U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

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29–118

" ! SENATE 104TH CONGRESS

2d Session

TREATY DOC.

104–27

1996

INTERNATIONAL NATURAL RUBBER AGREEMENT, 1995

MESSAGE

FROM

THE PRESIDENT OF THE UNITED STATES

TRANSMITTING

INTERNATIONAL NATURAL RUBBER AGREEMENT, 1995, DONE AT

GENEVA ON 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

(III)

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.

(V)

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 countries.

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-
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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 rubber.

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.
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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.
(1)
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