[Senate Executive Report 104-21]
[From the U.S. Government Publishing Office]



104th Congress                                              Exec. Rept.
                                 SENATE

 2d Session                                                      104-21
_______________________________________________________________________


 
              INTERNATIONAL NATURAL RUBBER AGREEMENT, 1995

                                _______
                                

                 June 26, 1996.--Ordered to be printed

_______________________________________________________________________


   Mr. Helms, from the Committee on Foreign Relations, submitted the 
                               following

                              R E P O R T

                   [To accompany Treaty Doc. 104-27]

    The Committee on Foreign Relations to which was referred 
The International Natural Rubber Agreement, 1995, done at 
Geneva on February 17, 1995, having considered the same, 
reports favorably thereon with one declaration and recommends 
that the Senate give its advice and consent to the ratification 
thereof subject to the one declaration as set forth in this 
report and the accompanying resolution of ratification.

                               I. Purpose

    Like its predecessor agreements, the major objectives of 
INRA III include:
          a. to achieve a balanced growth between the supply of 
        and demand for natural rubber, thereby helping to 
        alleviate the serious difficulties arising from 
        surpluses or shortages of natural rubber;
          b. to achieve stable conditions in natural rubber 
        trade through avoiding excessive natural rubber price 
        fluctuations, which adversely affect the long-term 
        interest of both producers and consumers, and 
        stabilizing these prices without distorting long-term 
        market trends, in the interest of producers and 
        consumers;
          c. to help stabilize the export earnings from natural 
        rubber of exporting members, and to increase their 
        earnings based on expanding natural rubber export 
        volumes at fair and remunerative prices, thereby 
        helping to provide the necessary incentives for a 
        dynamic and rising range of production and the 
        resources for accelerated economic growth and social 
        development; and
          d. to seek to ensure adequate supplies of natural 
        rubber to meet the requirements of importing members at 
        fair and reasonable prices and to improve the 
        reliability and continuity of these supplies * * * 
        (Art. 1).

                             II. Background

    The International Natural Rubber Agreement, 1995 (INRA III) 
is the third in a series of international agreements on natural 
rubber entered into by producing and consuming countries, the 
United States having been a party to each of the earlier 
accords. The first, the International Natural Rubber Agreement 
of 1979 (INRA I), was the first new commodity agreement to be 
entered into under the Integrated Program for Commodities (IPC) 
formulated by the United Nations Conference on Trade and 
Development (UNCTAD) and adopted by that body in 1976. INRA I 
was followed by the International Natural Rubber Agreement, 
1987 (INRA II), which was scheduled to expire in December 
1995.\1\ A one-year interim agreement was adopted the same 
month for purposes of ratification of INRA III.\2\
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    \1\ INRA II was agreed to by 6 producing countries (Cote d'Ivoire, 
Indonesia, Malaysia, Nigeria, Sri Lanka, Thailand) and the following 
consuming countries: Belgium, China, Denmark, European Economic 
Community, Finland, France, the Federated Republic of Germany, Greece, 
Ireland, Italy, Japan, Luxembourg, Morocco, Netherlands, Norway, 
Portugal, Russian Federation, Spain, Sweden, Switzerland, USSR, United 
Kingdom, United States). See Dep't of State Treaties in Force (1995); 
``New Global Price Pact to be Signed in Four Weeks,'' Reuter European 
Business Report, December 1, 1995, as printed in LEXIS/NEWS/CURNWS.
    \2\ Inro [International Natural Rubber Organization] under interim 
period to facilitate ratification of Inra III,'' Business Times, Dec. 
2, 1995, at 26, as printed in LEXIS/NEWS/CURNWS.
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                              III. Summary

                               A. GENERAL

    In general, commodity agreements can take various 
approaches, ``but essentially they involve (either separately 
or in combination) the operation of a system of export quotas 
(as in the coffee agreement), an international buffer stock 
which operates within a range of prices (as in the tin 
agreement), or a multilateral long-term contract which 
stipulates a minimum price at which importing countries agree 
to buy specified quantities and a maximum price at which 
producing countries agreed to export a stated amount (as 
originally in the wheat agreement).'' \3\ INRA I and II 
establishes a buffer stock, which could be sold and increased 
as prices moved between established levels in order to 
stabilize the price of the commodity. Producing and consuming 
countries contribute funds to the buffer stock based on their 
share of world rubber exports and imports. The rubber 
agreements also established an administering body, the 
International Natural Rubber Organization (INRO); committed 
members to maintaining the continuous availability of and 
market access for natural rubber; encouraged the development of 
other measures that facilitate the aims of the agreement 
(including research and development and improvements in 
processing, marketing and distribution); and authorized 
procedures for complaints and dispute settlement.
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    \3\ Meier, ``UNCTAD Proposals for International Economic Reform,'' 
19 Stanford L. Rev. (1967), as reprinted in Jackson, Davey & Sykes, 
supra note 1, at 1176.
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    As described in the President's transmittal letter to the 
Senate for the 1987 Agreement, the rubber agreements are 
intended ``to stabilize natural rubber prices without 
distorting long-term market trends and to foster expanded 
natural rubber supplies at reasonable prices.'' The Secretary 
of State simultaneously provided the following brief summary 
and comparisons of the 1987 Agreement with its predecessor:

          The structure and provision of the new Agreement 
        (INRA, 1987) are much the same as the 1979 Agreement. 
        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 with the initial 
        reference price level to be consistent with market 
        price development and activities of the buffer stock.
          As in the previous Agreement, each government's share 
        of the stock will depend upon its votes in the 
        Organization as determined by net exports or imports. 
        The share of the United States will be between 12.2 
        percent and 15.3 percent of the total contributions of 
        all members, depending on the number of governments 
        which become parties to 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. Moreover, an additional cap was placed on 
        individual member contributions. 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.
          INRA, 1987, 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.\4\

    \4\ ``Letter of Transmittal'' in Senate Treaty Document, supra note 
6, at v-vi.
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    As for its financial participation, the United States had 
obtained at authorization and an appropriation of $88 million 
for INRA I.\5\ In requesting funds for INRA II, the 
Administration stated as follows:

          Authorization and appropriations legislation must be 
        for the full amount of resources (both new money and 
        assets transferred form INRA, 1979) and should include 
        provisions directing the transfer of the U.S. share of 
        the assets of the INRA, 1979 to the new Agreement. This 
        transfer will be treated as a proprietary receipt and 
        as such will substantially offset outlays necessary 
        under the new agreement. \6\
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    \5\ Act of June 16, 1980, Pub. L. No. 96-271.
    \6\ Senate Treaty Document, supra note 6, at vii.
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                     B. SECTION-BY-SECTION SUMMARY

    Like its 1987 predecessor,\7\ the International Natural 
Rubber Agreement, 1995 (INRA III) consists of 15 chapters:
---------------------------------------------------------------------------
    \7\ As noted earlier, the Executive Branch stated that INRA II 
generally followed INRA I but listed a few differences in its submittal 
letter. We will limit any comparisons to INRA II.
---------------------------------------------------------------------------
  Chapter I--Objectives
  Chapter II--Definitions
  Chapter III--Organization and Administration
  Chapter IV--The International Natural Rubber Council
  Chapter V--Privileges and Immunities
  Chapter VI--Accounts and Audit
  Chapter VII--The Administrative Account
  Chapter VIII--The Buffer Stock
  Chapter IX--Relationship with the Common Fund for Commodities
  Chapter X--Supply and Market Access and Other Measures
  Chapter XI--Consultation and Domestic Policies
  Chapter XII--Statistics, Studies and Information
  Chapter XIII--Miscellaneous
  Chapter XIV--Complaints and Dispute
  Chapter XV--Final Provisions.
    Each also contains three annexes:
          Annex A--Shares of individual countries in total net 
        exports of countries, as established for the purposes 
        of Article 61 [entry into force of the agreement];
          Annex B--Shares of individual importing countries and 
        groups of countries in total net imports of countries, 
        as established for the purposes of article 61; and
          Annex C--Cost of the Buffer Stock as estimated by the 
        President of the United Nations Conference on Natural 
        Rubber, 1994.
    The 68 articles of INRA III follow the subject matter of 
INRA II, except that INRA III adds a new article (Art. 54) 
regarding environmental concerns. For the most part, INRA III 
provisions are identical in substance to those in INRA II. As 
described below, however, there are some differences between 
the two in standards for price determinations, the length of 
time between price reviews, and the authorities of the Buffer 
Stock Manager.
    INRA III continues the administering body of the 
International Natural Rubber Organization (INRO), which 
consists of two classes of members (exporting and importing) 
and which may be joined by intergovernmental organizations 
(IOs), such as the European Community (Arts. 4-5).\8\ The INRO 
Council, described below, elects a Chairman and a Vice-Chairman 
of INRO for each year, one being elected from among exporting 
members, the other from importing members, with the offices 
alternating each year between the two categories of members 
(Art. 11:2).
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    \8\ When an IO votes on a matter within its competence, it 
exercises its voting rights with a number of votes equal to the total 
number of votes attributed to its member States; member States may not 
exercise their voting rights when the IO to which they belong does so 
(Art. 5:2).
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    The highest authority of the INRO is the International 
Natural Rubber Council (INRC), which consists of all INRO 
Members (Art. 6). The Council may exercise all powers and 
perform (or arrange for the performance of) all functions 
necessary to carry out the Agreement, but may not incur any 
obligation outside the scope of the Agreement (Art. 7:1). In 
particular, it has not been given the capacity to borrow money 
and may not enter into any trading contract for natural rubber 
except as specifically provided for in Article 30:5 regarding 
sales and purchases by the Buffer Stock Manager (Art. 7:1). The 
Council, by special vote, appoints an Executive Director, 
Deputy Executive Director, and Buffer Stock Manager (Art. 12). 
The Council holds one regular section in each half year and may 
meet in sessions specifically provided for in the Agreement and 
in special sessions whenever it so decides or at the request of 
the Council Chairman, the Executive Director, a majority of 
exporting or importing member, or importing or exporting member 
or members holding at least 200 votes (Art. 13). The Agreement 
does not establish an Executive Committee, but instead creates 
committees on administration, buffer stock operations, 
statistics and other measures, with authority for additional 
committees to be established by special vote of the Council 
(Art. 18).
    The Council operates under a weighted voting system, with 
exporting and importing members each holding 1,000 votes as a 
group (Art. 14:1). Each exporting member receives one initial 
vote (unless it has net exports of 10,000 tons annually) with 
the remainder of the votes distributed among the exporting 
members as nearly as possible in proportion to the volume of 
their respective net exports of natural rubber for the period 
of five calendar years beginning six calendar years prior to 
the distribution of the votes (Art. 14:2). The votes of 
importing members is distributed among them as nearly as 
possible in proportion to the average of their respective net 
imports of natural rubber during the period of three calendar 
years commencing four calendar years prior to the distribution 
of votes, except that each importing member receives one vote 
even if its proportional net import share is otherwise not 
sufficiently large to so justify (Art. 14:3). All Council 
decisions are taken and all recommendations made by distributed 
simple majority vote, unless otherwise provided for (Art. 17). 
The Agreement contains quorum rules for Council meetings (Art. 
16).
    Two accounts are established to administer the Agreement: 
an Administrative Account and a Buffer Stock Account (BSA) 
(Art. 21). Member contributions to the former are assessed in 
proportion to the number of votes a Member is apportioned (Art. 
24:2). Failure to pay one's full assessed contribution will 
ultimately result in a loss of voting rights unless the Council 
decides otherwise (Art. 25:2).
    The total capacity of the buffer stock continues to be 
550,000 tons, a figure that, for INRA III, includes the total 
stocks still held under the 1987 Agreement (Art. 26). As in the 
1987 Agreement, the Buffer Stock, which is the sole instrument 
of market intervention for price stabilization in the INRA, 
will consist of the normal Buffer Stock of 400,000 tons and the 
contingency Buffer Stock of 150,000 tons (Art. 26).
    Members commit themselves in the Agreement to finance the 
total cost of the international Buffer Stock, with current 
shares of Members in the BSA, with the consent of each Member, 
to be carried over to the BSA established under the 1995 
Agreement stock (Art. 27:1). Financing of the normal and 
contingent Buffer Stocks is to be shared equally between 
exporting and importing members (Arts. 27:2). Contributions of 
members to the BSA are apportioned, according to the share of 
voters in the Council, except as otherwise provided in the 
Agreement (Art. 26:2).
    A price range is established consisting of the following 
elements:
          a reference price;
          a lower intervention price;
          an upper intervention price;
          a lower trigger action price;
          an upper trigger action price;
          a lower indicative (or floor) price; and
          an upper indicative price (Art. 29:1).
    The reference price is that applicable on December 28, 
1995. A specific reference price tied to Malaysian/Singapore 
cents had been established in INRA II. Intervention and trigger 
prices are calculated according to a percentage of the 
reference price (as in the current agreement, plus or minus 15 
percent and plus or minus 20 percent, respectively) unless the 
Council, by special vote, decides otherwise. Upper and lower 
indicative prices are set at 157 (formerly 150) and 270 
Malaysian/Singapore cents, respectively. Further, the Agreement 
establishes a daily market indicator price (DMIP), used in 
determining the reference price (Art. 32). The DMIP consists of 
a composite weighted average of three types of rubber (RSS 1, 
RSS 3, and TSR 20) and reflecting the market in natural rubber 
on the Kuala Lumpur, London, New York, and Singapore markets 
(Art. 32). INRA III increases the amount of TSR 20, a lower 
quality natural rubber, to be considered in determining the 
DMIP, in order to better reflect actual trade patterns in the 
commodity. \9\
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    \9\ ``Rubber: New International Natural Rubber Agreement Adopted,'' 
Multinational Service, March 3, 1995, as printed in LEXIS/NEWS/CURNWS. 
It was reported that the main issue in the final round of negotiations 
``concerned the `floor' price and certain provisions concerning the 
price range, which trigger market intervention. If the daily market 
indicator price (DMIP) remains as high as it has been recently, the 
reference price, currently at 196.84 Malaysian/Singapore cents per 
kilogram, will be automatically raised by 5 percent (to 206.68) cents 
at the next 15-monthly review to be carried out under the present 
Agreement. This review is now scheduled for August 2, 1995. The new 
reference price will be carried over in the new pact. While consumers 
could not go along with the producers' demand for a minimum 5 percent 
increase in the reference price upon entry into force of the new 
Agreement, they agreed to raise the lower indicative price, or `floor 
price' which is unrelated to the reference price, from 150 to 157.'' 
Id.
    Another news account described the negotiation as follows: 
``Initially, the United States wanted a scenario where a revision of 
the reference price resulted in the intervention price breaking the 
floor price. The U.S. wanted the percentage revision in rubber prices 
to be cut so that the intervention price, the trigger price, and the 
floor price coincided. * * * However, producers rejected the proposal 
and argued it would make buffer stock intervention less effective. In 
the final version, the U.S. request was modified to take into account 
the producers' concerns. As a result, the final formula envisages that 
two prices will coincide (the trigger action and floor price) while the 
third will always stay 2 cents higher than the intervention price. `Our 
minimum requirements were met,' said a senior member of the U.S. 
delegation.'' More Than 30 Nations Reach Accord on Rubber Pricing,'' J. 
of Commerce, February 21, 1995, at 5B.
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    Article 30 contains authorities for the operation of the 
Buffer Stock, delineating the conditions under which the Buffer 
Stock Manager is to purchase or sell natural rubber to 
stabilize its price. As under INRA II, the Buffer Stock Manager 
is to effect sales and purchases through established commercial 
markets at prevailing prices, with all transactions to be in 
physical rubber available for shipment at a given date (Art. 
30:5). Where INRA II provides that the delivery of rubber had 
to be no later than three calendar months forward, INRA III 
provides that rubber must be available for shipment no later 
than one month after the end of the first quoted month in the 
market concerned, or for delivery in a consuming market during 
the delivery month or months normally corresponding to such 
shipment month in that market (Art. 30:5). To facilitate the 
efficient operation of the Buffer Stock, INRA III now allows 
the Council to decide by consensus (that is, without objection) 
to allow the Buffer Stock Manager to purchase future contracts 
up to a maximum of two months forward ``on the strict and 
absolute condition that tenders are to be taken up on 
maturity'' (Art. 30:5). \10\ The terms ``first quoted month'' 
and ``established commercial market'' are added to the 
definitional section of the Agreement. The Agreement also 
specifies the composition of the buffer stocks (Art. 33) and 
the location of buffer stocks (Art. 34) and requires the 
Manager to ensure its high commercial quality (Art. 35).
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    \10\ The European Union had reportedly requested that INRA III 
contain ``a set of safeguards that would limit the possibility of the 
buffer stock manager engaging in any speculative action.'' ``More Than 
30 Nations Reach Accord on Rubber Pricing,'' J. of Commerce, February 
21, 1995, at 5B.
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    The reference price may be reviewed and revised based on 
market trends (INRA II having allowed changes based on market 
trends and/or net changes in the Buffer Stock), according to 
guidelines set forth in the Agreement; automatic adjustments 
remain at 5 percent unless the Council votes otherwise. (Art. 
31:1). At the request of consuming countries, INRA III shortens 
the time period between regular Council reviews of the 
reference price from 15 to 12 months.\11\ As in INRA II, if 
there are net changes in the Buffer Stock of 100,000 tons since 
the last regular Council session, a special Council session 
must be convened at which the Council may, by special vote, 
suspend buffer stock operation, change the rate of buffer stock 
purchases or sales, revise the reference price, and take other 
appropriate measures (Art. 31:2).
---------------------------------------------------------------------------
    \11\ ``Rubber: New International Natural Rubber Agreement 
Adopted,'' Multinational Service, March 3, 1995, as printed in LEXIS/
NEWS/CURNWS.
---------------------------------------------------------------------------
    The Council may, by special vote, revise the lower and 
upper indicative prices consistent with evolving market trends 
and conditions during reviews specified and pursuant to price 
guidelines set forth in the Agreement (Art. 32:6-9). The time 
period between regular Council reviews of the indicative price 
is shortened from 30 to 24 months (Art. 31:8).
    The Council, by special vote, may restrict or suspend the 
operations of the Buffer Stock, if in its opinion the discharge 
of the obligations laid upon the Manager under Article 30 will 
not achieve the objectives of the Agreement (Art. 36:1). The 
Executive Director may also do so if the Council is not in 
session, but must immediately convene a Council meeting to 
review the Manager's decision and must confirm or cancel it by 
special vote (Art. 36:2-3). If it fails to do so, buffer stock 
operations will be resumed (Art. 36:4).
    Members who do not fulfill their obligations to contribute 
to the buffer Stock account by the last day the contribution 
comes due are to be held in arrears and have their voting 
rights suspended, unless the Council votes otherwise, and will 
be subject to the payment of interest (Art. 37).
    Detailed procedures are set forth for adjusting a member's 
contribution when votes are redistributed in each regular 
session or whenever INRO's membership changes (Art. 38).
    INRO is to take ``full advantage'' of the facilities of the 
Common Fund for Commodities, but may not incur obligations and 
will not be responsible for liabilities arising from borrowing 
by any member or organization under any project funded under 
the Second Account of the Fund (Art. 41).\12\
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    \12\ The Common Fund for Commodities, which is part of the UNCTAD 
Integrated Programme for Commodities, has been described as follows: 
the Fund ``is intended to play two roles: to help finance buffer stocks 
set up pursuant to international commodity agreements and to help 
support other activities related to commodities, including development 
measures. The resources of the Fund would be divided between these two 
functions. The former function would be financed largely by 
subscriptions by members of the fund plus contributions from associated 
international commodity organizations and borrowings while the latter 
would depend heavily on voluntary contributions. Almost two-thirds of 
the subscription would be from the western industrialized countries, 
who would receive only about 40 percent of the voting power in the 
Fund. This could constitute blocking power since decisions would 
require a vote of at least two-thirds of those voting. The Fund came 
into effect in June 1989, with over 100 members (but not including the 
United States).'' Jackson, Davey & Sykes, supra note 1, at 1180-81.
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    Among their general obligations and liabilities, Members 
must ``use their best endeavors and cooperate to promote the 
attainment of the objectives of this Agreement and shall not 
take any action in contradiction to those objectives'' (Art. 
48:1). Members must accept all Council decisions as binding and 
agree not to implement measures that would ``have the effect of 
limiting or running counter to those decisions'' (Art. 48:2). 
Members' liabilities are limited to the extent of their 
obligations regarding contributions to the administrative 
budget and buffer stock financing and any obligations that may 
be assumed under Article 41 with respect to the Common Fund for 
Commodities. As noted earlier, the United States has supported 
language in the rubber agreements that ``prohibits its members 
from taking measures to manipulate rubber prices or restrict 
rubber supplies outside of the Agreement.'' \13\
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    \13\ ``Letter of Transmittal'' in Senate Treaty Document, supra 
note 6, at v-vi.
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    INRA III follows the complaint and dispute settlement 
procedures of its predecessor. A member may file a complaint 
that another member has failed to live up to its Agreement 
obligations and, if the former requests, the Council must take 
a decision on the matter after consulting with the parties 
involved (Art. 55:1). If the Council finds that a member has 
committed a breach of the Agreement, it may suspend the 
member's voting rights or, if the breach ``significantly 
impairs the operation'' of the Agreement, exclude the member 
from the Agreement (Art. 55:3). Disputes regarding the 
application or interpretation of the Agreement are to be 
referred to the Council, which may seek an advisory opinion 
from an ad hoc panel (Art. 56:1-2). In such case, the panel is 
to submit its opinion to the Council, which must decide the 
dispute by special vote (Art. 56:4).
    INRA III is open for signature through July 1996 (Art. 57, 
as modified). The Agreement is subject to ratification or 
approval by signatories ``in accordance with their respective 
constitutional or institutional procedures'' (Art. 59:1). 
Instruments of ratification must be deposited by January 1, 
1997, but the INRO Council may grant extensions to signatory 
governments unable to deposit their instruments by that date 
(Art. 59:3). Notification of provisional application by 
signatories is also possible (Art. 60). Like its predecessor, 
INRA III contains a ``no reservation'' clause (Art. 68).
    Annex I adds Bolivia and Cameroon to those exporting 
countries that ratified INRA II (Cote d'Ivoire, Indonesia, 
Malaysia, Nigeria, Sri Lanka, Thailand). Annex II indicates 
that the United States will be the largest consuming country, 
followed by the EU and Japan, the three countries comprising 
approximately 78 percent of shares. Annex C, suggesting the 
means for determining the cost of acquiring and maintaining a 
buffer stock, retains the formula of multiplying actual costs 
by the lower trigger action price and adding on 30 percent of 
the resulting figure. Unlike INRA II, it does not specify a 
trigger action price in Malaysia/Singapore cents.

                  IV. Entry Into Force and Termination

                          a. entry into force

    INRA III is to enter into force in July 1996 or on any date 
thereafter if by that date Governments accounting for at least 
80 percent of net exports and at least 80 percent of net 
imports (as set forth in Annex A and Annex B, respectively) 
have deposited their instruments of ratification (Art. 61:1).
    INRA will enter into force provisionally in July 1996, or 
on any date before January 1, 1997, if 75 percent ratification 
or notice or provisional application is achieved (Art. 61:2).
    If the Agreement does not come into force provisionally, 
ratifying countries may decide whether to ``take the necessary 
steps to put this Agreement provisionally or definitively into 
force among themselves in whole or in part'' (Art. 61:3). If 
INRA III does not definitively enter into force within 12 
months after it enters into force provisionally, the Council 
must meet and decide by vote whether to put it into force among 
current members, either provisionally or definitively and 
either in whole or in part; the Council may also decide to 
renegotiate it at that time (Art. 61:4).
    The Agreement is open for accession by the Government of 
any nation (Art. 62). Amendments require acceptance by two-
thirds of each of exporting and importing members (each 
constituting at least 85 percent of the votes of each category) 
to enter into force; members who do not subsequently accept the 
amendment by the date the amendment enters into force will 
cease to be contacting parties unless the Council extends the 
time limit (Art. 63).

                             B. TERMINATION

    The Agreement will remain in force for four years (Art. 
67:1).\14\ The Council may vote to renegotiate the Agreement 
before that time and to extend the Agreement for a period not 
exceeding two years in all (Art. 67:2-3). The Agreement will 
terminate if a new international natural rubber agreement 
enters into force during the extension period (Art. 67:3) and 
may be terminated by special Council vote at any time (Art. 
67:4). Members may withdraw from the Agreement at any time, 
subject to notice of one year (Art. 64).
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    \14\ It was reported that the initial duration of the agreement, 
one year less than that of INRA II, was the result of a compromise: 
``Producers and most consumers had initially favoured five years, while 
one major consumers had proposed three years, in each case with a two-
year extension.'' ``Rubber: New International Natural Rubber Agreement 
Adopted,'' Multinational Service, March 3, 1995, as printed in LEXIS/
NEWS/CURNWS.
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                          V. Committee Action

    The Committee on Foreign Relations held a public hearing on 
the proposed treaty on Thursday, June 20, 1996. The hearing was 
chaired by Senator Helms. The Committee considered the proposed 
treaty on Wednesday, June 26, 1996, and ordered the proposed 
treaty favorably reported by voice vote, with the 
recommendation that the Senate gives its advice and consent to 
the ratification of the proposed treaty subject to one 
declaration.

                         VI. Committee Comments

    The Committee on Foreign Relations recommended favorably 
the proposed treaty and, on balance, the Committee believes 
that the proposed treaty is in the interest of the United 
States and urges the Senate to act promptly to give its advice 
and consent to ratification. Several issues did arise in the 
course of the Committee's consideration of the treaty, and the 
Committee believes that the following comments may be useful to 
Senate in its consideration of the proposed treaty and to the 
USTR and State Department, who share jurisdiction over the 
treaty.

        a. adequate supply and price stability of natural rubber

    The U.S. does not produce natural rubber domestically. As 
the world's largest importer of natural rubber, U.S. industry 
relies on accords such as the INRA to maintain orderly supply 
relationships with major rubber producers in the developing 
world. Natural rubber is a critical input for U.S. industry, 
especially in the transportation sector which uses 80 percent 
of natural rubber imports. A unique capacity to resist 
abrasion, cracking, and heat have made natural rubber a primary 
component in airplane and radial tires and the only source of 
rubber latex for use in products such as medical gloves.
    The INRA assures a continuous supply of natural rubber the 
U.S. and dampens price volatility. Buffer stock activity has 
helped stabilize rubber prices and has allowed U.S. companies 
to more efficiently forecast future demand and production 
schedules. The INRA also allows any member country to request 
negotiations with other signatories to work through occasional 
trade difficulties. Such dialogue within the INRA has provided 
a forum for the reduction of prohibitive export taxes imposed 
by Malaysia, Indonesia, and Thailand. U.S. business has 
benefitted from the liberalized export regimes of these three 
principal suppliers of natural rubber.
    Since just three countries--Thailand, Indonesia and 
Malaysia--produce 75 percent of the world's rubber supply, 
economic and political developments in those countries can have 
a serious impact on rubber prices and supply in the U.S. and 
other consuming nations. Several factors have led to recent 
upward pressure on prices. On a general level, rapid 
industrialization in all three countries has meant less land 
available for rubber production, higher labor costs and more 
competition for capital. Adding to this problem has been the 
depreciation of the dollar, which has caused rubber to be less 
expensive for foreign buyers and therefore a less lucrative 
business for small farmers in these countries. In addition, 
Malaysia has begun phasing out government support for rubber 
production, causing output to decline. U.S. companies believe 
that a renewed INRA would smooth fluctuations in supply and 
prevent precipitous increases in rubber prices.
    The three largest tire manufacturers in the U.S. (Goodyear, 
Michelin, and Bridgestone) stand to gain the most from INRA 
1995 and support renewal of the agreement. The Rubber 
Manufacturers Association, largely comprised of smaller tire 
manufacturers, supports the agreement and testified at the 
Committee hearing on behalf of its members.

                       b. no reservations clauses

    During the period from January 8, 1986 to January 3, 1996, 
the Senate approved 127 treaties, 37 of which contained 
conditions, declarations, reservations, provisos or amendments. 
The Committee continues to be concerned by the increasingly 
common practice of agreeing to ``no reservations'' clauses as 
exemplified in Article 68 of this treaty, which would impinge 
upon Senate prerogative. The Committee's recommended Resolution 
of Ratification contains a declaration that it is the Sense of 
the Senate that such a ``no reservations'' provision can 
inhibit the Senate in its Constitutional obligation of 
providing advice and consent, and approval of this treaty 
should not be read as a precedent for approval of other 
treaties containing such a provision.
    Although the Committee has determined that this treaty is 
beneficial to the interests of the United States and should be 
approved notwithstanding Article 68, the Committee will 
continue to object to the inclusion of such provisions in U.S. 
treaties. The Committee has expressed in the past in report 
language its concern that such ``no reservations'' provisions 
are problematic to Senate ratification (see Executive Reports 
102-54 and 102-55).

                  VII. Explanation of Proposed Treaty

    For a detailed section-by-section analysis of the proposed 
treaty see Treaty Doc. 104-27.

              VIII. Text of the Resolution of Ratification

    Resolved, (two-thirds of the Senators present concurring 
therein), That the Senate advise and consent to the 
ratification of The International Natural Rubber Agreement, 
1995, done at Geneva on February 17, 1995 (Treaty Doc. 104-27), 
subject to the following declaration:

        It is the Sense of the Senate that ``no reservations'' 
        provisions as contained in Article 68 have the effect 
        of inhibiting the Senate from exercising its 
        constitutional duty to give advice and consent to a 
        treaty, and the Senate's approval of this treaty should 
        not be construed as a precedent for acquiescence to 
        future treaties containing such a provision.