for Agricultural States Export

for Agricultural States Export
August, 1962
Technical Bulletin 150
Policy for United States
Agricultural Export
Surplus Disposal
an
Interregional Publication for the
State Agricultural Experiment Stations
Published by
The University of Arizona, College of Agriculture,
Agricultural Experiment Station, Tucson, Arizona
ACKNOWLEDGMENTS
The authors of this study wish to express appreciation to
staff members of the Agricultural Research Service, the Economic Research Service, the Commodity Stabilization Service and
other divisions of the USDA who cooperated in clarifying and
making information available which was basic to this work.
Special thanks are also due to various members of the staffs
of the Michigan and Arizona Experiment Stations who assisted
in preparing, editing and typing materials for the report.
Valuable suggestions and criticisms were provided for the
study by the members of the Interregional Committee on Agricultural Policy whose names are listed below:
W. W. Armentrout, West Virginia Agricultural Experiment Station.
J. C. Bottum, Indiana Agricultural Experiment Station.
G. E. Brandow, Pennsylvania Agricultural Experiment Station.
A. J. Brown, Kentucky Agricultural Experiment Station.
W. W. Cochrane, Minnesota Agricultural Experiment Station.
G. F. Dow, Maine Agricultural Experiment Station.
°H. G. Halcrow, Illinois Agricultural Experiment Station.
H. W. Halvorson, Wisconsin Agricultural Experiment Station.
°D. E. Hathaway, Michigan Agricultural Experiment Station.
°J. S. Hillman, Arizona Agricultural Experiment Station.
°H. F. Hollands, Oregon Agricultural Experiment Station.
°E. W. Learn, Minnesota Agricultural Experiment Station.
L. A. Powell, Sr., Florida Agricultural Experiment Station.
*K. L. Robinson, New York Agricultural Experiment Station.
°R. W. Rudd, Kentucky Agricultural Experiment Station.
J. Schnittker, Kansas Agricultural Experiment Station.
°G.. S. Shepherd, Iowa Agricultural Experiment Station.
B. S. White, Jr., State Experiment Stations Division, USDA.
°C.
P. Wilson, Kansas Agricultural Experiment Station.
f
°L. W. Witt, Michigan Agricultural Experiment Station.
E. J. Working, Washington Agricultural Experiment Station.
Members of Administrative Advisory Committee:
°G. F. Dow (Northeast), Maine Agricultural Experiment Station.
*R. E. Huffman (West), Montana Agricultural Experiment Station.
*W. A. Seay (South), Kentucky Agricultural Experiment Station.
°C. P. Wilson (North Central), Kansas Agricultural Experiment Station.
*
Serving when the manuscript was approved for publication on June 22, 1962.
t Interregional Administrative Advisor.
t Chairman of Technical Committee, 1961 -62.
PREFACE
This report is one of a series of studies associated with research project
IRM -1, entitled "National Policies for Agricultural Prices and Incomes."
The work incorporated here is the result of joint efforts by personnel at
The University of Arizona and Michigan State University.
The focus is on the farm export programs of the 1950's, but the chief
concern is with the decisions on trade and agricultural policies which will
be made in the 1960's. Policy on trade and farm production are vital
parts of the total United States policy. The abundant productivity of
American agriculture needs outlets abroad and, properly focused, can
make substantial contributions to our foreign policy. There is general
interest in using the agricultural abundance effectively where possible,
or to shift the resources to more productive uses when this cannot be done.
The problems associated with the control and use of United States
agricultural abundance are complex. Few people appreciate the extent
to which farm exports have been maintained and expanded through the
operation of government programs, and the variety of social goals to
which they are directed. Fewer still understand the complications which
arise both in foreign and domestic relations with respect to these programs. This publication is intended to lay the groundwork for a better
understanding of these problems.
C. Peairs Wilson,
Interregional Administrative Advisor
TABLE OF CONTENTS
Page
Chapter
I INTRODUCTION
-
5
The Problem Situation
The New Magnitude
Domestic Surplus
Objectives, Scope and Method
II THE IMPORTANCE OF THE AGRICULTURAL
EXPORT MARKET
9
United States Share in World Agricultural Exports
Agricultural Exports and the Domestic Economy
The Export Market for Selected Farm Products
Resources Devoted to Producing Agricultural
Commodities for Export
Measuring Exports by a Utilization Index
Choosing an Indicator
III THE DEVELOPMENT OF AGRICULTURAL
EXPORT PROGRAMS
The Pre -Depression Era
22
Action in the 1930's
The War and Postwar Period
Shift to Surplus Disposal Export
Summary
IV SELLING SURPLUSES ABROAD
33
Export Programs in General
Sales for Local Currencies ( Title I, PL 480,
and Section 402, MSA)
Other Concessional Sales
Donations
Special Price Reductions
Summary
V
THE IMPACT OF PUBLIC LAW 480 ON
RECEIVING NATIONS
The Rationale of .Development Through Food Aid
The Public Law 480 Receiving Nations: Food
Needs and Food Aid
Planning for Development Through Food Aid
55
TABLE OF CONTENTS
Page
Chapter
Title I Food Aid and Economic Development
Progress and Problems in India, Israel
and Colombia
Title II Experience: The Use of Food Grants
as Wage Payments in Tunisia
Implications for Development Through Food Aid
Summary
VI EFFECTS OF EXPORT PROGRAMS ON
COMPETING NATIONS
Effects on Trade and Prices
Views and Actions of Competing Countries
71
Summary
VII EFFECTS OF PUBLIC LAW 480 ON THE
SENDING NATION
Public Law 480 and Domestic Farm Programs
84
Possible Ramifications of Changes in
Public Law 480 Programs
Costs and Values of Public Law 480 to
the U. S. Government
Political Strategy in Public Law 480 Accounting
Domestic Adjustment Responses to Public Law 480
VIII SUMMARY AND CONCLUSIONS
Effects on the Domestic Economy
Contributions to Nutrition
Contributions to Development
Effects on Foreign Policy
Interrelation of Goals
98
Policy for United States Agricultural
Export Surplus Disposal
Elmer L. Menzie, Lawrence W. Witt, Carl K. Eicher,
and Jimmye S. Hillman'
CHAPTER I
INTRODUCTION
The Problem Situation
Agricultural exports have been, and still are, of major importance
to the United States economy. During the 19th and early 20th centuries
the foreign exchange needed to build an industrial plant was largely
earned by the outflow of farm products. Furthermore, American farm
exports have provided an important part of the supplies of many nations
both during the war and postwar reconstruction periods. In general,
the American farm economy has been geared to production for export.
Figure I -1 shows relative changes in quantities of agricultural exports
since 1865.
While the largest part of United States exports in recent years has
been industrial products, farm products still constitute a substantial
volume. The $5 billion agricultural exports in 1960 -61 were about a
quarter of the total. One -third of these agricultural exports was bought
and paid for on commercial terms at the same price as was received
in the domestic market. Another third was bought and paid for in hard
currencies, but with a price subsidized by the government. The remainder was shipped as gifts and special sales for soft currencies to the
emerging nations of the world. These latter shipments are intended to aid
in solving these countries' nutritional and development problems as well
Elmer L. Menzie and Jimmye S. Hillman are respectively assistant professor and
professor, Department of Agricultural Economics, The University of Arizona. Lawrence W. Witt and Carl J. Eicher are respectively professor and assistant professor,
Department of Agricultural Economics, Michigan State University.
The authors wish to extend special thanks to Douglas F. Loveday, Research Associate, The University of Arizona, for his assistance in writing this report. The authors
assume sole responsibility, however, for all material presented.
U. S.
AGRICULTURAL EXPORT SURPLUS DISPOSAL POLICY
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ARIZONA AGRIC. EXPERIMENT STATION TECH. BULLET IN 150
as to act as a means of reducing surplus supplies and storage costs of
agricultural commodities in the United States.
While the United States has been faced for years with problems
of agricultural surpluses, in recent years it has been in a new situation
with respect to the magnitude of the surpluses and the nature of the
productive capacity of the industry. This situation, represented by an
imbalance between domestic production and consumption, has posed a
problem requiring new ideas and new solutions.
There is a need to give more emphasis to consideration of the
problem of domestic agricultural policy in terms of its relationship to
United States foreign affairs in general and to the agricultural policies
of other countries in particular. Solutions made in isolation from the
broader aspects of the problem are unlikely to provide desirable results.
There is also a need to consider the problem in terms of current economic and other circumstances. Derivation of solutions based solely or
largely on past positions or experiences is not likely to provide optimum
answers. Finally, consideration must be given to current moral and
philosophical attitudes and aspirations. For example, a pertinent issue
is whether the United States has a moral obligation to meet the unfulfilled food needs of less fortunate peoples of the world.
Domestic Surplus
-
The New Magnitude
Wetmore, et al., have defined a surplus as an "... excess in the quantity supplied over that demanded at a given price."' At lower prices
there is no surplus; the farm problem translates to one of low prices
and low farm income. This problem stems from advancing technology,
overexpanded productive capacity, changed domestic consumption habits,
and dollar scarcity for foreign purchasers.
The domestic price support program without effective curbs on
market supply or, conversely, chronic overproduction in United States
agriculture, has by definition created domestic surpluses of certain commodities. These have, in past years, resulted in a growing investment
by the U. S. in loans on and inventories of agricultural products, which
in the early 1960's stood at nearly $10 billion. The magnitude of this
investment has tended to generate programs to solve the "surplus" problem.
Despite the magnitude of the surplus problem in American agriculture, the idea of foreign demand expansion through regular market
channels did not play a major role in the proposed solutions until recent
years.3 Most early legislation was built around dumping schemes and
2 John M. Wetmore, Martin E. Abel, Elmer W. Learn, and Willard W. Cochrane,
Policies for Expanding the Demand for Farm Food Products in the United StatesPart I, History and Potentials, Tech. Bull. 231, University of Minnesota Agricultural
Experiment Station, April 1959, p. 4.
3
U. S.
The concept of demand expansion as defined by Wetmore, et al., ibid.
AGRICULTURAL EXPORT SURPLUS DISPOSAL POLICY
7
two-price plans.
Recent legislation has emphasized market development.4 Currently much thought is being given to long -term sales, Food
for Peace, and other ideas which would utilize agricultural productive
capacity for increased consumption in certain countries. Consideration
is being given to programs which would improve nutritional and dietary
standards in those countries.
Objectives, Scope and Method
A major objective of this study is to analyze the results of PL 480,
the Trade Development and Assistance Act, under which surpluses have
been moved with special government aid. A study of the events which
led up to the inauguration of the program will be made. Special attention will be given to the economic objectives of the program.
Specifically, the objectives of this study are to explore the following questions: (1) Has the PL 480 program been implemented in a
manner that is consistent with its objectives? (2) What have been the
effects of the program upon United States agriculture and related industries; are these consistent with objectives for the rest of the economy?
(3) In what way does the program contribute to the needs and objectives of other countries? (4) In what ways do conflicts occur? (5) Have
the criteria for shipping surplus products changed over time? These
and other questions will form the basis of an analysis which will cover
the field of surplus disposal and, to a limited degree, certain other international trade problems.
In order to explore these questions, studies will be carried out in
the following areas: (1) the history of United States proposals and
programs to subsidize its agricultural products in world markets; (2) the
results of the PL 480 programs with respect to domestic agriculture and
the agriculture of other countries; (3) the impact of subsidy programs
on other domestic and foreign problems and their objectives. Only those
programs related to exports of agricultural commodities of the United
States will be investigated. Import policy and topics such as tariffs, the
reciprocal trade agreements acts, Section 22, and international monetary
policy will be examined only to the extent that their operations relate
to export programs.
4
8
Particularly PL 480, Sec. 104a, as amended.
ARIZONA AGRIC. EXPERIMENT STATION TECH. BULLETIN 150
CHAPTER II
THE IMPORTANCE OF THE AGRICULTURAL
EXPORT MARKET
This chapter outlines the significance of the role that United States
farm products play in international trade and, consequently, the role
that the export market plays in the economic affairs of domestic agriculture. Data presented here will focus attention on the United States'
share of total world exports of agricultural products; on the relationship
between United States agricultural exports and total exports; on the
relevance of the foreign market as a source of farm income; on some
changes which have been going on within the commodity groups in
foreign trade; on the importance of the farm market to certain resources
used to produce agricultural exports of this country; and on problems
of measurement of the importance of exports to United States agriculture.
Discussion of the importance of the agricultural export market is
considered to be basic to an understanding of subsequent sections of
this report dealing with the various ramifications of certain legislative
programs, to either increase or maintain export levels. Since there are
various measures available with respect to agricultural exports, each
having its own merits and purpose, they will each be discussed in some
detail. Also, since there are certain problems of aggregation and limitations associated with each of these measures, some discussion of these
aspects has also been included.
United States' Share in World Agricultural Exports
Traditionally, the United States has been the world's largest exporter
of agricultural products including foods and nonfood raw materials. This
country dominated trade in farm products during the latter part of the
19th Century and up to and including World War I. In 1929, estimates
indicate that the United States accounted for about 13 percent of world
agricultural exports, or double that of Argentina, the nearest competitor.
However, during the depression years the United States' share declined,
and between 1929 and 1937 there was also an absolute decline in the
volume of farm exports. Yet this country continued to be an outstanding
exporter, having shipped about 10 percent of all the agricultural products
entering world trade in 1933 -34.5
Due to the decline in world trade between World Wars I and II,
and due to a trend toward self-sufficiency of importing nations, the
United States became a residual supplier of farm products for the world
market instead of the main supplier that it had been. Hence, producer-
5
kets
U. S. Office of Foreign Agricultural Relations, Agriculture's Stake in Foreign MarPart I: Trends in United States Agricultural Exports, Wash., May 1951, p. 13.
U. S. AGRICULTURAL EXPORT
SURPLUS DISPOSAL POLICY
9
5
1870
1880
1890
1900
1910
1920
1930
1940
Nonagricultural
1950
1960
Sources:
1865-1954: U. S. Foreign Agricultural Service, Foreign Agricultural Trade Statistical Handbook, Statistical Bull. No. 179, Wash., Aug. 1956. 1955-1960: U. S. Foreign Agricultural Service, Foreign Agricultural Trade of the United States, Fiscal Year 1960-61, Wash., Dec. 1961.
1960 (years beginning July 1).
Fig. II-1. Value of Agricultural Exports as a Percentage of Domestic Exports, United States, 1865-
0
20
40
60
80
100 percent
exporters were faced with both a declining and a fluctuating demand.
World War II, while disrupting prewar trade patterns, resulted in a
great increase in the share of total agricultural exports originating in this
country. Rehabilitation and recovery programs consolidated these gains,
and the United States' share of total world exports is still above the
prewar relationship.
Table II -1 presents, for comparative purposes, selected data on United
States and world agricultural exports. From these data it is evident that
the United States has recovered, for the most part, its former dominant
position as the world's leading agricultural exporter.
Agricultural Exports and the Domestic Economy
World trade in agricultural products has been declining relative to
all other products for about one hundred years. In the U. S., after 1890,
this decline was accelerated by a rapid rise in population, industrial
development, increased living standards at home and by competitive
exports from other countries. This phenomenon is demonstrated in
Figure II-1.
From the Civil War to the early 1890's more than three-fourths of
our exports were agricultural products, but by 1910 this figure had
dropped to about one -half. The decline continued after World War I
and the Great Depression, reaching a low of only 9 percent in 1940 -41.
Lend- lease, foreign aid and subsidies boosted this percentage once again
after 'World War II. With the added stimulation of exports in recent
years, the value of agricultural exports compared to total exports has
stabilized at around 20 to 23 percent.
The significance of the relative decline of agricultural exports can
be effectively evaluated only within the total context of factors which
have evolved in the domestic and international economies. Domestic
price supports on agricultural commodities at levels relatively higher
than those in other exporting countries have helped to contribute to the
deterioration of the terms of trade of our agriculture with respect to our
industrial products in world markets.
Certain factors have been prominent in maintaining both the value
and the volume of U. S. agricultural exports.6 Programs such as paymentin -kind to exporters have enabled United States cotton, wheat, rice and
feed grains to compete in world markets. Moreover, in countries short
of dollars, agricultural commodities have been made continually available for rehabilitation or development through U. S. programs, the largest
of which is PL 480.
6 United States farm exports in Fiscal Year 1960 -61 established records in both
value and volume. U. S. Economic Research Service, Foreign Agricultural Trade of
the United States, Fiscal Year 1960 -61, Wash., Dec. 1961.
U. S. AGRICULTURAL EXPORT SURPLUS DISPOSAL POLICY
1,000
Short Tons
1,000
Bales
1,744
12,892
490
1,036
10
38
28
5,296
21
421
235
166
2
41
41
4
46
1
8
6
5
8
2
5
10
6
7
46
U. S.
Percent
1,510
12,219
1,142
1,251
968
42
115
192
251
83
10,475
648
World
STATES'
400
4,134
866
474
1,388
556
104
34
54
7
330
3
U. S.
1950'só
26
34
76
38
65
13
86
14
34
7
6
54
U. S.
Percent
2,596
13,496
1,626
1,450
1,190
43
72
318
257
223
14,037
660
World
989
2,895
1,133
482
166
1,294e
389
27d
181d
125c
393c
7
U. S.
1958
SHARE OF WORLD AGRICULTURAL EXPORTS
38
21
70
33
59
9
33
16
38
57
49
74
U. S.
Percent
a
Fiscal year averages for 1934 -38 except: Rice ( calendar years 1936-40), Soybeans, Lard, Tallow and Grease, Tobacco and Edible Vegetable Oils (1935 -39).
b Fiscal year averages for 1950 -54 except: Rice ( calendar years 1951-55).
Includes malt barley; does not include "food for relief or charity."
d Includes products in terms of grain.
e Fiscal year 1957-58.
Sources: U. S., FAS, Competitive Position of United States Farm. Products Abroad, 1957, Wash., Jan. 1957; Ibid., 1958. Data for
1958, U. S., FAS, Prospects for Foreign Trade in Oilseeds and Oilseed Products, Wash., Jan. 1960; U. S., FAS, Prospects
for Foreign Trade in Tobacco, Wash., Dec. 1960; U. S., FAS, Prospects for Foreign Trade in Wheat, Rice, Feed Grains,
Dry Peas, Dry Beans, Seeds, Hops, Wash., May 1961, p. 23; U. S., FAS, Foreign Agricultural Circular, FLM 3-61,
Wash., Apr. 1961; U. S., FAS, Foreign Agricultural Circular, FFO 28 -60, Wash., Oct. 1960; U. S., FAS, Foreign Agricultural Circular FC 13 -60, Dec. 1960; USDA, Agricultural Statistics, 1960, Wash., 1961. Data for U. S., Barley, 1958,
from U. S., FAS, Foreign Agricultural Trade of the United States, Calendar Year 1959, Wash., May 1960, p. 21. Data
for Rye, Oats, Corn, Barley, World, 1958, from U. S., FAS, The World Grain Trade, M-53, Wash., Apr. 1959, p. 6.
Cotton
Oils
Edible Veg.
Tobacco
Grease
Tallow &
Lard
Rice
CC
Million Lbs.
"
Barley
Soybeans
"
638
39
62
402
124
96
17,625
360
Million Bu.
U. S.
1930'sa
DATA SHOWING THE UNITED
World
SELECTED
Unit
II-1.
Rye
Oats
Corn
Wheat
Commodity
TABLE
Prior to 1930, the value of agricultural exports for each year exceeded
percent of gross farm income. During the depression years, due to
self- sufficiency measures and the breakdown of the international trade
mechanism, this figure diminished considerably. After the war broke out
in Europe it reached a low point when in the years 1940 and 1941 only
4.88 percent of the value of farm production was exported. With the
assistance of governmental programs, exports averaged nearly 12 per
cent of gross farm income during 1956 -60. Total exports of U. S. merchandise, however, did not exceed 7 percent of gross national product
in any year from 1930 to 1960 and since 1947 has held at between 3.5
and 5.5 percent. These figures lend support to the argument that
American agriculture relies more heavily on the export market than does
the rest of the economy.
10
The Export Market for Selected Farm Products
Cotton, grains and tobacco have traditionally accounted for more
than two -thirds of the value of United States agricultural exports. The
exceptions were during the war periods when exports of livestock products reached abnormally high levels. Exports of cotton fell during both
World Wars, but much more sharply in World War II than in World
War I. Since World War II there has been an upward trend in cotton
exports, but with wide year -to-year fluctuations. These have resulted
from factors such as a greater use of synthetics, increased competition
from abroad, and from variations both in export subsidies and in U. S.
cotton prices relative to those of other competitors. Exports of food and
feed grains have also fluctuated widely due to a variety of factors such
as drought, war and policies of self-sufficiency in other countries. Because of postwar reconstruction and development needs in Europe and
Asia, grain exports have never returned to the low level of the 1930's.
More information can be obtained on structural changes in agricultural
exports from the many statistical publications of the Foreign Agricultural
Service.'
Exports, as a percentage of total United States production since
1910, are presented for selected products in Table II-2. Figure II -2 demonstrates the same relationships for selected commodities for fiscal year
1959-60. By the very magnitude of these percentages, it can be seen
that the export market provides the major outlet for a large portion of
domestic agricultural production of certain commodities.
7 For example, see U. S. Foreign Agricultural Service, Quantity Indexes of U.
Agricultural Exports and Imports, Publication M -76, Wash., Jan. 1960.
U. S. AGRICULTURAL EXPORT SURPLUS DISPOSAL POLICY
S.
13
0.1
1.8
0.1
7.2
17.8
5.9
19.6
37.3
0.1
1.2
13.1
Sources:
20.3"
1.1
23.2
29.5
22.1
25.0
2.4
5.6
23.8
0.3
2.0
31.9
0.9
8.1
12.6
3.8
34.1
0.6
31.2
21.5
2.1
1.7
29.5'
6.6
26.2
0.8
2.4
23.0
3.5
50.5
15.4
23.5
46.5
22.1
42.6
33.4
3.1
6.9
31.8
2.1
3.0
11.3
3.8
39.1
2.9
36.7
16.4
3.5
21.8
1.2
21.4
13.5
16.6
20.9
37.0
19.7
16.7
22.7
1956
31.5
5.2
11.5
2.8
i
1.9
13.6
5.8
65.5
1.7
38.0
22.8
18.2
30.0
50,2
19.6
41.4
2.5
5.9
41.6
1957
Includes grain equivalent of flour.
f Includes oranges, lemons and
grapefruit.
9 Includes fresh and dried
prunes and plums.
h
Average 1950-54.
Average for 1955.
e
26.3
34.7
16.2
3.0
4.0
9.5
23.5
3.6
6.6
29.4
1.0
3.0
11,7d
4.1
7.9
1.9
32.5
1.7
38.5
1952-53
1955-56
27.7
15.9
38.1
3.3
5.7
39.3
1.9
3.4
22.7
2.6
26.9
22.7
14.5
27.8
26.9
1.9
26.0
5.3
41.7
1958
29.5
5.4
9.5
2.8
27.8
5.5
25.3
4.2
29.0
25.1
22.8
25.9
31.8
21.6
41.2
2.4
5.7
32.1
1959
35.6
4.1
40.2
3.2
26.5
25.4
36.9
21.4"
5.1
52.6
2.8
40.8
19608
USDA, Agricultural Statistics, 1936, 1954, 1957, 1960; data for corn, cotton, rice, 1934-35 to 1938-39, U. S. Office of Foreign Agricultural Relations,
Agriculture's Stake in Foreign Markets. I. Trends in U. S. Agricultural Exports, Information Bull. 51, Wash., May 1951 p. 21; 1956, 1957,
1960, from U. S., FAS, Foreign Agricultural Trade of the United States, Statistical Reports for Calendar Years 1957, 1958, 1959, Wash., June
1958, 1959 and 1960 respectively; also U. S., FAS, 1960 Agricultural Exports, FATP 7 -61, Wash., Mar. 1961; Fats, Oils and Oilseed, U. S.,
FAS, Prospects for Foreign Trade in Oilseeds and Oilseed Products, Wash., Jan. 1959; Hops, 1959, U. S., FAS, Prospects for Foreign Trade in
Wheat, Rice, Feed Grains, Dry Peas, Dry Beans, Seeds, Hops, Wash., 1960.
0.9
3.2
20.8
9.8
18.7
4.7
3.4
Preliminary.
b Includes all
barley, grain and malt.
Includes linters.
d Includes shipments under Army Civilian Supply
Program, beginning
July 1946, and continuing in later years.
a
40.6
48.3
13.7
42.5
4.5
11.7
8.5
2.4
12.4
8.1
13.2
6.0
19.6
31.6
0.3
1.0
5.7
6.6
30.8
1.4
38.2
10.9
1.7
18.6
26.9
2.0
0.4
11.6
0.8
24.6
10.7
102
43.0
21.5
42.0
15.7
15.3
0.9
58.6
1.5
21.4
44.6
15.6
1.6
67.8
1.8
4.8
Tallow
Apples
Citrusf
Hops
Peaches
Pears
Plums and Prunes9
Vegetables, Fresh
Vegetables, Canned
Fats, Oils, Oilseeds
Barley
Corn
Cottons
Oats
Rice
Rye
Soybeans
Tobacco
Wheate
1948 -49
1951 -52
PERCENT
1934 -35 1942 -43 1945 -46
1938 -39 1944 -45 1947 -48
Lard
4.0
0.3
55.8
0.3
1924-25 1929 -30
1928 -29 1933-34
1.0
26.1
7.3
1909 -10
1913 -14
PERCENTAGE OF CERTAIN AGRICULTURAL CROPS AND PRODUCTS EXPORTED FROM THE UNITED STATES, SELECTED FISCAL PERIODS 1909-1910 TO 1952 -1953, AND ANNUALLY 1956 TO 1960.
4.1
1.7
42.0
0.4
13.4
3.7
2.9
35.9
6.4
Commodity
TABLE 11 -2.
Rice
_
- --- --_
-- ------
Wheat
Tallow
Cotton
Barley
s
iiiiiiiiiiiiiii iiiiiiiiiiiii ...
Tobacco
Soybeans
Lard
Sorghum Grains
Corn
PinTAiNDITI
1
I
10
20
1
30
PER
I
1
40
50
I
60
70
CENT
Fig. II -2. Exports Compared with Farm Sales for Crops and with
Production for Lard and Tallow for Fiscal Year
1959 -60.
Source:
U. S. Foreign Agricultural Service, U. S. Foreign Agricultural
Trade Outlook Charts, 1961, Wash., Nov. 1960.
Resources Devoted to Producing Agricultural Commodities
for Export
The ultimate physical indicator of the relevance of the agricultural
export market consists of the quantum of resources involved in producing for export. Very little analytical work is available in this field, but
some thought has been given the problem. Dowell and Jesness concluded that from 1920 to 1930 an average of 16.4 percent of all United
States farm acreage was required to produce the net exports of twelve
crops, including pork, lard and feed.$ The Foreign Agricultural Service estimates of cropland producing for export indicate that the percentage has varied since 1910 from 3.8 in 1941 to 18.4 in 1957, with 57 million acres, or 17.2 percent of production from harvested acreage being
exported in 1960.9 Thus, according to these estimates, slightly more than
8 Austin A. Dowell and Oscar B. Jesness, The American Farmer and the Export
Market, University of Minnesota Press, Jan. 1934, p. 84.
9 See U. S. Foreign Agricultural Service, Foreign Agricultural Trade Statistical
Handbook, Bull. 179, Wash., Aug. 1956; also U. S., FAS, Foreign Agricultural Trade
Outlook Charts, 1960, Wash., Nov. 1959.
U. S.
AGRICULTURAL EXPORT SURPLUS DISPOSAL POLICY
15
-.
TOTAL
EXPORT
HARVESTED
ACREAGE
ACREAGE
345;1
1950
1951
.5:..........
9:.
195 2
1953
4:......
.348;1
1954
:3401
1955 W36.:
195 6
47
.
:
.
. . .
.........
.
195 7
:326:
195 8
1959
I-41:`---
1960
57:.....
328;:
-- --
-_
1
o
100
200
Millions
of
300
400
Acres
Fig. II -8. Total Acreage of Harvested Crops and Estimated Acreage Used for Production of Export Products in
the United States.
Sources:
16
For Fiscal Years 1950 -55: U. S. Foreign Agricultural Service, Foreign Agricultural Trade Statistical Handbook, Statistical Bull.
No. 179, Wash., Aug. 1956. For 1956-60: U. S. Foreign Agricultural Service, Foreign Agricultural Trade Outlook Charts,
1961, Wash., Nov. 1960.
ARIZONA AGRIC. EXPERIMENT STATION TECH. BULLETIN 150
one -sixth of the cropland in the United States was producing for export
in 1960. Figure II -3 compares export estimates with total acreage harvested for the years 1950-60.
Acreage alone is not a sufficient indicator. Other resources are involved in producing the several billions of dollars in agricultural exports.
In order to provide a rough idea of the other major productive resources
involved, data were selected from the 1955 study of the Agricultural Marketing Service on the dollar volume of agriculture's transaction with
industry,10 and are presented in Table II -3. These data indicate that
for every one million dollars of output of the selected commodities or
groups the result was a direct purchase of a given dollar quantity of the
selected inputs. The resource inputs recorded are for production expenses only and do not include marketing costs and marketing margins.
Commodities sold are valued at farm prices.
These purchases of inputs thus help to demonstrate the value of exports
to the economy in general. For instance, 40 to 50 percent of cotton and
tobacco production enter the export market. Then it may be said that 40 -50
percent of the respective industry purchases associated with this production as indicated in Table II -3 are attributable to exports of cotton and
tobacco. Based on exports of cotton in 1959 -60 of approximately $800
million, this would require the purchase of about $80 million worth of
agricultural services, $41 million of chemical and allied products, $13
million of petroleum products, $84 million of nonresidential farm rents, plus
similar values for other purchases as listed in the table for a total of about
$288 million. Purchases for cotton production from each of these industries, of course, generate further purchases from other industries and the
total value to the rest of the economy is much greater than the value of the
initial purchase for production.
Measuring Exports by a Utilization Index
The measures of agricultural exports as used to this point all help to
demonstrate the importance or position of the movements of these commodities into world trade. Certain limitations must be placed on their
interpretation, however, due to problems associated with aggregation and
measures of value. For instance, export prices of agricultural products have
been lower in recent years than domestic prices paid to producers due to
the use of export subsidies. Irrespective of whether the true export prices
or the producer prices are used, a distortion in the relationships occurs.
10 U. S. Agricultural Marketing Service, Dollar Volume of Agriculture's Transaction
with Industry, Market Research Report No. 375, Dec. 1959.
U. S. AGRICULTURAL EXPORT SURPLUS DISPOSAL POLICY
17
TABLE
II -3.
DIRECT PURCHASES OF SELECTED PRODUCTS AND SERVICES PER
MILLION DOLLARS OF OUTPUT OF SELECTED AGRICULTURAL
PRODUCTS, UNITED STATES, 1955.a
Industry Purchasing
Cotton
Item
Agricultural Services
Chemical and Allied Products
Petroleum Products
Rubber Products
Machinery and Parts
Margin Industries on
Producer Inputs
Finance
Farm Nonresidential Rents
Repair Services
Construction
Food
Grains
99,187
51,571
16,460
2,948
6,604
49,598
50,116
28,435
3,761
13,034
44,230
9,240
106,076
13,322
10,964
65,193
17,926
150,357
26,901
12,619
Oil
Bearing
Crops
DOLLARS
Tobacco
48,083
9,242
37,097
4,058
18,071
30,127
42,062
24,264
2,848
4,968
68,879
11,755
100,027
37,670
10,948
48,331
22,809
82,305
9,876
18,376
a Derived from U. S. Agricultural Marketing Service, Dollar Volume of Agriculture's
Transaction with Industry, Market Research Report No. 375, Wash., Dec. 1959.
The question remains as to where the government subsidy should enter
the picture. Attempts have been made to measure the place of exports
through resource use. These have been inadequate due to the fact that
only one resource has been employed in the measure.
A more recent attempt to improve on existing measures has resulted in
the use of indexes on the supply and utilization of farm products. These
indexes were published in 1955 by the Agricultural Marketing Service and
have been supplemented several times since."
The Index of supply-utilization of all farm commodities measures their
total annual flow from farms and into the United States from foreign
countries and United States territories, and out of stocks. At the same
time it measures their flow into domestic distribution, through governmental and commercial channels, to foreign countries and United States
territories, and into stocks. The Index combines detailed statistics on
the supply and distribution of each commodity on the basis of its equivalent farm value, using 1947 -49 farm prices for all years covered by the
indexes, beginning with 1924. The combination of changing quantities
" U. S. Agricultural Marketing Service, Measuring the Supply and Utilization of
Farm Commodities, Agricultural Handbook No. 91, Nov. 1955 and Supplements for
1956, 1957, 1959; also Dr. J. J. Lanahan of ERS, USDA, who kindly assisted in bringing
data presented in Table II -4 up to date.
1
8
ARIZONA AGRIC. EXPERIMENT STATION TECH. BULLETIN 150
and fixed prices, using a modified Lespeyres formula, provides a measure
of changes in quantities in economic terms. The Master Index and its
subindexes include changes in supply and use of farm commodities in
unprocessed form and of major products processed from them. The
term "farm commodities" is used instead of "agricultural products" to
indicate the importance of tracing the flow in terms of primary farm
commodities.
To obtain a statistical measure of agricultural exports, constructors
of the Index combined sets of value aggregates on: (1) commercial
exports and shipments, (2) deliveries by the USDA, and (3) a special
set to measure shipments of farm commodities and their products by
the armed forces for use of civilian populations in occupied and liberated areas. The last two of these sets make up a category of exports
called "government deliveries"; all other commodities, even though they
are subsidized by the government or given away, are called "commercial deliveries" because they move through commercial export channels.
Table II -4 shows the export index and percentage relationships of
exports of farm commodities to total utilization. Breakdowns for "commercial deliveries" and "government deliveries" are included. A tabular
breakdown of the farm export index into food and nonfood items has
also been calculated. Over the 37 years for which the export index has
been calculated, exports have ranged between 3.4 and 11.0 percent of
total farm product utilization, with the peak year being 1960. Since
1950, the lowest percentage exported of total utilization was 6.3. The
index of exports based on the average for 1947 -49 was at a peak of 170
in 1960 and has exceeded the base value for all years since 1955. Except for the war and immediate postwar years almost all exports were
indicated as being moved through commercial channels. (This is not
to imply, however, that government aid was not employed.)
It should be noted that pronounced changes have taken place in
the food -nonfood export complex. Until World War II, from 60 to 80
percent of all farm commodity exports consisted of nonfood items such
as cotton and tobacco. Since 1954, the situation has been almost the
reverse with grains alone making up about 40 percent of the value volume.
Choosing an Indicator
The choice of an indicator to show the relevance of United States
agricultural exports will depend a great deal on the argument being
presented. It may be desirable to compare trade in products for the
U. S. with other countries of the world. Others may be interested only
in the effects on the domestic economy and the industry in particular
and, therefore, contend that the physical quantitative and qualitative
characteristics of exported commodities or resources are important measU. S.
AGRICULTURAL EXPORT SURPLUS DISPOSAL POLICY
19
TABLE
II -4.
INDEXES OF EXPORTS OF ALL FARM COMMODITIES THROUGH
COMMERCIAL AND GOVERNMENT CHANNELS, WITH
PERCENTAGE COMPARISONS, 1924 -60.3
Total Exports
and Shipments
to Territoriesb
Calendar
year
Percentage of
total
utiliIndex,
1947-49 =100 zation
Through Commercial
Channels
Index,
1947-49 =100
8.6
7.9
7.1
100
100
100
100
100
100
100
66
70
63
50
46
44
50
58
51
39
6.7
7.1
6.3
5.4
5.0
4.5
5.1
5.9
4.8
3.6
103
111
102
81
75
71
81
94
82
63
97
98
100
100
100
100
100
100
100
100
9
38
50
78
78
93
108
105
89
106
92
3.4
4.3
5.9
6.0
7.3
8.3
8.1
7.2
8.4
7.1
38
22
62
28
21
27
37
38
95
162
150
155
152
105
96
100
48
38
72
112
95
84
94
101
133
149
128
138
170
8.4
7.2
6.3
55
17
4
7
2
2
5
1
9.2
8.5
8.8
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
19600
Percent
142
137
140
150
139
129
110
88
85
86
93
86
80
68
1951
1952
1953
1954
1955
1956
1957
1958
1959
Percent
Percent
Percent
1924
1925
1926
1927
1928
1929
1930
1949
1950
Percentage of
total
exports
Government Deliveries
Percentage of
total exports
Military
USDA shipments
delivfor
eries for civilian
Index,
use
1947 -49=100 export
9.1
7.1
7.4
9.2
10.4
8.8
9.2
11.0
26
34
56
81
105
85
110
121
150
148
127
146
152
203
232
196
214
271
46
60
58
63
79
81
94
91
94
90
92
94
92
94
96
6
15
18
14
25
25
22
24
21
16
3
2
79
68
47
46
27
21
19
17
5
16
8
13
21
18
4
2
10
8
6
8
6
4
Based on 1947 -49 farm values.
Includes military shipments for civilian use in occupied and liberated areas.
Preliminary.
Source: U. S. Agricultural Marketing Service, Measuring the Supply and Utilization of
Farm Commodities, Agricultural Handbook No. 91, Nov. 1955, and supplements.
a
b
c
20
ARIZONA AGRIC. EXPERIMENT STATION TECH. BULLETIN 150
ures. In the final analysis, the value problem as it relates to the domestic
farm sector must be reckoned with and the various measures in this
category are the most useful.
As already indicated, there are some serious weaknesses in measures based on commodity values. The major problem is in determining
the prices to be used. In this study current prices are used as measures
of relative importance. In the case of evaluation of products at the
farm, these do not reflect changes in quality, form, transportation costs
and the addition of a variety of other services. These all complicate
the effort to obtain an accurate measure of the dependence of agriculture on the export market. The value measures are, nevertheless, important
indicators and do help to show change in both absolute and relative terms.
The export statistic of the Supply -Utilization Index outlined in this
chapter removes the influence of changing prices by using a set of fixed
prices. Resulting figures reflect changes in volume of farm products
exported. It has another advantage in that it excludes the effects of
changes in amounts of marketing services by valuing the farm equivalents of exports in terms of farm prices.
The Supply -Utilization Index has certain shortcomings, however, which
should be pointed out. Like all index numbers, there is the problem
of reflection of changes in kind and character of the product measured.
It does not reflect changing dollar values arising either from shifting
relationships among commodity prices or changes in the general level
of farm prices. It does not measure the total significance of farm products to the United States economy since it excludes marketing services
on commodities exported. Furthermore, it does not reflect the competitive position of United States agriculture in the world market
because the effects of large amounts of government subsidy and assistance are included in the results.
Despite these weaknesses, this indicator is one of the best known
measures of the importance of exports to United States agriculture and
is a valuable addition to other available indicators. The most appropriate approach to take toward appraising the importance of exports,
therefore, appears to be to use the Supply- Utilization Index export indicator as a basic general measure and to supplement or substitute it where
necessary and feasible with the other measures.
U. S.
AGRICULTURAL EXPORT SURPLUS DISPOSAL POLICY
21
CHAPTER III
THE DEVELOPMENT OF AGRICULTURAL
EXPORT PROGRAMS
As indicated in Chapter II, the foreign market has traditionally
accounted for a large share of United States cotton, wheat and tobacco,
and more recently, rice, vegetable oils and oilseeds. The judgment that
the high export ratio of the late 1800's and early 1900's is representative
of a normal export period and should be continued indefinitely undoubtedly provided the impetus for the introduction of certain legislation to
protect the position of agriculture in later years when world markets
were not so favorable. Almost without exception the major farm programs since that era have incorporated the implication that somehow
agriculture must recapture its normal share of the world market.
To assume that some past period can be designated as normal involves a value judgment and is statistically elusive. It means that
conditions in the world economy are static or should be held static.
However, changes in technology and other factors affecting demand and
supply relationships undoubtedly change respective comparative advantage positions. It is much too simple to try to blame the disruption
of trade patterns solely on the depression of the 1930's or on the effects
of wars. These events have in fact been major contributors to real
changes in the structure of the economy which are unlikely to be reversed.
It is questionable whether the so- called "stable" or "normal" situation for United States agricultural exports could have been maintained
without "abnormal methods of exporting" and "supply distortions." The
surpluses facing agriculture today are largely a function of the technological revolution in agriculture, the government programs and the war
and postwar production developments. Prices maintained above world
price levels by government programs have tended to increase production
and limit markets both domestic and foreign. So- called "normal" trade
patterns in agricultural products could be maintained only by further
government programs.
Superimposed on the immediate problem of supply and trade adjustments are basic changes in patterns of growth and trade among
nations. Political realignments and the cold war have been extremely
significant; economic development has come to the forefront. In short,
world marketing patterns of agricultural products have been altered by
factors such as: changes in world food and fiber production; population
shifts and growth; monetary arrangements and financial conditions of
countries involved in trade; various bloc arrangements which involve
agricultural products; and basic changes in the agricultural and trade
policies of the community of nations.
22
ARIZONA AGRIC. EXPERIMENT STATION TECH. BULLETIN 150
The Predepression Era
A major means of getting rid of surpluses has been to move the
commodities in question through the export market. This is not a new
solution, however, but has a long history of development.
In the 1890's, farm groups advocated an export subsidy program, and
in 1895 a bilU2 was introduced in Congress with this intent. There is
evidence also that the Department of Agriculture, through its Section
of Foreign Markets, was concerned and actively participated in export
expansion programs such as sending experimental shipments of surplus
perishables abroad and gathering data on foreign markets.73
Export conditions for agriculture improved considerably after the
turn of the century, especially during World War I. There was, nevertheless, evidence that strong forces were acting to change the patterns
of world trade in agricultural commodities during this period. The United
States was changing from debtor to creditor status, reflecting a rising
industrial strength. Cheaper sources of fiber and food supply were being
developed. Technological changes made transportation easier and communication more rapid. Remote areas of the world were brought into
a competitive position and domestic demand was taking an increasing
share of United States production. Some of these adjustments were postponed or reversed in the postwar years.
Prices declined sharply during the years following World War I.
Exports continued in relatively large volume until the late 1920's but at
substantially reduced prices. Year -to -year fluctuations also reflected the
uncertainties of world commerce in the position of domestic agriculture.
With the abrupt decline of prices after the war, it was inevitable that
farmers and farm Ieaders should look for remedies to the problem of
declining incomes. Agitation increased for price supports, two -price plans,
cooperative marketing, import protection, and other proposals," all of which
anticipated the use of foreign markets to absorb the so- called "surplus
production."
Protectionist attitudes were reflected in the Emergency tariff of 1921,
the Fordney -McCumber tariff of 1922 and the Hawley -Smoot tariff of
1930. These tariff policies represented a change in the attitude of
H. R. 2626, December 23, 1895.
73H. C. Taylor and Anne D. Taylor, The Story of Agricultural Economics, The
Iowa State College Press, Ames, 1952, Ch. 19.
See also USDA, Yearbook of Agriculture, /897, Wash., p. 270.
t4 Harold W. Faulkner, American Economic History, Sixth Edition, Harper and
Bros., New York, Mar. 1949, p. 634.
72
U. S.
AGRICULTURAL EXPORT SURPLUS DISPOSAL POLICY
23
American farmers who were, prior to the war, opposed to high tariffs.15.
Efforts to increase exports through subsidies, two -price plans, or other
means were reflected in unsuccessful attempts to: (1) revive the War
Finance Corporation as a financial medium for export, (2) pass the
Norris Bill which proposed establishment of a government corporation
to buy farm products domestically and sell them abroad for credit, (3 )
pass the McNary -Haugen proposals aimed at restoring exports to "normal" by various dumping schemes.
The supporters of cooperative marketing schemes and legislation were
somewhat more successful. They obtained passage of the Agricultural
Marketing Act of 1929 and the creation of the Federal Farm Board
which brought a de- emphasis to specific export disposals. No special
efforts were made in this legislation to stimulate exports artificially. After
exports of certain commodities dropped to almost nil in 1930, the Grain
Stabilization Board undertook a program to stimulate exports in 1931
and 1932. Price concessions, sales to foreign governments and gifts were
used with limited success. Stabilization sales represented about two thirds of the 123,000,000 bushels of wheat exported in 1931 -32.16 Operations of the Board to improve prices and increase sales were not generally successful; they did, however, act as a forerunner to later schemes,
including current PL 480 programs, which embodied many of the ideas
used by the Board.
The crash of 1929 left world trade markets in chaos. The physical
volume of agricultural exports fell from an index of 117 (1910-14 =100) in
1929 to a low of 54 in 1935.17 The dollar value of agricultural exports
declined from an average of $1,879 million in the period 1925 -29 to $694
million in 1933.
Action in the 1930's
Some export aid, to offset the decline in the first years of the depression,
was provided through the Agricultural Adjustment Act of 1933. Section 17,
Title I, provided a refund of the processing tax, which had been imposed
on agricultural commodities, to exporters of the taxed commodities. To
the extent that the tax had the effect of reducing prices to farm producers,
15 Murray R. Benedict, Farm Policies of the United States, 1790-1950, The Twentieth Century Fund, New York, 1953, p. 205.
16 Third Annual Report of the Federal Farm Board, Year Ending June 30, 1932,
Wash., pp. 62 -63.
17 Benedict, op. cit., p. 277.
24
ARIZONA AGRIC. EXPERIMENT STATION TECH. BULLETIN 150
UI
Source:
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
Total
1945
1946
1947
1948
1949
1950
1936
1937
1938
1939
1940
1941
1942
1943
1944
Date
Dairy
145,134
17,426,214
200,648
6,592,707
5,036,707
3,033,833
2,562,319
Eggs and
Poultry
80,443,036
2,738,955
7,581,144
14,016,237
13,210,644
16,460,902
10,240,926
7,859,419
4,068,233
3,606,788
541,271
514
19,151
39,377
59,475
Fruits
81,903,601
10,862,421
502,507
7,777,785
3,383,566
4,191,686
2,828,559
7,101,747
154,261
231,112
78,961
9,116,007
11,115,141
4,465,971
4,217,037
6,656,673
1,313,993
4,154,712
3,751,462
Grain
141,620
141,620
15,602,289
10,167,023
4,559,192
876,074
IN DOLLARS
Livestock Peanuts and
Products
Products
8,550,381
8,546,500
3,881
Tobacco
2,879,878
697,715
645,625
800,066
578,251
158,221
Tree Nuts
1,881,315
909,570
971,745
Vegetables
Other
...
.
10,862,421
851,976
881,132
898,178
9,774,925
47,232,398
10,241,595
10,297,705
6,656,673
1,313,993
4,154,712
20,297,675
33,742,025
19,900,425
26,978,444
24,573,570
24,253,420
17,106,632
11,751,304
11,920,214
4,614,690
4,109,295
8,519,704
Total
4,017,633 310,933,106
.....,
135,492
502,347
645,730
1,510,378
677,229
546,457
SECTION 32 PAYMENTS FOR AGRICULTURAL EXPORTS, FISCAL YEARS, 1936-61
U. S. Agricultural Marketing Service, Removal of Surplus Agricultural Commodities, Obligations by Commodities, Fiscal Years, Budget and Finance
Division, Wash., D. C.
97,942,005
15,636,643
32,770,280
2,022,263
1,884
257
289
17,335 323,955
35,636,762 121,179
5,775,624
6,080,668
Cotton
TABLE
this provision tended to give encouragement to exports.18 The use of the
processing tax was short lived, however, being declared unconstitutional
in 1936.
Section 32 was added as an amendment to the AAA in 1935. This
section provided for direct subsidization of agricultural exports via the use
of part of the customs receipts. Up to 1961 the total value of Section 32
payments amounted to about $311 million. Over 30 percent of this was
for the subsidy of cotton, 26.3 percent for grains, and 25.9 percent for
fruits.19 Table III -I presents details by commodity and year on Section 32
subsidy payments.
In 1934 aid for exports was provided through the establishment of the
Export- Import Bank. It was organized as a government corporation to
extend emergency services to finance anticipated trade. This institution
had self-imposed restrictions on its actions, and therefore was of limited
value in developing export trade. By 1939 total disbursements for all
types of trade amounted to only $115,000,000.2°
On August 11, 1939, Congress passed two new export measures. One
authorized the CCC to sell from its surplus stocks to foreign governments
for food reserves against war emergency. This authority was never used.
The other, PL 387, authorized the CCC to exchange surplus stock for
stocks of strategic and critical materials produced abroad. Such exchanges
were to be carried out under provisions of treaty. Six hundred thousand
bales of cotton were traded to England for rubber of equal value in anticipation of war with Japan.21
The War and Postwar Period
During World War II the problem of agricultural surpluses was
temporarily solved. The primary problems of this time were shortages in
terms of the needs for successful prosecution and rehabilitation of war
ravaged areas. Nevertheless, the question of surpluses never really left
the minds of many congressmen and farmers.
18 For price effects on the various commodities, see United States Bureau of Internal Revenue, An Analysis of the Effects of the Processing Taxes Levied Under the Agricultural Adjustment Act (prepared by the U. S. Bureau of Agricultural Economics),
Wash., 1937.
19 For a full analysis of the legislative evolution of Section 32, see Douglas F.
Loveday and Jimmye S. Hillman, A Review of Legislation for Export Disposal of Agricultural Surpluses, unpublished manuscript, Univ. of Ariz.
20 Olin F. Pugh, "The Export- Import Bank of Washington," Essays in Economics,
Bureau of Business and Economic Research, Columbia, S. C., June 1957, pp. 2 -5,
21 Walter W. Wilcox, The Farmer in the Second World War, Iowa State College
Press, Ames, 1947, p. 35.
26
ARIZONA AGRIC. EXPERIMENT STATION TECH. BULLETIN 150
.
In the early years of the war, agricultural exports dropped to their
lowest levels in nearly 70 years. In 1940 -41 Congress appropriated $100
million largely to finance the export of agricultural products for the relief
of war refugees. Later appropriations added to this fund.
On March 27, 1941, the original Lend -Lease appropriation was
passed.22 This substantially increased the purchasing power of foreign
countries, especially of Great Britain, and thereby caused an upsurge in
the quantities of United States agricultural exports. This type of action
alleviated further immediate need for legislation to stimulate exports.
Table III -2 gives details on Lend-Lease and other agricultural exports
during World War II.
TABLE
Yeara
1941
1942
1943
1944
1945
1946
1947
III -2.
LEND -LEASE AND OTHER
EXPORTS IN WORLD WAR II.
COMPARISON
OF
CCC Deliveries for Export
Cash
Paying
LendGov'ts.
Otherb
Lease
29.3
782.9
999.8
1,671.8
2,137.5
872.4
45.0
Section
32
IN MILLIONS OF DOLLARS
2.4
12.9
100.9
153.5
425.2
642.1
6.7
125.2
215.6
327.1
714.0
1,022.9
10M
10.6
6.7
1.3
4.1
20.3
33.7
AGRICULTURAL
Other
Exports'
Total
310.1
229.4
352.4
315.4
431.2
425.1
1,866.3
350
1,032
1,497
2,305
2,191
2,857
3,610
-
Fiscal years ending June 30.
Army Civilian Feeding, Red Cross, Territorial Emergency Stockpiles, Private Relief
Organizatitons; UNRRA beginning in 1945; U. S. and British financed bizone shipments; Japanese, German cotton and a small amount of deliveries to private exporters
in 1947.
The remainder after subtracting the other four columns from the total column. These
are not exact figures, since figures in all the other columns may not be strictly comparable, as indicated by the negative result for 1945. This column may nevertheless
be taken to indicate roughly the relative magnitudes of exports outside government
managed programs.
Sources: CCC deliveries for export from: U. S. Production and Marketing Administration, Deliveries to Export Programs, Invoiced During Fiscal Years 194150 Through December, 1949, Fiscal Branch, Financial Analysis Division,
Wash., Apr. 1950, Table 1. Totals from: U. S. Foreign Agricultural
Service, Foreign Agricultural Trade Statistical Handbook, Bull. No. 179,
Wash., Aug. 1956, p. 1.
a
b
22 Murray R. Benedict and Elizabeth K. Bauer, Farm Surpluses -- U. S. Burden or
World Asset?, Univ. of Calif. Press, Feb. 1960, p. 28.
U. S.
AGRICULTURAL EXPORT SURPLUS DISPOSAL POLICY
27
The potential for CCC exports was increased by a legislative provision
enacted April 12, 1945. While all domestic sales from CCC stocks were
limited to sales at parity prices or higher, export sales were specifically
exempted from this restriction. An export disposal policy was implicit in
this "sanction by exception."
In the immediate postwar years there was a period of dire food
shortages in the world. Foreign needs were looked upon as an almost
limitless opportunity for export disposal of U. S. agricultural surpluses.
Stopgap grants and credits were made available during this period such as
Greek -Turkish aid, Philippine rehabilitation and China aid 23
However, the real aid program of the postwar years began with the
Marshall Plan of 1948. Provision was made for the use of CCC stocks
acquired through price support programs and for the maximum use of
Section 32 funds to finance surplus commodity sales. In the same year the
CCC became a federally chartered corporation. In the Charter Act, the
CCC was authorized to use its general powers to procure agricultural commodities for sale to other government agencies, foreign governments, and
for relief or rehabilitation requirements. Authorization was given to
remove or dispose of surplus agricultural commodities and to export or
cause to be exported or aid in the development of foreign markets for
such commodities. The CCC in effect was limited in export disposal
programs only by its annual capital restoration appropriation.
Shift to Surplus Disposal Export
By 1949 U. S. agricultural productivity had caught up with government and foreign demand, and sizeable stocks of surplus farm products
were accumulating. Concern over this situation was evident in some
congressional acts of 1949.
Section 407 of the Agricultural Act of 1949 reiterated the policy of
exception from price restriction on CCC export sales. Section 416 authorized the CCC to donate foods considered to be in danger of spoiling to
other federal agencies for school lunch programs, public welfare programs and private foreign welfare programs. An act to amend the CCC
Charter gave the CCC power "to accept strategic and critical materials
produced abroad in exchange for agricultural commodities acquired by the
Corporation." The Federal Property and Administrative Services Act of
1949 replaced the Surplus Property Act of 1944 and renewed its provisions
for the export sale of surplus agricultural commodities. Even the International Wheat Agreement of 1949 was written with safeguards so that
no interference would occur with respect to any existing export aid or
subsidy arrangements.
23
28
Ibid., pp. 29-31.
ARIZONA AGRIC. EXPERIMENT STATION TECH. BULLETIN 150
The urgency of the problem of surpluses existing in 1949 was alleviated
with the outbreak of the Korean War in June, 1950. This event also shifted
the purpose and emphasis of U. S. foreign aid programs from economic
recovery to focus on the development of military capacity for resistance
to communist aggression.
Along with the new military-oriented program, special problems of
need continued to arise. On June 15, 1951, a loan of $190 million for
shipments of food grains to meet "the emergency need arising from the
extraordinary sequence of flood, drought and other conditions existing
in India," was approved in the Emergency Aid to India Act. The general
authority to make such a Ioan was contained in the Economic Cooperation
Act of 1948.
By 1953 agricultural productivity had again overtaken and was outpacing the total demands upon it. The basic problem of surplus, and
congressional concern over it, was reappearing. In a Senate committee
hearing of February 23, 1953, Senator Anderson said "... facing now 800
million bushels of wheat, this committee and depas tment have some responsibility to try to decide how they are going to get rid of that wheat."24
On April 24, 1953, A. W. Palmer, head of the Cotton Division of the
the chief importing countries . . . find themselves under
FAS, said,
pressure to economize their dollar expenditures. They do so mainly by
constitute the only serious barmeans of exchange controls ... [which]
rier to free importation of American cotton ...X25 On March 25, Secretary
Benson had said, "Emphasis will be reoriented toward developing offshore
markets for our own agricultural production and reviewing the whole
problem of exports and imports. "26 These statements illustrate the problem
as seen by policy makers at the time and the direction in which the solution
was. sought.
At this time a famine condition was developing in Pakistan. The
method of aid undertaken, probably influenced by the thinking just noted,
was entirely different from that used in the similar case of India two years
before. Instead of a straight loan, provision was made for a counterpart
fund payment arrangement. The CCC was directed to transfer 100 million
long tons of wheat under a U. S.- Pakistan agreement. The agreement
included free gifts to people of Pakistan who were unable to pay and the
"...
...
24U. S. Congress, Senate Committee on Agriculture and Forestry, Hearings on
Commodity Inventories of the Commodity Credit Corporation, 83rd Cong., 1st Sess.,
1953, p. 65.
25 U. S. Congress, Senate Committee on Agriculture
and Forestry, Hearings on
Agricultural Exports and Imports and Their Effect on Farm Price Programs, 83rd Cong.,
1st Sess., Wash. 1953, p. 370.
26 U. S. Congress, Senate Committee
on Agriculture and Forestry, Hearings on the
Report of Secretary of Agriculture, Ezra Taft Benson, on Policies and Programs of the
Department of Agriculture, 83rd Cong., 1st Sess., Wash. 1953, p. 8.
U. S. AGRICULTURAL EXPORT
SURPLUS DISPOSAL POLICY
29
deposit of Pakistan currency to a U. S. account for any amounts sold.
The currency was to be used to aid the people of Pakistan in food
production and other programs.27
The Mutual Security Act of 1953 also added a new section (550)
authorizing the President to enter into such agreements with any friendly
country, i. e., to sell surplus agricultural commodities for their own
currency, to be put in a U. S. Government account and spent according
to provisions in the agreement. The purposes for which this currency
might be disbursed were: "for providing military assistance . . . for
purchase of goods or services in friendly countries . . . for loans . . . to
increase production
for developing new markets . . . for grants in
aid to increase production .
for purchasing materials for United States
stockpiles." Other provisions attempted to assure that such sales would
be strictly in addition to total sales that could otherwise be made and
that private trade channels should be used. Triangular agreements also
were authorized, so that surplus goods could be sold to one country and
the local currency proceeds used to meet aid commitments to a third
country.
This arrangement made U. S. foreign aid subject to the condition
that it be taken in the form of surplus agricultural commodities: "Not
less than $100,000,000 and not more than $250,000,000 of the funds
under this Act, shall be used
to finance the purchase of surplus agricultural commodities. . ." At least $100 million of the federal budget
designated as foreign aid might thereafter be questioned as possibly
belonging in an item under export disposal of surplus fame products.
Since the passage of the Agricultural Trade Development and Assistance Act
(PL 480) , this appropriation has been made in Section 402 of the Mutual
Security Act of 1954. It is specifically appropriated to be spent "in
accordance with . . Section 101" of PL 480.
The policy of free grants in cases of urgent food crises was generalized
later in an Act:28
.
.
.
.
.
.
.
.
.
.
.
To enable the President, during the period ending March 15,
1954, to furnish to peoples friendly to the United States emergency
assistance in meeting famine or other urgent relief requirements.
Be it enacted
the [CCC] is authorized and directed to make
available . . . agricultural commodities
. for transfer
(1) to
any nation friendly to the United States in order to meet famine
or other urgent relief requirements of such nation and (2) to
friendly but needy populations without regard to the friendliness
of their government providing that such commodities will be so distributed as to relieve actual distress among such populations.
...
.
27
28
30
.
Public Law 77; 67 Stat. p. 80.
Public Law 216, 67 Stat. p. 476.
ARIZONA AGRIC. EXPERIMENT STATION TECH. BULLETIN 150
.
5
O
O
O
ctn
m
r
70
c
N
-i
13
m
X
r
D
M
C
C
r
n
X
0
D
67
2
47
6
tionsb
USDA
Dona-
Loans'
Bank
1,787
913
1,576
2,269
1,729
1,188
580
435
448
62
113
14
89
24
170
274
17
35
750
250
UK
IN MILLIONS OF DOLLARS
Total
Grants
&
C
15
273
96
113
1
195
1,157
323
42
70
L
Total
184
34
25
133
56
7
46
()thud
Loans and Credits
ExportImport
135
Sales,
Foreign
Currency
1,982
2,070
1,899
2,311
1,799
1,202
854
532
696
Totalf
Doris D. Rafler, "Government Financing of Farm Exports in the Postwar Period," Agricultural Economics Research, USDA, Vol.
VII, No. 4 (Oct. 1955), p. 96.
Due to rounding, individual items do not always add to total.
Source:
Sec. 550 of Mutual Security Act of 1951, as amended.
f
ton); 1953: India grain loan, Pakistan and Afghanistan wheat loans.
1946 -48: USDA cotton credits; 1949 -51: Natural- Fibers Revolving Fund; 1952: India grain loan, Spanish loan (wheat and cot-
Estimated.
Sec. 416 of the Agricultural Act of 1949, as amended.
1946 and 1947: Lend -Lease, UNRRA; 1948: UNRRA, Post -UNRRA, Interim Aid, Greek-Turkish Aid, ECA, International Refugee Organization; 1949 -54: ECA, Mutual Security and other programs of ICA and predecessor agencies (except ECA-GARIOA), including
relief shipments under PL 216 (83rd Congress).
422
492
837
753
461
175
68
58
24
Civilian
Supplies
Grants
VALUE OF GOVERNMENT FINANCED AGRICULTURAL EXPORTS JULY 1, 1945 - JUNE 30, 1954
e
d
b
a
1,365
421
739
1,516
1,262
966
510
377
357
Aida
30
1946
1947
1948
1949
1950
1951
1952
1953
1954
Economic
Year
Ending
June
TABLE 111-3.
Limitations on appropriations for purposes of this Act were set at
$100,000,000.
Summary
It therefore becomes apparent that the United States has had a
considerable history of development of attitudes and actions in relation
to surplus disposal programs. The experience with development programs
in the postwar years and the accumulation of surpluses in the early 1950's
lead to positive congressional action for disposal of agricultural commodities. Table III -3 summarizes some results of government farm
commodity export programs during the postwar recovery years. The
provisions of the Mutual Security Act of 1953 were mere forerunners of
the real surplus disposal legislation of PL 480, enacted in 1954. It is with
the ramifications of this legislation that the ensuing chapters of this study
will be concerned.
32
ARIZONA AGRIC. EXPERIMENT STATION TECH. BULLETIN 150
CHAPTER IV
SELLING SURPLUSES ABROAD
Attention focused more intently on foreign markets as U. S. farm
exports dropped from the 1951 -52 record of $4.1 billion to the 1952 -53
level of $2.8 billion. A combination of the recovery of European agriculture, the disappearance of war- induced demand, export prices for
U. S. farm products above those of other countries, and the continued
dollar shortage abroad had reduced overseas commercial markets. The
persistence of excess agricultural capacity at home implied additional
measures to adjust to the situation. Were these to be supply reduction
or demand expansion in nature? The existing approaches through modest acreage restrictions, trade policy, domestic disposal, and foreign grants
and loans were no longer sufficient to maintain socially desired prices
without substantial stock accumulations. These programs needed to be
implemented far more strongly or new techniques needed to be developed.
As described in Chapter III, foreign disposal was emphasized through
the 1953 extension of the Mutual Security Act with the earmarking
of between $100 and $250 million of the foreign aid appropriation for
farm products. Of the many other bills introduced in Congress in
1953 and 1954, the Agricultural Trade Development and Assistance Act
( commonly known as PL 480) was enacted into law on July 10, 1954.
With its passage the United States embarked on direct export disposal
as a major means of bringing farm production and utilization into adjustment. In addition, export subsidies were used to reduce dollar prices.
has
one of the most complicated in government
Public Law 480
four titles, several supporting motives, and involves many agencies of
government. It consolidates in one legislative document several apdomestic and foreign donations, barproaches to the surplus problem
ter, and sales for local currency. It also reflects humanitarian objectives
aid in cases of drouth or other natural disaster, international distribution via voluntary agencies to those unable to purchase an adequate
diet, and support to school lunch programs in other countries. Although
the program began on a relatively modest basis, with one billion dollars
for three years, program commitments now exceed two billion dollars
in a single year. PL 480 originally was presented as a temporary program to eliminate current storage supplies. It was hoped that farm
prices would increase as sales and disposals came into closer balance
with production and that this would permit the government to retire
from intervention in agriculture. As it became clearer to Congress and
the Eisenhower administration that the excess capacity was persistent,
PL 480 was periodically extended but continued to be considered a
short term or temporary program.
-
-
-
U. S.
-
AGRICULTURAL EXPORT SURPLUS DISPOSAL POLICY
33
With time other goals came into view, particularly a concern for
using surplus food as a means of economic development abroad. In
1960 and 1961 greater efforts were made to implement this concern
into policy, first through long-term sales contracts, and secondly, through
partial wage payments in food to otherwise unemployed or underemployed workers in various countries. Practical program considerations, a humanitarian concern for people and nations with inadequate
diets, and the desire to stimulate development combined to shift the
focus of local currency sales toward those countries with heavy populations and weak currencies.
More specifically, PL 480 consisted of three titles and five programs
in its early stages: Title I
local currency sales; Title II -- government to- government emergency food aid; and Title III
domestic food distribution, foreign food distribution, and barter. Each of these, except
domestic food distribution, will be discussed in some detail. Section
402 of the MSA will be discussed along with Title I since the two
programs are fairly similar. Consideration will also be given to export
stimulation through price reduction, such as the International Wheat
Agreement or export subsidies. Finally, attention will be given to new
long -term economic development conprograms added later: Title I
economic development projects; and Title IV -- longtracts; Title II
term dollar loans. Before dealing with these specific Titles and programs, a general summary of the surplus situation, appropriations for
farm exports, expenditures, and the commodity impact will be presented.
-
-
-
-
Export Programs in General.
Surplus Situation
In recent years the cost of the CCC inventory has approached $10
billion. Wheat, corn and cotton have been and are the major items
in the stock pile, while grain sorghums add significantly to the quantities of feed grains. Dry skim milk, dry beans and tobacco are among
the commodities held in small volume.
Financing
Over $12 billion has been appropriated for Title I and II of PL 480
from 1954 through December 31, 1961; about $1 billion has been spent
on Title III donations and about $1.3 billion for Title III barter. In
addition, about $1.5 billion of farm products has been exported under
the MSA program during the same period. Thus, in seven and a half
years over $16 billion has been spent or committed on these special
programs.
The specific legislative authorization for the export disposal programs is different from the general concept of legislative appropriation.
The PL 480 concessional sales and disaster relief do not represent addi34
ARIZONA AGRIC. EXPERIMENT STATION TECH. BULLETIN 150
TABLE
IV -1.
Authorized in
1953
1954
1955
1956
1957
1958
1959
1960
1961
1961
Source:
AUTHORIZATIONS: TITLE I, TITLE II OF PL 480 AND SECTIONS
550 -402 OF THE MUTUAL SECURITY ACT
Period Covered
Title I
Title II
Annual Sections
550 -402
IN MILLIONS OF DOLLARS
July 10, 1954 through June 1957
July 10, 1954 through June 1957
July 10, 1954 through June 1957
Through June 1958
Through December 1959
200
300
Through December 1961
700
800
1,500
1,000
2,250
3,000
Through December 1961
Through December 1961
2,000
4,500
900
300
600
100 -250
350
300
250
175
175
175
175
U. S. Congress, House, Semi- Annual Reports on Activities Carried on Under
Public Law 480, Wash.
tional expenditures of government funds; except for shipping charges,
the outlays of CCC funds already have been made as the commodities
moved into storage. Hence, the authorization is for export disposal with
a reimbursement of the CCC for the losses incurred (in a bookkeeping
sense) as the commodities move out of the stockpile. In the case of
Section 402 MSA, a portion of the direct appropriation for foreign assistance was earmarked for farm products. Export subsidies, as well as
Title III donation programs under PL 480, are financed out of CCC
capital, which is periodically restored by congressional appropriation.
Likewise in barter, a subsequent appropriation is made to cover the
cost of materials turned over to the Supplemental Stockpile, or if turned
over to another government agency, the CCC is reimbursed by that
agency. Table IV -1 summarizes the authorizations made in advance of
export. The other export programs (Title III) can be summarized only
by looking at actual exports, as is done in Table IV -3, since appropriations are made subsequently.
Volume of Coneessional and Donated Farm Exports
The total volume and value of agricultural exports have been reviewed in Chapter II. In Table IV -2 these exports are separated into
three categories:
(1) Commercial exports, that is, exports for which full payment
is made in dollars at U. S. domestic prices;
(2) Commercial exports with government assistance, that is, exports for which payment is made in dollars but at prices
less than U. S. domestic levels. The government has reduced
U. S.
AGRICULTURAL EXPORT SURPLUS DISPOSAL POLICY
35
TABLE
IV-2.
Year ending
June 30
U. S. AGRICULTURAL EXPORTS: COMMERCIAL AND SPECIAL
PROGRAMS, BY YEARS 1953 - 60
1953
1954
1955
1956
1957
1958
1959
1960
1961
a
Commercial Exports
Gov't assisted
Special
Programs
No assistance
1.8
1.9
1.9
1M
1.7
1.6
1.6
L9
2.0a
Total
IN BILLIONS OF DOLLARS
0.4
0M
.6
.4
.8
.4
1.4
.5
1.1
1.9
1.2
1.2
1.3
.8
1.3
1.3
1.5
1.4a
2.8
2.9
3.1
3.5
4.7
4.0
3.7
4.5
4.9
Estimated.
Trade Statistics Branch, ERS.
Source:
the price by paying export subsidies to private traders or
by accepting losses on government -held supplies.
(3) Exports under special programs, that
PL 480 or Section 402, MSA.
is,
under some Title of
Attention will be given first to the exports under special programs.
For such programs there are a long series of decisions which must be
made, many of them by the U. S. Government. Export subsidies also
are reviewed; however, once the U. S. Department of Agriculture determines the amount of price concession, the decision to purchase or
not to purchase is left largely to the individual or government abroad.
In Table IV -3, special program exports are divided between con cessional sales and donations. The first is by far the most important.
Commodities Involved
Nearly three-fourths of the wheat and flour moves through a "specified government program" (PL 480 or Section 402, MSA); nearly all
the remainder receives an export subsidy under the International Wheat
Agreement. Much the same applies to cotton and corn. Even a substantial amount of the milled rice, cotton seed and soybean oil moves
in this way. The year 1959 -60 is illustrative for major commodities
as shown in Table IV -4. The continued export of these products
requires special programs. While the farmer's income (quantity sold
times price received) depends primarily upon the CCC loan and purchase price, the CCC stocks of these commodities would be far larger
if these programs had not provided a continuing outflow.
36
ARIZONA AGRIC. EXPERIMENT STATION TECH. BULLETIN 150
TABLE
IV -3. UNITED
STATES AGRICULTURAL EXPORTS UNDER
SPECIAL PROGRAMS, 1954 - 61
1954/55
56/57
55/56
Section 402
Barter
Total
58/59
59/60
60/61
IN MILLIONS OF DOLLARS
CONCESSIONAL
SALES:
Title I
57/58
73
450
125
439
335
298
909
394
401
660
227
100
727
210
132
815
167
153
934
186
147
648
1,092
1,704
987
1,069
1,135
1,267
83
135
91
184
88
165
92
173
56
131
65
104
146
144
218
275
253
265
187
169
290
GRANTS AND
DONATIONS:
Title II
Title III
Total
Source:
Trade Statistics Branch, FAS; Semi -Annual Reports on PL 480.
TABLE IV -4.
EXPORTS OF SPECIFIED COMMODITIES BY GOVERNMENT
PROGRAMS AND FOR DOLLARS, JULY - JUNE
Wheat
Flour
&
Gov't programs
or export subsidies
Dollar sales
No subsidies
Total
Source:
Rice
Feed
Grains
Cotton
1959 - 60
Dairy
Products
Other
Total
IN MILLIONS OF DOLLARS
871
105
499
4
31
42
875
136
541
826
79
233
2,613
48
826
127
1,789
2,022
1,914
4,527
Trade Statistics Branch, FAS.
Sales for Local Currencies
(Title I, PL 480, and Section 402, MSA)
In usual commercial international trade transactions, the U.
S. ex-
porter sells commodities for dollars or accepts currency which is freely
transferable into dollars. The international banking system matches these
currencies against the payment for commodities imported into and sold
in the United States for dollars. The lack of convertibility, or dollar
shortage, in some countries, severely limits commercial trading. In an
effort to remove this limitation the U. S. Government through Title I,
PL 480, or Section 402, MSA (formerly Section 550) agrees to provide
dollars to the exporter and receives local currency, rupees, pesos, cruzeiros, etc., from the recipient country. This technique, in effect, says
U. S.
AGRICULTURAL EXPORT SURPLUS DISPOSAL POLICY
37
that the international economic system fails to provide an effective demand for all the food that is produced, despite a clear nutritional need
for food in a number of heavily populated nations. The international
economic system can be made to work better by measures which
encourage development and strengthen the productivity and ability of
weak economies to earn foreign exchange. Such measures are being
carried on by the U. N., World Bank, and the U. S. Agency for InterThis, however, requires time. Meannational Development (AID)
while, there are dozens of nations and millions of people within these
nations who would consume more food were it available. Sales for
local currency, then, supplement the international economic system by
bypassing the foreign exchange system. This food is not a gift to the
individual consumer; it is sold into market channels in recipient countries and requires money payment by those buying it. Whether the
food eventually is a gift, a partial gift, or in effect a long -term loan to
the other government depends upon how and to what extent the United
States uses the local currency received.
.
Estimates of Value of Commodities Shipped
Scheduled Title I sales for local currency from July 1954 through
December 31, 1961, total $10,873 million at CCC cost.29 The export market value of shipments made during this period is about 60 percent of
this figure. Table IV-5 indicates that there are several estimates of the
size and value of the program. First is the congressional authorization
of $11,250 million to December 31, 1961, of which $10,873 million was
committed. Both of these amounts are at CCC cost including prices paid
to farmers, storage, processing or drying, handling and internal transportation.
The export price is usually below the domestic price support level,
to say nothing of the additional marketing charges. Estimates are that
about 30 percent is written off to make prices more competitive. To
assist that half of the commodities that are carried on American vessels, as required by law, a dollar allocation is made for ocean transport.
A second estimate then is $6,740 million
the estimated market value
of the commodities at export prices at U. S. ocean ports.
Commercial contracts and shipments, however, are not made immediately; hence, exports lag behind agreements signed. Some time
elapses between shipping the farm products to foreign ports and the
transfer of local currency. The greatest delay, however, is in using the
-
29 The U. S. Congress, Fifteenth Semi- Annual Report on Activities Carried
on Under
PL 480, House Document No. 385, is the source for the statistics in this and the
following section, 87th Congress, 2nd Sess., Wash., 1962.
38
ARIZONA AGRIC. EXPERIMENT STATION TECH. BULLETIN 150
TABLE
IV-5.
DIFFERENT ESTIMATES OF PROGRAM SIZE, TITLE I,
PL 480,
JULY 1954 THROUGH DECEMBER 1961
Congressional Authorization Title I
Estimated CCC cost of agreements signed
CCC write -offs or losses
- IN MILLIONS OF DOLLARS 11,250
10,873
3,281
Export market value including ocean transport
Ocean transport
7,592
852
Export market value
6,740
Actual shipments
Local currencies delivered through September 1960
(Compare with shipments plus ocean transport)
Local currencies disbursed through September 1960
5,012
4,987
2,434
local currency; about half of the currency owed on shipments (and
transport) have been utilized for designated purposes.
The major point, however, is that the cost of aid to other nations
is not the CCC cost of $10,873 million, but rather a figure substantially
less, perhaps 60 or 65 percent. The other 35 percent is the domestic
cost of the price support program, and should be so allocated.3° Thus,
a $2 billion a year appropriation for PL 480 has a maximum foreign aid
value of $1.4 billion. Whether it begins to attain even this figure (or
some smaller amount) involves two complexes of factors, one the export prices of farm commodities from other countries if the U. S.
policy were different, and the other the extent to which farm exports
are effective parts of a total development aid program in the recipient
country. Some aspects of the latter will be developed in Chapter V.
Major Commodities and Principal Recipients
Wheat and flour, and cotton are by far the most important commodities programmed under Title I and Section 402. Wheat has been
the most important in Title I while cotton gradually replaced wheat
under Section 402, until that program was discontinued in 1961 -62. Fats
and oils represent less than 15 percent of the total, with feed grains,
30 Even this 65 percent may be too high, since it is calculated from existing world
prices. These in part are higher because the United States holds or disposes of commodities so as to partially protect the world farm commodity situation, as do a number
of other countries. See T. W. Schultz, "Value of Farm Surpluses to Underdeveloped
Countries," Journal of Farm Economics, Dec. 1960, pp. 1019-1030, and comments by
L. Witt, same issue, pp. 1046-1051.
U. S.
AGRICULTURAL EXPORT SURPLUS DISPOSAL POLICY
39
TABLE
IV -6. WHEAT
AND COTTON SHIPMENTS FOR LOCAL CURRENCY
RELATIVE TO TOTAL SUCH SALES, 1954 - 1960
Years
1954-55
1955-56
1956-57
1957-58
1958 -59
1959 -60a
1960-61a
Exports of Wheat
& Cotton
391.7
465.9
780.4
591.9
642.4
581.4
715.8
Total Local Currency
Shipments
IN MILLIONS OF DOLLARS
523.6
793.3
1,303.7
886.9
940.0
825.4
933.7
Percent
74.8
58.7
59.8
66.7
68.3
70.0
76.7
Excludes exports under Mutual Security Act.
Source: Semi- Annual Reports on PL 480.
a
rice and tobacco representing 4 to 7 percent each. ( See Table V-2) . Between 58 and 75 percent of total shipments have been wheat and cotton,
with some indication that the percentage is rising in recent years. Annual
fiscal year data are shown in Table IV-6.
During the early years of PL 480, small amounts of nonsurplus commodities were sometimes included in the sales agreements. Later, however, commodities were almost entirely those in or threatening to become surplus. Under Section 402, however, this limitation did not
apply, if the particular commodity was needed for development purposes. Even so, surplus commodities dominated this program also. In
many cases Section 402 financed the usual marketings required under
PL 480 agreements.
The largest recipient is India with nearly 25 percent of all Title I
agreements. Spain, Yugoslavia, Pakistan, Poland, and Turkey represent
5 to 10 percent each. Together with India these six countries have
taken some 60 percent of all Title I programmed commodities. Table
V -2 shows a summary of the major countries and commodities.
The operations under Section 402 involve small allotments to about
38 countries. The major shipments have gone to nations with large
U. S. associated military programs
Korea, Taiwan, Spain, Germany
(for Berlin) and Vietnam. The existence of two separate programs for
largely the same purpose and under similar rules led to confusion.
Moreover, though the program continued until 1961, long -term contracts were not made; hence, there were a series of short -term arrangements negotiated each year involving much government manpower. Most
countries prefer to use Title I for food import contracts and to use
MSA funds for nonagricultural products; hence, there has been difficulty in meeting congressional minimums.
-
40
ARIZONA AGRIC. EXPERIMENT STATION TECH. BULLETIN 150
If Title I and Section 402 allocations are combined, Israel is clearly
the largest recipient of agricultural surpluses on a per capita basis.31
India's large total pales into small figures on a population basis.
On a regional basis, between 80 and 90 percent of the shipments
have gone to Europe and Asia. An increasing proportion of the agreements signed in recent years (nearly three -fourths of the total since
July 1959) has been with Asia. The largest single agreement was
with India in May 1960 for $1.3 billion. Agreements with European
countries were developed more rapidly so that in the early years this
area took well over half the total. Since then Europe's share has departly because strengthening currencies made most European
clined
countries ineligible for Title I sales and shifted them into the dollar
market. Both in agreements and shipments, Latin America totaled
between 6 and 18 percent. There is some indication of larger sales
since 1960.
-
Multi-year Contracts
Short -term contracts were the rule in the early years of PL 480.
This was in keeping with the early Benson -Eisenhower administration
view that surpluses were temporary. Once stocks were liquidated, American agriculture was to go on a current market basis without government intervention. Two -year agreements were made only when commodities in substantial surplus were involved. As a result, it was
difficult to incorporate U. S. food shipments into long -term development
programs in recipient countries. The program was essentially a stopgap
operation on both sides. Inevitably, many agreements were made during
periods of seasonal shortages in the receiving countries and shipments
began to arrive during the subsequent harvest periods. The internal price
effects often were most unfortunate.
Gradually, however, there was official realization that the imbalance
in American agriculture was persistent, substantial and long -run in nature.
I mproved storage facilities abroad helped to protect harvest -time prices.
At the same time several countries, particularly India, resisted sales
agreements unless longer -run assurances of imported supplies were pro ided. Shortly before President Eisenhower's visit to India, a decision
was made to participate in multi-year (three and four year) contracts,
and in May 1960 a four -year contract was signed with India. Such contracts make it possible to reshape development programs, often of five
years duration, so as to expand the rate of industrialization without put-
31 A USDA sponsored contract in Israel, to study the economic impact of the program, has been completed by the Bank of Israel. F. Ginor, Analysis and Assessment of
the Economic Effect of the U. S. Public Law 480 Program in Israel, Oct. 1961.
U. S. AGRICULTURAL EXPORT
SURPLUS DISPOSAL POLICY
41
ting additional effort in domestic agriculture to provide food for new
urban workers. It can make a higher rate of development possible.32
In any case, since 1959 there has been an overt recognition that surpluses are a continuing problem likely to require foreign surplus disposal
for a long period. The United States has committed itself to provide
certain commodities for a number of years into the future; this has
meant that 1960 and 1961 budgets have been used to authorize shipments through 1964 and 1965. To accomplish this it was necessary to
increase the authorization for calendar year 1961 from $1.5 billion to
$3.5 billion. Greater emphasis on the contribution of food to development is likely to lead to even more long -term contracts.
Local Currency Use
There is much confusion about the local currency received in payment for farm commodities. Part of this is due to an imperfect understanding of money as such and part to the special problems of weak
currencies.33 Some of the difficulties are due to the rules which apply
to the use of currency derived from the sale of farm products.
When farm products are made available to another country through
Title I or Section 402, these products are sold into regular commercial
channels in that country.34 The flour mills, wholesale merchants, feed
dealers and others pay their government at stated prices, and the returns
are deposited to the credit of the U. S. Government. The merchandisers,
of course, process and sell these products to retailers and/or consumers
and in this way recoup their expenditures. These products are then sold
to the final consumer; they do not become gifts to individuals lacking
purchasing power.
The money accumulated and deposited locally to the U. S. Government account represents buying power to command local resources just
as in the U. S. the dollar has the power to buy American resources. However, most of the countries receiving surplus farm products under special
programs do so because they qualify as having exchange problems, i. e.,
they have weak currencies and their resources are limited. Their currency does not have the power of the dollar, the German mark, or
pound sterling to purchase goods in other countries, or more properly,
it is not freely convertible.
See Chapter V for more complete development of these ideas.
For a more detailed discussion of these problems see: E. S. Mason, "Foreign
Currencies We Can't Use," The Atlantic, May 1960, and also a government document
he helped prepare, The Problem of Excess Accumulation of U. S. -Owned Local
Currencies, Department of State, April 4, 1960.
32
33
34 In some cases, as in India, the wheat may be held in storage for a time without
being sold.
42
ARIZONA AGRIC. EXPERIMENT STATION TECH. BULLETIN 150
TABLE
Authority
(a)
(b)
(e)
(d)
(e)
(e)
(f)
(g)
(h)
(i)
(i)
(k)
IV -7.
AUTHORIZED USES OF LOCAL CURRENCY
Currency Use
Agricultural market development
Supplemental stockpile
Common defense
Purchase of goods for other
countries
Grants for economic development
Loans to private enterprise
Payment of U. S. obligations
Loans to foreign governments
International educational exchange
Translation of books and periodicals
American-sponsored schools and
centers
Scientific, medical, cultural and
educational activities
Buildings for U. S. Government use
Trade fairs
Acquisition, indexing, and dissemination of foreign publications
American educational institutions
Workshops and chairs in American studies
Purchase nonfood items for
emergency uses
Audio -visual materials
(1)
(m)
(n)
(o)
(p)
(q)
(r)
(s)
Sales of dollars for U. S. tourists
Responsible Agency
Dept. of Agriculture
Office of Civil and Defense
Mobilization
Depts. of State ( ICA) and Defense
Dept. of State (ICA)
Do.
Export- Import Bank of Washington
Any authorized U. S. Govt. agency
Dept. of State ( ICA) and
Development Loan Fund
Dept. of State
U. S. Information Agency
Dept. of State and U. S.
Information Agency
National Science Foundation,
Dept. of State and other
appropriate agencies
Dept. of State
U. S. Information Agency
Librarian of Congress
Dept. of State
Do.
Dept. of State (ICA)
Dept. of State and U. S.
Information Agency
Not yet assigned
To help protect the value of the local currency in the international
markets, there is an agreement that most of the currency will be spent
locally for clearly designated purposes. The possible purposes, as stated
in the current extension of PL 480, are shown in Table IV -7. In the
any purpose
case of Section 402 the authorization is more general
within the meaning of the Mutual Security Act.
In broad terms, nearly half of the local currency is designated for
more or less direct use by the U. S. Government or private enterprise,
while a little more than half is for use by the local government or its
agencies. More specifically, most of the purposes stated in Section 104
of PL 480 are for U. S. use and amount to 30.3 percent of the total
through December 31, 1960. An additional 7.0 percent has been allocated to common defense, and 6.7 percent for loans to private enterprise
the so -called Cooley loans. These two purposes are closely related
to several aspects of U. S. foreign policy and generally are considered
as U. S. uses.35 Clearly at the disposal of the local government, once
-
-
35
U. S.
A somewhat
different allocation
is
made by T. W. Schultz, op. cit.
AGRICULTURAL EXPORT SURPLUS DISPOSAL POLICY
43
the purpose is approved, are grants for economic development (104 e)
These amount to 11 percent, but have increased in recent agreements.
Loans to foreign governments ( 104 g ) represent 45.0 percent of the
total. In this case the recipient government or one of its agencies requests the loan and the U. S. Government reviews and decides whether
the loan is to be approved, usually on a mutual basis. The use to which
the money is to be put when repaid is still not defined.
More fundamental, however, is the question of why should a government borrow its own currency back; why not create the credit or
print the money, thus avoiding the U. S. review and the necessity of
paying interest. In this case, of course, the deposit to the credit of
the U. S. Government remains on the books and represents an eventual claim upon local resources. This can be viewed as a postponable
obligation, and often is.
The money assigned to U. S. use is spent within the country to hire
personal services, office space, to construct embassies, military housing,
cultural centers, to pay subsistence and travel expenses for U. S. personnel, and so on. It has value only to the extent that it is permitted
to command the use of local resources, and in doing so it may compete with and disrupt local development programs. In some countries
the sales of farm products are sufficiently small and the possible uses
of the money sufficiently large that the currency is adequately utilized.
However, in a number of countries the surplus commodities are being
delivered in such large quantities that excess currencies are being accumulated. Many of the excess bushels of wheat in the United States
have become excess bank deposits of rupees in India and Pakistan, and
similarly in other countries.
Why not convert these currencies into Japanese yen or French francs
or Italian lira? Simply because one of the major development problems
of the countries in which there are excess currencies, is that there are
already too many claims against their foreign exchange earnings to pay
for imported tools and machinery for economic development. Their
resource base and export potential is too limited. If the currency were
so exchanged,36 the farm product sale would then be a regular compurchase in competition
mercial purchase by the recipient country
with other desired commercial imports, i. e., a purchase which it could
not make and therefore requested a Title I agreement.
As of September 30, 1961, the status of the local currency was as
.
-a
follows: 37
36 A part of the funds allocated to market development can be converted under
current contracts.
37 Thirteenth Semi- Annual Report, op. cit.
44
ARIZONA AGRIC. EXPERIMENT STATION TECH. BULLETIN 150
Agreements provided
Collections for products delivered
Allocated by the U. S. Bureau of Budget
(In anticipation of collections)
Transferred to agency accounts
Disbursed by agencies
$6,824 million of local currency
$4,987 million of local currency
$5,067 million of local currency
$4,083 million of local currency
$2,434 million of local currency
Thus, well over half of the local currency has not been spent; much
of it is in a few countries where the prospects for expenditure are limited.
In January 1962, the following countries were classified as having excess
currency: Burma, India, Israel, Pakistan, Poland, United Arab Republic,
and Yugoslavia. Greece, Spain and Turkey have been close to this
classification. It should be remembered that only as this currency is
used does the United States receive any direct returns on the farm products sold. Even then, some of the return, as indicated above, is through
grants and loans for local country development.
Other Concessional Sales
In addition to sales for local currency, other efforts to supplement
or bypass the international economic system have been pursued. There
have been a number of short-term credit sales facilitated by the Export Import Bank. Most important have been barter sales, while some hope
that Title IV long -teen dollar loans can become important in the future.
-
Title III
Barter
Barter was authorized under the CCC Charter Act of 1948, but
totaled only $108 million for the five years 1949-54. In part, this is
because the program was not pushed vigorously, but mostly it was
because the producing countries preferred to sell for dollars, if the
imported commodity was eligible for inclusion in the Strategic Stockpile. With the enactment of PL 480 and the authorization of the Supplemental Stockpile (not normally purchasing imported products for dollars), the program expanded rapidly, reaching $400 million in 1956-57.
Vigorous protests on this controversial program led to its review and
change in May of 1957. (See Chapter VI.) Thereafter, the program
has been much more modest, averaging a little over $100 million annually.
The use of the term barter leads to confusion. It does not describe
the program as it is operated. The vast majority of the bartered commodities have been sold into markets with strong economies and strong
currencies. Through the fiscal year 1960, barter exports totaled about
$1,200 million. Over three-fourths of this, $935 million, went to ten
countries as follows:38
38
Tabulated by the Foreign Agricultural Service.
U. S. AGRICULTURAL EXPORT
SURPLUS DISPOSAL POLICY
45
United Kingdom
Netherlands
Japan
West Germany
Belgium
France
Italy
Ireland
Austria
Norway
$246 million
139
"
138
135
117
55
30
30
25
23
"
"
The pattern for the fiscal year 1960 also indicates that most of the
sales competed with American commercial exports. Why has the program had this effect?
During the heyday of barter arrangements producers of a commodity eligible for the Supplemental Stockpile would approach the
USDA, usually through a broker, to try to arrange a deal whereby
diamonds, uranium or some other product would be accepted in exchange for surplus commodities. The amounts of each would be negotiated. There are indications that the deals were very favorable with
commissions of 15 percent reported.39 If an agreement was made, the
farm products changed hands and the contractor agreed to deliver the
strategic material over a period of several years. Prior to May 1957,
no interest was charged. The contractor agreed to export the farm
product. With a price concession it was far easier to sell the products
in a market with a strong currency, and then use this currency to buy
the strategic commodity in the producing country. Meanwhile, the contractor had the use of interest -free money.
As these abuses became evident, several U. S. regular commercial
exporters and Canada protested vigorously. The rules were changed so
as to reduce sales in strong economies and direct them toward weak
economies. The result was a severe reduction in the program, but an
expansion in regular commercial sales to countries with sound currencies. Congress, particularly through. Representative Cooley, has pushed
for a larger program, and at one time in the debate argued for a mandatory $350 million appropriation annually. More modest counsel prevailed, but the issue continues to be discussed.
If strategic materials are desired they can be purchased more
cheaply for dollars. There seems to be little merit in accumulating unneeded minerals in exchange for unneeded farm products. In fact, at
one stage the proposal for the new Agency for International Develop39
46
"Food- for -Peace," Food Research Institute Studies, Stanford UniNo. 2, May 1960.
J. S. Davis,
versity, Vol.
1
ARIZONA AGRIC. EXPERIMENT STATION TECH. BULLETIN 150
ment included language to permit the redisposal abroad of commodities
in the Supplemental Stockpile. With the expansion of world population,
food is likely to be a greater asset in 1965 and 1970 than many of the
commodities going into the Supplemental Stockpile. Clearly, barter sales
which reduce commercial sales are contrary to the American foreign
trade position. In view of these shortcomings, there is no place for
the present so- called barter program.
Title IV
The first use of this section of PL 480 was in August 1961 despite
its three -year status. Briefly, Title IV authorizes the export of farm
products in exchange for long -term notes, coming due up to twenty
years after the shipments have been completed, and at modest rates.
Discussions have been held with a number of countries looking towards
an agreement; only three were completed up to January 1962, with El
Salvador, Venezuela and Portugal. Why have there not been more
agreements?
This Title was designed to provide a transitional or intermediate
step between regular commercial sales and local currency sales. Countries eligible for Title IV but not Title I will seek the latter status, or
seek ways to use Title II to serve national purposes. A tough position
by U. S. officials may eventually force such countries to accept Title
IV, but taking such a stand for an extended period of negotiation s may
be contrary to the domestic pressures for disposal.
Donations
While local currency transactions supplement the international economic system by putting farm products directly into the markets of
recipient countries, their ultimate consumption is by people who have
purchasing power within the recipient country. Donations, however, make
commodities directly available to consumers with limited purchasing power,
thus bypassing the local economic system as well. In most cases the
major concern is to improve nutrition; in others it is to provide calories
for a more adequate level of physical activity.
There are three main types of donations, each with several subclassifications. Under Title II food is available for famine and emergency relief, usually to governments, and expresses a traditional American concern for those suffering from natural disasters. The food normally is donated locally, depending upon the specific circumstances. A
new section of Title II since July 1960 provides food as part of the
wage payment needed to put unemployed or underemployed people to
work at various labor projects which qualify for economic development
purposes. Title III donations may be either foreign or domestic. The
church, welfare or
products flow through various voluntary agencies
-
U. S.
AGRICULTURAL EXPORT SURPLUS DISPOSAL_ POLICY
47
-
international which operate feeding programs overseas, and range from
school lunches to food packages.
These programs constitute about 10 to 15 percent of the total
surplus food shipments. However, under the Kennedy administration,
these phases of the program have expanded, with special attention to
Title II economic development and to a wider range of commodities
under Title III.
Title II
Famine and Emergency Relief
-
Until recently this title has been used primarily to provide tern porary and emergency relief in the case of floods, crop failures, earthquake and other disasters. Much of the aid still is of this type. Thus,
help to Korea and the Ryukyu Islands after a disaster, food and feed
to drouth -stricken countries in the Near East and to several countries in
Africa, and aid to refugees have been recent examples. Surplus foods
were delivered to the United Nations in September 1960 for distribution
in the Congo. Title II shipments were less than $100 million annually up
to 1960 -61. Such shipments are recent examples in a long line of American gifts of food, such as relief to Europe after World War I, or to Japan
after a severe earthquake in the early twenties.
Also under this title are a number of government-to-governmentsponsored child feeding programs, usually through school lunches, beginning in Japan, Italy and Tunisia. The first of these has been taken
over completely by the government of Japan, the second is largely supported by Italian authorities, while the third continues. There has been
some hesitation in expanding this program. Some argued for agreements
only if there was some prospect that the Japanese and Italian experiences would be repeated; they were unwilling to take on new programs
which would continue indefinitely, like that in Tunisia. This has been
referred to as a "phase -out" policy, though there are arguments as to
whether it was a policy or a point of view. In any case, school lunch
programs now are being expanded, with an agreement with Peru in
May 1961, and others being discussed.
Most important in this respect is the dry skim milk situation. The
CCC has not purchased any great quantity of excess supplies; and at
times the existing programs were rationed. Any substantial expansion
of Title II school lunches and Title III programs (see below) may
require an indefinite future commitment, since the welfare and foreign
policy effects in the recipient country may make withdrawal very difficult.
Title II
-
Economic Development
Tunisia has had substantial unemployment and underemployment,
particularly in the south. For several years emergency food aid was
provided under Title II, though with the passage of time, it appeared
that this problem was chronic rather than temporary. Food assistance
48
ARIZONA AGRIC. EXPERIMENT STATION TECH. BULLETIN 150
,
-
supported a number of activities
road building, school construction,
clearance of irrigation ditches and so on, which led to capital fo, iation and economic development. At the request of the Eisenhower
administration, Congress amended Title II to authorize for one year
an economic development program using food as part of the wage
payment. During the last half of 1960 such agreements were made with
Afghanistan, Korea and Tunisia. This is an expanding program, receiving permanent authorization under the Kennedy administration. The
economic implications of this program will be developed in Chapter V.
Title III
-
Donations
Long part of the authority of the USDA, this program expanded
under the impetus of PL 480. Under the charter of the CCC the corporation can finance such shipments as part of its annual losses, claiming later reimbursement from Congress. The program consists of donaCARE,
tions to approved U. S. or international welfare organizations
UNICEF
organizations,
-related
church
Catholic, Protestant ' and Jewish
who distribute the food in various foreign countries.
and UNRWA
organizations paid ocean transport to the recipient
the
recipient
first
At
country, as well as warehousing, transportation and distributing costs
within the country. More recently, the U. S. delivers the food items
to the port of entry as well as defraying packaging costs, with lettering
indicating that the contents are a gift of food from the United States.
The distributing agencies raise private funds in the United States and
abroad to meet their costs, and frequently succeed in obtaining government assistance as well.
While wheat flour is distributed, arrangements for baking and distributing bread or rolls are common. Rice is desired in many countries
where wheat is not part of the normal diet. Most important, however,
are dried skim milk, cheese and other products to improve nutrition.
Early in 1961 special efforts were made to supply soybean oil so as to
provide a greater variety of food.
There are various categories of users. UNICEF is primarily concerned with children, UNRWA with refugees. The other organizations
school lunches, maternal and child- health
operate a variety of programs
centers, refugee programs, summer camps, institutions such as orphanages, and family feeding programs. In most cases the food is dispensed
through school lunch or cafeteria arrangements; however, food parcels
are distributed to individual poverty -ridden families. In this case, end
use is difficult to control, since some families prefer to trade in the
market for cash or a different commodity.
These programs tended to begin in Western Europe and other
countries of Christian faith. Gradually the more developed countries
of Western Europe have been eliminated (as capable of supporting
their own welfare activities) , and programs have shifted to some of
-
-
-
_
U. S. AGRICULTURAL EXPORT SURPLUS DISPOSAL POLICY
49
the less developed countries. Even so, most of the voluntary agencies
hesitate to enter countries where the prevailing religion is Moslem or
Hindu ( and are not always welcomed) , particularly since they must
raise new funds for expanded programs. They prefer to operate where
there are some co- religionists or at least some potential. The three nonreligious agencies, of course, are an exception. From a humanitarian
standpoint, it is preferable to shift from countries where the average diet
is reasonably adequate to countries where the diet is poor. Nonetheless, individual countries must also be judged in terms of the adequacy
of internal distribution.
Donations have averaged between $150 and $200 million per year
at CCC values, or about $100 million at export market values. By and
large, these programs have been applauded as significant humanitarian
contributions, and as supporting foreign policy by creating a grass roots
appreciation for the gift of food. One question, however, is whether
the food generally is considered a gift from the United States, or a form
of religious proselytizing. Also, unfortunately, the psychology of the receiver is little understood. A gift without any possible token of repayment can breed frustration and resentment, or it can be viewed as no
more than the social duty of the rich (nation) to give to the poor. If the
aid is later reduced or eliminated, any gratitude which had developed
could turn to ashes.
Special Price Reductions
The programs outlined above provide procedures to bypass or sup -;
plement the international economic system, though barter has not succeeded in doing so. Donations also supplement the domestic economic
system. There is much effort to increase the volume of farm commodities moving through the commercial marketing system. The most
important current effort to expand commercial sales is to reduce the
export price below domestic levels.
Authorization for limited price cutting has been held by the USDA
for over 25 years, in provisions of the CCC charter and in Section 32
of the AAA. A production control or price support program which raises
above what it otherwise would have been requires export payments if foreign trade is to continue. The higher price discourages
exportations from the U. S. and encourages exportation from foreign,
competitors. The U. S. either gives up the export market or develops
a technique to reduce the price. It should be emphasized, however,
that many other countries have followed or are following similar
procedures.
a payThe U. S. procedure has been that of "export payments"
ment in cash or kind to the commercial exporter so as to lower the
domestic price to a "competitive" world price. Functioning briefly during the late thirties, the program has been renewed and expanded dur-
-
50
ARIZONA AGRIC. EXPERIMENT STATION TECH. BULLETIN 150'
ing the last ten years. Under the terms of the International Wheat
Agreement, certain maximum and minimum prices are defined. Both
are substantially below U. S. domestic prices. The export payment of
50 to 90 cents per bushel in recent years has been in accordance with
the agreement, and in a sense has international approval. For other
commodities, however, the United States operates unilaterally, making
its own decisions each year on the level of the export payment. The
average subsidy rate for 1958 -59 on commodities moving into commercial
TABLE
IV-8.
Commodity
Wheat
Wheat flour
Rye
Corn
Grain sorghums
Oats
Barley
Rice, milled
EXPORT SUBSIDIES PAID ON COMMERCIAL SALES BY
COMMODITIES, ANNUAL AVERAGE 1958 - 59
Unit
Bushel
Hundredweight
Bushel
Bushel
Bushel
Bushel
Bushel
Hundredweight
Running bale
Pound
Pound
Pound
Pound
Quantity
Thousands
90,772
18,830
3,273
144,633
70,209
26,728
89,901
2,592
1,272
11,886
32,196
2,350
1,303
Estimated
unit ratea
Dollars
0.50
1.75
.307
.115
.191
.121
.146
2.75
30.00
.108
.083
.125
.187
Estimated
cost
Million
Dollars
45.4
33.1
1.0
16.6
13.4
3.2
13.1
7.1
38.2
1.3
2.7
Cotton
Tung oil
Milk, nonfat dry
.3
Cheese
.2
Butter
Butter oil, anhydrous milk fat, and
.2
.234
772
Pound
ghee
b
95
.50
Beans, dry edible
Hundredweight
175.8
Total subsidy
a Estimate of difference between domestic market price and CCC sales price or
average of payments in cash or in kind. Furnished by CCC commodity specialists
or worked up in consultation with such specialists.
b Less than $50,000.
Source: U. S. Congress, House, Hearings, Department of Agriculture Appropriations
for 1961, part 2, p. 282.
markets is shown in Table IV-8. Estimated costs of the subsidy were
highest on wheat with cotton next. The rate of payment on cotton was
6 cents per pound in 1960-61 and 8.5 cents for 1961 -62. The payment
is about one -fourth of the export value for those commodities affected.
The indicated $176 million export subsidy applies only to dollar sales.
As such, it is properly a charge against the domestic price support program, since it represents the difference between world prices and domestic
prices. However, special program exports (PL 480, Section 402 and
U. S. AGRICULTURAL EXPORT SURPLUS DISPOSAL POLICY
51
o
(51
z
r
ñ
Z
Ô
-i
D
(n
z
R
x
m
X
m
ñ
X
D
D
Y
X
N
269
94
875
4
777
1
7
7
7
"r
23
41
136
541
8
87
31
18
471
62
32
31
63
136
73
349
42
391
541
18
8
150
94
646
55
122
20
225
4
229
875
Cotton
265
826
1
825
670
826
670
156
1
155
IN MILLIONS OF DOLLARS
Rice,
milled
552
7
Rye
Feed
grains
16
34
59
34
127
127
3
2,015
8
1,993d
14
8
1,789
1,797
2,015
48
66
218
14
204
Other
18
16
11
34
61
Dairy
products
618
2,209
2,149
169
4,527
1,309
1,914
3,223
4,527
169
1,304
900
235
Total
agricultural
exports
b
a
Exports under Titles I, II, and III of Public Law 480 and Sec. 402 of Public Law 665.
Estimated value of exports principally under payments -in -cash or in -kind programs.
Donations under Titles II and III of Public Law 480.
d Includes vegetable fats, oils, and oilseeds (principally soybeans and soybean and cottonseed oil), $538 million; animals and animal
products except dairy (principally lard, tallow, meats and products, and hides and skins), $456 million; fruits and vegetables, including preparations, $400 million; tobacco, $342 million; and other, $257 million.
e Excludes donations.
Source: FAS, USDA.
Amount export paymente
With export paymentsb
Without export payments
Donations'
Total
All exports:
Government programs: a
With export paymentsb
Without export payments
Donations
Subtotal
Dollar sales:
With export paymentsb
Without export payments
Subtotal
Total
flour
Wheat
and
WITH AND WITHOUT EXPORT PAYMENTS, BY COMMODITY, JULY JUNE 1959 - 60
ESTIMATED VALUE OF U. S. AGRICULTURAL EXPORTS UNDER GOVERNMENT PROGRAMS AND DOLLAR SALES,
Type of Export
TABLE IV-9.
Title II) also involve such costs. An estimate of the total export payments of $618 million for 1959 -60, actual and calculated, is shown in
Table IV-9.
The official United States point of view is that these payments are
necessary to offset the higher internal prices fostered by the agricultural
programs. They are needed in order to preserve the "U. S. share of
the world market." Other countries argue that the U. S. is striving to
expand its position, that historical shares should be changed and do
change over time, and that export subsidies constitute unfair trade practices. Chapter VI will develop these issues in some detail.
Summary
Changing Goals and Objectives
The PL 480 bill had trade development and assistance in its title
in the original 1954 act. Moreover, the first authorized use of local
currency ( Section 104a) had a five percent allocation for market development. Still the principal focus was on export disposal. Its authors
and supporters had high hopes that the program would eliminate surpluses and permit the government to retire from agricultural intervention. The agreements and barter contracts between 1954 and 1957 clearly
reflect a desire to export regardless of the implications for foreign trade
and foreign relations. It was argued that when this temporary program
had run its course, the relationships would be much improved.
By 1957, even the partisans of the program began to realize that
the marriage of convenience between supposedly short -run over- production and short-run disposal was based on erroneous expectations. Vigorous protests from competitor countries and strong pressures from some
U. S. commercial exporters, who saw government sponsored programs
usurping their markets, combined to bring a reconsideration. The 1957
record export stood for several years.
The period 1957-60 showed an increasing concern with foreign economic development, as a means for providing income and thus consumption in addition to existing uses. More of the local currency was designated for loans and grants in recipient countries as a spur to development. To reduce conflicts with other competitors a system of consultation
was developed for use while negotiating each Title I agreement. A shift
from U. S. to global usual marketing provisions was a more positive step,
thus helping maintain market opportunities for competitors in recipient
countries. A drastic revision of the rules on barter and a substantial
reduction in volume greatly eased conflict with Canada. Disposal was
limited to surplus commodities, rather than occasionally including nonsurplus products.
U. S.
AGRICULTURAL EXPORT SURPLUS DISPOSAL POLICY
53
Food for Peace, /959 -60
The inauguration of the Food for Peace program in 1959 did not
bring about as substantial a shift as that described earlier for 1957 -58.
There were several conferences called among wheat exporting nations
term which
in an effort to give more attention to surplus utilization
has a better ring than surplus disposal. The major change, however, was
the use of the multi-year agreement, clearly demonstrated in the four year India contract and the grant back to India of 40 percent of the
local currency. This policy change has been continued in a similar
arrangement made with Pakistan in mid-1961. It greatly facilitates the
planning of development programs and the possible implementation of
projects within the time period of the agreement. The only other development to justify the new term was the use of food as wage payments in
small scale development projects. Further interest in development, however, was inevitable with the shift in shipments toward developing areas,
particularly Asia.
-a
Food for Peace, 1961 -1962
The day before President Kennedy took office, a Food for Peace
task force recommended a doubling of Title I, an even greater increase
in Titles II and III and the implementation of Title IV.40 Within this
framework the new administrators received the program and attempted
to establish new criteria.
Though difficult to judge in a limited period, several conclusions
can be drawn. First, both from within the administration and elsewhere, pressures for disposal are at least as strong as they were in the
previous administration. Second, in groping for new outlets, Title II
and Title III programs have been expanded, partly reflecting more humanitarianism in the program through expanded school lunch, food for
underemployed workers, and donations. Third, Title IV agreements have
been inaugurated and are expanding. A favorable interest rate, recently
negotiated, has helped to make Title IV shipments a cheaper and less
onerous form of loan to recipient countries than other types of financing.
Fourth, the use of food for development is given great priority, with
four -year agreements under Title I and new Title II programs. However, a coordinated program of food aid with other development aid is
not encouraged by existing organizational arrangements. The role of food
and of agriculture in development is not well understood.
Chapter V turns to the problems of development as they apply to
food, and examines how food can contribute to the development process.
-
° A Report of the Food for Peace Committee, Murray Lincoln, Chairman, Jan. 19,
1961, Wash., D. C. (mimeographed).
54
ARIZONA AGRIC. EXPERIMENT STATION TECH. BULLETIN 150
CHAPTER V
THE IMPACT OF PUBLIC LAW 480 ON RECEIVING NATIONS
Chronic poverty in two -thirds of the world and a widening income
disparity between high and low income nations call for programs to
increase the rate of development and improve nutrition in emerging nations. This chapter appraises how effective food aid is in stimulating
economic development in emerging nations. The analysis which follows
centers on the contribution of food aid to development, the results of
some studies which indicate how some nations have benefited or suffered from the receipt of United States surplus food over the 1954-1962
period, and then compares food aid with dollar aid.
The Rationale of Development Through Food Aid
Beginning as early as 1949, the FAO gave special attention to certain commodities in world agricultural trade for which no adequate
effective demand existed. The FAO conference in Rome in 1953 stressed
that the foremost means of absorbing excess supplies were courageous
policies for increasing consumption. Three methods of using surpluses
were advanced
two old and one new. The old and familiar methods
were improving nutrition through direct feeding and meeting famine
conditions caused by crop failure. The new proposal was to use surpluses to aid economic development. The FAO staff was asked to
undertake pilot field surveys in countries likely to receive surplus commodities. One such survey was made in Egypt by the FAO staff in
August, 1954.
country with a large potenAnother survey was made in India
under the leadertial for using surpluses in economic development
ship of M. Ezekiel. This study Iaid the theoretical groundwork for facilitating economic development through capital transfers in the form of
food aid.41 The FAO pilot study was published one year after Public
emphasizing disposal not
Law 480 was passed and as PL 480 shipments
were increasing in momentum. The FAO study,
economic development
in some ways, has helped legitimize food aid for economic development.
It suggested that from the standpoint of the United States, the twin objecreducing United States surpluses and assisting our
tives of PL 480
could
foreign policy through accelerated economic development abroad
be fulfilled via surpluses tagged for economic development projects.
-
-a
-
-
-
-
-
41 United Nations, Food and Agriculture Organization, Uses of Agricultural Surpluses to Finance Economic Development in Underdeveloped Countries: A Pilot Study
in India, Commodity Policy Studies No. 6, Rome, Italy, June 1955. The supporting
data for the FAO study are reported in: V. M. Dandekar, Use of Feed Surpluses for
Economic Development (India; Gokale Institute of Politics and Development, Publication No. 33, 1956).
U. S. AGRICULTURAL EXPORT SURPLUS DISPOSAL POLICY
55
TABLE V-1.
INCOME AND CONSUMPTION OF CEREALS PER HEAD IN SELECTED
COUNTRIES, 1957 -58
Country
United States
Canada
United Kingdom
France
Italy
Japan
Mexico
Brazil
U. A. R.: Syria
Pakistan
India
Sources:
Egypt
Income
Total
consumption
of cereals as
food, feed,
seed, etc., in
terms of
grain and
husked (or
milled) rice
Cereals for
direct human
consumption
in terms of
flour and
milled rice
(1)
(2)
(3)
2,164
1,431
960
839
406
250
234
218
169
112
77
60
646
929
413
375
304
218
218
214
257
235
173
144
67
71
85
110
142
157
147
106
162
188
151
124
- U. S. DOLLARS -
-- KG. PER YEAR --
Protein for human
consumption
Total
Animal
(4)
(5)
66
62
51
49
94
95
87
96
15
16
18
12
13
8
6
67
66
67
73
-- G. PER DAY --
25
76
79
45
47
(1) UN: Yearbook of National Accounts /959, and UN: Monthly Bulletin of
Statistics, Jan. 1961; (2) to (5) FAO: Food Balance Sheets.
If the pace of development is to be stepped up in emerging nations,
among other things, additional investment is needed. Since it is often
difficult to mobilize sufficient indigenous resources to finance the "desirable" rate of development, many nations have turned to outside assistance. The 1955 FAO pilot report hypothesized that if food aid is forthcoming the sale of these commodities to consumers in exchange for local
currency would mobilize the capital needed to finance investment projects. These investment projects would employ idle people, raise incomes,
and raise the demand for food and clothing; most of the increases in
income earned by the now employed workers would be spent on food
and clothing. The logical question is: Why don't domestic agricultural
producers increase their output? The usual answer is that the elasticity
of food production is low in emerging nations ( domestic output cannot
be increased quickly enough to avoid inflation in food prices) . In this
case, imported food can satisfy the increase in demand and hence, constrain the upward movement of prices. Moreover, the FAO pilot report
contended that food aid would not interfere with normal commercial
sales; instead, the surplus will satisfy incremental demand, created as
local currency accumulated and immediately was spent for investment.
56
ARIZONA AGRIC. EXPERIMENT STATION TECH. BULLETIN 150
The Public Law 480 Receiving Nations: Food Needs and Food Aid
-
The world food problem is located primarily in the Far East and
Communist Asia. Both dimensions of the population problem
high
population density in relation to productive capacity and the state of
the arts and a high rate of population growth are present in this area.
The recent USDA World Food Budget points out that the "Far East,
excluding Communist China, has two -thirds of the wheat shortage projected for 1962, and nearly one -half of the animal and pulse protein
shortage. "42 The consumption of cereals and proteins in selected nations
is shown in Table V -1. People in India and Pakistan, for example, were
consuming about one -half as much protein as that of the high-income
nations in 1957 -1958.
A logical question is whether PL 480 shipments have or are likely
to reduce the "protein gap" and other food shortages in the Far East
and in other underdeveloped receiving nations. The major commodities
sent abroad under Title I have been wheat and flour, fats and oils and
cotton. This is shown on the last line of Table V -2. It is quite apparent that the nutritional content of the food needs in underdeveloped
nations is not being and is not likely to be met by PL 480 shipments.
When Pakistani officials were preparing their request for more PL 480
aid in February, 1961, they noted that: "The diet of the people in
Pakistan is inadequate as well as unbalanced. Cereals account for about
74 percent of total calire intake compared to the 50 percent recommended for a diet balanced by an adequate component of protective
foods."43
The Pakistan request for food aid stated that its consumption level
could be raised from the present 2,000 to 2,250 calories through more
United States grains "even though this will mean continued imbalance
in the diet." Later in 1961, the U. S. agreed to send $621,500,000 of
to assist
PL 480 food to Pakistan
mainly in the form of cereal grains
in the Second Five-Year Plan over the 1962 -1966 period.
In general, the nutritional content of the food needs of receiving
nations has been given minor attention in our PL 480 program since its
inception. In the past year, however, Food for Peace administrators
have made frequent references to the nutritional problems in emerging
nations. It has been mentioned that pork and pork products could be
produced more cheaply abroad through U. S. feed grain exports than
-
-
-
42 United States Department of Agriculture, The World Food Budget: 1962 & 1966,
Wash., Oct. 1961. p. 5.
43 Government of Pakistan, "Memorandum on the United States Surplus Agricultural Commodities Aid to Pakistan," Feb. 1961, p. 9.
U. S. AGRICULTURAL EXPORT SURPLUS DISPOSAL POLICY
57
w
O
-i
Z
C
CO
56.61
3,816.1
375.6
157.3
47.2
50.9
94.1
119.6
6.17
415.6
116.9
298.7
6.07
409.1
130.3
278.8
3.5
5.3
2.0
13,75
926.6
360.5
566.1
5.6
91.4
11.97
806.7
130.8
675.9
1.0
1.3
175.9
33.9
247.2
98.2
21.6
18.3
74.4
165.3
24.2
78.5
(5)
5.43
366.5
196.6
169.9
2.6
11.9
14.9
25.8
4.8
45.5
8.8
23.0
28.8
3.8
(6)
Othera
100.0
6,740.6
1,310.7
5,429.9
252.6
1,994.8
195.5
926.6
378.4
471.8
294.6
280.3
175.1
460.2
(7)
Market
value
100.00
19.44
80.56
3.75
29.59
2.90
13.75
5.61
7.00
4.37
4.16
2.60
6.83
(8)
Percent
(10)
70.0
488.0
25.5
94.6
30.0
31.0
27.8
26.0
2.15
18.5
3,61
4.55
7.67
9.79
12.61
15.22
10.60
10.78
81.44
24.88
$
- MILLIONS - - DOLLARS -
(9)
Population
Per capita
market value
of Title I
commodities
U. S. Congress, House, Fifteenth Semiannual Report on Activities Carried on Under Public Law 480, Wash., April 9, 1962.
Includes tobacco $241.4 million, dairy products $59.6 million, fruit, $16.1, seeds, $0.4 million, potatoes, $1.4 million, poultry, $5.6 million, beef $28.1 million, pork, $10.0 million and beans $3.9 million.
Source:
a
Percent
Total
0
I
Other
3,440.5
(4)
oils
IN MILLIONS OF DOLLARS
(3)
Cotton
28.7
33.7
23.6
65.5
40.7
19.6
23.8
62.5
(2)
(1)
Rice
4.1
grains
flour
Fats
and
.6
Feed
Wheat
and
PRINCIPAL RECIPIENT COUNTRIES AND MAJOR COMMODITY COMPOSITION OF PROGRAMS UNDER TITLE I,
PL 480, JULY 1, 1954 - DECEMBER 31, 1961
Brazil
245.3
India
1,630.6
Korea
74.2
Pakistan
571.9
Poland
180.1
18.8
Spain
164.5
Turkey
UAR (Egypt) 206.6
Israel
57.9
290.6
Yugoslavia
Country
TABLE V-2.
Z
-i
0
8
Á
c
i
Z
rn
I
71
RI
X
(i
7
G)
D
D
Z
O
Ri
x
D
oi
o)
by buying protein foods
underdeveloped nations.
on sending foods which
to continue, and noted in
in the U. S. open market and sending them to
To date, however, the major emphasis remains
are in surplus. The FAO expects this pattern
1961 that:
The use of food aid is naturally limited to countries where large
sections of the population consume the food grains which are in
significant surplus, namely wheat, barley, maize and millets at
the present time."
The major share of Title I food aid over the July 1, 1954-December
31, 1961 period has been directed to India, Spain, Yugoslavia, Pakistan
and Poland. This is shown in column 8 of Table V-2. On a per capita
basis, however, Israel is by far the largest recipient of Title I food aid
having received an average of $81.44 per person as compared with $4.55
per person in India.
Planning for Development Through Food Aid
-
-
Since food transfers under Title I and the economic development
section of Title II of PL 484 the main concern of this chapter
are
exchanged on a government -to- government basis, development planning
plays an important role in the strategy of using these foods in the
receiving nations. This is in contrast to normal commercial food imports
which move through the market mechanism.
A development plan is essentially an investment plan. In practice,
planning and programming are the same act. They require government deliberations on investment decisions and consumption targets and
they imply less reliance on the market mechanism to allocate resources
than in economies not engaged in planning or programming. The greater
the volume of government -to- government aid, the more planning and accounting performed by recipient nations. Therefore, the discussion which
follows relates food aid to planning and programming in the receiving
nations.
There is little difference to the U. S. producer of goods for aid,
whether he be a wheat farmer, machinery or DDT manufacturer, whether
our economic aid is sent abroad in the form of capital goods, commodities, or DDT. This is because the American producer is paid in dollars
for the goods exported under foreign aid programs whether financed under
a hard loan, soft loan, or grant. Likewise, the end-user in the receiving
nation usually pays the going -price in local currency for what he gets.
how do the citizens in India or Brazil benefit from U. S. economic aid?
"Collectively, the citizens of the receiving country gain to the extent that
as United Nations, FAO, Development Through Food: A Strategy for Surplus Util.
ization, Rome, Italy, 1961, p. 17.
U. S.
AGRICULTURAL EXPORT SURPLUS DISPOSAL POLICY
59
they receive useful goods and services from abroad without having to
export goods and services of comparable value. "45
There is considerable disagreement on the strategy of extending economic aid. Some economists advise earmarking grants and credits for
designated irrigation projects, roads and power plants. Increasingly, however, greater acceptance is being given to extending aid to country
development programs rather than to specific projects.
However, economists in many emerging nations as well as AID
workers have encountered major difficulties in preparing and appraising development plans. Judgments beyond the realm of economics are
required to forecast requirements for national defense, minimum consumption standards and the effects of policy decisions on producer motivations. Considerable margins of error are involved in development programming.
Planning and programming do not guarantee progress.
Nevertheless, development programs "provide a framework within which
the country can think in an orderly way about its economic future. "46
Title I Food Aid and Economic Development Progress
and Problems in India, Israel and Colombia
The various forms of food aid available through PL 480 were discussed in Chapter IV. This section presents the limited research results
-
-
which are available on the impact of the major form of food aid
Title
on three receiving nations, India, Israel and
I or local currency sales
Colombia. There are comprehensive research reports in the last two
countries; India is reviewed because it has received a fifth of the total
receipts.
The Indian Experience47
First, a historical note on India's development policies and procedures. In 1951, India embarked on its first Five -Year Development
Plan which relied heavily on the market mechanism. The peasant's welfare (raising his consumption standards) as well as his increased output
were stressed in the first plan. An increase in agricultural output was
assigned a high priority. Aided by favorable weather, India did increase
its agricultural output over the 1951 -56 period.
45 Robert Asher, Grants, Loans and Local Currencies: Their Role in Foreign Aid,
Wash., The Brookings Institution, 1961, p. 126.
" Asher, op. cit., p. 83.
47 Based on J. C. Crawford's observations on the Indian experience with Title I
commodities: "Using Surpluses for Economic Development," a paper presented at the
11th International Conference of Agricultural Economists, Cuernavaca, Mexico, Aug.
16, 1961 (mimeographed) , pp. 1 -26.
60
ARIZONA AGRIC. EXPERIMENT STATION TECH. BULLETIN 150
Due to reasons still unclear, the Second Five -Year Plan included a
marked shift in investment from agriculture to industrial projects. Unfavorable weather, however; forced India to import food. Continued
food imports led to a balance of payments crisis early in the second
plan. The first Title I agreement was signed by India and the United
States in August, 1956, for a three -year period.
Food deficits became serious and all of the food allowed in the
1956 agreement was imported in less than two years. Another Title I
agreement was signed in June, 1958. Since then, several Title I agreements have been signed
the most important on May, 1960. This four year commitment called for delivery of 16 million tons of wheat and
1 million tons of rice. The market value of this agreement was $1.3 biIlion. The Indian Third Five -Year Plan was launched in April, 1961.
The target of this plan is to raise per capita annual income to $80 in
1966 from $69 in 1961.
This is the background for Crawford's observations on the Indian
experience with surplus food imports. India's per capita food intake is
barely back to prewar levels. Since the food supplies in sight for the
third plan were below a minimum thought necessary, arrangements were
made to import more food. But why imports? It is contended that
domestic supplies cannot be increased enough or quickly enough. Hence,
the availability of foreign exchange to import food for the third plan
became a central issue. Thus, Crawford states that the limiting factor
in the third plan was the ability to import needed goods because "domestic resources cannot be pushed beyond the availability of essential foreign exchange components in the program. "48
Since India does not
expect to become self- sufficient in food production until 1965 -66, needed
food supplies must come from food imports
either as replacement of
commercial imports or as additions to some concept of normal commercial
imports.
-
-
The Israeli Experience49
In 1959, the Foreign Agricultural Service initiated a systematic
review of PL 480 activities in receiving nations. Israel was selected as
the first country for empirical study. Since the net per capita national
product of Israel was almost $600 in 1956, Israel was fairly well advanced in many ways and was not in the category of underdeveloped
nations in which India and Pakistan are associated.
48
Ibid., p. 10.
Based largely on A. E. Kahn, "Assessing the Impact of a PL 480 Program: The
Case of Israel," preliminary paper, Cornell, Dec. 1961. Kahn's paper discusses many
of the issues presented in the Ginor Report to the USDA in the fall of 1961. Chapter
IV has reference to the Ginor Report.
49
U. S. AGRICULTURAL EXPORT
SURPLUS DISPOSAL POLICY
61
The relations between PL 480 shipments and the operation and development of the Israeli economy became very complex. Kahn points out
that the' conclusions depend "on a structure of interlocking assumptions
about what would have happened in its absence. "5°
Wheat and feed grains accounted for roughly two -thirds of the
U. S. shipments of $159 million of Title I commodities to Israel during
the 1955-60 period. Since Israel's limited arable land and high irrigation
costs imposed high costs of producing wheat and feed grains, aid in
the form of wheat and feed grains permitted "a greater expansion of the
domestic livestock industry and a quicker relaxation in the rationing of
eggs, dairy products, meat and poultry than would otherwise have occurred. "57 Even if Israel had received the same amount of aid in the
form of free dollars, Kahn concludes that Israel could not have avoided
sharply increasing its commercial purchases of feed grains.52 Therefore,
since the U. S. shipped the commodities which Israel could produce only
at a relatively high cost, and which Israel would have purchased in world
trade anyway, food aid was almost as useful from Israel's point of view
as dollar aid. Israel's agriculture responded positively from the inflow
of feed grains, while the foreign exchange formerly used to pay for commercial imports of wheat and feed grain was used to pay for other
imports vital to a high rate of over -all growth.53 Israel's livestock economy (especially its poultry industry) and Israeli consumers benefited
from PL 480 shipments of grain even though these grain receipts were
not entirely incremental but at the partial expense of normal commercial purchases. There were also indirect effects of the PL 480 program on
agricultural trade. U. S. soybean commercial exports to Israel rose continuously from $4.2 million in 1956 to $13.6 million in 1961.
The Colombian Experience5.'
Colombia is a nation which is experiencing a marked rise in industrial output, a high rate of population growth, an agricultural sector with
coffee as its foundation, and a general economy whose ability to import
50
Kahn, op. cit., p. 2.
Ibid., p. 29.
52 Ibid., p. 30.
53 Note the inference that some of the U. S. Title I exports substituted for what
would have been U. S. commercial exports. The assessment of whether Title I sales
were true additions or partial substitutes for commercial sales depends on the assumptions made about the situation in the absence of PL 480.
54 The following discussion is based on a recent study by James Goering, "United
States Agricultural Surplus Disposal in Colombia," ( unpublished Ph.D. dissertation,
Agricultural Economics Department, Michigan State University, 1961).
57
62
ARIZONA AGRIC. EXPERIMENT STATION TECH. BULLETIN 150
depends, to a large extent, on coffee export earnings. In 1954, Colombia
was more industrialized than any other Latin American nation except
Argentina.
Over the 1954 -1960 period, PL 480 shipments to Colombia were the
third largest in Latin America. Colombia received surplus food through
Titles I and III. Title III food donations, which were distributed by
voluntary agencies outside the regular market, accounted for $25.9 million over the 1955 -60 period. In addition, a total of $75 million or 400
million pesos of surplus commodities were shipped to Colombia under
Title I of PL 480 over the 1955 -60 period.
Wheat, flour, cotton, fats and oils were the main United States surplus commodities received by Colombia. In the six -year period, 195560, PL 480 imports amounted to 7.8 percent of total agricultural imports
and had a value equal to less than one percent of domestic production.
Wheat imports through PL 480 averaged 30.6 percent of domestic production over the six -year period.
What was the impact of PL 480 on Colombian agriculture? The
PL 480 wheat inflow brought lower wheat prices and consequently many
wheat producers shifted a large percentage of their wheat land to barley production. This shift was made relatively quickly and easily with
a slight income effect on Colombian agriculture. In fact, the promotional
taxes levied on PL 480 imports may have overshadowed any harmful effects
to agriculture because these promotional taxes were additions to government funds earmarked for agricultural development.
Title II Experience: The Use of Food Grants
as Wage Payments in Tunisia
It is frequently suggested that the problem of idle rural people
could be solved by urging them to migrate to the cities and find industrial employment. However, one writer notes that:
The effect of over -population is low productivity, for which capital formation, not industrialization as such, is the basic economic
remedy. In what particular fields the capital is applied depends
on many things including foreign trade opportunities and domestic income elasticities of demand. Often it is the category of
public overhead facilities that claims the biggest share in a poor
country's investment program. Often it is here that surplus farm
labor can best be used: in building roads, railroads, schools, power
plants and irrigation works.55
This section explores capital formation possibilities through putting idle
rural people to work on social overhead projects and receiving partial
payment in kind with American wheat.
55 For a discussion of capital construction by surplus labor see: Ragnar Nurkse,
"Excess Population and Capital Construction," Malayan Economic Review, II, Oct.
7.957, pp. 1 -11.
U. S.
AGRICULTURAL EXPORT SURPLUS DISPOSAL POLICY
63
In 1958, the United States authorized food grants to Tunisia under
Title II in order to employ rural people and construct a social overhead
network in rural areas. Since Tunisia has been the major receiver of
Title II food grants, the remainder of this section discusses the Tunisian
experience.
Tunisia, a nation of 3.9 million people in 1960, received its independence from France in 1956. Approximately 180,000 French emigrated
from Tunisia in 1956; this massive departure of French personnel, the capital flight from Tunisia, and serious crop failures on account of drought
in 1956, created an economic crisis over the 1956 -1958 period. To meet
this crisis, 20,000 tons of surplus wheat were granted to Tunisia under
Title II of PL 480 on April 8, 1958. The wheat was to be used "to carry
out worthwhile work relief projects having economic value, mainly in the
agricultural field.X56 By April 30th, a total of 184 projects averaging two
months duration had been selected by the governors of the provinces and
approved by the central government. The governors provided straw
bosses for each 20 to 25 men and a project director or foreman for
each 100 men. Pay scales were established in each governorate for these
supervisory men plus special salary provisions for others such as camel
drivers, masons, and donkey cart owners.
Tunisia is basically an agricultural country, with a shortage of water
in the center and south of the nation. Thus, most of the projects selected
were designed to conserve or provide more water through the construction of dams and cisterns to capture water for later use in irrigation and
livestock production, removal of a shrub called "jujibier," to enable idle
land to be grazed, planting of trees, road repair and fire breaks.
The early program consisted of a daily wage of four kilos of American hard red winter wheat supplied under Title U of PL 480 and 100
milliemes in cash supplied by the Tunisian government. This wage
amounted to about $0.71 per day, with about one -third paid in cash and
the remainder in wheat. This payment was equal to the basic wage in
rural areas. Since the Tunisian national dish, "couscous," was made best
from durum wheat, which was ground into a coarse meal called semolina, the American hard winter wheat was unsuitable for direct use by
the Tunisian peasant. Therefore, approval was secured to permit the
exchange of American hard wheat on a local value basis for semolina
which was made from local durum wheat. This semolina was distributed
in bags bearing the phrase in Arabic "Tunisian Semolina donated by the
people of the United States of America." The ratio of semolina to cash
was changed several times and in January, 1960, the workers were paid
a daily wage of $0.68 of which 2/3 was in cash.
The program employed some 50,000 -70,000 unemployed rural workers on a ten to fifteen day rotation basis, equivalent to about 25,000
56ICA, Airgram, April 30, 1958.
64
ARIZONA AGRIC. EXPERIMENT STATION TECH. BULLETIN 150
workers full -time until November, 1959. Since then, workers have been
employed on a full -time, 48 hour week and the number had been increased to 120,000 by July 1, 1960, and to nearly 200,000 by November,
1961.
The program was evaluated as extremely successful by the Tunisians.
Some of the features accounting for the success of the experience according to ICA experts were: local planning of projects, governors of good
administrative ability, and the local projects were tied into the Office of
the Presidency through a work relief administrator. This suggests that
the quality of local planning and administration are extremely important
variables in a food -for -wages program.
The success of the Tunisian experiment was partially responsible
for the amendment of Section 202 of Title II in 1960 to include an explicit
and broadened use of surplus goods to finance economic development
projects. In 1961, the new Food-for -Peace Director, George McGovern,
launched a drive to expand food -for-wages programs. As of October,
1961, a total of ten nations: Tunisia, Morocco, Afghanistan, Korea, Dahomey, Ethiopia, Iran, Tanganyika, India, and Libya, were participating
in the food -for-wages program.
Implications for Development Through Food Aid
It is difficult to compare the impact of PL 480 shipments in India,
Israel and Colombia, since these nations are at different stages of growth.
While capital imports might be critical at one stage of development, investment in education might induce a more optimal growth rate at
another stage of development. Moreover the magnitude of food aid to
India has been frequently overstated. As indicated earlier, when a per
capita comparison is made, India has received less than $5 of Title I
food aid per person compared to over $80 per person in Israel for the
period July 1954 through December 1961. The studies reported on in
this chapter offer only an introduction to the issues involved in using
food aid in Asia, the Middle East and Latin America.
In Israel and Colombia, the inflow of PL 480 commodities appeared
to reduce commercial grain imports, but apparently brought in more
grain than would have been the case without the program. At the same
time, commercial sales of some other U. S. commodities were increased.
The short -run impact on indigenous agriculture in Israel was favorable.
Both Israel and Colombia produced wheat at a high cost. Israel used
United States PL 480 wheat and corn to expand its output of livestock
and poultry products and was able to relax rationing controls on eggs,
dairy products, meat and poultry quicker than if this aid had not been
forthcoming.
The inflow of PL 480 commodities to Colombia in 1955 coincided
with a sharp drop in world coffee prices. With PL 480 wheat, the
U. S.
AGRICULTURAL EXPORT SURPLUS DISPOSAL POLICY
65
Colombian government was able to avoid the difficult decision of reducing capital imports which would have slowed down the pace of development. Moreover, the inflow of wheat acted as a counter- inflationary
force. Many Colombian wheat producers shifted to barley production
without any apparent loss of income. If the PL 480 program had not
been operative, Colombia might have requested larger dollar loans to
meet its balance of payments crisis.
Goering contends that the general economy was aided by PL 480
because the inflow of PL 480 commodities coincided with the sharp
reduction in world coffee prices. Thus, food aid was forthcoming during Colombia's balance of payment crisis.
During the years 1955-60, $33.4 million of Title I farm products
were imported without foreign exchange expenditure. As a result, per capita wheat consumption increased 19 percent at a
time when domestic production was static and balance of payments considerations called for reduced commercial imports.57
Some economists have contended that PL 480 shipments have been
harmful to domestic agriculture in certain PL 480 receiving nations. Kahn,
on the other hand, points out:
The Israeli experience suggests that, in the context of vigorous
growth, shipments in aid need not excessively harm domestic agriculture even if they are used in part to counter inflationary forces
and only partially to increase investment.5B
Kahn sums up the pros and cons of the Israeli experience as follows:
Obviously, the decision of this country (U. S.) to grant the major
share of its financial assistance to Israel in the form of surplus
agricultural commodities has involved some problems
loss of
commercial sales, a probable greater diversion of trade from other
exporting countries, and a tendency for the resources Israel received to be worth somewhat less to that country than if they
had come in the form of money. But from the standpoint of Israel
the aid was almost as good as free dollars; it would have used the
dollars to purchase most of these same commodities anyhow. And
the preponderantly important effect was to make a significant contribution to the growth and ultimate viability of the Israeli econ-
-a
omy.59
Kahn is quick to point out that food aid can contribute only a fraction of the total economic aid needed for investment in Israel. Moreover, Title I food aid cannot claim credit for any identifiable part of a
57
Op. cit., p. 2.
58
Op. cit., p. 29.
59/bid., pp. 31-32.
66
ARIZONA AGRIC. EXPERIMENT STATION TECH. BULLETIN 150
nation's development program but only a proportionate part of the total.
In addition, this proportionate part cannot be objectively measured because the total of investment really activated by Title I aid cannot be
measured. The contribution of Title I food to investment is not the
sole criterion of its possible contribution to economic growth. Kahn reports that the value of Title I food as a check to inflation in Israel may
have been a greater contribution to sustained growth than would any
equivalent expansion of investment. Since Israel already had an ambitious development program under way and was devoting 20 to 24 percent of its resources to capital formation, Title I imports were counterinflationary since these foods permitted a relaxation of rationing and import controls and expanded consumption. Thus to Israeli and Colombian
consumers and farmers, the inflow of PL 480 appears to have achieved
over -all positive short-run benefits even though immediate commercial
wheat imports seem to have been reduced in both cases. The long -run
impact on Israeli and Colombian agriculture, however, is uncertain at this
point in history.
Turning to the use of food grants under Title II of PL 480, experience in Tunisia has been lauded by both Tunisians and Americans who
have watched the food- for-wages program mushroom since 1958. The
long -term implication of this type of program is unclear at this time.
There is some evidence to suggest that this program has maintained current consumption levels in Tunisia but has limited prospects of guiding
the people now employed on food- for-wages projects into becoming progressive agricultural producers or new industrial workers.
Not all of the comments on the Tunisian project have been favorable. Professor Jacob Viner has said:
It is a sad foodnote
. that under the Food-for -Peace program
it is planned to pay workers on development projects in part in
American surplus food instead of money. It may be that several
millennia after the introduction of the use of money as a medium
of exchange, we have found this to have been a mistake. But it
does seem ... paradoxical that in our economic development activities abroad we should help laborers who have probably in many
cases but recently emerged from a near -barter economy to return
.
.
to it.60
Viner's criticism seems to be rather evasive of the main issues. Instead
of appraising the output of workers who have volunteered to work for
1/3 cash and 2/3 food payment and the projects completed through
this form of food aid, Viner implies that the greater the percent of wages
received through the market mechanism, the greater will be the speed
of development.
60
Jacob Viner, "Economic Policy on the New Frontier," Foreign Affairs, Vol. 39,
No. 4, July 1961, p. 568.
U. S. AGRICULTURAL EXPORT SURPLUS DISPOSAL POLICY
67
A more valid argument against wage work projects is the one
which points out that the U. S. hard red wheat in surplus might not
be easily used by people such as the Tunisians whose main macaroni type dishes are best made from durum wheat which is ground into
semolina. Another criticism is that the mass feeding program is not
being tied to measures to increase the supply of livestock, credit, and
equipment which are necessary to complement the improved social overhead network and to expand agricultural output. The ICA was aware
of this; in 1961, Washington ICA officials proposed that feed grains be
shipped to Tunisia to build up the livestock industry. This has not
occurred.
There are many ramifications of food -for-wages projects. The important economic consideration is whether the documented short-term
improvements in consumption and the improved social overhead network will enhance the productivity of Tunisian agriculture and peasants in the long run. Perhaps the significant benefit at the moment
is that the food - for -wages projects have contributed to political and
social harmony and enabled the newly independent Tunisian government to concentrate on its long -term development plan. Recent reports
suggest, however, that a similar project is faltering in nearby Morocco
mainly because of corruption and a lack of an effective social and political organization at the local level.
Summary
When surplus food started to move abroad under PL 480 in 1954,
there was little concern about relating U. S. surpluses to economic development projects and plans in receiving nations. From the United States'
point of view, these surpluses had arisen from reasons other than an
explicit wish to make them available for economic development.
The
strategy was one of year -to -year surplus disposal. There was, however,
major agreement that surpluses could play a positive role in famine
relief, emergencies such as the Tunisian economic crisis of 1956 -1958,
and in deploying buffer stocks in emerging nations to mitigate the effects
of seasonal changes in supply. As the U. S. attempted to expand the
program to aid such goals as economic development, some disagreements
appeared. During the past four years of PL 480 operations, 1958 -62,
surpluses have been increasingly tied to economic development projects
and development plans. When indigenous agriculture is unable to expand or increase output quickly enough and when foreign exchange
is a limiting factor in utilizing domestic resources
especially idle labor,
then food aid can theoretically play a positive role in development.
Two modifications in operational procedures may enable surpluses
to be of more effective use in development. The first is the extension
of food aid agreements. In May, 1960, the U. S. agreed to send $1.3
-
68
ARIZONA AGRIC. EXPERIMENT STATION TECH. BULLETIN 150
billion market value of commodities to India over a four-year period.
This and subsequent long -term agreements have been lauded by planners in the receiving nations. The second major change in food aid
policy came in 1960 when Congress authorized the granting of commodities for economic development projects under Section 202 of Title
II. Since then Title II food -for-wages projects have expanded to ten
nations.
Some major qualifications remain to the effective use of PL 480
for development. The first qualification arises from the procedure of
selling PL 480 goods for local currency. The accumulation of local currency has caused some major problems. In 1960, American holdings of
Indian rupees were causing anxiety in India as well as creating difficulties at home.61 Mason asks:
Why, apart from playing the game should a country having an
adequate fiscal and banking system want to borrow its own currency at 4 percent and have to listen to American advice on how
this currency should be used in the bargain ?62
that we sharply restrict the sale
of PL 480 commodities for local currency and replace these sales with
grants of food. ( See Chapter IV) .
The second qualification to the use of PL 480 commodities in economic development is that much of this food does not reach the hungry
in the poorer countries. It is true that most PL 480 commodities have
gone to underdeveloped countries. Since Title I food is purchased by
consumers in normal commercial outlets, this use of the market mechanism,
however, thwarts getting the food to the "hungry" poor and to those in
As a policy prescription, Mason suggests
greatest need.
The next qualification to the use of Title I food aid in development lies in the short and long run impact of the food aid on indigenous agriculture. There is divided opinion on whether the short-term
gains which countries like India have obtained from PL 480 will turn
out to be a long -term constraint or inducement to agriculture in the
receiving nations.
It is appropriate to compare food aid and dollar aid. It is easy
to be misled and think that food aid is a perfect substitute for dollar
aid. Moreover, not all emerging nations need food aid. Even in nations
which can utilize specific food surpluses, dollar aid is required to play
an important role. Even if food aid is a partial substitute for other
economic aid, many countries do not need food but need economic aid.
61
Edward
1960, p. 83.
62
U. S.
S. Mason,
"Foreign Money We Can't Spend," Atlantic, Vol. CCV, May
Ibid.
AGRICULTURAL EXPORT SURPLUS DISPOSAL POLICY
69
Latin America, for example, generally has a small nutrional gap in comparison with Southeast Asia. Latin America generally needs a relatively
high proportion of dollar aid to food aid.
There are differences in food and dollar aid. They are not perfect
substitutes. Dollar aid leads to a drain on American taxpayers. Food
aid, on the other hand, adds nothing to the tax burden of the American people or to the drain on foreign exchange reserves, if it is assumed
that the surpluses have not been specifically produced for any portion
of planned economic aid to other nations. On the other hand, food aid
adds a tax drain on American consumers if this form of disposition has
made and continues to make it politically feasible to continue current
domestic price support programs to agriculture. Whether or not food
aid is a drain on taxpayers depends on the assumptions made as to policy
alternatives. ( See Chapter VII) .
Increasing evidence suggests that surplus disposal should not be
regarded as a substitute for dollar aid. Whereas the 1955 FAO pilot
study hypothesized that from 30 to 50 percent of additional development projects in India could be financed through agricultural surpluses,
the FAO reported in 1961 that:
It is estimated that food aid for economic development alone could
not be expected to amount to more than one -sixth to one-fifth of
the total capital aid required by underdeveloped countries 63
This downward adjustment should be heeded by the senders and receivers of both food and dollar aid. An important danger of current
PL 480 operations is that food aid will be considered to be nearly
equivalent to dollar aid. If this occurs and food is substituted for dollar
aid, this will restrict the flow of capital items needed for over -all rapid
rates of growth in emerging nations.
63 United Nations, FAO, Development Through Food: A Strategy for Surplus Utilization, Rome, Italy, 1961, p. 3.
70
ARIZONA AGRIC. EXPERIMENT STATION TECH. BULLETIN 150
CHAPTER VI
EFFECTS OF EXPORT PROGRAMS ON COMPETING NATIONS
Other nations of the world that are competing with the U. S. for
markets for agricultural products are vitally concerned with the nature
of United States agricultural export policies. Often they tend to look
at U. S. policy only as their own faun exports run into difficulties involving lower export prices or an accumulation of stocks. They are
primarily concerned with three major elements of U. S. export policy
the barter program, the export subsidies, and local currency sales. The
foreign producer and exporter often fails to discriminate among them,
arguing only that U. S. policy has made it more difficult to export
competitively. Later sections of this chapter, however, will attempt to
differentiate among these policies.
The list of countries producing commodities included in the U. S.
surplus export program is very long. If attention is limited to countries
exporting the two major commodities, wheat and cotton, the list is much
shorter. These countries, however, are vitally concerned because the
price and volume of exports are an important contribution to their
national well -being. A few countries are particularly concerned with certain minor U. S. export commodities, for example, New Zealand with
dried milk.
There are three broad categories of competitive countries. (I) Some
are affected primarily or exclusively as competitive exporting countries,
and have received few, if any, PL 480 commodities. Among such countries are Canada, Sudan, Denmark, Australia, New Zealand, Mexico,
Thailand, South Africa, and most of the Soviet Bloc. (2) A second
group of countries, with weak currencies, are both competing exporters
and recipients of PL 480 commodities, but for different products. These
include such cotton exporting countries as Brazil, Peru, Egypt, India
and Pakistan, and a number of countries exporting other farm products
such as Greece, Turkey and Burma. (3) A third group of countries,
with strong currencies, formerly recipients of PL 480 exports, now are
affected as competing exporters of special products, by changes in world
farm price levels, or through lower prices for purchases on which the
U. S. government pays export subsidies. Among these countries are West
Germany, France, Norway, Sweden, Netherlands, Italy, the United Kingdom and Japan.
Major attention will be devoted to countries in the first category.
To deal adequately with the second group of countries would require detailed complex analysis of gains and losses by specific countries. Requisite
data and analyses are not now available. The third group of countries is omitted also, except to the extent that world farm prices and
-
U. S. AGRICULTURAL EXPORT
SURPLUS DISPOSAL POLICY
7i
trade are discussed. In a few cases specific country reactions will be
cited, but only insofar as countries in groups two and three are reacting
as competitors.
Attention will also be given to changes in U. S. policy stemming
from the protests about the real or supposed effects of U. S. export policies. Such changes, of course, reflect the willingness of Congress and
the Administration to take account of protests coming directly from the
affected nations or channeled through the FAO or other international
agencies.
Effects on Trade and Prices
Attention will be given first to some of the effects which the PL
480 program, the export subsidy program, and other developments of
the 1950's have had upon world trade and prices of farm products. An
aggressive expansion in U. S. farm exports can force a decline in the
prices other countries receive, unless one or more counteracting events
occur. These are: (1) a decrease in production in importing countries,
with a consequent increase in imports; (2) a reduction in the marketings of other exporting countries, ( consumption or stocks may have increased, or production decreased) ; (3) an increase in world purchasing power so that consumption expands at existing prices ( technically
an increase in demand) ; or (4) a similar increase in consumption but
implemented by special sales provisions which do not affect the world
market. In recent years these have taken the form of decreases in price
for many U. S. exported products, more stable prices for other farm
products, and rising nonfarm prices.
Price Changes
The change in export unit values, sometimes referred to as world
prices, is the result of a wide variety of forces. The price at which the
United States is prepared to export is the domestic price less an export
payment where one is authorized. The export price may drop because
of lower free market prices, reduced levels of price supports, or an increase in the amount of the export payment. The last two depend on
U. S. government decisions which may be made at either the Congressional or administrative level. In any case a decline in export prices
affects the prices other countries receive, and thus their welfare. They
are more likely to protest when the decline results from a government
decision than when it is a result of market forces. Consequently, export
payments are observed closely and are a major price factor.
Most of the program operations under PL 480 have attempted to
ship products as additions to normal commercial sales. The export subsidies, however, are intended to make U. S. farm products competitive
in the world market. This means regaining or maintaining an "appro72
ARIZONA AGRIC. EXPERIMENT STATION TECH. BULLETIN 150
priate" share of the world market." The use of barter, at times, has
provided an even more aggressive means of exporting farm products.
Since each of these programs has affected PL 480 commodities, the
over-all price effects cannot be separated. Whatever the reason, there
is evidence that, in the period following 1952-53, the price index of
PL 480 commodities dropped relative both to non-PL 480 farm products
and to nonfarm products.
1952-53
100
100
100
U. S. surplus export farm products
Other farm products
Nonfarm products
1959
76
99
105
1958
79
100
105
This tabulation (based on Table VI-1) indicates that world prices
of industrial products rose slowly, most farm products remained steady,
while those involved in disposal programs dropped by 25 percent. Only
tobacco and barley among the important "special" export commodities
have shown price advances. Among the other farm products, only a
copra, peanuts, olive and palm
few show comparable price decreases
oil (which compete with soybean and cottonseed oil), coffee (which
has its own surplus problems), and wool (which lost much of its military market after 1952). This statistical evidence is blurred by sevtemporary crop failures or bumper crops, the difficulty
eral factors
of obtaining a true world price when many nations are engaged in
special sales, manipulation of exchange rates, bilateral trading and other
devices. Both 1958 and 1959 data, however, are largely consistent with
the statements made above. After a detailed study of wheat prices for
the decade of the fifties, Helen Farnsworth pointed out that after 1953-54
the United States increased the subsidy and reduced the price below the
International Wheat Agreement maximum thus leading to a price decline during the years 1954-56. For the subsequent period she says,
<`.
. indicates
. the record of United States 'commercial 'export prices
that American administrators have kept the subsidized 'commercial'
export price of No. 2 hard winter wheat at an almost constant level
since 1955-56."65
-
-
.
" These most commonly are commodities in which there have been significant
changes in technology, and consequent greater increases in supply than in demand at
the prevailing prices. Thus comparative advantage may have changed also.
65"American Wheat Exports, Policies and Prospects," Food Research Institute
Studies, Stanford, V. I, No. 2, May 1960, pp. 245-250.
U. S. AGRICULTURAL EXPORT
SURPLUS DISPOSAL POLICY
73
Study of other commodities indicates that the commodities receiving special export attention in the United States are those with considerable excess capacity in other countries as well. Also, there have been
some increases in productive capacity as the result of irrigation and
other economic development projects. Thus the U. S. special export
programs have added to the pressure upon world prices for these farm
products, but they are not the only depressing force. Nor is the U. S.
the only country engaged in such activities.
TABLE VI -1.
COMPARISON OF AVERAGE EXPORT UNIT VALUES OF U. S.
Ex-
PORTED FARM PRODUCTS, OTHER FARM PRODUCTS, AND
MANUFACTURED GOODS FOR 1958 - 59.
(1952-53 = 100)
U. S. Special Export Commodities
Wheat
Barley
Corn
Rice
Soybeans
Soybean oil
Powdered milk
Tobacco
Cotton
Other Farm Products
Sugar
Apples
Bananas
Oranges
Copra
Peanuts
Olive oil
Palm oil
Cattle
Bacon
Cheese
Butter
Potatoes
Coffee
Cocoa
Wool
Tea
Rubber
Manufactured Goods
Source:
1958
80
71
65
69
78
89
77
107
78
1959
76
72
64
63
77
80
74
108
68
96
156
94
121
100
77
101
93
113
98
94
66
101
82
125
112
96
99
67
110
124
89
123
112
105
105
75
91
111
95
103
123
74
78
95
124
93
72
State of Food and Agriculture, 1960, FAO, pp. 47, 180.
These statements should not be taken to mean that the special program exports have not succeeded in bolstering world consumption; rather
74
ARIZONA AGRIC. EXPERIMENT STATION TECH. BULLETIN 150
the inference is that despite substantial efforts in recent years to protect
and supplement the commercial market, excess production has had the
effect of reducing the relevant commodity prices. Whether this has happened because of U. S. export disposal programs implies subtle differences and could be debated at length. What is relevant is that in one
way or another the U. S. farm problem is being generalized to other
parts of the world, i. e., prices of surplus farm products are lagging behind or dropping relative to prices of other commodities. It should also
be recognized that from the consumer's standpoint such changes in relative prices are an aspect of economic development: they are able to
purchase more food for the same expenditures, or buy the same amount
of food and have extra purchasing power for other products.
These price decreases (or less rapid price increases) are counter
to the interests of farmers in other countries. Only if they can increase
their productivity and /or decrease their costs as prices turn against them
can they maintain their income position. There is no evidence that
such changes are sufficient to counter the 20 to 25 percent drop in
world prices of some commodities in the past six years. In consequence there are international reasons to urge a speedup in the development process, to expand demand, to more effectively control U. S. production of surplus crops, or perhaps to follow a less aggressive export
program.
Changes in Trade
The volume of world agricultural trade has expanded in the past
eight years, measured in physical terms. The 1958 and 1959 figures"
show an increase of about 20 percent compared with 1952 -53, or an
even larger increase compared with earlier years. Such increases have
restrained stock accumulation. All groups of farm products have shared
in this increase with edible oils and oil seeds, and meat showing the
greatest expansion. If measured in value terms, cereals and agricultural
raw materials (principally cotton) show decreases, while most other
commodity groups show increases in money value.67 This is to be expected
from the discussion above on price changes.
The patterns of trade also have been changing. Grain shipments
from the United States to South Asia have increased dramatically since
World War II, due largely to Title I exports. Japan has become a significant purchaser of wheat and soybeans in the commercial market. Ecli66 FAO, The State of Food and Agriculture, 1961.
These figures include exports
under special programs for the United States, France, Australia, Canada, South Africa,
and others.
67 John Vondruska, U. S. Export Programs and the Downtrend of World Agricultural Prices, 1950 -60, unpublished Master's thesis, Mich. State Univ., 1962.
U. S.
AGRICULTURAL EXPORT SURPLUS DISPOSAL POLICY
75
ble oils and oil seed imports into Europe draw much more heavily on
the .United States, while Southeast Asia is exporting much less fats and
oils. The expansion of the textile industry in developing countries has
assisted in the broader distribution of raw cotton over the world. The
share of the United States in the world trade of major farm products
has increased sharply from the level of the 1930's, but not relative to
the late forties. For this period the picture is mixed. However, it is
true that stocks of surplus commodities, particularly wheat and cotton,
are being held by other countries as well as the United States, whereas
in earlier decades the United States held most of the reserve or surplus
stocks. The same can be said with respect to coffee: Brazil is no longer
the sole holder of surplus stocks.
A more specific illustration is provided by a study in Colombia.°
Goering found that: "In summary, it would appear that Canadian wheat
and flour markets in Colombia have been reduced in both relative and
absolute terms." He points out that United States Embassy officials
contend that "there is no concrete proof that the Canadian wheat market in Colombia has been affected by PL 480." In part, the conclusions
drawn will depend upon the base period selected, and the unstable years
between 1945 and 1954 furnish no clear base period. Still it is true as
Goering points out, that "the CCC's capacity to absorb losses undoubtedly
give United States wheat exports an advantage which Canadian exports
do not have. "69 Also as discussed in Chapter V, some part of Title I
shipments and of barter shipments is likely to compete with United States'
own commercial exports.
Views and Actions of Competing Countries
International trade in surplus commodities usually is more important
to the economic well -being of the competing countries than to the United
States. In Chapter II it was shown that farm exports were 25 to 30
percent of total U. S. exports, with no individual farm commodity attaining as much as 5 percent of total trade. There are a number of countries where wheat or cotton alone represents a fourth or more of total
trade of that country and some in which two or three farm products
provide 70 to 80 percent of their export earnings. Understandably, they
are concerned, and several such nations have charged the United States
with unfair competition.
68 James Goering, "United States Agricultural Surplus Disposal in Colombia," unpublished Ph.D. thesis, Michigan State Univ., 1961, p. 144.
69 However, sales to Mainland China in 1961 -62 have
depleted the Canadian
stockpile.
76
ARIZONA AGRIC. EXPERIMENT STATION TECH. BULLETIN 150
Competing export nations such as Canada, New Zealand, and Denmark have charged that PL 480 constitutes a three -way subsidy. First,
U. S. farm products are sold at less than domestic prices, thus making
U. S. export prices a function of government policy and not world demand and supply interrelations. Second, countries short of dollars can
purchase with their local currency. They are more willing to purchase
if little foreign exchange is required. Third, the local currency received
is partially returned to the country as a grant, partially spent for U. S.
obligations, and partially loaned back to local government agencies. Competing countries view this as a further price cutting device. They insist
that their treasuries are not rich enough to underwrite this type of
foreign aid. The U. S. argues that the second and third points are contributions to foreign aid that other exporting countries have been unwilling to make, and that the program increases consumption and hence
reduces world stocks. It is argued also that the first is simply the U. S.
way of aiding farmers
practice followed in many other countries
through trade barriers against U. S. exports.
-a
A number of foreign maritime nations have protested the requirement that at least half the U. S. special exports move on American vessels. Sweden, Norway, and Denmark are among these nations, since
they earn much of their foreign exchange from shipping. Though one
or two of these might have qualified for early PL 480 agreements, their
attitude on this issue kept them from participating in Title I programs.
Also receiving its share of protests, particularly from Canada, is the
provision that Title I sales "safeguard usual marketings." In the early
years of PL 480, competing countries argued that the United States unduly protected its own marketings. They urged that the U. S. take its
chances in competition with other countries for whatever additional markets existed, rather than to use Title I sales to provide a guarantee of
a commercial market. This provision was changed in 1958 and is criticized less now ( see below)
.
The most vigorous protests were reserved for operations under Title
III barter. The exchange of farm commodities for minerals and other
products which added to the Supplementary Stockpile turned out to be,
in many cases, a thinly disguised form of price cutting. Both Canadian
exporters and American regular exporters argued that they were losing
sales in the commercial markets to recipients of barter contracts. So
vigorous were the protests that the program was drastically curtailed
during 1957.
Also vigorous in their protests were the rice growing countries of
Southeast Asia, especially Thailand. After the large PL 480 Agreement
with India in May 1960 involving 17 million tons of wheat and 1 million
tons of rice the foreign minister blamed the agreement for a precipitous
U. S.
AGRICULTURAL EXPORT SURPLUS DISPOSAL POLICY
77
( speculative) decline in the price of Thai rice.
quickly, however, and the episode faded.
Rice prices recovered
Influence on U. S. Policy
These protests did not go unrecognized. As it became evident that
the surplus problem was of long duration, and as the protests mounted,
a number of changes made the program more acceptable. Four major
changes will be discussed: (1) a withdrawal of eligibility for Title I
sales for a number of strong currency countries (this action tended to
reduce protests and to maintain a larger world commercial market) ; (2)
the broadening of the framework of "safeguarding usual marketings";
(3) the drastic change in the barter program; and (4) the use of the
consultation procedure, prior to a final agreement.
Eligibility
During the first years of PL 480 a number of Title I
sales were made with West Germany, the Netherlands, United Kingdom,
Japan, Mexico, Italy, and France. In some cases these were for tobacco,
poultry or fruit, but they also included wheat, rice, cotton and feed
grains. These countries are now ineligible for most or all Title I sales
and must purchase in the world market with hard currency. In these
markets the various exporting countries have substantial opportunities
to sell in competition with the United States, sometimes with advantages
of their own over the United States.
Usual Marketings
The 1958 extension of PL 480 changed the
legislative framework for viewing usual marketing arrangements. Congress
added the underlined words to Section 101 of Title I.
"(a) take reasonable precautions to safeguard usual marketings of
the United States and to assure that sales under this act will not unduly
disrupt world prices of agricultural commodities or normal patterns of
commercial trade with friendly countries."
As a result attention was given not only to the historical patterns
of trade with the United States, but also to purchases in the world commercial markets. Various provisions were inserted in sales agreements
requiring recipient countries to continue to import the historical quantities of commercial purchases. This helped maintain (and expand) commercial markets and gave other exporting countries an opportunity to
compete for such sales.
Barter
Prior to April 1957, bartered farm commodities could be
sold to any free world country by the bartering agent. The abuses and
protests previously mentioned led to a drastic revision in the regulations.
Supporting this move was the realization that a barter sale, for example
of cotton, to Great Britain, (or other countries) only temporarily reduced
CCC stockpiles. Regular commercial sales were lost and the cotton not
sold tended to move into CCC hands to replenish storage holdings.7°
-
-
-
70 In the complex world of international trading, it is easier to argue the validity
of these relations than to prove it for any specific transaction.
78
ARIZONA AGRIC. EXPERIMENT STATION TECH. BULLETIN 150
The new regulations in 1957 set up a complex country- commodity
system which barred sale of certain commodities in some countries, limited them in others and tried to direct barter sales into markets of limited consequence to U. S. exporters. It became much more difficult to
complete barter agreements and the volume dropped to a fourth of its
earlier level. At the same time commercial markets for the U. S. and
competing countries expanded.
Though these changes were welcomed, it became evident that the
change in policy had consequences that were unwelcome. A Canadian
newspaper article reported:"
The cards are stacked against us in our economic poker game
with the United States. It has now become clear that the only
reason we may be able to sell more wheat in the world market
is because we will be selling a lot less lead and zinc. This tie -up
between lead and zinc and wheat is an intriguing one and the
strings attached to it all lead back to Washington
Washington
has been stockpiling lead and zinc, taking a lot of the minerals
in exchange for surplus wheat.
In simpler terms, the U. S. through the barter program was buying
and stockpiling minerals some of which otherwise would not have been
purchased. Thus, restrictions on barter reduced the market for these
nonfarm products. Meanwhile, Canadians felt that their wheat was
more able to compete. Whether this was because of the reduction of
barter or the new provisions for usual marketings on a broader basis is
not clear.
-
Consultation
The consultation procedure involves several phases. One is the
process by which the State Department reviews each proposed Title I
agreement with the countries whose markets might be affected. The
other is the relationships with the United Nations organization and the
FAO subcommittees on surplus problems.
The consultation procedure involves country by country discussion
of proposed Title I agreements. The countries participating would be
determined by the commodity and previous trade with the proposed
Title I recipient. Undoubtedly, this procedure changed some details of
proposed agreements. Sometimes changes would be effected prior to the
consultation and in other instances provisions of agreements would be
altered.
Early recognition of surplus problems was given by the FAO which
created a Committee on Commodity Problems. In 1953 -54 this commit71 As quoted in W. E. Hamilton & W. M. Drummond, Wheat
Surpluses and Their
Impact on Canada - United States Relations, National Planning Assoc., and Private
Planning Assoc. of Canada, 1959.
U. S.
AGRICULTURAL EXPORT SURPLUS DISPOSAL POLICY
79
tee established a set of Principles and Guidelines to deal with agricultural surpluses. These were aimed at (1) orderly surplus disposals without disrupting normal production and trade, (2) emphasizing the importance of absorbing disposals by additional consumption which would
not have taken place without the special transaction, and (3 ) establishing consultation among the interested nations if disposal is undertaken
in "exceptional" volume or rates of sales. Since then the United States
and some 43 other nations have accepted these Principles.
International Action
During the Geneva Trade Conference in 1955
the General Agreement on Tariffs and Trade was revised to include provision against subsidized exports. The United States, with special pressure from Canada, Denmark, The Netherlands, Australia, and New Zealand, accepted the following limitations: (1) No country would subsidize
exports of agricultural products to the extent that it would gain an "unfair" share of world markets ( "Unfairness" would be based on past experience and become a matter for negotiation and discussion.) ; and (2) if
any country claimed substantial injury as a result of another country's
subsidy policy, the subsidizing country would agree to discuss the matter, and if proved, make amends in some form or another.
The most recent international negotiation involves a 1960-61 concern
by the UN and the FAO. Here the effort is toward a more active
role by international agencies in the disposal procedure, possibly involving the machinery of FAO to distribute part of the world's surpluses in
particular countries. The United States, through the Food- for-Peace
Administrator, has agreed to provide $40 million in food and cash as
a beginning of such a program. The appropriate policies and procedures
are still under discussion. It appears to be moving toward acceptance
as a part of the FAO Freedom- from-Hunger campaign.
Calendar year 1961 saw a great deal of activity in this direction
with FAO reviewing and then proposing a unit which would aid in
moving food from areas of surplus to areas of deficit. Their efforts are
presented in a recent publication,72 which has been accepted by the
United Nations as a basis for action.
These attempts to ease the conflicts have been accepted as substantial program improvements. It is too much to say that surplus disposal is welcomed by competing countries. They would prefer to have
the markets and the U. S. the stockpile. They would be even happier
if the U. S. had effective programs to limit surplus production. But within
a framework of world excess supplies they view the U. S. effort as being
somewhat more responsible than it was in 1954-1957. They argue that
the U. S. has more alternative resource uses, more economic power, and
-
72 FAO, Development Through Food: A Strategy for Surplus Utilization,
Rome,
1961, p. 121.
80
ARIZONA AGRIC. EXPERIMENT STATION TECH. BULLETIN 150
more opportunities to shift or control production. Thus they suggest that
the U. S. can more easily bear a larger share of the production adjustment than it has in the past. Generally speaking the U. S. argues that
it has attempted to control production, and carries more than its share
of world excess supplies.
Influence on Competing Countries' Policies
Efforts to influence policy have not been limited to protests, to
seeking changes in U. S. policy, and to developing and enforcing United
Nation's principles. Some competing countries have adopted certain laws,
policies and practices which can be attributed in whole or in part as
counteractions to the PL 480 program.
A specific economic procedure to protect itself is exemplified in Mexico. In 1956, Mexico introduced a sales system whereby imports, such
as motor vehicle parts, were made contingent upon the sale of exportable cotton surpluses. This requirement directly affected assembly plants
of major U. S. automobile companies in Mexico. In effect, they became
salesmen of Mexican cotton and any deterioration of sales opportunities
increased the cost of automotive parts. They hoped in this way to encourage internal American political pressures against the cotton export
subsidy program.
In Canada there was a threat to promote shifts in trade. While
other important factors were involved this threat may, at least partially,
be attributed to PL 480 programs. In 1957 the Conservative Government, which usually advocates closer ties with Great Britain, proposed
that 15 percent of Canada's trade be shifted from the United States
to the Commonwealth. It was dropped after a Cabinet level economic
conference with the United States where Canada, among other things,
received assurances that bartering of surplus wheat would remain at
low levels.
There is some evidence that Thailand has threatened to use the
approach of over -all political reorientation to emphasize its concern. After
the large Indian Agreement was announced, the Bangkok Post quoted
informed sources as follows:
What advantages are there for Thailand to remain in the free
world when countries not at all committed to the free world are
getting equal benefits and, in addition to these advantages, of
economic aid.73
The foreign minister is reported to have threatened that Thailand was
going to make her own "agonizing reappraisal" of her position as an
ally of the United States in the Southeast Asia Treaty Organization.
73
U. S.
New York Times, May 13, 1961.
AGRICULTURAL EXPORT SURPLUS DISPOSAL POLICY
81
Some countries are pursuing export subsidy policies of their own.
The Union of South Africa pays export subsidies on corn. Its answer
is to increase the rate of subsidy so that its corn continues to move into
commercial markets in competition with the United States.
Another reaction, which may or may not be a response to U. S.
export policies, is the willingness of Australia and Canada to make sales
to Mainland China. Had they not had surplus stocks, built up partly
because of their own expanded production and partly because of the
limited commercial outlets, it might have been more difficult to arrange
the volume of sales, credit, and other sales terms with Mainland China.
However, with U. S. sales policies aggressively seeking out various market outlets, Canada and Australia looked upon China sales as an opportunity to reduce their stocks. Neither the citizens nor the government
was prepared to cooperate in a U. S. boycott of Mainland China; they
disagreed with this policy and were willing to conclude sales contracts.
At the same time Canada's internal policies on marketing of wheat
and other grains have tended to hold down production and marketing.
A less aggressive marketing program by the United States, a greater
willingness to store large quantities of surplus farm products, probably
would have enabled the Canadian Wheat Board to accept and pay for
a larger part of each year's production more expeditiously. Such action
probably would have encouraged more wheat production.
It has also been argued74 that the United States oversold wheat to
Pakistan to the extent that a German- Syria- Pakistan proposal exchanging
wheat from Syria for jute from Pakistan fell through. The government
wheat which the Soviet Union
of Syria found itself with unsold wheat
purchased as one of the initial steps in an attempted subversion of Syria.
-
Summary
-
The effects of surplus disposal on competing countries are found in
three principal areas the prices of their exports, the volume of their
trade, and in a complex pattern of protests and attempted counteraction.
There is partial but not conclusive evidence that the prices of PL
480 commodities have declined relative to other farm and nonfarm commodities. Assessment of responsibility is more difficult. Are prices lower
because production has expanded, or because trade policies have changed
so that production increases can affect the world market? Would the
effect have been greater or smaller if PL 480 and related policies had
not been inaugurated or been implemented in a different way? More
refined analysis is necessary to resolve these issues.
74 In a speech presented to the conference, "American Abundance in a Hungry
World: Challenge to U. S. Foreign Policy," May 15, 1959, by Stanley Andrews, then
Director of the Center on Agricultural Communications, and former U. S. Director of
Technical Assistance Programs.
82
ARIZONA AGRIC. EXPERIMENT STATION TECH. BULLETIN 150
There is clear evidence that U. S. farm products are moving in larger
volume in world trade. Much of this is under special programs which
do not materially affect commercial markets. However, even in the commercial markets the United States is aggressively seeking outlets. Export
payments enable U. S. products to move abroad at substantial discounts
from domestic prices. They have helped the U. S. retain a substantial
share of the world market which was lost in the years after 1930 when
nations erected tariff barriers, emphasized self -sufficiency programs, and
became heavily involved in directing the flow of trade. Whether the
share of the market is too large or too small can be answered only in
relation to specific criteria and objectives of policy some of which may
vary with the individual commodity and country concerned.
This aggressive export program has led to a wide range of responses
in competing countries. Some have used economic weapons conveniently
at their disposal to ease the effect of the program. Others have used
diplomatic and political weapons as more suitable to their situation.
Some of these economic and political weapons have been effective in
changing certain aspects of U. S. policies; others have been turned aside
and have become part of the suppressed conflict between nations or
added to the cost of conducting international trade.
U. S.
AGRICULTURAL EXPORT SURPLUS DISPOSAL POLICY
83
CHAPTER VII
EFFECTS OF PUBLIC LAW 480 ON THE SENDING NATION
Public Law 480 and Domestic Farm Programs
Public Law 480 programs have broad and varied domestic effects,
many of which are not measurable. They may, nevertheless, be examined for direction and relative magnitude of influence. Basically, it must
be remembered that the export programs are a function of domestic
agricultural programs resulting in supplies in excess of those which will
clear the market at prices established. Fundamental to the situation has
been the decision by the United States to carry out policies of aid to
its agricultural producers. This aid has taken the form of price supports maintained by a government supported storage program. Major
commodities involved are wheat and cotton, although other products are
directly or indirectly involved as well. The immediate demands at the
farm level for these commodities, which are the basis for investment
of U. S. resources in agriculture, are functions of these current government farm programs. The support prices established have been well
above world market prices. As a result supplies have accumulated and
exports have been moved only with various other government aid schemes.
Current subsidies on wheat are approximately 56 cents per bushel75 and
on cotton 8.5 cents per pound.'( In spite of these subsidies, however,
other measures such as PL 48G have apparently been used to move
quantities into export and to retard the growth of stockpiles.
The effect of PL 480 on the demand for U. S. farm commodities
and on investment of resources in U. S. agriculture must come through
pressures created with respect to current government farm programs.
Two features of the current programs are particularly relevant to pressures for change. One is the physical fact of increasing commodity stockpiles in storage. The other is the financial fact of tax burden for inventory investment. No physical or economic facts in themselves will change
the farm programs, which define in part the demand for U. S. farm
products. This is a matter of law which can be changed only by a political decision. The way in which the political process takes these facts
into account, however, may influence the outcome of legislative decisions.
Scarce resources of the nation's economy limit the ability of the
government to support production which is not utilized for any contribution to the economy. To the extent that government must sacrifice
other objectives in order to acquire the commodity inventories and that
84
75
U. S. Economic Research Service, The Wheat Situation, WS -177, Feb. 1962, p. 8.
76
U. S. Economic Research Service, The Cotton Situation, CS -199, Mar. 1962, p. 3.
ARIZONA AGRIC. EXPERIMENT STATION TECH. BULLETIN 150
citizens must pay taxes and therefore forego individual desires, there is
a limit on what can be spent for the excess commodities. The comparatively great wealth of the United States makes this limit less restrictive
than it might be for such programs in most other nations. Furthermore,
the tolerance levels may be partly a function of social, psychological and
political factors entering people's value judgments. The appearance of
financial costs of farm price support programs in government budgets
alerts citizens and policymakers to the sacrifices involved. Newspaper
publicity concerning the quantities of commodities in storage serving no
visibly useful purpose, offends traditional values of utilitarian efficiency.
To the extent that PL 480 retards the growth of commodity stockpiles
and alters the appearance of and attitudes toward government outlays
for farm price support programs, the tolerance level for sacrifices involved
in such programs may be raised substantially. As this is taken into
account in the political decision-making process, a major effect of PL 480
is in the direction of maintaining the current government farm programs,
the demand situation for farm products, and the level of resources engaged in agriculture. By directing policy toward eliminating surpluses,
which are merely a symptom of the U. S. farm problem, PL 480 may
mitigate the urgency for treating the cause.
Possible Ramifications of Changes in Public Law 480 Programs
Domestic Farm Programs
Undoubtedly PL 480 acts as a release valve for pressures which
might otherwise bring change in domestic programs. Any attempt to
eliminate or reduce PL 480 ( unless substitute legislation were instituted )
would likely result in modifications of domestic programs. Under these
assumptions or conditions it then becomes important to understand some
of the ramifications of such changes. For instance, a decision might
be made to discontinue the special export programs, sell whatever the
foreign market would take via the regular subsidy, and stockpile the remainder. This would involve additional storage costs, and pressures
would undoubtedly increase to have the stockpiles removed. Another
solution might involve increasing the size of the direct export subsidy
to make the products more competitive. In this case the direct subsidy
costs would be increased but such a program of dumping would likely
result in unfavorable repercussions abroad which may be even more
costly in the long run. Competing nations may conduct trade wars or
step up their protests. Either way the direct or indirect costs would
likely be greater than the U. S. would be prepared to pay.
Another solution might involve production control via legislative directive. A number of methods, some of which have been or are being conU. S.
AGRICULTURAL EXPORT SURPLUS DISPOSAL POLICY
85
sidered, may be used." Supply control programs would involve substantial adjustments within agriculture and considerably more mandatory
control over production. This would likely run into political objections
with references to the "police state in agriculture," as once decried by
Senator Humphrey and others in Senate hearings 78 There would be
taxpayer costs associated with the adjustments as well as the price supports. Depending on how the program was administered, it would involve the likelihood of rigidities and incorporated inefficiencies in pro duction. The adjustment costs probably could be eliminated by merely
allocating rigid quantity production certificates to specific producers.
While this might be more acceptable to taxpayers, it would not be as
desirable for producers and may add to the current social and unemployment problem in agriculture.
If an assumption is made that the U. S. intends to continue supporting
farm prices at levels higher than world market prices and that supplies
exceed domestic demand at these prices, then decisions must be made
with respect to the excess supplies. Production may be allowed to continue free of control with surpluses being destroyed, stockpiled, used in
special domestic distribution programs, or moved into export via various
methods of subsidy. Destruction is distasteful, stockpiling is expensive
and limited, and subsidies are opposed by competing nations. These
also involve expenses which must be justified to taxpayers. Alternately,
the government may decide to use production controls, thereby eliminating the problem of surpluses.
Production control and surplus disposal programs involve different
costs and returns, both quantitative and qualitative. If production controls are used, the government may have to pay the farmer the difference between his costs and the support price on the volume taken out
of production. That is, it will be necessary to reimburse producers for
foregone returns above cash costs. The producer will need to be compensated for idle land, equipment and other unused resources. This
is the case within the restriction of the initial assumption that the support price is fixed, since it would not then be a matter for bargaining
77 For an additional reference on supply control see George E. Brandow,
Interrelations Among Demands for Farm Products and Implications for Control of Market
Supply, Bull. 680, Penn. State Univ., Aug. 1961, 124 pp. Also J. Carroll Bottum, et al.,
Land Retirement and Farm Policy, Research Bull. 704, Purdue Univ., Sept. 1961, 73 pp.
Some other works relating to supply control are current IR -3 projects in this area
including: "The Analysis of Supply Control Mechanics in the Feed- Livestock Sector,"
at the University of Minnesota; "Methods of Controlling Agricultural Supplies by Controlling Inputs," at Iowa State University; and "Effects of Alternative Agricultural Control Policies on Human Resource Adjustments," at North Carolina State College.
78 U. S. Congress, Senate Committee on Foreign Relations, Hearings
on International Food for Peace, 86th Cong., 1st Sess., 1959, pp. 19, 22 -3, 153, 174.
86
ARIZONA AGRIC. EXPERIMENT STATION TECH. BULLETIN 150
li
m
r
o
o
-0
o
C
-0
C
-1
o
-o
Ps:
support price
LEGEND
Q0:
quantity demanded for domestic use in U. S. at Ps
Qs: quantity produced in U. S. at Ps with no controls
of production control
Net additions to cost
Fig. VII-1. Hypothetical Cost Relationships in Export Disposal and Production Control.
o
4z.
of export subsidy
C
pi]
Net additions to cost
C
PS
to induce farmers to bear any part of the cost except as they are taxpayers. If production is left uncontrolled, then the government will
have to bear either the cost of stockpiling or the cost difference between
the amounts received via its sales programs and the price paid to the
producers. Of course, if the sales programs involve aid to foreign countries such as in PL 480, there may be substantial returns which cannot
be measured, such as improved international political relations and longterm trade development benefits. These would be given some value,
presumably based on the sending nation's notion of such things as its
responsibilities and its security position in terms of world international
relationships.
In Figure VII -1 a support price Ps is assumed to bring a quantity Qs
of production out of which Qo will be purchased on the domestic market
without consumer subsidies. Under such conditions net marginal costs
to the government, of controls on production, increase as the excess
supply is reduced toward the quantity Qo taken on the domestic market. It can be expected that the costs will increase at an increasing rate
as controls are increased since it will likely become more and more
difficult to get farmers to decrease production as the volume of production is reduced from Qs. Similarly, the less the production control
the greater the surplus that must be subsidized for sale. As the surplus increases, it can be expected that the net marginal costs of carrying out the subsidy program will be increasingly greater as the competition and resistance to such programs increases. Operating rationally,
administrators would presumably try to optimize their position by equating net marginal production control costs with net marginal subsidy costs.
Net export costs may be reduced from the level indicated by higher
returns in measurable values received or by higher evaluation of the
nonmeasurable value. In fact, it is conceivable that exports may be
considered to have zero net costs or even some positive value over and
above the cost of producer price supports. Under the latter conditions,
it is conceivable the producer prices would need to be raised above Ps
in order to bring forth quantities greater than Qo to Qs for shipment to
foreign consuming nations. Alternately the combined costs of production control and surplus disposal at point X and Qi may bring forth more
reaction than the government can afford to withstand. Under these circumstances either the support price would have to be set below Ps or
some less expensive or more subtle method of support would have to
be employed.
If the latter condition held it would be necessary to consider an
optimum position in a more dynamic situation involving a varying support price or perhaps even some variation of free market conditions
with or without a support price program. Under conditions of relatively inelastic supply and demand for farm products, any move in the
88
ARIZONA AGRIC. EXPERIMENT STATION TECH. BULLETIN 150
direction of more flexible prices would result in lower costs to consumers and lower gross returns to producers at least in the short run.
The less the differential between the support price and the market price,
the lower the subsidy payment necessary for exports. In fact, reduced
prices should cause some increase in domestic consumption and some
reductions in production. These results should in turn reduce both
the cost of production control and of export subsidy payments. Losses
of income and the effects of increased production adjustments would,
however, be countered by strong opposition from agricultural producers.
Foreign Aid Costs79
Since PL 480 has twin objectives in removal of surpluses and assisting our foreign policy aims, a decision to change or eliminate the programs would require a reappraisal of the alternatives for foreign assistance. Current costs to the U. S. are the total costs to the CCC of the
commodities shipped, plus handling and shipping charges. Where the
products are used as gifts, no direct returns are involved. Of course,
the same amount of commodities could have been purchased at world
market prices involving a much smaller outlay for the aid. However, it
may be that the U. S. considers the additional costs of this means of foreign aid are more than offset by the attendant benefits associated with
giving the business entirely to its own producers. In this case costs
should be segregated, part being charged to foreign aid and part to sustaining the domestic industry. There is a further possibility that if other
goods or services had been provided, the same amount of benefits could
have been attained at much lower cost to the U. S. For instance, there
may be other food which would provide greater benefits to the receiver
and at lower costs. Or it may be that education, technical assistance,
and capital equipment would have provided a greater benefit at lower
cost. Without PL 480 there likely would be greater pressure to provide
such alternative types of aid.
.
Undoubtedly, exports of agricultural surpluses charged at full cost
to the Commodity Credit Corporation exaggerate the value of grants,
gifts, or sales for foreign currency. Schultz has estimated that
the value to the recipient countries is about 37 cents per
dollar of CCC costs and the cost to us in earnings foregone may
be zero. . .80
.
He also estimated that the final returns to the U.
S.
on PL 480 sales will
For analysis of effects on receiving nations, see Chapter V.
T. W. Schultz, "Impact and Implications of Foreign Surplus Disposal on Underdeveloped Economies; Value of U. S. Farm Surpluses to Underdeveloped Countries,"
Journal of Farm Economics, Dec. 1960, p. 1023.
79
ß0
U. S. AGRICULTURAL EXPORT
SURPLUS DISPOSAL POLICY
89
be between 10 and 15 percent of CCC costs. Exaggeration of the value
of these commodities tends to have the effect of an illusion in terms of
aid programs. S. R. Sen of the Indian Planning Commission expresses
concern over this illusion:
...
it may have an unfortunate effect if in any way it creates a
feeling of complacency in the donor country which may have the
effect of slowing down the direct foreign exchange assistance
which the underdeveloped countries badly require.B1
Many congressmen and taxpayers measuring food aid in terms of
dollar costs actually do see it as a magnified total aid program and are
reluctant to allocate aid funds for other uses. In fact, there is evidence
that some congressmen would oppose foreign aid altogether if not given
in the form of surplus food.
Senator Johnson, in hearings on the
subject, said:
I have been against foreign aid
because I think it has
been misused, and it has given us more headaches than anything
else, but the 480 program is all right, I think.
We could do more in this field and less in the other, in my
opinion, and it would be better.... I think that if we are going
to have relief, this is the kind of relief that we ought to have as
much as possible.82
.
.
.
.
Since the real costs of food aid, given current farm programs and
food surpluses, are negligible, it is relatively easy to obtain appropriations to ship these commodities to a user. The surpluses are available and involve not only real costs for storage and interest charges,
but are a political burden on farm programs and a moral concern in an
undernourished world. Congress is only too happy to be able to get
out from under the weight of this burden, especially when they have an
opportunity to charge the costs to humanitarianism.
Related Domestic Interests
A change in current export programs would undoubtedly affect domestic interests in related industries. For example, a redistribution of
shipping benefits may result from a decrease in the special export programs. Some individuals in the ocean transport industry losing FL 480
contracts may not be in a position to fully recoup revenue losses from
any resulting substitute shipments. They would therefore lose and would
oppose any change in the program. Similarly, exporters may lose business for which there are insufficient immediate substitutes. Opposition
81
S. R.
p. 1037.
-
Sen, "Impact and Implications of Foreign Surplus Disposal on UnderdevelThe Indian Perspective," Journal of Farm Economics, Dec. 1960,
oped Economies
82 U. S. Congress, Senate Subcommittee of the Committee on Agriculture
and Forestry, Hearings on S. 1027, Sale of Surplus Agricultural Commodities for Foreign Currencies, 87th Cong., 1st Sess., 1961, p. 22.
90
ARIZONA AGRIC. EXPERIMENT STATION TECH. BULLETIN 150
would be strong from these groups. However, to the extent that normal
commercial channels of trade are revived, there probably would be some
redistribution of business among the firms which would result in gains
for some and losses for others. Those anticipating gains, either in shipping or in exporting, could be expected to support a program of change.
Individuals anticipating increased storage revenues might be expected
to favor elimination of PL 480. Current storage costs are running well
over $1 million per dayS3 on commodities valued somewhat below those
shipped under PL 480 to date. If these stocks were still in storage, a
substantial increase in returns to storage business would accrue.
U. S. Government
Public Law 480 sales have resulted in large foreign currency holdings. These holdings are to be used to purchase items within the country in question. They may be used for mutual defense, loans for economic development, and loans to American businessmen, among other
purposes. Returns from the above uses result in some dollar values for
CCC stocks in the U. S. and are used to help write off the costs of such
programs. Of course, there are numerous losses, as these currencies are
held, resulting from changes in their value and in the lack of opportunity
to put them to use.
Total losses from these sources are not truly measurable, but dollar
equivalents of currencies obtained may be estimated and used to charge
off against CCC operating costs.84 This relieves pressure on Congress
to change programs at home. Furthermore, some businessmen, traveling
congressmen, and others would obtain benefits from the availability of
the funds. Any attempt to curtail such benefits would presumably lower
the welfare of the groups or individuals involved, and they could be
expected to oppose such action. To the extent that the funds result in
improved defenses that would require other expenditures, a saving would
be made to the U. S. Government. Similarly, if development improves
in the recipient country, assuming this to be an objective, it may reduce
the need for other funds for this purpose.
As indicated earlier in this chapter, foreign aid may be less than
desirable for development due to the illusory effect upon the cost magnitudes of the aid programs which, in fact, produce real values in the
83 See USDA -CCC, Charts, Providing a Graphic Summary of Operations, June 30,
1961, Table 3, for storage costs. See U. S. Congress, House, The 14th Semiannual Report on Activities of the Food -for-Peace Program Carried on Under PL 480, 83rd Cong.,
Document No. 223, Aug. 1961, p. 2, for summary of shipments under PL 480. See
USDA -ASCS, Commodity Credit Corporation Report of Financial Condition and Operations as of June 30, 1961 (Sept. 1961), p. 44.
84
U. S.
See Chapter IV, Table IV -6, for more details.
AGRICULTURAL EXPORT SURPLUS DISPOSAL POLICY
91
recipient country of much smaller magnitudes. Indications are also that
surplus aid needs to be associated with a high proportion of dollar aid
if its potential is to be exploited in terms of development for the recipient country.85 Any development induced may, of course, ultimately result
in greater purchasing power of the people involved and increased trade,
some of which would likely go to the U. S. The effect of the latter
chain of events should be taken into account but would likely be too
remote for any immediate action to be taken for this purpose.
Costs and Values of Public Law 480 to the U. S. Government
Domestic Relationships
Irrespective of the balancing effect of foreign currencies held on
PL 480 account or used for specified purposes, there are substantial costs
to the USDA, both net and gross. Net costs are largely indeterminate
since foreign currencies accumulated from the sales remain Iargely unused. Gross costs charged to PL 480 are obtainable and increase in
direct proportion to the volume shipped. Total gross costs involve payments by the CCC to producers, plus storage, handling, shipping, and
interest charges on funds advanced to producers.
The CCC is charged with a responsibility to recover all costs of
operations in sales made. Records of Title I and II operations indicate
that the procedures actually allow the organization to charge more than
costs." Thus, proceeds, largely from Treasury appropriations, actually are
shown as in excess of costs. This should not be looked upon, however,
as operating profit. Foreign currencies held by the Treasury from Title I
sales are sold at the Treasury selling rate to various government agencies
for specified uses when agreements are reached. The dollars paid by
the agency are then credited to the account of the CCC and are used to
reduce the appropriations required for PL 480 operations. In determining appropriations required, the returns from recoveries, plus the estimated recoveries which are based on indicated agency needs, are credited
to the CCC's PL 480 account.87
85 Food and Agriculture Organization of the United Nations, Uses of Agricultural
Surpluses to Finance Economic Development in Underdeveloped Countries, FAO Commodity Policy Studies No. 6, Rome, Italy, 1958.
86 USDA -CCC, Charts Providing a Graphic Summary of Operations, June 30, 1961,
Nov. 1961, Table 25.
87 U. S. Congress, House Subcommittee of the Committee on Appropriations, Hearings on Department of Agriculture Appropriations for 1960, 86th Cong., 1st Sess., 1959,
p. 1577.
92
ARIZONA AGRIC. EXPERIMENT STATION TECH. BULLETIN 150
This method of accounting grossly exaggerates the value of PL 480
programs as aid and also tends to postpone or obscure losses. Currencies still held by the Treasury will not be finally valued until the
accounts are closed or payments are made on loans, which could be
years in the future. Full costs to the CCC include subsidies normally
paid for commercial exports on most of the commodities involved in order
to make them competitive. These costs also include other handling and
administrative charges which are strictly a function of domestic programs The maximum value to a receiving nation would be the world
commercial market price and for such a price to prevail would assume
that the goods received were those really desired and not those taken
as next best, as seems to be the case.S8 If we assume the domestic programs to remain, the real costs to the U. S. of the disposal programs
may even be negative. As long as the programs exist, the commodity
costs incurred by the CCC and charged to PL 480 would have been
incurred anyway.
If it is assumed that normal exports cannot be expanded to eliminate the surplus, and destruction is not a feasible solution, the storage
costs would continue to mount without PL 480. Estimates on storage
costs have been given ranging from 10 to 16 percent of value.89 Estimates on final returns to PL 480 sales have been made at 10 to 15
percent of original cost.90 Net new costs under PL 480 have been
estimated by FAS officials at approximately 20 percent of the total authorization involved.91 On the basis of the above estimates, balancing PL 480
returns, plus storage costs eliminated, against net new costs at 20 to 25
percent of authorizations, there is a range of possible results varying
between net losses of 5 percent to net gains of 11 percent as the result
of shipping PL 480 commodities. These results assume that the amount
of CCC costs above net new costs of PL 480 disposal would be charged
to the farm programs and not to PL 480. They also assume zero value
for storage of surplus commodities which may not be fair. At least some
of the stocks may have an emergency value both to the United States
and the rest of the world.
88
S. R. Sen, op. cit.,
pp. 1039-41.
89 U. S. Congress, House Subcommittee of the Committee on Agriculture, Hearings on H. R. 225 Barter and Stockpiling Policy, 85th Cong., 1st Sess., 1957, p. 52.
90
T. W. Schultz, op. cit., p. 1030.
91 U. S. Congress, House Committee on Agriculture, Hearings
on H. R. 4728 to
Amend Title I of Public Law 480, 87th Cong., 1st Sess., 1961, p. 34.
U. S. AGRICULTURAL EXPORT SURPLUS DISPOSAL POLICY
93
International Relationships
Any decision to rearrange the accounting procedures would result
in a reduction in the U. S. merchandise exports account and would,
therefore, lead to a change in the interpretation of the balance of payments accounts. Since 1949 the United States has generally experienced
net deficits in its current balance of payments account despite heavy
export balances of goods and services. This "paradox" is due largely
to U. S. capital investments abroad and foreign assistance transfers. With
the advent in 1955 of large -scale sales of United States agricultural products for foreign currency came a new means of augmenting the export
surplus on the balance of payment current account. Transfer authorizations under Titles II and III amounted to $937 million and $1,593 million,
respectively, through June 30, 1961.92 Sizeable amounts have also taken
place under Title I which are labeled "grants" or "United States direct
investment" in the balance of payment accounts. These do not, however, represent dollar payments to the accounts of foreign countries, but
merely accounting offsets for shipments of goods and services which
appear as merchandise and service exports on the credit side of the
ledger.
Currencies are not generated from PL 480 sales until the goods have
been bought and accepted. Thereafter what happens in the trade balances depends on the agreement made between the U. S. and the recipient, as provided for under Section 104, designating how the currencies
will be used. Large portions of Title I proceeds have been loaned to
the recipient governments and thus the capital account is debited by
the gross total of these loans. United States uses of these currencies fall
heavily in "service" imports. Grants under Title I are handled as any
other unilateral transfer and add to the cash deficit on current account.
There are difficulties in estimating the value of foreign currencies
largely due to time lapses between accumulation and use. Several years
may lapse between the time of shipment of the products and the time
of the final decision as to the use of the currencies. Decisions to make
gifts, grants, and loans, and such things as inflation may result in
payments at considerable variance with the original capital value exported.
Due, therefore, to the various aid programs, including surplus disposal Food -for -Peace, and others, a sizeable part of our merchandise
export account occurs only because of special financing. The balance
of payments account of the United States as it reflects the several billions of dollars of exports through disinvestment of government inventories, can reveal little about the effects of such exports on our national
92 U. S. Congress, House, The 14th Semiannual Report
on Activities of the Foodfor -Peace Program Carried on Under PL 480, 83rd Cong., Document No. 223, 1961.
94
ARIZONA AGRIC. EXPERIMENT STATION TECH. BULLETIN 150
income position. Waugh93 has speculated on the effects of these exports on farm income, but little attention has been devoted to the total
effects of continued large -scale- PL 480 and Food- for-Peace programs
on the United States' and recipient countries' international accounts. To
the extent that foreign aid has been in the form of goods and services
purchased in the U. S., it seems evident that the U. S. balance of payments cash deficit could not be reduced by withholding such aid, except
insofar as it resulted in lower income to American producers. This could
result indirectly in a reduced demand for imports to the U. S.
Public Law 480 sales have contributed to our export balance of
goods and services. To the extent that obligations abroad have been discharged with currencies received, reduction of this aid could increase
rather than reduce our cash deficit. Also, to the extent that normal
commercial sales may be tied to aid programs, any reduction in the
aid would result in a reduction in our cash receipts on the international
payments account. However, to the extent that PL 480 sales act as
substitutes for normal commercial sales, the cash receipts will tend to
be reduced. This will be especially the case if PL 480 sales take the
form of gifts, or grants, which show no net return to the U. S. account.
Political Strategy in Public Law 480 Accounting
Evidence indicates that the procedures of accounting probably are
deliberate and purposeful. By charging the entire CCC commodity costs
to the PL 480 account without showing a balancing account for unrealized returns, or charging part to farm programs, it can be argued that
PL 480 is a large foreign aid program and not a part of the domestic
farm program. In hearings before the House Agriculture Committee
conflicting views have been presented on the matter of where to charge
the costs of PL 480. When it was suggested that agriculture might
receive the same benefits through dumping the commodities, and, therefore, the industry should not have to bear the costs of "worldwide social advantages" associated with PL 480, Mr. Martin, the Assistant Secretary
of State for Economic Affairs, replied: ". . I would suggest if we were
conducting a program of dumping agricultural products in the ocean
there would be some, different views in this country about our agricultural programs. . ."94 A later exchange between Congressman Poage and
Mr. Waters, Special Assistant to the ICA Director, proceeded as follows:
.
.
MR. POAGE:
... shouldn't we make a serious effort to sep-
93 Frederick V. Waugh, Managing Farm Surpluses, National Planning Association
Pamplet No. 117, Wash., D. C., April 1962, p. 49.
94 U. S. Congress, House Committee on Agriculture, Hearings on H. R. 6400 Agricultural Act of 1961, Serial E, part 7, 87th Cong., 1st Sess., 1961, pp. 718 -9.
U. S. AGRICULTURAL EXPORT SURPLUS DISPOSAL POLICY
95
arate that part which is a real farm program and that part which
something else.
I think this is questionable, CongressMR. WATERS:
man.... I think the best defense the farm groups or farm people
something
have to these accusations is to show they are doing
95
beyond just taking subsidies for themselves.
There seems to be an obvious quandary about the purpose of PL 480
and how it should be charged. Congressmen and others express dissatisfaction with having the costs charged to agriculture, yet fear an interpretation which would put the costs on foreign aid and welfare. Congressman Belcher, commenting on this possibility, said, "I think you will
take the jurisdiction of this program away from this committee. "96
Pressures may, through accounting procedures, either be dissipated
or focused in a direction away from the farm programs. While PL 480
results in increased total appropriations in the agricultural budget, a substantial charge which would normally be made to farm programs is made
to appear to be a cost of foreign aid. Since farm program costs have been
under fire, this procedure is apparently of strategic importance.
is
.
.
.
Domestic Adjustment Responses to Public Law 480
-
Agricultural surpluses held in government stockpiles are the object
of continuous attack. Domestic consumers feel they would consume
more if prices were lower, and reactions are strong to stockpiles of food
while large segments of the world's population have inadequate supplies.
Public Law 480 has been an effective method of retarding the build -up
of surpluses in the CCC stockpiles. By retarding this build -up, storage
costs are partly checked and a major symptom of maladjustment in agriculture, for which the taxpayer is being charged, is partly relieved. By
retarding the growth of the stockpile, pressures on Congress and the
administration to adjust domestic programs are reduced. Mr. Lynn of
the Farm Bureau, commenting on the value of PL 480, said:
...
I shudder to think what the situation would have been had
we not had it.
On the other hand, we may have made the adjustments in
agricultural programs that have caused us to have less coming
into the CCC, had we not had Public Law 480, which was an
easy way to dispose of ít.97
Ibid., p. 802.
U. S. Congress, 1louse Committee on Agriculture, Hearings on H. R. 4728,
to Title i of Public Law 480, 87th Cong., 1st Sess., 1961, pp. 28 -29, Mar. 15.
97 Hearings on H. R. 6400, op. cit., p. 827.
96
96
96
ARIZONA AGRIC. EXPERIMENT STATION TECH. BULLETIN 150
Congressman Findley supports this argument as follows:
This is what I am thinking. This has been a sort of relief
valve, putting off the day of reckoning. We have been able to
shave off some surplus stocks and put off the hard decisions we
really should have made long ago to solve this surplus problem. . .98
.
In fact, there is evidence that the effects of the relief valve may be
greater than indicated above. Apparently, some groups have even gone
so far as to consider increasing the maladjustment problem by using
PL 480 as a production incentive mechanism. Senator Young in an exchange about durum wheat with art FAS administrator said:
...
I would like to have you
make some kind of a study to
find out how much demand there would be for this type of wheat
in foreign countries.
This is a product, the production of which we could expand;
particularly in my area. I would like to know what potential
export market we would have for this if our production was
.99
expanded.
High farm prices associated with technological advances have brought
on the high levels of production in agriculture. Associated production
controls and programs to encourage shifts in the use of resources have
been insufficient to keep a balance between supply and demand. Too
many resources continue to be used in agriculture with the result that
this part of the economy remains relatively depressed as well as constituting a tax burden. Not only is there forced redistribution of income
through agricultural support, and surplus to storage and disposal programs, there is a loss to the whole economy as a result of resources being
employed where their marginal value product is substantially below
earnings of similar resources in other parts of the economy. Any program that reduces the pressures to bring about the required adjustments
may, therefore, be considered as contributing to the perpetuation of this
maladjustment. The evidence indicates that PL 480 operations are in
this category. Whether the results of the programs in terms of their
foreign policy objectives are of sufficient value to warrant their continuation and to offset any undesirable effects in terms of the domestic
economy and elsewhere remains to be seen.
.
98
Ibid.
99 U. S. Congress, Senate
Subcommittee of the Committee on Agriculture and
Forestry, Hearings on S. 1027 Sale of Surplus Agricultural Commodities for Foreign
Currencies, 87th Cong., 1961, p. 8.
U. S. AGRICULTURAL EXPORT SURPLUS DISPOSAL POLICY
97
CHAPTER VIH
SUMMARY AND CONCLUSIONS
Agricultural exports have been, and are, of considerable importance
to the United States' economy. In recent years the value of these exports
has amounted to over 20 percent of the total of all United States
exports and they have accounted for from 9 to 11 percent of the total
utilization of farm commodities. These agricultural exports have not been
stable, however, and the continued severe decline in both volume and
value from 1926 to 1940 was cause for considerable concern. This was
the birth period for price support programs which tended to price U. S.
agricultural commodities out of world markets. It was also the period
during which pleas were registered for programs designed to restore and
sustain exports to so- called "normal" levels.
The problems of agricultural surpluses have plagued the industry
in one form or another for over 30 years. These problems are related
to the technological revolution in agriculture, the stimulation of warinduced demand, various government programs which encouraged production, and the slow growth in domestic and foreign demand for farm
products. Whatever the reason, markets have been limited both at
home and abroad by measures maintaining prices above world price
levels, and production has expanded at unprecedented rates.
Broadly speaking, there are three major choices of alternatives to
solve the surplus problem. One alternative is to hold back production
through acreage retirement, whole farm retirement, migration of farm
people, or by comprehensive controls, often referred to as supply management. Another alternative is to permit prices to seek whatever level
is necessary to clear the market, and accept whatever level of income
this provides to agricultural producers. History of the past 30 years
indicates that this program is not socially acceptable, at least in its pure
form. However, some price and income adjustments have been accepted
as long as other efforts were being carried out to improve the farm income
situation. The third general alternative is to expand demand by increasing food and fiber consumption at home and abroad so as to use the
excess production. Estimates of costs and returns for the various possibilities are needed to assist in a choice of the alternatives.
-
Effects on the Domestic Economy
Public Law 480 is directed toward a solution of the surplus problem via the third alternative. This study has concentrated on the ramifications of this approach. If one assumes all other programs are unchanged, then the cost of PL 480 export programs is small to the American economy. Some estimates have placed the net new cost as low as
20 percent of the value of commodities shipped at CCC cost. In some
98
ARIZONA AGRIC. EXPERIMENT STATION TECH. BULLETIN 150
cases, there even may be net savings as storage costs arc eliminated
which otherwise would have to be paid over a number of years. These
costs may amount to 10 to 15 percent per year.
Furthermore, conservative estimates place net returns to the United States on sales at
10 to 15 percent. Net results of the programs, therefore, could very well
be positive in a dollar returns sense.
Public Law 480 has certain effects on the United States balance
of payments, the current account of which has been running deficits and
creating concern. The merchandise export account has been expanded
by these special financing programs. The appearance of aid tends to be
greater to the extent that goods shipped are valued somewhat above the
estimated benefits to recipients and substantially in excess of their real
costs to the U. S. While the above effects are observable, most PL 480
transactions do not adversely affect the U. S. cash balance of payments
account. The most direct way in which the balance of payments may
be affected is if PL 480 shipments reduce to some extent the commercial
sales the U. S. otherwise would have made.
There are also political effects associated with PL 480 and accruing
to the U. S.
especially the agricultural sector. It has provided a means
whereby an apparent humanitarian act can be executed with a minimum
of cost, if not an actual return. Evidence indicates it probably has also
eased the pressure for more of other types of aid. There are also strong
indications that it has been a release valve for pressures which could
have resulted in changes in farm programs, leading to more economic
allocation of resources. Undoubtedly, the program has brought side benefits to numerous groups and individuals including those in the transport
industry and in the import- export business and has acted as a partial and
temporary solution to a number of thorny problems.
-
Contributions to Nutrition
The Title I program, sales for local currency, contributes to an increase in the average level of per capita consumption. It does not provide significant help to those groups with little purchasing power. Thus,
its contribution to improved world diets is due mainly to increases in
the available supplies of food in food deficit countries.
Title II and Title III donation programs, however, are more effective in providing additional food to those urban groups whose diet is
poor. Because of internal distribution problems, only rarely do these
programs provide more food to rural people with deficient diets.. Particularly benefited have been people in orphanages, hospitals, schools, and
similar institutions.
Seriously limiting the nutritional benefits to be gained from any of
these programs is the dominance of wheat and cotton in the programs,
whereas the more serious dietary deficiencies are in animal type proteins. Thus, calories and plant protein components of the diet have
U.
S. AGRICULTURAL EXPORT SURPLUS DISPOSAL POLICY
99
been improved, but the balance with other proteins probably has deteriorated.
A value question remains, which will not be easily resolved, as to
the extent to which the American people are concerned or can benefit
through improved foreign policy if needy people abroad receive a more
nutritious diet. How far does this nation wish to go in eliminating dietary deficiencies? In terms of potential, without regard to cost, shipping, storage, or market feasibility, the world nutritional deficit is larger
than could be provided for by American agriculture, even if operating
at full capacity.700 There are very real technical difficulties, also, in any
expansion of the programs from present levels, even if all parties agreed
that it was desirable.
Contributions to Development
The process of economic development implies a' transfer of people
from agriculture, an increase in urban employment, and a rise in levels
of living. This process requires an increase in the production and marketing of food by those remaining in agriculture. Since this process often
lags behind the increase in the demand for food, food shipments from
abroad can bridge a period of food shortage.
In a dynamic world some countries find their export earnings increasing, while others find them decreasing because prices have fallen.
Many emerging nations fall in the latter groups. Under these circumstances, sales for foreign currencies can help maintain foreign purchases
and a faster rate of growth than otherwise would have been possible.
There is some evidence that U. S. commercial sales have been reduced, but total U. S. shipment sales are larger than they otherwise
would have been. The amount of substitution for commercial purchases
and the amount of addition to total purchases is very difficult to determine, particularly when it is necessary to assume a slower rate of
development in the absence of the PL 480 shipments.
Recent food- for-work programs under Title II ( grants) have more
immediate effects in converting food into capital. The value of the
program rests heavily upon the effectiveness of the local units of government in devising suitable programs. Any economic development impacts of Title III programs involving donations of food must come gradually and indirectly, through better health and greater energy on the
part of participants. It is difficult to determine the degree to which
food donations assist in this way.
Food shipments can assist the development process. However, too
much food aid can hold back the changes which are needed to increase
too USDA, The World Food Budget, 1962 and 1966, Foreign Agricultural Economic Report No. 4, Economic Research Service, Wash., G.P.O., 1961.
100
ARIZONA AGRIC. EXPERIMENT STATION TECH. BULLETIN 150
the productivity of local agriculture. Furthermore, nations which begin to
count on PL 480 shipments are likely to postpone some of the difficult
agricultural adjustments. It is becoming clearer that food aid can form
perhaps 15 -20 percent of the total external assistance
only a part
needed in development. Thus, too much food aid can discourage local
agricultural production in various ways, while too little food aid can
slow down the development process.
The potential of food shipments for development has a definite
limit. For some countries, this level may already have been exceeded.
However, if shipments are carefully matched with local development
efforts, the expanding local economy will provide substantial opportunities for future trade increases, particularly commercial sales. Such
a program requires careful country by country long -term planning and
negotiation.
-
-
Effects on Foreign Policy
The most dramatic and tangible foreign policy responses are those
which arise as competing exporting nations protest against what they
exports which displace their own
consider to be unfair trade practices
sales or depress the prices they receive. Most of these nations have
come to recognize that the world has a serious market surplus of wheat
and cotton and that extraordinary measures are needed to handle these
supplies. Still, they protest against substantial increases or changes in
U. S. policies which may affect them adversely. Clearly, PL 480 has
become a source of friction with friendly competing nations, but there
are other sources of friction as well which must be lived with and minimized where possible.
However, other foreign policy impacts can be far more important
and more permanent in nature. The development of nations in Asia,
Africa, and Latin America into productive, economically expanding societies can do a great deal to shift the balance of world power and influence the day -to -day conduct of foreign relations. Food aid can be an
important part of a foreign aid program designed to stimulate development and raise levels of living. Such considerations require that the
foreign policy effects of food shipments be weighed by balancing the
protests of competing nations with the benefits to recipient nations, bearing in mind also that friendly competing nations can also gain as the
underdeveloped countries strengthen their economies.
With respect to recipient nations, the hopes of some Americans that
food gifts or concessional sales would substantially change the foreign
policy orientation have not been fulfilled. In some cases they have
helped to prevent an adverse shift in a government's foreign policy, but
in most cases the foreign policy is the result of a complex of interrelationships. Food aid is an important part, but only a part of this total. In
-
U. S. AGRICULTURAL EXPORT SURPLUS DISPOSAL POLICY
101
some cases nations have felt that they are doing the U. S. a favor by helping to consume a "burdensome surplus." The way in which Title I shipmakes it difficult to identify
via usual markets
ments are handled
the food to the ultimate consumer. Even where it is identifiable, e.g.,
Title III donations, the food sometimes is identified more with the local
distributing agency than with the United States. Be that as it may, the
United States essentially is saying: Strong, expanding societies with rising levels of living are more likely to work with us; therefore, let us assist
them to reach this status. Of course, this also means that many years
may pass before we can come to a firm evaluation of our foreign aid
and food aid programs.
There are foreign policy benefits from food aid, but as in the case
of development aid there are limits on the amount that can be used,
and even that which is used needs to be carefully channeled through
appropriate organizations. As such agencies and procedures evolve, it
probably would be possible to increase the size of the shipments to
any one country as well as the program as a whole. A crash program
is likely to lead to food spoilage, food use without any noticeable foreign policy effects, and even the situation where food no longer is considered a positive asset in the receiving country. Here, too, the path is
narrow between too much and too little, with the errors of too much
appearing to be much more costly to American prestige and goodwill.
-
--
Interrelation of Goals
A final problem for the American people is to interrelate these
three goals and, perhaps, thus to determine which should receive the
greatest stress or highest priority. Should programs to improve nutrition be pressed as far as possible even when the foreign policy benefits are neutral or even negative? Should food aid be based primarily
on criteria which provide a maximum rate of development? Or, should
each sale or donation, large or small, pass the test that it furthers
American foreign policy? Not all shipments will do all three things
at the same time; some will contribute only to one of these goals, or
even possibly only to the U. S. related goal of reducing storage stocks
and storage costs, and thereby furthering the interests of domestic
agriculture.
Nutritionally speaking, there is a vast potential for food exports,
though the commodity composition should be modified. In terms of
development the potential is closely related to perhaps about a one to
five ratio of food aid to dollar foreign aid, with substantial variations
between countries and the amount of nondollar foreign aid, available.
A wider range of commodities to send would provide a somewhat larger
scope for food aid. In terms of implementing foreign policy the standards are less clear, partly because the losses in some countries must be
102
ARIZONA AGRIC. EXPERIMENT STATION TECH. BULLETIN 750
measured against the gains in good will in others, and partly because the
positive benefits of a foreign policy are hard to measure in any case.
If improved world nutrition now, with little concern for the future, is
to be an overriding priority, the limits to PL 480 are technical and physical, imposed by dock, marketing, storage, and distribution facilities. If
other goals are considered more important, then skillful and judicious
programming is required, based upon careful current studies in individual countries. The aid programs for each recipient country need to
be carefully related to their own development programs and to assist
their own agriculture in becoming more productive.
The authors believe that the latter approach should dominate. This
implies that U. S. agricultural programs should consist of a combination
of policies and programs, including some production controls, some off farm migration, some use of the price and marketing system to discourage
or shift production, some domestic disposal programs, and some productive use of surpluses abroad through special export programs. No single,
simple answer is likely to solve the surplus program.
U. S. AGRICULTURAL EXPORT SURPLUS DISPOSAL POLICY
103
BIBLIOGRAPHY ON THE EXPORT OF SURPLUSES
The materials available on this subject are published in a wide ranging group of journals and publications. The following list is an
attempt to bring these together in one place. The primary emphasis is
upon the operation of PL 480, though this implies materials on food and
development. References dealing mainly with agriculture's role in development are omitted.
The list has further been limited by a concentration on materials
likely to be of interest to research workers and scholars. Newspaper
stories, informational materials, etc., are omitted. Speeches are omitted
unless of special analytical interest or available in published form. In
the main, also, items in trade policy, economic development, surpluses
as such, and nutrition have been omitted unless they were specifically
related to PL 480.
BOOKS
Asher, Robert E., Grants, Loans and Local Currencies: Their Role in Foreign Aid,
Washington, The Brookings Institution, 1961. (Includes discussion of currencies generated under PL 480 and other programs.)
Benedict, Murray, and Bauer, Elizabeth, Farm Surpluses: U. S. Burden or World Asset?
Berkeley, University of California, 1960. ( Ranges from history of U. S. excess capacity to local currency problems.)
Dandekar, V. M., Use of Food Surpluses for Economic Development, India: Gokale
Institute of Politics and Economics, Publication No. 33, 1956. (An analysis
of the need for food in economic development.)
Krause, Walter, Economic Development, San Francisco, Wadsworth Publishing Company, 1961, Chapter 22, "Aid Through Agricultural Surpluses." (This chapter
is similar to his monograph published by the University of Iowa
see below.)
-
PUBLISHED JOURNALS
Agricultural Policy, Politics and the Public Interest, The Annals, September, 1960.
(Includes half a dozen articles by various authors, relevant to this bibliography.)
Brandis, Ely M., "Food for the Hungry of the World," Journal, Stanford Research Institute, Volume 5 (first quarter 1961). (Discussion of problems of surplus disposal and possible use in economic development.)
Capel, George L., "Some Implications of an Export Subsidy," Journal of Farm Economics, Volume 39 (December, 1957) ( Theoretical discussion of subject.)
Clark, John M., "U. S. Surplus Disposals," Quarterly Review of Agricultural Economics (January, 1956 )
Cochrane, Willard W., "Farm Technology, Foreign Surplus Disposal and Domestic
Supply Control," Journal of Farm Economics, Volume 41 (December, 1959).
Davis, John H., "Agricultural Surpluses and Foreign Aid," American Economic Review,
Volume 44 (May, 1959). (Suggestions on how surplus disposal can be of
greater assistance to economic development.)
"Surplus Disposal as a Tool for World Development Objectives and
Accomplishments," Journal of Farm Economics, Volume 40 (December,
1958). (Similar topic.)
Davis, Joseph S., "Food for Peace," Food Research Institute Studies, Volume 1 (May,
1960), pp. 135 -150. (A review of limitations to the Food for Peace Program
especially valuable section on barter.)
.
.
-
-
104
ARIZONA AGRIC. EXPERIMENT STATION TECH. BULLETIN 150
Dietz, George J., "Developing Foreign Markets Through Local Currency Projects,"
Journal of Farm Economics, Volume 39 ( December, 1957).
Ezekiel, Mordecai, "Proposed New Directions in World Agriculture Policy," Journal of
Farm Economics, Volume 36 ( August, 1954) . ( Review of FAO problems
with a discussion of food and development.)
"Apparent Results in Using Surplus Food for Financing Economic Development," Journal of Farm Economics, Volume 40 ( November, 1958) . ( Reports
on some studies in recipient countries.)
"Impact and Implications of Foreign Surplus Disposal on Developed Economies and Foreign Competitors: The International Perspective," Journal of
Farm Economics, Volume 42 ( December, 1960 ). (A presentation of the international perspective of surplus disposal.)
Farnsworth, Helen C., "Imbalance in the World Wheat Economy," Journal of Political
Economy, Volume 66, No. 1 (February, 1958). (An analysis of the current
imbalance of the world wheat economy and the prospects of changes in population, wheat production and per capita consumption to solve it.)
"American Wheat Exports, Policies, and Prospects," Food Research Institute Studies, Volume 1 ( May, 1960 ). ( Comprehensive review of American
wheat programs and problems of the past eight years.)
Fisher, Franklin M., "A Proposal for the Distribution Abroad of the United States' Food
Surplus," The Review of Economics and Statistics, Volume XLIV ( February,
1962). (A proposal to expand the Food for Peace Program in such a way
that the food export markets of friendly nations are not damaged.)
Fraser, Gordon O., "Discussion: Developing Foreign Markets Through Local Currency
Projects," Journal of Farm Economics, Volume 39 (December, 1957), No. 5.
( Discussion of Dietz paper.)
Hillman, Jimmye S., "Impact and Problems in Administration of Export Programs,"
Journal of Farm Economics, Volume 37 ( February, 1955)
"Can Food for Peace Solve Our Farm Surplus Problem ?" Farm Policy
Forum, Volume 14, No. 2, Iowa State University Press, 1961-62.
Johnston, Bruce F., "Farm Surpluses and Foreign Policy," World Politics, Volume X,
No. 1 (October, 1957).
Johnson, D. Gale, "Discussion: Agricultural Trade and U. S. Foreign Policy," Journal
of Farm Economics, Volume 39 (December, 1957), No. 5. (Discussion of
Soth's paper.)
Kristjanson, R. L., "Discussion: Impact of Surplus Disposal on Foreign Competitors
and the International Perspective on Surplus Disposal," Journal of Farm Economics, Volume XLII (December, 1960) . (Discussion of Mortensen and
Ezekiel papers.)
Kust, Matthew J., "Economic Development and Agricultural Surpluses," Foreign Affairs,
Volume XXXV, No. 1 (October, 1960). (Argues that the world's surpluses
can all be used for economic development. Fails to separate price and international commodity stabilization from surplus disposal and development. Proposes a commodity exchange union.)
Martin, Joe A., "Surplus Export Policy and Domestic Farm Policy," Journal of Farm
Economics, Volume 39 (December, 1957). (Consideration of inconsistencies.)
Mason, Edward S., "Foreign Money We Can't Spend," Atlantic, Volume CCV (May,
1960) .
Mortensen, Erik., "Impact and Implications of Foreign Surplus Disposal on Developed
Economies and Foreign Competitors
The Competitor's Perspective," Journal of Farm Economics, Volume XLII (December, 1960). (Surplus disposal
as viewed by a competitor nation - -- Denmark )
Myers, Max, "Discussion: Impact and Implications of Foreign Surplus Disposal on
Developed Economies and Foreign Competitors," Journal of Farm Economics,
Volume XLII (December, 1960). (Review of Ezekiel, Mortensen papers.)
Olson, R. O., "Discussion: Impact and Implications of Foreign Surplus Disposal on
Underdeveloped Economies," Journal of Farm Economics, Volume XLII
(December, 1960). (Discussion of Schultz's and Sen's papers.)
Schultz, Theodore W., "Impact and Implications of Foreign Surplus Disposal on Underdeveloped Economies: Value of U. S. Farm Surpluses to Underdeveloped
Countries," Journal of Farm Economics, Volume 42, No. 5 (December, 1960).
(An analysis of the real value of surpluses to underdeveloped countries.)
-
.
-
U. S. AGRICULTURAL EXPORT
SURPLUS DISPOSAL POLICY
105
Sen, S. R., "Impact and Implications of Foreign Surplus Disposal on Underdeveloped
Economies
The Indian Perspective," Journal of Farm Economics, Volume
42, No. 5 ( December, 1960) . (The use of surpluses from the point -of -view
of the recipient countries.)
Stern, Robert M., "Agricultural Surplus Disposal as a Means of Financing Economic
Development," Economica Internazionale ( November, 1959).
"The Regional Pattern of World Food Imports and Exports," Weltwirtschaf tliches Archive, Hamburg, Band 83 (Ileft 2, 1959) .
"Agricultural Surplus Disposal and United States Economic Policies,"
World Politics, Volume XII, No. 3 (April, 1960).
Swerling, Boris, "Some Interrelationships Between Agricultural Trade and Economic
Development," Kyklos, Volume XIV, Fasc. 3 (1961).
"The Role and Character of Foreign Aid
Discussion," American Economic Review, Papers and Proceedings, Volume XLIX (May, 1959). (Discussion of Davis' paper.)
Viner, Jacob., "Economic Foreign Policy on the New Frontier," Foreign Affairs, Volume 39, No. 4 ( July, 1961) . (Discussion of food for development, and implications of wages in kind.)
West, Quentin, "Use of Surplus Agricultural Commodities in the Economic Development of the Far East," Journal of Farm Economics, Volume 41 ( December,
1959). (Ways in which surplus food can assist food and foreign exchange
deficits.)
Witt, Lawrence, "Discussion: Impact and Implications of Foreign Surplus Disposal on
Underdeveloped Economies," Journal of Farm Economics, Volume XLII (December, 1960) . (Discussion of Schultz's and Sen's papers.)
-
SEPARATELY PUBLISHED REPORTS
These are printed reports, nongovernment, something like experiment
station bulletins.
Attiga, Ali Ahmed. Opportunities and Problems of Using United States Surplus Food
to Increase Capital Formation in Underdeveloped Countries, Agricultural Economics Pamphlet 103, Agricultural Experiment Station, South Dakota State
College, Brookings, August, 1959. ( An analysis of how surplus food can provide a means for accelerating capital formation.)
Brown, Aubrey J., and Rudd, Robert W. The Market Potential for U. S. Tobaccos
and Tobacco Products to Spain, Kentucky Agricultural Experiment Station,
Bulletin 656, University of Kentucky, Lexington, February, 1958. ( Description of the factors that determine tobacco sales to Spain.)
Canadian- American Committee. Towards a Solution of Our Wheat Surplus Problems,
October, 1959. (A report describing the dimensions of the surpluses, the factors that contribute to their development and the problems they have bred.)
(Sponsored by National Planning Association and the Private Planning
Association of Canada.) Wheat Surpluses and the U. S. Barter Program,
March, 1960.
Conference on Economic Progress. Food and Freedom, October, 1960. (A look at the
"American farm problem" in the international context. Value loaded.)
Crawford, J. G. "Using Surpluses for Economic Development," a paper presented at
the 11th International Conference of Agricultural Economists, Cuernavaca,
Mexico, August 16, 1961, mimeo. (To be published, Proceedings of the International Conference.)
Foster, Phillips, and Witt, Lawrence. Part 5: Problems of the Effective Use of Agricultural Surpluses in the Maintenance of Peace, The Institute for International
Order, 11 West 42nd Street, New York, September, 1960. ( Six hypotheses are
suggested and each is considered in light of research needs and the state of
research.)
Ginor, F. Analysis and Assessment of the Economic Effect of the U. S. Public Law 480
Title I Program in Israel, Bank of Israel, Tel -Aviv, October, 1961.
Hamilton, W. E., and Drummond, W. M. Wheat Surpluses and Their Impact on Canada- United States Relations, Canadian- American Committee sponsored by
National Planning Association and Private Planning Association of Canada,
106
ARIZONA AGRIC. EXPERIMENT STATION TECH. BULLETIN 150
( A study of the importance of wheat to both countries and measures
used by both to expand exports.)
Hardin, Lowell S., and Hesser, Leon F. Development of Markets for Agricultural
Products in Japan, Agricultural Experiment Station, Purdue University, Lafayette, Indiana, November, 1960. (A study of the historic and prospective
effectiveness of agricultural market development projects in Japan. )
Hillman, Jímmye S. "Agricultural Surplus Disposal
Case Study: Brazil," Proceedings of the Western Farm Economics Association, Pullman, Washington,
1959.
-A
1958.
loanes, Raymond. "A Review of Policies to Expand the Demand for Farm Products,"
paper presented at the Second Annual Farm Policy Review Conference, November 29, 1961, to be published by the Agricultural Policy Institute, North
Carolina State College. (A review of domestic and foreign demand expansion
prospects.)
"What We Are Doing About Farm Surpluses," Farm Surpluses, Missouri
Experiment Station Bulletin 666, January, 1956. (An early review of PL 480.)
Jesness, O. B. "American Agriculture and Foreign Economic Policy," The American
Assembly, United States Agriculture: Perspectives and Prospects, 1955. ( A
statement of the conflicts of agricultural and foreign policy together with possible alternatives.)
Krause, Walter. American Agricultural Surpluses and Foreign Economic Development,
Studies in Business and Economics, New Series No. 8, Bureau of Business and
Economic Research, College of Business Administration, State University of
Iowa, Iowa City, 1960. ( A description of U. S. disposal programs, their pro's
and con's and possible alternatives.)
Latin American Trade Mission of Agricultural Extension Specialists, April 19 to May 26,
1960. (An impressionistic study of the requirements for long -range market
development as well as observations on immediate trade issues between the
United States and Latin. America. Mission was sponsored by USDA -FAS. )
Learn, Elmer W., and Houck, James P., Jr. An Evaluation of Market Development
Projects in West Germany, University of Minnesota, Agricultural Experiment
Station, Bulletin 455, June, 1961. ( Evaluation of market development in
terms of economics, administration, and market techniques.)
Leibfried, James L. A Search for Rules for International Wheat Surplus Disposal,
August, 1959, Economics Department, Agricultural Experiment Station, South
Dakota State College, Brookings. (An attempt to establish a basic rule for
determining the level of commercial wheat imports by underdeveloped countries in addition to concessional purchases and rules for exporting countries
supplying wheat on concessional terms.)
Miksell, Raymond F. Agricultural Surpluses and Export Policy, Washington: The
American Enterprise Association, Inc., February, 1958. (A description of the
pricing problem in domestic agriculture and its impact upon agricultural exports, critical.)
Myers, Max, and Palmby, Clarence. "Export and Import Programs as Related to Domestic Price and Income Policies: A Situation Paper," Price and Income Policies,
Iowa State University, CAEA Report No. 7, December, 1960. (A review of
PL 480 and other export programs.)
National Planning Association. Using American Agricultural Surpluses Abroad, Planning Pamphlet No. 91, May, 1955.
Olson, Russell. "Export and Import Programs as Related to Domestic Price and Income
Policies: An Appraisal," Price and Income Policies, Iowa State University,
CAEA Report No. 7, December, 1960. (A review of Myer -Palmby paper
and of general farm trade policies.)
Raushenbush, Stephen. Not Too Much Food, Public Affairs Institute, 1959. (A program
for linking farm surpluses to the world's needs of progress and peace. )
South Dakota State College. International Wheat Surplus Utilization Conference Proceedings, Brookings, South Dakota, May, 1959. (A series of papers focused on
ways to better use wheat abroad for development and nutrition.)
Swerling, Boris. Agriculture and Recent Economic Conditions: Experience and Perspective, Federal Reserve Bank of San Francisco, August, 1959 (esp. Chapter
III). ( Chapter III is a review of domestic and foreign developments related
to farm markets.)
Waugh, Frederick V. Managing Farm Surpluses, National Planning Association, Pamphlet No. 117, Washington, D. C., April, 1962.
Witt, Lawrence. Appraisal Policies to Expand the Demand for Farm Products. Paper
presented at the Second Annual Farm Policy Review Conference, November
-
U. S.
AGRICULTURAL EXPORT SURPLUS DISPOSAL POLICY
107
29, 1961, to be published by the Agricultural Policy Institute, North Carolina
State College. (A review of paper by Ray Ioanes, especially on misconceptions of local currency "sales.")
"Increasing the Foreign Demand for Farm Products," a paper presented at
the Agricultural Adjustment Center, Iowa State College, April 6, 1959. Printed
in Farm Policy Forum, Volume 13, No. 1 ( Winter) 1960 -61. (A description
of United States surplus export program, its objectives and specific individual
program impacts.)
Potentials of New Markets for Agricultural Products, to be published in
1962 as one of three supplemental papers, Committee for Economic Development. (A review of potentials of larger domestic consumption, industrial use,
and export of farm products.)
"Making Decisions on Special Export, Programs," Increasing Understanding
of Public Problems and Policies, 1961, Farm Foundation. (Discussion of governmental organization of PL 480.)
UNITED NATIONS AGENCIES
These are printed or more formal documents. There also are many
more specific reports, working papers, committee reports to which one
might turn for historical purposes.
-
United Nations, Food and Agriculture Organization
Disposal of Agricultural Surpluses, Commodity Policy Studies, No. 5 (Rome:
1954) , by Gerda Blau. (A review of various ways in which surplus problems
are handled.)
Uses of Agricultural Surpluses to Finance Economic Development in Underdeveloped Countries: A Pilot Study in India, Commodity Policy Studies, No. 6
(Rome: June, 1955) ( Sponsored by M. Ezekiel, this is the early, standard,
theoretical work.)
National Food Reserve Policies in Underdeveloped Countries, Commodity Policy
Studies No. 10 (Rome: 1958), Functions of a World Food Reserve- Scope
and Limitations.
National Food Reserve Policies in Underdeveloped Countries, Commodity Policy
Studies No. 11, 1958.
Man and Hunger, World Food Problems, No. 2 (Rome: 1957).
A Note on the Utilization of Agricultural Surpluses for Economic Development in
Japan, Economic Commission for Asia and the Far East, Agriculture Division
(Bangkok: 1958), mimeo.
Report on the FAO Principles, CCP /CSD/59/23, 22 May, 1959.
Development Through Food: A Strategy for Surplus Utilization (Rome: 1961).
(Reports prepared with respect to a U. N. sponsored food for development
program; includes report of "Committee of Experts" and Director Sen's recommendations.)
A Note on the Utilization of Agricultural Surpluses for Economic Development in
Pakistan, Economic Commission for Asia and the Far East (Bangkok: 1961).
( Similar to the earlier Japanese study, except that more attention is given to
effects on Pakistan agricultural development programs, consumption, and international trade).
.
UNITED STATES GOVERNMENT REPORTS
Excludes hearings before House and Senate committees. Also excludes most of a series of reports, generally short, prepared by FAS or
ERS, which review the program. These may be found in Foreign Agri culture, or as separate releases of four to eight pages.
Baughman, Ernest T. et al. Prospects of Foreign Disposal of Domestic Agricultural
Surpluses, a staff study, directed by the Interagency Committee on Agricultural Surplus Disposal, May, 1956. (A study to evaluate foreign disposal as
a means of solving the domestic agricultural surplus problems.)
Berenson, Robert L., Bristol, William M., and Strauss, Ralph L. Accumulation and
Administration of Local Currencies, a Special Report to James H. Smith, Jr.,
Director, International Cooperation Administration, Washington, August, 1958,
processed. (The first report dealing effectively with PL 480 local currencies.)
108
ARIZONA AGRIC. EXPERIMENT STATION TECH. BULLETIN 150
Johnson, Sherman. "The Strategy of Food Aid," Foreign Agriculture, January, 1962.
( Argues that market development and economic development are major results
of PL 480. Also points out that most of food needs must be supplied locally.)
Long, Mary E. Australia's Agricultural Production and Trade Policies Affecting U. S.
Farm Exports, USDA -ERS, Foreign Agricultural Economics Report No. 3,
December, 1961. ( Page 22 discusses competition with the U. S.)
Mason, Edward S. et al. The Problem of Excess Accumulation of U. S. -Owned Local
Currencies, findings and recommendations submitted to the Undersecretary
of State by the consultants on International Finance and Economic Problems,
April 4, 1960, Appendix I and II. (A statement of the economic and political
problems of increasing accumulation of local currencies together with recommended solutions.)
Message From the President Transmitting the 1st Through 15th Semiannual Report on
Activities of the Food for Peace Program. (A series of semiannual reports on
PL 480 operations. Each report is available six to eight weeks after June 30
and December 31.)
U. S. Bureau of the Budget, Special Analysis E, Foreign Currency Availablities and Uses,
reprint of pages 925 to 935 from the Budget of the United States Government
for the Fiscal Year ending June 30, 1961, January, 1960. (A presentation in
summary form of data on foreign currency availabilities and uses with special
emphasis upon PL 480.)
United States Congress, Subcommittee on Foreign Economic Policy of the Joint Economic Committee. Food and People, 87th Congress, 1st Session, Washington, 1961. ( Includes papers by Ralph McCabe, "Agriculture's Role in the
1960 Decade," and Louis Bean, "Closing the World's Nutritional Gap.")
United States Congress. Agricultural Surplus Disposal and Foreign Aid, 85th Congress,
1st Session, Committee Print, Paper No. 5, 1957. Prepared by National Planning Association. (Appraisal of agricultural surpluses as a form of developmental assistance; recommendations for changes.)
USDA - ERS. Europe and Asia Take Most of 1960 U. S. Agricultural Export Gains,
15, August, 1961. ( Analysis and tables on subject indiForeign
ERS
cated.)
USDA - Foreign Agricultural Service. Food Balances in Foreign Countries, Part I:
Estimates for 16 Countries of Western Europe, FAS -M -100, October, 1960;
Part II: Estimates for 12 Countries in the Far East, FAS -M -101, October,
1960; Part III: Estimates for 20 Republics of Latin America, FAS -M -104,
November, 1960; Part IV: Estimates for 28 Countries, of Africa and Western
Asia, FAS -M -108, February, 1961. (Data of supply and utilization of various commodities in different countries.)
USDA - Foreign Agricultural Service. The World Food Deficit: A First Approximation, March, 1961. (An analysis of food deficits both in terms of various
regions and food equivalents.)
USDA - FAS - ERS. The World Food Budget, 1962 and 1966, Foreign Agricultural
Economics Report No. 4, October, 1961. ( The final report of a series of
studies of nutritional deficiencies.)
USDA - FAS. Industry and Government Cooperation in Foreign Agricultural Market
Development, a task force report to the Secretary of Agriculture, June, 1961.
(Describes process of developing markets and government- industry cooperation
plus recommendations to improve activities under Section 104 (2), PL 480.)
USDA - FAS. Report of the Wheat Utilization Mission to Japan, India, Indonesia,
January, 1961.
USDA - FAS. The Role of PL 480 in India's Economic Development, November 13,
1959, also a revised 1961 edition. (A description of India's foodgrain needs
and supplies and PL 480's relationship to these needs and supplies.)
USDA - FAS. U. S. Agricultural Exports; Commodity by Country, Fiscal years 1954 -55
through 1959 -60, FATP 10 -61, March, 1961.
USDA - Graduate School. The International Age in Agriculture, published May, 1960,
USDA. (A series of lectures and seminars concerned with the relationship of
United States agriculture to world peace, technical assistance and world agricultural markets.)
-
U. S. AGRICULTURAL EXPORT SURPLUS DISPOSAL POLICY
109
United States General Accounting Office. Summary of Organization and Procedures
for the Operation and Administration of the Agricultural Trade Development
and Assistance Act of /954 (commonly known as Public Law 480), December, 1960 (three other documents have similar title, more details) . (A report
of the responsibilities and activities of the various agencies involved with the
Act as well as interagency coordination.)
Witt, Lawrence. Potentialities of Multiple -Price Plans for Improving Agricultural Trade
Relations. Policy for Commercial Agriculture, Joint Economic Committee, 80th
Congress, 1st Session, November, 1957. (Argues that we are spending many
of our farm resources without knowing the results.)
UNPUBLISHED REPORTS
This clearly is a partial list of items available to the compilers. Some
of these are in the process of being published, some are for distribution
as mimeographs
( or
were ), while others were for limited distribution.
Bachman, Kenneth L. World Food Research: Present Status and Goals in ERS, a paper
presented at the World Food Research Planning Conference, Ames, Iowa,
February, 1962.
Barletta, Nicolas Ardito, Jr. History and Analysis of the Use of U. S. Agricultural
Surplus Commodities for Foreign Aid, unpublished Master's thesis, Department of Agricultural Economics, North Carolina State College, mimeo. 1961.
Beun, Brian Dan. Policies for Subsidizing Agricultural Exports in the United States:
A Historical Critique, unpublished Master's thesis, University of Arizona, 1961.
Cochrane, Willard W. Using Our Food Surplus to Promote Economic Development
in Underdeveloped Countries, a speech delivered before the National Farm
Institute, Des Moines, February 20, 1959. ( An outline of recommendations
for making surplus disposal an asset for economic development.)
Davis, John H. Policy Considerations Pertaining to Public Law 480, report prepared
for the Department of State; mimeo 1959. ( Appraisal of the PL 480 program. )
Fischer, R. W. Building Overseas Markets for American Farm Products, speech to the
National Farm Institute at Des Moines, February 17, 1962. (As a member
of the Soybean Council, he gives attention to market development aspects of
PL 480).
Foster, Phillips. The Economics of the Use of Food in Economic Development, speech
given at the Midwest Food for Peace Conference, Lincoln, Nebraska, February
25, 1961. (Use of surplus food for economic development with examples.)
Goering, James. United States Agricultural Surplus Disposal in Colombia, unpublished
doctoral thesis, Michigan State University, 1961.
Bane or Boon to the Economy of the United States,
Heady, Earl. Food for Peace
a paper presented at the International Symposium on the Sale of Food in
World Peace, Ohio State University, April, 1962.
Kahn, A. E. Assessing the Impact of a PL 480 Program: The Case of Israel, preliminary draft of a paper, Cornell, 1961. (Advisor to an Israeli study of PL 480,
this is a draft of a proposed journal article.)
Kross, John L. Agricultural Surplus Disposal Program and Foreign Policy Case Study
in Israel, Foreign Service Institute, U. S. Department of State, June 2, 1961.
Loveday, Douglas F., and Hillman, Jimmye S. A Review of Legislation for Export
Disposal of Agricultural Surpluses, unpublished manuscript, University of
Arizona.
The Impact of Public Law 480, Title I, on the Demand Situation for U. S.
Agricultural Producers. Unpublished Master's thesis, University of Arizona,
-
1962.
Myers, Max. The Nature of Our Foreign Agricultural Product Markets Today, speech
to the Des Moines National Farm Institute, February 16, 1962. (Divides
world market into six groups ranging from commercial to donations.)
Peterson, Everett E. Australia, Friend and Ally, Industrial and Investment Market
Agricultural Competitor, University of Nebraska. (A description of the relationship between U. S. 480 wheat exports and Australia's wheat marketing.)
110
ARIZONA AGRIC. EXPERIMENT STATION TECH. BULLETIN 150
Pickrel, Luther J. A Report on Japan, an Important Trade Partner and Ally, University of Minnesota, Agricultural Extension Service, U. S. Department of Agriculture ( Tables) . (A social, political, and economic description of presentday Japan.)
Stern, Robert M. World Food Exports and United States Agricultural Policies, unpublished Ph.D. thesis, Columbia University, 1958. (A review of PL 480 and a
discussion of how disposal and development may be simultaneously aided.
Surpluses should be used for additional consumption and additional foreign
aid.)
Witt, Lawrence. Goal and Value Conflicts in World Food Policies, presented at Ames,
Iowa, Conference on World Food Problems, February 21, 1962. (Goal conflicts between sending and receiving nations, as well as within exporting,
competing and importing countries.)
Using Farm Products in Foreign Aid, speech to the Des Moines National
Farm Institute, February 16, 1962. (Misconceptions, need for food in development, need for local farm people to participate in development.)
U. S.
AGRICULTURAL EXPORT SURPLUS DISPOSAL POLICY
111
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