producer Consumer Forum for copper. Following extensive contact with key producing and consuming countries, the U.S. circulated a proposal for the creation of an intergovernmental body for copper modeled along the lines of the International Lead and Zinc Study Group as a basis for discussion at the December 8–12, 1986 ad hoc meeting on copper. Although negotiations would be under the auspices of UNCTAD, we anticipate that the group would be autonomous and not answerable to any other organization. UNCTAD would have an observer role. UNCTAD will convene a meeting in Geneva in early March to determine if there is a sufficient basis to proceed with formal negotiation.² The U.S. delegation to the meeting would be headed by a representative of the U.S. Trade Representative.

The copper forum would be a classic commodity study group as opposed to a commodity price/supply stabilization program. As such it would have two main functions, serving as:

1. A forum for the exchange of views among governments; and

2. A means to improve copper statistics and market transparency.

The period since the early 1970’s has been one of sluggish consumption growth and increasing uncertainties in the world copper market. While the United States has consistently opposed proposals that would entail direct intervention by governments in the copper market, it now believes the establishment of the Copper PCF would provide a helpful, and constructive service to the copper industry.

Membership in the PCF would be open to all countries with an economic interest in copper production, consumption, or trade.

VIEWS OF INDUSTRY

Entering into negotiations has been discussed at length with our copper industry. The industry, concerned about uncertainties surrounding the future course of the market and the sluggish demand growth and low price of copper, has strongly supported the creation of the copper PCF. Participation by industry representatives as advisors on delegations will be encouraged. There is also a great deal of congressional support for establishment of the PCF. The 28 member copper caucus has written to USTR further urging the quick establishment of such a group.

OTHER FACTORS

Copper ranks among the most valuable non-fuel primary commodities in international trade, with total exports of around $8 billion annually. It is an essential raw material in world industry, particularly because of its role in the efficient generation and transmission of electrical energy. Mining and refining of copper constitute an important resource-based industry in both developing and a large number of developed countries, including the U.S.

An ad hoc meeting on the copper PCF took place in Geneva December 8–12. The participants agreed that they would meet in Geneva, probably in March, to see if there is agreement to begin formal negotiations toward conclusion of a PCF. Most copper producers appear to support the creation of this forum without economic provisions. Most consumer countries have also reacted positively; however, the United Kingdom continues to be opposed and this position was reinforced by the failure of the Tin agreement and the lobbying of the International Wrought Copper Council, a European association of processors.

A memorandum of law attached as Tab 1³ concludes that there are no legal obstacles to our entering into negotiations.

RECOMMENDATION

That you concur in U.S. participation in the negotiation of an agreement for the creation of a copper PCF.⁴

1. Source: Department of State, Executive Secretariat, S/S Files, 1987 Official Office Files for (E) Economic Affairs Allen Wallis, Lot 89D155: Action Memoranda, February 1987. Confidential. Drafted by Cynthia Smith (EB/ERP/ICD/ISM) on January 15; cleared in EB/ERP/ICD/ISM, EB/ERP/ICD, EB/ERP, EB, EB/L, L/T, TPSC, L/EB, IO/E, L and M/COMP/BP. A stamped notation at the top of the memorandum reads: “WAW Has Seen.” “PJC 2/26” and “BP 2/27” are written at the top of the memorandum.
2. According to telegram 2797 from Geneva, March 9, the second UNCTAD ad hoc meeting on copper convened in Geneva March 2–6, where it was agreed that a “preparatory meeting should be convened in September to further discuss the objectives, functions, and nature of an intergovernmental producer-consumer forum on copper, and to elaborate the terms of reference for such a body.” (Department of State, Central Foreign Policy File, Electronic Telegrams, D870184–0251)
3. Dated February 11. Attached but not printed.
4. Wallis initialed the “Approve” option on February 27. According to telegram 68914 to multiple diplomatic and consular posts, March 4, 1989, the UN copper conference concluded with an agreement establishing terms of reference for an international copper study group (ICSG) on February 24, 1989. Thirty-one nations participated in the conference with only Japan refusing to agree to the final conference resolution. If asked about the group, posts were instructed to indicate “that the U.S. is pleased by the outcome of these negotiations and urges governments to join the study group.” (Department of State, Central Foreign Policy File, Electronic Telegrams, D890181–0370)