284. Briefing Memorandum From the Deputy Assistant Secretary of State for International Finance and Development (Boeker) to Secretary of State Kissinger 1

Grain Reserves: Main Issues

You asked this morning for a summary analysis of the main issues in developing a US position on a grain reserves arrangement prior to [Page 982]the meeting of ten major importers and exporters we have called in London February 10–11.2

The central issue is a choice between an arrangement based upon:

  • consultation to reach a consensus on measures for implementing stock accumulation and decumulation guidelines, or
  • commitments that would assure participants preferential access to supplies in times of shortage and impose reciprocal obligations prohibiting subsidized exports in times of surplus.

Agriculture supports only guidelines and consultation. State, joined by Treasury and STR, supports firm commitments. OMB, CEA and CIEP are ambivalent but leaning toward the USDA position.

We believe that an essentially hortatory approach will not meet the food security problem. Those who can afford to purchase their requirements, e.g., Japan and the USSR, have no motive to bear the cost of stocks so long as the US market is open to them. The USSR accounts for 80 per cent of the deviations from trend in wheat imports—its large and erratic import requirements are the main source of price/supply disruptions. Without US commitment to an arrangement that includes rules for preferential allocation of supplies among participants, the Soviets would have little incentive to bear the costs of stocking reserves. Without Soviet participation a reserves scheme is severely limited in the protection it can offer.

In any reserves arrangement, the United States has only one inducement or concession to offer—improved assurance of access to US stocks in periods of shortage. In return, the United States seeks equitable distribution of the burden of carrying world grain stocks between exporters and importers with special provisions for large LDC importers such as India and Egypt. We also ought to obtain reciprocal assurances from other exporters, expecially the EC, of prohibitions on subsidized exports during periods of sustained surplus.

Agriculture argues that only a consultative arrangement is negotiable now. In its view, negotiation of commitments by others would be extremely difficult and commitments by the United States would be unacceptable to the US agricultural sector, as represented by the American Farm Bureau Federation.

Countering Agriculture’s domestic political point are the positions of some Congressional figures such as Senator Humphrey, who recently [Page 983]told Tom Enders that he continues to strongly support reserve commitments and believes that support in Congress for this view is growing.

Secondary Issues. At the working level, the issues of the size of a reserve and whether government stocks are required have been set aside for the time being. We have agreement that a stock of up to 60 million tons is needed—but USDA and OMB lean toward 45 million tons. We are satisfied there is an adequate legal basis for either government-owned stocks or government-induced private stocks to meet a US reserve commitment. Both of these issues can be resolved more readily after the choice between consultation or commitment in a reserves arrangement is made.

Next Steps. The IFRG Working Group will meet tomorrow to complete an issues/options paper for consideration at a Cabinet-level meeting you may wish to chair early next week. (Butz will be unavailable until Monday, February 3.)

  1. Source: Ford Library, National Security Adviser, Presidential Agency Files, Box 17, State Department, 10/5/74–9/30/75. Secret. Sent through Robinson. Drafted by Placke. Neither Paul Boeker nor Robinson initialed the memorandum. Attached is a January 30 memorandum from Davis to McFarlane that notes: "Bob Hormats has no objection to the Grain Reserves paper."
  2. Kissinger requested the paper at a Department of State staff meeting that morning. The minutes of the meeting are in the National Archives, RG 59, Transcripts of Secretary of State Kissinger’s Staff Meetings, 1973–1977, Entry 5177, Box 6, Secretary’s Staff Meeting, January 27, 1975. Telegrams 2147 and 2163 from London, both February 11, report on the ad hoc grain reserves meeting. (Ibid., Central Foreign Policy Files)