178. Current Economic Developments0
US Policy Liberalized on Aid to Foreign Agriculture
US policy concerning aid to underdeveloped countries to be used in the production of agricultural commodities currently in world surplus has recently been moderately liberalized. This resulted from approval by the Council on Foreign Economic Policy of Department of State proposals for revisions in the ICA policy governing assistance to foreign agriculture.1
Old Policy Since 1956, ICA policy has been that the US should not in general directly assist foreign countries to increase production of surplus agriculture commodities so as to result over a reasonable period of time in increased exports or decreased imports of such commodities. While exceptions in this policy were made, the presumption was against such aid and the burden of proof of the necessity for an exception was on the initiator of such a project to increase the production of a surplus commodity. USOM’s were instructed to give the most careful consideration to this policy decision in framing their yearly projects. Any decision to support or to continue to support such an activity had to be based on a written justification, and exceptions were [Page 338] allowed only when it appeared that it was in the over-all best interests of the US. Furthermore, no such decision would be supported by the ICA until it was proved that the production of the surplus commodity would be increased on a sound economic basis for the purpose of increasing domestic consumption or maintaining domestic consumption at least at subsistence levels and that no practical means existed of increasing imports of surplus commodities from the US or other friendly exporting countries. This policy was an attempt to carry out ICA programs of assistance to agricultural development in accordance with certain principles, the purpose of which, insofar as possible, was to reconcile a conflict between US surpluses and foreign agricultural programs.
New Policy One of the basic foreign policies of the US is to support the progress of free peoples in their efforts to further their economic development and thus to strengthen their freedom. The Department believes that this policy can be implemented by a vigorous program of agricultural development to increase production capacities in underdeveloped areas and hence suggested the policy revision.
Under the revised policy, subject to normal programming procedures, US aid of any kind may be provided to a country for the purpose of increasing the production of food and feeds for domestic consumption. Such aid, however, may not be given to increase the production of surplus foods and feeds so as to result in substantially increasing exports or increasing production of surplus agricultural commodities other than food and feeds. It is the responsibility of the USOM proposing such a project to assure that the assistance to be rendered the producing country will in fact be used for production of food for domestic consumption. If it should appear, however, that such assistance will also have the direct effect of substantially increasing the production of a commodity for a purpose for which aid is not permitted under this policy, such assistance would not be extended. If, in the judgment of the USOM, it is important to the US objectives in the area to support a project of a kind not permitted under this policy, a full written justification should be referred to Washington for consideration by the Director of ICA in the light of total US interests.
Included under the term “surplus agricultural commodity” are all commodities determined by the ICA to be surplus for the purpose of the new policy. Until changed, this term will include the following commodities which have been continuously in world or US surplus: rice, sugar, wheat, vegetable oils, citrus fruits, cotton, coffee and tobacco. The term “production of commodities” means the growing, harvesting or processing of the commodity. Thus, for the purpose of the new policy, the term wheat production would include growing [Page 339] wheat and milling it into flour but not baking it into bread; and cotton production would include growing, harvesting and ginning cotton but not spinning it into textiles.
This modest liberalization of US policy constitutes an affirmative statement of the importance of assistance to foreign agriculture. It now permits aid, both technical and economic, for the production of food and feeds for domestic consumption even though food imports from the US might so be reduced. It also permits aid for the production of food and feeds even though, as a result, exports of food and feeds might be increased provided that such an increase is not substantial. It invites the USOM’s to ask for exceptions where, in their judgment, the restrictions laid down in the policy interfere with the accomplishments of US objectives in the area. The practical effect of the new policy in the absence of an exception will be: a) no aid for the production of cotton and tobacco whether for domestic consumption or for export (affected countries include Pakistan, Sudan, UAR, Brazil and some African countries); b) aid for wheat, rice, sugar, oils, coffee, citrus fruits for domestic consumption or for modest increases in exports; and c) no aid for coffee production in Africa or citrus production in Spain if the result would be substantially to increase exports; and d) no aid to Burmese, Viet-Namese, Korean, Thai, Cambodian, or Formosan rice production if the result would be substantially to increase rice exports.
This revised policy will govern all ICA aid to foreign agriculture, whether it is through the use of appropriated funds or local currency receipts from PL–480 sales. It will not, however, govern aid furnished by either the DLF or the Eximbank.
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- Source: Washington National Records Center, Current Economic Developments: FRC 72 A 6248. Confidential.↩
- The Department of State proposals were presented in CFEP 585/1, June 9 (ibid., CFEP Files: FRC 62 A 624, CFEP 585, Assistance to Agriculture Abroad), which the Council approved in principle on June 18. (Approved Minutes of the 91st Meeting of the Council on Foreign Economic Policy; Eisenhower Library, CFEP Records, Office Series, CFEP Minutes, 1959 (1)) In a July 1 memorandum, Cullen advised CFEP members that the Departments of State and Agriculture and the Council of Economic Advisers had agreed to retain the original language presented in CFEP 585/1, which thereby became policy. (Washington National Records Center, CFEP Files: FRC 62 A 624, CFEP 585, Assistance to Agriculture Abroad)↩