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Department of State bulletin (Volume v. 56, Jan- Mar 1967) online

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interest is in being assured of additional
supplies of the various types of coffee as we
need them. The new arrangements are well
suited to our changing needs. Whenever
effective demand for one type causes prices
to be above the ceiling for 15 days, export
quotas for the countries producing the type
demanded will be raised. If the price remains
above the ceiling for further 15-day periods,
additional quota increases will be auto-
matically forthcoming.

Experience in operation of the Agreement
indicates that producing countries do not
wish to "gouge" consuming countries by
seeking to set quotas so as to force prices to
unreasonable levels. Both consuming and
producing countries have in fact sought to
work together to achieve market stability
through assuring that supplies would be in
reasonable balance with demand. With the
new selective system of quota adjustment by
type of coffee, the annual quota should be
even easier to negotiate than it has in the
past. The selective system provides for con-
tinual adjustment throughout the year.
Therefore the annual quota should tend to
become a base point from which adjust-
ments are made automatically as market
forces dictate.

The United States, by virtue of its 400
votes in the Council, retains the power to in-

sist that annual quotas are set at reasonable
levels and that the price brackets are satis-
factory to consumers. Under the provisions
of the Agreement, the decision on the an-
nual export quota is taken by a distributed"
two-thirds majority vote of the importers
and exporters groups voting separately.
Since the United States has 400 votes, and
may veto any decision with the support of
only one other country, we have a powerful
voice in setting quotas. Indeed, unless the
United States concurs in the annual quota
decision, the entire quota mechanism would
not be operative for that year.

III. Problems and Prospects

Revision of Basic Quotas

Collectively, all the producing member
countries recognize the need for exercising
mutual restraint in holding surplus coffee
if they are to achieve stability in the coffee
market. Nonetheless, individually, each
country wishes to sell as much of its own
crop as it can. For this reason it was very
difficult to negotiate the country basic export
quotas in 1962, and the decision was taken
then on the understanding that quotas would
be reviewed in 1965 and revised if possible.
The Council tried at two meetings in 1965
to reach agreement on changes, but was un-
able to do so. Again in 1966 it proved impos-
sible to resolve this important question. A
high-level Working Group of the Coffee
Organization is now preparing statistical
and other information for further considera-
tion of the problem.

The adoption of the selective system of
quota adjustments may somewhat ease the
problem of revising basic quotas. With ex-
perience, coffee producers and their govern-
ments should come to realize that in a sur-
plus situation they cannot expect to enjoy
both good prices and unrestrained sales.
Nevertheless, since basic quotas determine
the share of the world market each country
enjoys, revision of basic quotas will in-
evitably be one of the key issues in the re-
negotiation of the Agreement. The renegoti-



ation will probably begin in the latter part
of 1967.

Diversification and Production Controls

The United States has a clear interest in
assuring that the Coffee Agreement is used
to bring about an orderly adjustment of pro-
duction to foreseeable demand. As con-
sumers, we wish to avoid the periods of low
prices that in the past have caused produc-
tion to fall so low it triggers subsequent
runaway price increases. Our general in-
terest in the economic and political health
of the developing countries that grow
coffee further dictates that we encourage
wise long-range production policies.

The Coffee Agreement clearly recognizes
that the price stability it creates will be
undermined if production continues to ex-
ceed foreseeable demand. Persistent accu-
mulation of surpluses will create uneasiness
no matter how closely quotas are observed.
In addition, the resources devoted to produc-
ing coffee that cannot be sold are wasted.
And coffee growing countries can ill afford
such waste.

The period of relative price stability
brought about by the International Coffee
Agreement gives the producing countries
time to diversify away from surplus coffee
production and into more productive activi-
ties. In the absence of the Agreement ad-
justment would have to take place through a
drastic fall in prices which would be painful
to the coffee farmer and gravely disruptive
of the development programs of the coffee
producing countries.

In recognition of these facts, the drafters
of the Coffee Agreement included specific
provisions by which all the producing mem-
bers undertook to adjust their production to
world market demand. The Coffee Council
was to project world demand for the years
ahead and on this basis recommend produc-
tion goals for individual countries. There-
after countries were to submit regular re-
ports on their compliance with their produc-
tion goals. Unfortunately, it has not been

possible to implement this section of the
Agreement. Most countries hesitated to
agree to the Council's setting production
controls so long as there was a chance that
they might negotiate for themselves such an
increase in their basic quota that they would
not have to curb production.

Several countries, however, have not
waited for the Council to act. They have
recognized that they cannot afford to go on
producing surplus coffee. The largest pro-
ducer in Africa, the Ivory Coast, for exam-
ple, has banned all new coffee plantings and
is devoting its agricultural development
funds to encouraging substitute crops like
rice and oilseeds. Brazil, the largest producer
in the world, has started a massive $70 mil-
lion diversification program. Brazil has al-
ready begun to uproot 400 million coffee
trees in order to reduce production by as
much as 5 million bags per year. In addition
to measures to discourage surplus coffee pro-
duction, Brazil is actively encouraging the
growing of foods, fibers and other raw ma-
terials essential to its food needs and eco-
nomic development.

The Coffee Council has begun to move to
stimulate international action on diversifi-
cation and the elimination of surplus coffee
production. In past years under the Agree-
ment several countries have been granted
special export quota increases (designated
as waivers) that permit them to export more
coffee than their normal quotas. Waivers
have usually been granted in recognition of
special problems like physical inability to
store surpluses and the existence of an un-
usually large crop. The permission to sell
coffee above quotas, however, frequently
served to make coffee production in these
countries more remunerative and to en-
courage further expansion. From a global
point of view, it tended to add to, rather
than diminish, world coffee difficulties.

In 1966, the Council adopted the im-
portant principle that waivers would be
granted on the basis that part of the pro-
ceeds would be used to solve the inten-elated

FEBRUAKY 13, 1967


problem of overproduction and excessive
stock accumulation. SpecificaUy, the coun-
tries that received waivers in the 1966-67
coifee year will be permitted to use them only
if they agree to set aside 20 percent of the
proceeds for diversification programs or to
freeze an equivalent amount of coffee stocks.

In addition, the Council inaugurated in-
tense international study of a draft proposal
for an International Coffee Diversification
and Development Fund. Representatives of
the major producing and consuming coun-
tries met at the International Bank for Re-
construction and Development in Washing-
ton in November 1966 with the African
Development Bank, the Inter-American De-
velopment Bank and the Food and Agricul-
ture Organization. They agreed to circulate
to all the member countries of the Interna-
tional Coffee Agreement the outlines of a
Fund to be used to carry out diversification
activities, to be financed by the producing
countries as a cooperative self-help measure.
Consideration was given to the possibility
that international organizations like the
IBRD and the regional development banks
might take over substantial parts of the ad-
ministration of the Fund. The technical fa-
cilities and development programs of the
international organizations and the bilateral
economic assistance programs of the United
States and other industrial countries could
also be woven into the producing countries'
mutual efforts to help each other by develop-
ing alternative opportunities to surplus cof-
fee production.

Countries are now considering the basic
elements of the Fund and how it would work.
Action on this proposal will have high pri-
ority in 1967.

Renegotiation of the Agreement

The Agreement will expire September 30,
1968. In order for all the member countries
to have time to consider the text of a new
agreement and take necessary legislative
action to ratify and implement it, formal
renegotiation should begin during 1967.


Current Actions



Constitution of the Food and Agriculture Organiza-
tion of the United Nations, as amended (TIAS
1554, 4803, 5229, 5506, 5987). Signed at Quebec
October 16, 1945. Entered into force October 16,

Acceptances deposited: Botswana, November 1,
1966; Lesotho, November 7, 1966.


Treaty on principles governing the activities of
states in the exploration and use of outer space,
including the moon and other celestial bodies.
Opened for signature at Washington, London, and
Moscow January 27, 1967. Enters into force upon
the deposit of instruments of ratification by five
governments, including depositary governments.'
Signatures in Washington: Afghanistan, Argen-
tina, Australia, Bolivia, Botswana, Bulgaria,
Bur-undi, Cameroon, Canada, Central African
Republic, Chile, China, Colombia, Congo (Kin-
shasa) , Cyprus, Czechoslovakia, Denmark, Do-
minican Republic, Ecuador, El Salvador, Ethi-
opia, Finland, Federal Republic of Germany,
Ghana, Greece, Haiti, Honduras, Hungary, Ice-
land, Indonesia, Ireland, Israel, Italy, Japan,
Korea, Laos, Lesotho, Luxembourg, Mexico,
New Zealand, Nicaragua, Panama, Philippines,
Poland, Romania, Rwanda, Sweden, Switzer-
land, Thailand, Togo, Tunisia, Turkey, Union
of Soviet Socialist Republics, United Arab Re-
public, United Kingdom, United States, Uru-
guay, Venezuela, Viet-Nam, Yugoslavia.


Protocol for the accession of Yugoslavia to the Gen-
eral Agreement on Tariffs and Trade. Done at
Geneva July 20, 1966. Entered into force August
25, 1966.
Signature: United States, January 17, 1967.


Germany, Federal Republic of

Agreement relating to prepayment of the remaining
German debt to the United States resulting from
postwar economic assistance (excluding surplus
property). Effected by exchange of notes at Bonn
and Bonn/Bad Godesberg December 29, 1966. En-
tered into force December 29, 1966.


Agreement amending the agricultural commodities

Not in force.



agreement of March 7, 1966 (TIAS 5973). Ef-
fected by an exchange of notes at Seoul December
5, 1966. Entered into force December 5, 1966.


Protocol to amend the agreement of January 29,
1957 (TIAS 4777), concerning radio broadcasting
in the standard band. Signed at Mexico April 13,
1966. Entered into force January 12, 1967.
Proclaimed by the President: January 18, 1967.


Agreement concerning matters of customs adminis-
tration, with annexes. Sigrned at Washington Jan-
uary 4, 1967. Entered into force January 4, 1967.




The Senate on January 26 confirmed the following
nominations :

Clarence A. Boonstra to be Ambassador to Costa
Rica. (For biographic details, see Department of
State press release 21 dated February 3.)

William B. Buffum to be the deputy representative
of the United States to the United Nations.

Arthur E. Goldschmidt to be the U.S. representa-
tive to the Economic and Social Council of the
United Nations. (For biographic details, see White
House press release dated December 13.)

John F. Henning to be Ambassador to New Zea-
land. (J*or biographic details, see White House press
release dated January 12.)

David S. King to be Ambassador to the Malagasy
Republic. (For biogi'aphic details, see White House
press release dated January 12.)

Robert L. Payton to be Ambassador to the Federal
Republic of Cameroon. (For biographic details, see
White House press release dated January 12.)

Richard F. Pedersen to be the deputy representa-
tive of the United States in the Security Council of
the United Nations. (For biographic details; see
White House press release dated January 13.)

Idar Rimestad to be Deputy Under Secretary of
State. (For biographic details, see Department of
State press release 22 dated February 3.)

Eugene Victor Rostow to be U.S. Alternate Gov-
ernor of the International Monetary Fund for a
term of 5 years and U.S. Alternate Governor of the
International Bank for Reconstruction and Develop-
ment for a term of 5 years.

Recent Releases

For sale by the Superintendent of Documents, U.S.
Government Printing Office, Washington, D.C., 20i02.
Address requests direct to the Superintendent of
Documents, except in the case of free publications,
which may be obtained from the Office of Media
Services, Department of State, Washington, D.C.,

Trade — Renegotiation of Schedule XX (United
States) to the General Agreement on Tariffs and
Trade. Interim agreement with Japan signed at
Geneva September 6, 1966. Entered into force Sep-
tember 6, 1966. TIAS 6106. 30 pp. 15«f.

Aviation — Joint Financing of Certain Air Naviga-
tion Services in Iceland. Agreement with other gov-
ernments amending the agreement done at Geneva
September 25, 1956, as amended. Adopted by the
Council of the International Civil Aviation Organiza-
tion, Montreal, May 19, 1966. Entered into force May
19, 1966. TIAS 6108. 2 pp. f,^.

Circulation of Visual and Auditory Materials of an
Educational, Scientific and Cultural Character.
Agreement and protocol with other governments
opened for signature at Lake Success July 15, 1949
— Signed on behalf of the United States of America
September 13, 1949. Date of entry into force with
respect to the United States of America January 12,
1967. TIAS 6116. 34 pp. 15«}.

Atomic Energy — Application of Safeguards by the
IAEA to the United States-Australia Cooperation
Agreement. Agreement with Australia and the In-
ternational Atomic Energy Agency — Signed at
Vienna September 26, 1966. Entered into force Sep-
tember 26, 1966. TIAS 6117. 10 pp. 10(f.

Atomic Energy — Cooperation for Civil Uses. Agree-
ment with the Philippines amending the agreement
of July "27, 1955, as amended — Signed at Washing-
ton June 27, 1966. Entered into force October 21,
1966. TIAS 6119. 5 pp. h^.

Whaling. Amendments to the schedule to the Inter-
national Whaling Convention — Signed at Washing-
ton December 2, 1946. Adopted at the eighteenth
meeting of the International Whaling Commission,
London, June 27-July 1, 1966. Entered into force
October 5, 1966. TIAS 6120. 2 pp. 5«f.

Trade in Cotton Textiles. Agreement with Spain
amending the agreement of July 16, 1963, as
amended. Exchange of notes — Signed at Washington
September 14, 1966. Entered into force September
14, 1966. TIAS 6121. 2 pp. 5(«.

Technical Cooperation. Agreement with Afghanistan
extending the agreement of June 30, 1953, as ex-
tended. Exchange of notes — Signed at Kabul July 16,
and October 5 and 8, 1966. Entered into force Octo-
ber 8, 1966. Effective June 30, 1966. TIAS 6123. 4
pp. 5^.

FEBRUARY 13, 1967


Atomic Energy — Cooperation for Civil Uses. Agree-
ment with Indonesia amending the agreement of
June 8, 1960 — Signed at Washington January 12,
1966. Entered into force October 31, 1966. TIAS
6124. 2 pp. 5.

Agricultural Commodities. Agreements with Paki-
stan amending the agreement of May 26, 1966, as
amended. Exchange of notes — Signed at Rawalpindi
October 6, 1966. Entered into force October 6, 1966.
And exchange of notes — Signed at Rawalpindi Oc-
tober 25, 1966. Entered into force October 25, 1966.
TIAS 6125. 5 pp. 5

Online LibraryUnited States. Dept. of State. Office of Public CoDepartment of State bulletin (Volume v. 56, Jan- Mar 1967) → online text (page 48 of 90)