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[Senate Treaty Document 104-27]
[From the U.S. Government Publishing Office]

104th Congress                                              Treaty Doc.

2d Session                                                       104-27







                           FEBRUARY 17, 1995

 June 19, 1996.--Treaty was read the first time and, together with the 
accompanying papers, referred to the Committee on Foreign Relations and 
            ordered to be printed for the use of the Senate

                         LETTER OF TRANSMITTAL


                                    The White House, June 19, 1996.
To the Senate of the United States:
    I transmit herewith, for the advice and consent of the 
Senate to ratification, the International Natural Rubber 
Agreement, 1995, done at Geneva on February 17, 1995. The 
Agreement was signed on behalf of the United States on April 
23, 1996. The report of the Department of State setting forth 
more fully the Administration's position is also transmitted, 
for the information of the Senate.
    As did its predecessors, the International Natural Rubber 
Agreement, 1995 (INRA), seeks to stabilize natural rubber 
prices without distorting long-term market trends and to assure 
adequate natural rubber supplies at reasonable prices. The U.S. 
participation in INRA, 1995, will also respond to concerns 
expressed by U.S. rubber companies that a transition period is 
needed to allow industry time to prepare for a free market in 
natural rubber and to allow for the further development of 
alternative institutions to manage market risk. The new 
Agreement incorporates improvements sought by the United States 
to help ensure that it fully reflects market trends and is 
operated in an effective and financially sound manner.
    The Agreement is consistent with our broad foreign policy 
objectives. It demonstrates our willingness to engage in a 
continuing dialogue with developing countries on issues of 
mutual concern and embodies our belief that long-run market 
forces are the appropriate determinants of prices and resource 
allocations. It will also strengthen our relations with the 
ASEAN countries, since three of them--Malaysia, Indonesia, and 
Thailand--account collectively for approximately 80 percent of 
world production of natural rubber.
    Therefore, I urge the Senate to give this Agreement prompt 
consideration and its advice and consent to ratification to 
enable the United States to deposit its instrument of 
ratification as soon as possible.
                                                William J. Clinton.

                          LETTER OF SUBMITTAL


                                       Department of State,
                                          Washington, May 29, 1996.
The President,
The White House.
    I have the honor to submit to you, with a view to its 
transmission to the Senate for advice and consent to 
ratification, the International Natural Rubber Agreement 
(``INRA''), 1995, done at Geneva, February 17, 1995. The 
Agreement was signed on behalf of the United States on April 
23, 1996.
    While the International Natural Rubber Organization (INRO), 
established by the Agreement, has been useful, the U.S. 
Government believes that free markets are better able to serve 
the interest of both consumers and producers. For that reason 
we have announced our intention that INRA 1995 will be the last 
we join. U.S. participation in INRA 1995 responds directly to 
concerns expressed by U.S. rubber companies and unions that a 
transition period is needed to allow industry time to prepare 
for a free market in natural rubber and to allow for the 
further development of alternative institutions to manage 
market risk.
    The United States has been a party to the previous two 
International Natural Rubber Agreements (``INRA 1979'' and 
``INRA 1987'') despite our preference for a free market. The 
purpose of those earlier Agreements, which will continue under 
the new agreement, was to stabilize natural rubber prices 
within predetermined, but flexible, ranges through operation of 
a buffer stock of not more than 550,000 metric tons. Producing 
and consuming countries, both of which have benefitted from 
reduced price volatility, contribute funds to the buffer stock 
according to their share of world rubber exports and imports.
    Prior to conclusion of INRA 1979, rubber prices had 
historically been unstable, with strong rises--particularly in 
1951, 1955, 1960, and 1973-74--followed by sharp and sudden 
declines. This behavior not only destabilized producers' 
incomes, but also contributed to inflation in industrial 
    In addition, it discouraged needed long-term investments in 
natural rubber production. This was and is of particular 
concern to the United States which, as the world's largest 
consumer of natural rubber, has a substantial interest in 
assuring adequate future supplies of this commodity.
    The United States has been satisfied with the operation of 
these agreements. The buffer stock has been responsibly managed 
and the price range within which it operates has been adjusted 
in accordance with the agreements' provisions for semiautomatic 
changes. The agreements have not adversely affected the day-to-
day operation of the market or attempted to fix the market 
price at a level that was not responsive to fundamental changes 
in market forces.
    Renegotiation of a successor agreement, INRA 1995, was 
concluded in February 1995 at the Fourth United Nations 
Conference on Natural Rubber convened by the United Nations 
Conference on Trade and Development (UNCTAD). The objectives 
pursued by the United States resulted in a well-structured 
accord which offers a fair balance of benefits and 
responsibilities for both consumers and producers of natural 
    The structure and provisions of the new Agreement are much 
the same as those in the previous agreements. The buffer stock 
will defend a price range designed to ensure consistency with 
long-term market trends. The price range adjustment mechanism 
will remain the same as that contained in INRA 1979 and INRA 
1987, with the initial reference price level to be consistent 
with market price developments and activities of the buffer 
stock. INRA 1995, consistent with U.S. objectives, contains 
language which prohibits its members from taking measures to 
manipulate rubber prices or restrict rubber supplies outside of 
the Agreement.
    In addition, a number of improvements sought by the United 
States have been incorporated into the new Agreement. These 
changes provide for more frequent and automatic adjustment of 
prices to reflect market trends and to strengthen the financial 
structure of the Agreement. These changes provide a reasonable 
constraint on the financial liability of members; at the same 
time, they ensure that when the new Agreement enters into 
force, it will have sufficient resources to operate in an 
effective and financially sound manner.
    As in the previous Agreements, each government's share of 
the buffer stock will depend upon its votes in INRO, as 
determined by net exports or imports. The share of the United 
States will be between 14.2 percent and 17.8 percent of the 
total contributions of all members, depending on the number of 
governments that become parties to the Agreement.
    The Department of State's recommendation that the United 
States ratify and participate in INRA 1995 is contingent upon 
such participation's not requiring additional appropriations or 
outlays at this time to fund the U.S. contribution to the INRO 
buffer stock account. We will continue to consult with Congress 
to confirm that the current U.S. share in the buffer stock 
account, which totals approximately $78.5 million, may be 
rolled over from INRA 1987 to INRA 1995 without a new 
appropriation. This includes $7.5 million in the buffer stock 
account and $71 million held in the INRO Surplus Funds Account, 
an interest-bearing account managed by Rothschild Asset 
Management Ltd., Singapore.
    Depending on developments in the international rubber 
market, it is estimated that potential additional budgetary 
requirements during the term of INRA 1995 could reach $14 
million ($78.5 million plus $14 million for a total of $92.5 
million). Such additional funds would only be necessary, 
however, under worst case market conditions. The Department as 
well as market observers, including an independent producer/
consumer organization, believe that such worst case market 
conditions are unlikely.
    The annual contribution of the United States to INRO's 
administrative budget would be approximately $300,000. The 
Department's proposed budget for FY 1997 includes this item.
    The Office of the United States Trade Representative, the 
Departments of Commerce and Treasury, and the Office of 
Management and Budget concur in my recommendation that the 
Agreement (INRA 1995) be submitted to the Senate for advice and 
consent to ratification.
            Respectfully submitted,
                                                Warren Christopher.