Foreign Relations of the United States, 1964–1968, Volume IX, International Development and Economic Defense Policy; Commodities

131. Telegram From the Mission to the Organization for Economic Cooperation and Development to the Department of State¹

Paris, November 25, 1966, 2130Z.

8005. CEDTO. Subject: OECD Ministerial Meeting, November 24–25—Development aid problems. Friday morning’s session² of Ministerial devoted to development aid with primary emphasis on world food problem. Abiding DAC preoccupations, volume and terms, also frequently mentioned, but mainly in passing. Clear indication that more converts being won to doctrine that self-help performance essential to development process and several testimonials to desirability of international organizations as aid channels. French made customary plea for market organization as most effective contribution to development process. U.S. proposed OECD study fund to stimulate agricultural development by guaranteeing investment and subsidizing interest rate in agriculture-related projects in LDCs. General reaction to proposal implied need further study but not unsympathetic.

Following is summary of principal points made by speakers during course of discussion:

1. SecGen (Kristensen). A. Pointing out there has been no real increase in assistance since 1961. Kristensen suggested that explanation lies both in LDC’s and OECD member countries. LDC record far from perfect both in planning and execution and had provided justification for critics of aid. Aid programs of number of member countries are new, and not yet established element of economic policy. Some donors tended to consider aid simply as means for promoting exports. Moreover, in period of general full employment pressure on resources, and budgetary stringency lack of priority accorded and frequently resulted in severe cuts.

B. Turning to problem of food he pointed to fundamental change which had occurred in past generation. Regions which had been net exporters of food before war are now net importers and need for imports likely to increase. Seriousness of problem concealed in past by existence of substantial surplus stocks in some developed countries, but these stocks now drawn down and growing requirements of LDCs will have to be supplied out of current production.

C. Increasing food demand should improve position of agriculture in developed countries, and permit progressive reduction of agricultural subsidies these countries. But increasing needs of LDCs can be met only partially on commercial basis; part must be met by aid. This raises problem, since only relatively small number of countries have exportable surplus of food production, and should be considered in general context equitable sharing of aid burden.

D. Kristensen referred to Faure³ suggestion at Agricultural Ministerial⁴ that possibilities of expanding agricultural production in developed countries with view to increasing exports to LDCs should be considered. He said this matter now under study.

E. Kristensen stated also that population is integral part of total problem, that useful development center study of problem had just been published and that matter would require further consideration.

F. Summarizing OECD role in development process he emphasized following points:

i) Organization should keep aid policies of member countries under review;

ii) Organization should give particular attention to need for increased contributions of technical assistance, which in many cases was more important than capital assistance, and which was especially needed in field of agriculture. In agriculture, research particularly important and there are great needs for adaptive research which can be carried on only within LDCs;

iii) OECD could do much to help make science the driving force in LDCs it had become in member countries;

iv) Increased attention should be given to contribution private investment can make to development. Foreign investment also can contribute technical assistance and DAC and BIAC are cooperating in assessing nature and scope of TA provided by private firms.

2. U.S. (Rostow). A. Under Secretary stated that evolution of OECD agenda reflects changing pattern world policies and economics. Initial preoccupation of organization with Europe but concern has widened as time passed. Development assistance a key current issue, and U.S. sees several areas for urgent DAC attention this field: a) world food problem; b) self-help performance standards, and c) growing burden of indebtedness of developing countries. Re world food problem Under Secretary suggested that OECD members collectively mark twentieth anniversary Marshall Plan and provide tangible evidence desire help developing countries by establishing fund to simulate agricultural development in LDCs. Object would be to encourage investment in agriculture and related industries in LDCs. Means would be to guarantee approved investments in agricultural and agriculture-related projects. Results would be to stimulate with limited public resources a maximum flow of private capital to critical agricultural sector LDCs.

B. Under Secretary also suggested time had come for further DAC work on self-help performance questions.

C. On debt problem, asked for further study looking to means of forestalling impending debt crises, and for further increase in volume of aid and improvement of terms to increase net transfers to LDCs. He called for support of IDA replenishment. (Full text Rostow statement cabled separately.)⁵

3. U.S. (Schnittker). A. Under Secretary Schnittker outlined gravity of world food problem and focussed specifically on immediate Indian situation where acute crisis looms again. He called on OECD countries to begin at once to mobilize resources, food, cash, equipment, and medicines, which would be needed. He stated that India’s emergency reminds us that longer-term world food problem calls for action now.

B. Action Required: i) Food aid to meet famine crises and to provide time for developing countries to improve their agricultural performance; ii) a substantial increase in agricultural productivity in LDCs. More important way to accomplish this is through agricultural inputs, principally fertilizer. OECD members can help by providing inputs and technical assistance needed to make their use effective. Wherever economically justifiable, facilities to produce these inputs should be constructed in LDCs.

C. Under Secretary pointed out that progress in increasing agricultural productivity required cooperative effort between aid donors and recipients; that donors and recipients must understand each other. DAC work would benefit from exchanges with LDCs at profressional level. He suggested that purpose might be served in this area, and on a range of problems of concern to DAC by closer working relations between DAC and development center, with development center serving as channel of communication with developing world. (Full text Schnittker statement cabled separately.)⁶

4. Italy (Zagari). A. While conceding importance of food problem, Zagari emphasized necessity of viewing development in global perspective. He advocated global strategy for development and suggested OECD members agree to stress: i) increased channelling of aid through international organizations; ii) increased effort to utilize science to accelerate economic development; iii) increased attention to principles of burden-sharing among donor countries, with appropriate consideration of economic capacity and principle of progressivity.

5. France (Debre). A. French Minister stressed moral and human-itarian aspects aid and need for sincerity both with ourselves and LDCs. Made three points: 1) Time has come to recognize can only help others if prepared make sacrifices and give up something ourselves. LDCs also obliged to make sacrifices, must give up old habits and traditions if are to achieve necessary increases in savings, agricultural production, 2) Inaccurate to talk of “developing countries” in generic sense; actually three categories: a) those where immediate problem is one of sheer existence; b) those where food problem not basic, and question one of overall development (i.e., mainly Africa); and c) those which are not too far behind OECD countries where problem is one of accelerating process already underway (i.e., those of European continent and LA). For each, problems very different, requiring different approaches and types assistance. (Presentation these neat categories somewhat unbalanced by extended invocation of favored French remedy—organization of markets. This followed familiar line, with perhaps somewhat more than customary emphasis on its “realism” and uniqueness as effective treatment of problems of category B countries.) 3) AID, however, is intellectual problem with thread of common need in fields education and training, particularly vocational training; also medicine and health. Agreed with SecGen and U.S. problem of aid likely be more important and increasingly complex in future; saw this as underscoring repeated French appeals for realistic assessment requirements and steps to meet long-range needs. Concluding, Debre expressed view Organization should take certain initiatives now in three areas: increase agricultural production, organize commodity markets, and increase industrialization countries category C. French Government prepared give fullest support efforts along these lines.

6. Canada (Winters). A. Canadian Minister coupled recognition of need for increased effort and more aid with requirement for softer terms, better planning and coordination, and improved performance part of LDCs ensure most effective uses of resources. Suggested desirability establishing criteria to measure extent to which aid has contributed to economic development as one means better convincing public of utility of aid.

B. On agriculture, felt long-term solution required immediate intensified efforts increase food production in LDCs, combined with appropriate policies maintain balance between population growth and food supplies. Saw role of DAC as encouraging adequate responses both donors and recipients; role for both multilateral and bilateral programs, and expressed hope Bank, FAO and UNDP would make their experience this field available to both developing and donor nations. Canada prepared to increase own contributions in food and agriculture field even in face this entailing some diversion Canadian resources which might otherwise be utilized in expanding other forms aid. He spoke of importance of wheat sales to Canadian economy and balance of payments, pointing out that to give wheat as aid was only possible if Canada foregoes sale. He thought that food aid should not be sole responsibility of those few countries which were food exporters.

C. Canadian Del. referred also to mounting debt burden as acute problem of increasing gravity and having immediate relevance to broaden issue of promoting economic development. Noted problem of diversities in aid terms among donors, and urged continuance DAC efforts arrive at some basic criteria for harmonization of terms.

D. Finally, Winters commented economic aid alone will not close gap between available resources and requirements; expansion export trade developing countries equally essential. In this context, noted one of key problems trade field is chronic short-term fluctuations in prices tropical commodities such as sugar, cocoa and coffee. Canada, a large importer tropical products, cooperating in efforts to stabilize prices; saw successful completion KR as important step this regard.

7. Switzerland (Schaffner)—Swiss Del. focused on need for OECD work out priorities development plan. Suggested as priorities 1) development agricultural production; 2) development industries based on agriculture; and 3) regional cooperation and integration. In support this thesis, commented any examination conscience would prove results our efforts thus far both aid and trade fields modest indeed; noted, for example, problem of preferences discussed in OECD and other forums for many years, with little more than psychological benefits. After KR we will have to see what more can be done for LDCs. LDCs wrong to develop manufacturing industries for sales on markets industrialized countries; should consider possibilities of regional cooperation and integration among themselves, with view to practicing on each other before trying to compete on harder markets. Expressed fear industrialization in LDCs present time too closely linked to prestige; should concentrate on production food and food supplies. In concluding remark, Swiss Del. announced Switzerland would become member Greek consortium.

8. United Kingdom (Abie)—In unilluminating statement, British Del. recorded U.K. full acceptance OECD objectives on aid, welcomed DAC res. last July to concentrate on AARs and preparations UNCTAD II, noted aid established part British foreign policy for long time, agreed one most important aspect food problem is assist LDCs increase own agricultural production. He expressed interest in U.S. proposal for fund, noting particularly prospects thereby subsidizing interest rates. Noted also U.K. support IDA replenishment on high level. Agreed with Debre donor nations have moral obligation to narrow the gap, and some sacrifices necessary. Agreed also with French Del’s categories of countries, but warned against being too rigid; felt we had suffered in the past from too many illusions about rate of development and forms of aid which could be most effective.

9. Germany (Lahr)—German Del. agreed with SecGen there yet much to do, but did not feel results efforts so far disappointing. Noted $10 billion flow last year and qualitative improvements; primary need is for LDCs make more effort help themselves. Opposed any formal link between aid flows and requirements, and any tendency focus exclusively on public aid. Important to increase private flows, and in this connection stressed need for OECD move ahead on multilateral convention for protection private property striving have it adopted by as large number countries as possible. On agriculture, Germany in complete accord with initiatives being undertaken OECD; 40 percent German aid now devoted agricultural development and food; intention is to increase aid this sector.

10. Australia (Walker)—Australian Del., noting concern re effects population growth on food and agriculture problem, stressed implications demographic trends for capital requirements in future. Noted impact population growth on capital investment needs in turn will have marked impact on political structure of world, problem very acutely felt in SEAsia. Commented GOA very concerned over political orientation neighboring Indonesia, and not certain whether arrangements for rescheduling Indonesian debt will meet political exigencies facing country. On debt problem generally, GOA of view aid should be more in form of grants; noted in light encouraging trends incomes and production OECD countries would seem they could afford be more liberal this direction. Felt sustained effort relate terms to needs LDCs required. On food problem, noted all countries not similarly affected. Australia being food exporter very much aware relatedness trade and aid; in KR had stressed need for considering together since in GOA view problem cannot be solved unless reasonable prices available to agricultural producers assured. In final comment, said IDA replenishment early on government agenda after elections.

11. The Netherlands (Bot)—Dutch Del. repeated recommendation made at HLM that consortia and CGS should pay particular attention to agricultural development. Re U.S. proposal for agricultural development fund, showed some doubt re desirability of another fund; objective should be to assure limited resources are used in most effective manner possible. Agreed with U.S. on continuation work of special group on preferences with prospect developing proposals for Ministerial consideration next July. Finally, in keeping with SecGen’s statement that development aid should be integral part of foreign policy all member nations, called for Council review all activities of organization from standpoint their merits for development assistance.

12. Japan—Noted Japan has for some time stressed importance food production, and has been helping LDCs SEA through technical assistance, training and extension activities. GOJ would continue make food aid available those LDCs in need, while at same time helping them improve production. Commented all participating countries at conference Asian countries in Tokyo last April had agreed on importance role agriculture in economic development and urgent need improving production; as followup agricultural experts to meet in Tokyo December 6–7 consider ways improving rice production. Efforts underway also promote regional cooperation in agricultural production.

13. Austria—stressed importance providing aid on terms and conditions most conducive to effective use resources in LDCs; noted vast needs developing countries frequently lead them accept conditions too onerous to handle, and suggested OECD could do more in direction amelioration terms. Stressed also importance private sector flows, and suggested OECD move more deeply into this aspect aid. Noting Agriculture Ministers’ decision set up study group consider optimum development agricultural production member OECD countries, suggested should be pilot projects and series similar undertakings designed assist LDCs.

14. Ireland (O’Colla)—expressed agreement OECD undertaking to study and act with FAO on food and agriculture problem; agreed also on need for LDCs improve own agricultural production. Made point that Ireland’s own experience with pilot project in Tanzania proved it not easy to transfer agricultural techniques developed countries to LDCs. Saw important role for OECD, possibly through development center research, examine what further could be done to adapt modern agricultural techniques to particular problems and situations LDCs.

15. Norway—After noting Norway prepared cooperate other donor nations in giving assistance particular aspects agricultural production, e.g., fertilizer production and for development agriculture and fisheries, seized opportunity to raise once more “tied aid” perennial; pointed out some countries who practice tied aid policy would any event receive largest portion export orders if aid were untied. Finally, identified GON with Swiss suggestion OECD undertake study various parts of organization to determine extent to which they really focused on most essential aspects development assistance.

Trezise

1. Source: Department of State, Central Files, OECD 3. Limited Official Use. Repeated to the NATO capitals, (Brussels for USEC and Geneva for GATT), Belgrade, Bern, Dublin, the Mission in Geneva, Madrid, Stockholm, Tokyo, Vienna, and Helsinki.
2. November 25.
3. Edgar Faure, French Minister of Agriculture.
4. Reference is to a meeting of the OECD Ministers of Agriculture in October.
5. Text in telegram 7999 from Paris, November 25. (Department of State, Central Files, OECD 3)
6. Not found.