288. Memorandum From Malcolm Butler of the National Security Council Staff to the President’s Deputy Assistant for National Security Affairs (Scowcroft)1

SUBJECT

  • EPB Meeting on Food Reserves Proposal, Monday, May 12, 8:30 a.m.2

The Problem

At the World Food Conference last November the Secretary announced U.S. support for an "international system of nationally-held food reserves." State and Agriculture, and to a lesser extent other agencies, have spent most of the intervening five months arguing about how the U.S. should implement this commitment. The difference between the State and Agriculture positions on an international reserves scheme is fundamental, and the inflexible positions taken so far threaten to make a meaningful U.S. initiative impossible.

Agency Positions

The State Department proposes a "tight" global system, which would require automatic responses to a given shortfall in world production. The binding international agreement would include a commitment to impose export controls, in order to prohibit exports to non-participants in a tight market. Export controls are unacceptable to the Agriculture Department, which has counter-proposed a "loose" global system in which the agreement would be to consult on further action under pre-negotiated supply conditions. Both schemes would involve reserves of 50,000–60,000 metric tons of grain. Other agencies are concerned about the economics of a global system, and have proposed a smaller "tight" system—perhaps 20,000 metric tons—which would offset production shortfalls and food price increases for the lesser developed countries.

The struggle between "tight" and "loose" global schemes has dominated inter-agency discussions, and diverted attention from analytical developments of these and other options.

The Secretary’s Speech

Until last week this debate has taken place in the working group of the International Food Review Group (IFRG). State has been drafting [Page 995]a food security speech for the Secretary including the "tight" global option. Last week the Secretary decided to give the speech in Kansas City on Tuesday, May 13, and this forced State to undertake an informal clearance process with key IFRG principals. They immediately came up against implacable opposition from Secretary Butz, who will not agree to the export controls which are basic to the tight system. State thereupon withdrew the speech and substituted a broader one on international economic independence. The section of this speech on grain reserves (Tab A), however, is equally unacceptable to Agriculture. "Priority access to reserves" is a proxy for export controls, and Agriculture has refused to clear.

EPB Meeting

A "principals only" session of the EPB meeting has been called for Monday morning, May 12, to bring this debate into the open. Enders will attempt to obtain approval of language changes which paper over the problem, Butz will argue that the "loose" system would still allow the Secretary to make a significant proposal, and OMB will make its predictable—and in this case valid—comments on lack of agreement on basic objectives. It will be clear in any case that there is no basis for committing the Secretary to a firm and specific initiative of significance.

LDC-Only Compromise

We have sketched this problem for Secretary Kissinger in earlier memos, and have suggested that a more limited system to provide food security to the LDC’s would provide the Secretary with a meaningful proposal which would meet a recognized critical need and be acceptable within the U.S. Government. Intensive work has been under way in the last few weeks on this option. CEA has developed it analytically in some detail, and OMB has included it in a re-drawn options paper which was submitted to the IFRG Working Group.3 It is not as comprehensive as a binding international agreement, but it is a valid option. It could be combined with the "loose" global reserves system, and experience which we gain could be useful in moving more confidently toward a tighter system in the future.

Recommendations

  • —The speech could stay general unless the Secretary can make a solid proposal. It makes no sense to launch an initiative which has to be buried in weak language in the middle of the speech. (Peter Rodman, who has more general problems with the current draft, strongly supports this conclusion.)
  • —The IFRG Working Group should give priority attention to an options paper to be submitted to the IFRG by Monday, May 19. This should include a fully developed LDC-only system.
  • —This should move through the NSC channel, perhaps broadened to include CIEP/EPB if necessary. (In this area, CIEP has competent staff with whom we can work.)

Attached at Tab B are talking points for your use during the meeting.4

Tab A

Paper Prepared in the Department of State Bureau of Economic and Business Affairs 5

Basic Elements of An International System of Grain Reserves

  • —Combined reserves should be large enough to meet 95% of shortfalls in production below the long-term trend.
  • —Grain exporters and importers should agree to share the responsibilities and the costs of the system, taking into account their wealth, and their production and trade in grains.
  • —Each participating country should be free to determine the method by which its reserves will be held and thus to apply such incentives as may be required for their build-up, holding and eventual draw-down.
  • —Agreed guidelines should encourage members to take advantage of good crop results to build-up reserves.
  • —The system must assure priority access to reserves and other supplies by participating countries in times of shortage.
  • —Guidelines should be agreed in advance for the draw-down of reserves, which would be triggered by short-falls in world production. While these guidelines need not be rigid, they must establish the clear presumption that all members would join in making available their reserve [Page 997]supplies when needed, and conversely, that these reserves would not be released prematurely, and thus unnecessarily depress market prices.

  1. Source: Ford Library, National Security Adviser, Presidential Subject Files, Box 6, Food (4). Confidential. Sent for action.
  2. No record of this meeting was found.
  3. Not further identified.
  4. Tab B is attached but not printed.
  5. No classification marking. Attached to a May 9 memorandum from Enders to IFRG Working Group members that reads: "Attached for your information and comment is a summary of the substantive points on grain reserves to be made in a foreign policy speech to be given by the Secretary of State at Kansas City on Tuesday, May 12 [13]."