Foreign Relations of the United States, 1969–1976, Volume XXXI, Foreign Economic Policy, 1973–1976

262. Record of a Meeting of the Council on International Economic Policy Senior Review Group¹

Washington, August 23, 1974.

MEMORANDUM FOR

• Edwin M. Martin
• Thomas O. Enders
• Department of State
• Charles H. Cooper
• Howard Worthington
• Department of the Treasury
• Clayton K. Yeutter
• Don Paarlberg
• Richard E. Bell
• Department of Agriculture
• Frederick B. Dent
• Lawrence A. Fox
• Robert S. Milligan
• Department of Commerce
• Gary Seevers
• Council of Economic Advisers
• B. A. Bridgewater
• Phil DuSault
• Office of Management and Budget
• Harald B. Malmgren
• Office of the Special Representative for Trade Negotiations
• Roger E. Shields
• Department of Defense
• Daniel Parker
• Phil Birnbaum
• Agency for International Development

SUBJECT

• Council on International Economic Policy (CIEP) Senior Review Group Decisions on the Dairy Issue and the World Food Conference

At the CIEP Senior Review Group meeting of August 23, 1974, the following decisions were taken:

[Omitted here is discussion unrelated to the World Food Conference.]

II. World Food Conference

A. Reserves

The U.S. will suggest for purposes of encouraging discussion and comment, but not as a negotiating proposal, that consideration be given to an international system of grain reserves in the range of 30 to 60 million metric tons above world-wide working stocks. The SRG agreed that the reserves should be over and above working stocks, that the targets for countries should be based on a combination of reserves and working stocks, that the targets should be calculated as a total of all grains, and that rice should be included in the definition of grains.

B. Burden Sharing

It was agreed for present purposes that a combination of three criteria should be used in discussing how the burden of sharing reserves should be distributed. These criteria include the level of gross domestic product, the trend level of imports and exports, and the variation from trend in total grain production. It was further agreed that the export/import criteria would include a proposal that two-thirds of the reserves be held by importers and one-third by exporters. Among importers, some distinction will be made between less developed countries (LDCs) and developed countries.

The SRG authorized Ambassador Martin to present these ideas as our present thinking. He should in particular present the range of reserves and the criteria for burden sharing, not as the U.S. position, but as a plausible framework for discussion in the present economic context, without commitment to our possible positions in the future in any more firm negotiating context. Ambassador Martin is not authorized to pursue these points with greater specificity in the context of the World Food Conference. The details will be left for negotiations following the World Food Conference.

C. U.S. Government (USG) Role

It was felt that a U.S. commitment to a reserves system would be interpreted as a USG commitment to hold reserves if necessary. The SRG agreed that Ambassador Martin must make it clear in his consultations and at the World Food Conference that the USG is not commiting itself in advance to hold reserve stocks and that the U.S. reserves the right to determine how it will fulfill any reserves commitment.

D. Draft Resolution

Ambassador Martin presented a draft resolution which outlines in very general terms the U.S. thinking at this time. The draft resolution was approved in principle by the SRG, with the exception of two specific reservations and a general proviso that we should avoid undue specificity where possible. The specific reservations were:

1. STR and Treasury objected to the World Food Conference follow-up procedures as outlined in paragraph three of the resolution.

2. OMB objected to the language in paragraph 4b concerning the calculation of reserves.

Ambassador Martin agreed to resolve these differences with the agencies involved before presenting the resolution to other World Food Conference participants.

E. Future Work Schedule

Ambassador Eberle and Gary Seevers will agree on a new chairman for the working group which will focus on the following issues:

1. Reserves versus stocks analysis for burden sharing.

2. Accumulation and release criteria for stocks, including budget costs.

3. A system of sanctions to get countries to participate in the reserves system.

4. Food aid policy.

In addition, a Special Task Force of the Trade Steering Group will be established to clarify those issues which need to be negotiated further in the context of the MTN and the longer term commercial objectives of the U.S. in relation to reserves, stocks, and world food security questions generally.

Attachment

Washington, August 30, 1974.

Draft Resolution Prepared by the Secretary of State’s Senior Adviser (Martin)²

GRAIN RESERVES

1. Believing that it is intolerable that the present low level of global grain reserves has made the people of the world dependent for survival on good weather for food crops,

2. Agreeing that it is, therefore, necessary to initiate promptly the establishment of an international system of national grain reserves designed to prevent the repetition of such a situation,

3. The undersigned governments pledge to meet at an early date to initiate negotiations on

a. The location and nature of the implementing organization required by such a system;

b. International guidelines covering the responsibilities to be assumed by each participant in the creation and management of such a system;

c. The procedures to be followed in assuring effective international cooperation in the building up of reserves and the operation of the system; and

d. The relationship of the above considerations and the principles outlined below to broader negotiations on the conditions of world trade in agriculture.

4. They affirm their present agreement to conform these decisions to the following general principles:

a. The system should be operated in such a way as to safeguard the interest of the world’s people in an adequate supply of food without extreme price fluctuations having full regard to the interests of both farmers and consumers, of exporters and importers.

b. Reserves shall be designed to maintain orderly commercial grain markets and to ensure the availability of grain which donors are prepared to finance on concessional terms to needy developing countries to fill gaps between their needs (including building reserves), their production and the amounts they can afford to import commercially. To achieve these objectives general guidelines for the management of reserves shall be agreed among the participants.

c. To qualify as reserves, grain stocks must be additional to an agreed estimate of those required for the normal day-to-day workings of the food system of each country.

d. Each country shall set up and operate its own reserve system, including deciding whether or not it holds a single reserve or segregates its food aid and emergency reserves from its commercial ones.

e. The total of reserves toward which participants as a group should aim shall be based on the amounts required to compensate in major part³ for the global shortfalls in production below trend which can be expected over the next ten years in the light of the experience of the past 13 years.⁴

f. The distribution among participants of responsibility for holding stocks or reserves shall be based on some combinations of their capacity to finance the acquisition and operation of a reserve system, their responsibility for shortfalls as evidenced by past fluctuations in their grain production and their share in world grain exports or imports as the case may be.

g. Participants will review at least once each year the conformity of the reserve policy of each participant with the agreed guidelines and the way in which the policy adopted by each participant is being implemented, and the effect of the current policies of non-participating major exporters or importers on the achievement of the objectives of the reserve system.

h. For this purpose and to assist countries in planning their grain production programs, each participant will keep the designated staff organization regularly and promptly informed of any significant changes which have taken place or are expected in the size or composition of its reserves, in its grain production and consumption prospects, and in its export-import intentions.

i. Careful analysis of these data and any other available to the designated staff, such as those developed by the FAO early-warning system, shall be discussed at regular meetings of the participants as a basis for suggestions to participants on the operation of their reserve programs.

5. The undersigned governments invite any other members of the UN who wish to become participants by accepting the above obligations to do so and urge other countries that are major grain producers, importers or exporters to join them.

6. They also request the World Food Conference to express its approval of this initiative, to urge participants to build up the agreed-upon reserves expeditiously, and to encourage all countries that are major producers, exporters and importers of grains who have not yet done so to adhere to this declaration of intentions.

“Must” countries for participation would be:

• United States
• Canada
• Australia
• European Community
• Japan
• USSR
• India

“Desirable” countries would be:

• Argentina
• Brazil
• UAR
• South Korea
• Bangladesh
• Pakistan
• Indonesia
• PRC
• Poland
• East Germany
• Spain

1. Source: National Archives, RG 429, Records of the Council on International Economic Policy, 1971–1977, Box 255, Senior Review Group Meetings, 1971–1974, 53908 From W. D. Eberle Re Calls CIEP/SRG Meeting for 2 p.m. August 23, 1974 Agenda: International Grain, World Food Conference, Grain Reserve, Trade Issues and Dairy Issue Date 8/22/74. Confidential. Prepared by J.M. Dunn of the CIEP staff; revised on August 28. Background materials for this meeting are in the Ford Library, National Security Council, Institutional Files, Box 12, Senior Review Group Meeting, 8/23/74—Food Committee and CIEP.
2. No classification marking.
3. Thus keeping room for some play of market forces in adjusting demand and supply. [Footnote is in the original.]
4. This formula includes no provision for consumption above trend. [Footnote is in the original.]