To the Senate of the United States:
I transmit herewith the International Sugar Agreement, 1977, accompanied by the report of the Department of State. Ambassador Young signed this Agreement on behalf of the United States of America on December 9, 1977.
The Agreement seeks to stabilize sugar prices to meet both our domestic interests as a major consumer and producer of sugar, and our international interests as the world's largest importer of sugar. The United States has been a member of previous international sugar agreements, including the first one in 1937. But we were not a member of the most recent, which was negotiated in 1968 and expired in 1973. Serious negotiations for this new Agreement began last April when sugar prices were low and surpluses were large. High prices during 1974 and 1975 had stimulated world production, cut world demand, and encouraged the development of high fructose corn syrup, a direct competitor with beet and cane sugar.
The new Agreement is designed to avoid the problems created by excess supplies of sugar, while providing assurances of adequate supplies in the future. It does so by stabilizing world prices between 11 and 21 cents a pound. The 11 cent minimum will be defended by a worldwide system of export quotas. The Food and Agriculture Act of 1977 establishes a domestic support price of 13.5 cents per pound which is roughly equivalent to the 11 cent minimum world price when normal duties and transportation are added. When domestic prices rise above that level, the Secretary of Agriculture may suspend the price support program.
The Agreement protects the interests of consumers by guarding against high prices and ensuring adequate supplies for domestic needs. It calls for reserve stocks under which about 2.5 million tons of sugar will be set aside and held in exporting countries for release in case prices approach the 21 cent level. The 11 cent price will encourage sufficient investment to avoid sharp reductions in supplies and concomitant price increases.
The Agreement is consistent with our broad foreign policy objectives and with our intent to balance the interests of producing and consuming countries through international cooperation. Once in full operation, it should eliminate the need for the tariff and fee measures recently imposed to defend our domestic price support program. Such unilateral measures adversely affect the earning capacity of many developing countries and undermine our commitment to an open international trading system. Instead, the Agreement represents a cooperative effort among sugar exporting and importing countries to achieve their mutual interests in equitable and stabilized sugar prices and supplies.
For all of these reasons, I urge the Senate to give this Agreement favorable consideration .and its advice and consent to ratification. The Department of State will submit legislation to implement the Agreement.
The White House,
January 25, 1978.