CUT IN US SUGAR QUOTA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP87T00759R000200200023-9
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 12
• Document Creation Date: December 22, 2016
• Document Release Date: November 19, 2010
• Sequence Number: 23
• Publication Date: September 10, 1985
• Content Type: MEMO

Sanitized Copy Approved for Release 2010/11/19: CIA-RDP87T00759R000200200023-9
SEP 1985
ME1VtIANDM Fem.: National Intelligence Officer for Economics
Acting Chief, Economics Division
Office of Global Issues
SUBJECT : Cut in US Sugar Quota
Attached are talking points and a briefing paper on the potential irmact
of a 600,000 ton cut in the US sugar quota. The briefing paper has also been
sent to Richard Levine at the NSC as a typescript memorandum. If you have
questions on the attached, Hould be glad to
discuss them with you.
Attachments:
Talking Points
I act of Proposed Reduction in US ort Quota for 1985/86
GI M 85-10241, September 1985,
Sanitized Copy Approved for Release 2010/11/19: CIA-RDP87T00759R000200200023-9
 Sanitized Copy Approved for Release 2010/11/19: CIA-RDP87T00759R000200200023-9
I I
Talking Points
o Potential cut of 600,000 tons in US sugar quota would mean a net earnings
loss of $100 million for Latin America and $63 million for the CBI
countries.
o Within the CBI group, the Dominican Republic, Panama, and Guatemala would
be hit hardest. The D.R. alone would see its US sugar earnings fall by
$30 million -- h^^* *^ I ^m ent of its 1986 debt-service
obligation.
o CBI countries believe that further quota cuts would bankrupt their sugar
industries, destablize their national economies, and lead to political
unrest. In addition, quota cuts at this time give the wrong signal --
that the Administration is not serious about the Caribbean Basin Economic
Recovery Act.
o Other options are available. Some of these are:
-- Allocation of the quota cut among countries in better economic shape.
-- Importation of cane syrup on an ex-quota basis.
-- Enactment of supplementary or canpensation quota
Sanitized Copy Approved for Release 2010/11/19: CIA-RDP87T00759R000200200023-9
 Sanitized Copy Approved for Release 2010/11/19: CIA-RDP87T00759R000200200023-9
10 SEP 1985
MFNDRANDLM FOR.: Richard S. Levine
Deputy Director for International Economic Affairs
National Security Council
.1 Economics Division
Office of Global Issues
SUBJECT : Cut in Sugar Quota
Attached is a briefing paper on the impact of a potential 600,000 ton cut
in the US sugar quota. This responds to your request of 6 September in a
telephone conversation
hope that you find it useful. If
we can be of any further assistance or if you have questions concerning the
attached, please call
Attachment:
I act of Proposed Reduction in US Su ar I ort Quota for 1985/86
GI M 85-10241, September 1985
Sanitized Copy Approved for Release 2010/11/19: CIA-RDP87T00759R000200200023-9 1
 Sanitized Copy Approved for Release 2010/11/19: CIA-RDP87T00759R000200200023-9
V
SUBJECT: Impact of Proposed Reduction in US Sugar Impact Quota
for 1985/86
OGI /ECD/QVI:I (10 September 1.985 )
Distribution:
1 - Richard Levine, NSC
1 - NIO/Econ
1 - SA/ UCI
1 - Executive Director
1-ICI
1 - CPAS/ISS
1 - D/OGI, ID/OGI
1 - OGI/PG/Ch
8 - OGI/EXS/PG
1 - Ch/BCD
2 - ECD/CM
Sanitized Copy Approved for Release 2010/11/19: CIA-RDP87T00759R000200200023-9
 Sanitized Copy Approved for Release 2010/11/19: CIA-RDP87T00759R000200200023-9
Central Intelligence Agency
10 September 1985
Impact of Proposed Reduction in U.S. Sugar Impact
Quota for 1985/86
Sumnar y
With approximately two-thirds of the global US quota allocation, the 23
Latin American sugar exporters would be particularly hard hit by the proposed
quota cut. The countries most seriously affected would be the-Daninican
Republic, Panama, Guatemala and Peru. Within Latin America, countries
involved in the Administration's Carribbean Basin Initiative would loss some
220,000 tons of their US sugar quota. In addition to intensifying their
economic problem, this outcome would accentuate the perception among sugar
dependent Carribbean and Central American Countries that the Administration is
not committed to the Caribbean Basin Economic Recovery Act (CERA). While a
600,000 ton sugar import quota cut will inevitably harm the econanies of
countries that rely on the US market for sugar exports, allocating the cuts in
other than an across the board fashion could perhaps be more beneficial to US
goals.
This nnorandum was prepared by Cormtodity Markets Branch,
Office of Global Issues. The information contained herein is updated to
10 September 1985. Ccmmnts may be directed to Acting Chief.
Economics Division,
25X1
25X1
Sanitized Copy Approved for Release 2010/11/19: CIA-RDP87T00759R000200200023-9
 Sanitized Copy Approved for Release 2010/11/19: CIA-RDP87T00759R000200200023-9
Impact of Proposed Reduction in U.S. Sugar Import
Quota for 1985/86
Background
Sugar exporters face a potential 600,000 short ton or 24 percent
reduction in the 1985/86 U.S. sugar import quota. If this quota reduction is
approved, the base quota for the 10-month quota year 1 December 1985 to 30
September 1986 would be 1.95 million short tons. This compares with the 14-
month quota for 1 October 1984-30 November 1985 of 2.55 million tons, the 12-
month quota 1 October 1983-30 September 1984 of 3.05 million tons and pre-
quota imports of approximately 4.9 million tons annually for the period 1978-
81. 1 The sharp contraction in U.S. impart requirements reflects a sharp drop
in domestic sugar consumption, caused by a surge in US use of sugar
substitutes such as high fructose corn sweeteners (HF(S), combined with stable
U.S. sugar production, boosted in part by a price support loan program.
Impact on Latin America
With approximately two-thirds of the global US quota allocations, the 23
Latin American sugar exporters would be particularly hard hit by the proposed
quota cut. We estimate that if the global quota is cut to 1.95 million tons
for 1985/86, Latin American exporters' earnings in the U.S. quota market would
1. The 1984/85 quota was originally set for a 12 month period but was
extended to 14 months last January when U.S. sugar production estimates were
raised and major beverage companies announced increased use of IIFCs in soft
drinks, thereby reducing domestic sugar requirements. The revision in the
quota effectively reduced imports by 425,000 tons for the original quota year
1 October. 1.984-30 September 1985.
Sanitized Copy Approved for Release 2010/11/19: CIA-RDP87T00759R000200200023-9
 Sanitized Copy Approved for Release 2010/11/19: CIA-RDP87T00759R000200200023-9
decline to around $56Willion from earnings of $646 ro ion this quota
year. .(Table 1)
The earnings decline from US quota cuts would be partially offset by
sales on the world market where prices have been running around 5 cents per
pound and below compared with the 19-20 cents per pound that quota sugar
gleans in the US market. Assuming that 387,000 tons of the 600,000 ton quota
cut--Latin America's share based on current quota allocations--is sold on the
depressed world market for approximately $40 million, the net loss to the
region would be approximately $100 million.
This reduction in sugar earnings would come at a
time as commodity prices for other key agricultural and metal exports have
slumped badly from levels of the early 1980s--significantly reducing the
region's total export earning capacity. Moreover, the fall in sugar export
earnings would reduce the ability of these countries to service their
substantial debt. Debt service for these countries was estimated at $43
billion. (Table 2)
Impact on Carribbean Basin Initiative (CBI) Countries
Within Latin America, countries involved in the Administration's
Caribbean Basin Initiative would lose 220,000 tons of US import quota. We
estimate this would depress their export earnings by a net of million. In
particularly
ino ortune
addition to intensifying their economic problems, this outcome would
accentuate the perception among sugar-dependent Caribbean and Central American
countries that the Administration is not committed to the Caribbean Basin
Economic Recovery Act (CBERA), whose centerpiece is preferential trade access
to the US market. Furthermore, CSI countr
believe that further quota cuts
would lead to bankruptcyof their vital sugar industries, ciestabl.i_l.ize~ their
national economies, and lead to political unrest. Officials in the region
Sanitized Copy Approved for Release 2010/11/19: CIA-RDP87T00759R000200200023-9
 Sanitized Copy Approved for Release 2010/11/19: CIA-RDP87T00759R000200200023-9
have expressed this M ern to our Brnbassies r.epeated4%ver the last several
months and officials of CBI countries as a group expressed their deep concern
to the Secretary of State in a letter in July.
We already have evidence of the deteriorating economic situation in the
sugar sectors in the region during the course of 1984/85 and we believe a
significant quota cut again in 1.985/86 would further stress these troubled
economies. Moreover, recent research by this office has revealed that
de reds d economic conditions, among other key factors, have,y rib tlted,to
the recent expansion of the drug industry in a number of the source col,tntrie
......wr?es+aa=r+r*4'..wx+~v~:-+:ACe>wrv n..r... __..