Foreign Relations of the United States, 1977–1980, Volume II, Human Rights and Humanitarian Affairs

243. Memorandum From Secretary of Agriculture Bergland to President Carter ¹

Washington, February 7, 1978

SUBJECT

• The Food Aid Convention

The 1971 International Wheat Agreement—consisting of the Wheat Trade Convention and the Food Aid Convention—will expire on June 30, 1978. A negotiating conference to replace this Agreement will be convened in Geneva from February 13 to March 23, 1978 under the auspices of the United Nations Conference on Trade and Development (UNCTAD).

The United States must determine its contribution to the new Food Aid Convention. Under this Convention, the U.S. and other countries commit themselves to a minimum annual quantity of food aid to developing countries for the next several years.

The 1971 Food Aid Convention is an agreement by which nine countries pledge minimum annual contributions of food aid to developing countries. Total contributions under the current Convention are 4.226 million tons of wheat and coarse grain, of which the U.S. share is 1.89 million tons² or 44.7%. As shown in Table 1,³ U.S. food aid flows have been much greater than our current FAC commitment.

During 1972–74, when grain prices were very high, the U.S. sharply reduced its food aid primarily in order to hold down budget costs and inflationary pressure. However, in these “world food crisis” years the developing countries had the greatest need for food aid. I believe that the U.S. should strive to avoid a repetition of the 1972–74 pattern. Our program of grain reserves, especially the proposed International Emergency Wheat Reserve,⁴ will help ensure that the U.S. can maintain its level of food aid even in years of high grain prices and tight supplies. By accepting a larger obligation under the new Food Aid Convention, the U.S. would commit itself internationally to do so.

At the World Food Conference of 1974 and subsequent meetings of the World Food Council and the Food and Agriculture Organization (FAO), the U.S. has endorsed a world food aid target of 10 million tons of grain per year. In the International Wheat Council discussions prior to the upcoming negotiations, the U.S. has proposed that, in accordance with this target, the new Food Aid Convention should ensure the annual availability of 10 million tons of food aid.⁵ The U.S. has emphasized that responsibility for food aid must be widely shared among donor and potential donor countries.

Recommendations

The size of the U.S. contribution to the new Food Aid Convention has been discussed by the Working Group on Food and Agricultural Policy.⁶ Based on these discussions, I am submitting three recommendations which involve progressively increasing levels of U.S. commitment to provide food aid.

First, I recommend that, at the upcoming negotiations, the U.S. should make a minimum commitment to contribute 4.47 millions tons annually under the new Food Aid Convention.

This quantity represents a U.S. share of the 10 million ton target which is equivalent to our 44.7% share of the current Convention. To commit less than this quantity would be inconsistent with our support for the 10 million ton target. In making this commitment, it would be assumed that the new Convention would allow similar financial terms for aid as the current Convention.

The budget impact of this commitment depends on grain prices. Currently programmed food aid quantities and budget outlays for FY 78 and FY 79 should be adequate to meet a commitment of 4.47 million tons under the FAC, as shown in Table 2.⁷ Of course, if grain prices rise above projected levels, this FAC commitment would require that the U.S. increase its budget outlays for food aid rather than reduce the quantity below this level. For each 10¢ per bushel increase in the price of wheat and corn, food aid costs for FY 79, which would be the first full year of the Convention, would increase by about $16 million. However, if grain prices do rise, budget outlays for farm income support now anticipated for FY 79 would fall sharply.

This recommendation has been considered by the Working Group on Food and Agricultural Policy and is concurred in by all members present.

DECISION⁸

Second, I recommend that, if useful in obtaining the contributions of other countries toward the 10 million ton target, the U.S. negotiator should be authorized to offer that the U.S. would increase its contribution above 4.47 million tons so that the U.S. share would be no less than 50% of total contributions—up to a maximum U.S. contribution of 5 million tons.

In other words, if the contributions of other countries exceed 4.47 million tons, the U.S. would match these contributions on a ton-for-ton basis until the 10 million ton target is achieved. Such a conditional offer would provide an incentive for other potential donors to increase their contributions.

In making this offer, the U.S. would first assure that its Currency Use Payments (CUPs)⁹ for certain Title I agreements would not make those agreements ineligible under the FAC. In this way, almost all of our current Title I agreements could be counted toward fulfillment of our FAC contribution, as shown in Table 2.

Currently programmed food aid quantities and budget outlays for FY 78 and FY 79 should also be adequate to meet a commitment of 5 million tons under the FAC, although the exposure to potential increases in budget costs would be correspondingly greater.

The commodity coverage of the FAC will be negotiated. If rice or other commodities are included in the FAC, it will be easier for the U.S. to meet this 5 million ton commitment, as shown in Table 2.

This recommendation has been considered by the Working Group and supported by all members present.

DECISION¹⁰

Third, I recommend that, at the upcoming negotiations, the U.S. propose a new provision for a “callable food aid commitment” which would set rules for sharing responsibility among all food aid donors for increasing food aid during periods of special need by low-income developing countries.

In times of production shortfalls, a sharp increase in food aid may be required by the poorest developing countries. Historically, the U.S. and other exporters have been expected to respond to such special needs. I believe that the new Convention should establish rules for sharing responsibility for such increased food aid.

In general, the U.S. would propose that, whenever foodgrain production in the low-income developing countries is more than an agreed percentage below trend, all donor countries would meet to consider jointly increasing food aid by up to an agreed percentage of each country’s basic contribution under the Convention. Specific guidelines for such a proposal have been developed by the Working Group on Food and Agricultural Policy.

The potential budget impact of such a proposal depends on the maximum size of the U.S. callable food aid commitment and the probability that the criteria for calling up this additional food aid would be met. I recommend that the U.S. negotiator be authorized to accept a callable food aid commitment for the U.S. up to 1.0 million tons—that is, up to 20% of 5 million tons—provided that the percentage shortfall from production trend which would trigger consideration of such additional food aid would have an estimated probability of less than one-fourth in any one year. Thus, the potential budget exposure of the U.S. would have an upper limit.

This recommendation has been considered by the Working Group and is supported by all members present.

DECISION¹¹

Bob Bergland

1. Source: Carter Library, Office of the Staff Secretary, Handwriting File, Presidential File, Box 73, 2/15/78. No classification marking. Transmitted to the President under cover of a February 14 memorandum from Eizenstat and Daft to Carter, recommending that Carter approve the negotiating positions. (Ibid.) The President appended a handwritten note in the corner of the covering memorandum: “Stu—Get max p.r. benefit. J.” A February 15 memorandum from Hutcheson to Mondale, Moore, Powell, Watson, McIntyre, Schultze, Brzezinski, and Bourne that reads: “Secretary Bergland will be informed of the President’s decision by us” and a February 15 memorandum from Hutcheson to Bergland that indicated that the President had reviewed and approved all three of Bergland’s recommendations are ibid.
2. The President underlined the phrase “1.89 million tons.”
3. Table 1, “Volume of P.L. 480 Wheat and Coarse Grains and Products Shipments, FY 1955–1979,” is attached but not printed.
4. See Document 225 and footnote 4 thereto.
5. In addition to earlier preparatory talks during the summer and early fall of 1977 (see footnote 7, Document 236), discussions took place in London November 28–30, 1977, and January 10–11, 1978. See William R. Pearce, “Groping for a New World Wheat Pact,” The New York Times, September 11, 1977, p. 126; Seth S. King, “Negotiations That Could Put U.S. in Wheat Accord Begin in London,” The New York Times, September 27, 1977, p. 79; and Louis B. Fleming, “Wheat Council Clears Way for New Grain Agreement,” The Los Angeles Times, January 20, 1978, p. B–21.
6. In a September 30, 1977, memorandum, Carter established a Working Group on Food and Agricultural Policy. See footnote 2, Document 230.
7. Table 2A, “Quantity of P.L. 480 Wheat, Coarse Grains, and Products for FY 77, FY 78 and FY 79,” and Table 2B, “Quantity of P.L. 480 Wheat, Coarse Grains, Rice, and Products for FY 77, FY 78 and FY 79,” are attached but not printed.
8. The President checked his approval and initialed this recommendation.
9. Public Law 480 Title I agreements permit recipient countries to purchase commodities on a long-term repayment plan. However, the law’s provisions also specify that partial payment—in local currencies—must be made by the recipient nation in order for it to receive Title I commodities. Currency Use Payments enable the United States to fund Embassy operations and other projects within the recipient country, without committing U.S. dollars.
10. The President checked his approval and initialed this recommendation.
11. The President checked his approval and initialed this recommendation. On March 3, the White House announced that the President had instructed the U.S. officials attending UNCTAD to pledge 4.47 million tons of grain annually to the FAC. For the text of the announcement, see Public Papers: Carter, 1978, Book I, pp. 455–456.