Foreign Relations of the United States, 1955–1957, Foreign Economic Policy; Foreign Information Program, Volume IX

106. Memorandum From the Chairman of the Interagency Committee on Agricultural Surplus Disposal (Francis) to the Chairman of the Council on Foreign Economic Policy (Randall)¹

Washington, November 6, 1957.

SUBJECT

• Extension of Public Law 480

At the meeting of the ICASD² November 5, 1957 the following opinions were expressed:

a) that there is no basis currently in sight for anticipating overall reduction in surpluses—that unless and until there is a substantial change in our domestic policy, surpluses will continue. In these circumstances there is a risk amounting to a certainty that this “temporary” operation will become permanent.

Agriculture’s estimate of surplus:

June 1958—$7.2 billion (with present P. L. 480 authorization)

June 1959—$7.2 billion (with 2 billion P. L. 480 authorization for fiscal 1959)

Because of the current status of surplus there was unanimous agreement that the law should be extended through FY 1959.

b) A review (excluding financial authorization) of the several titles of the law indicated satisfaction with its basic provisions, with the following two exceptions:

Commerce would limit Title I sales to countries now unable and unlikely in the future to be able to pay dollars for additional agricultural commodities. They would in addition provide for sales for dollars on liberal credit terms to countries now lacking dollars but with prospects of having the ability to pay in the future. Commerce reserved the right to discuss this proposal before the CFEP.

Budget would prefer a reduction in Title I authorization and an increase in Title II. The Bureau’s argument is: (1) that the reduction in Title I (under last year) would maintain the Administration position that the Title is temporary and should be phased out; (2) that the increase would enable the disposal for aid purposes presently carried out under Title I. Title I would be reserved under this recommendation for currency sales motivated solely by domestic consideration of surplus disposal.

c) The mechanics for administering the law received unanimous endorsement.

d) Size of Authorization. State, ICA and Agriculture agreed on $1.5 billion (Title I). Commerce, Treasury and Budget advocated $1 billion primarily because they felt any larger amount represented a change in direction of the downward trend adopted as a policy matter last year by the CFEP. To counter this, Agriculture adduced the argument that regardless of the Title I authorization the Congress approves—whether 1, 1.5 or 2 billion—the total exports of agricultural commodities by the CCC will be less in FY 1959 than in FY 1958 and that this trend will be evident in 1960.

Budget recommended $1 billion with $500,000,000 for Title I and a similar amount for Title II. State strongly and specifically opposes Budget on the following grounds: such a proposal puts foreign aid in Title II of P.L. 480, would lead Congress to reduce aid funds for mutual security, would thus greatly diminish the flexibility of the Mutual Security program by prescribing aid only in agricultural surpluses. Agriculture also opposes on ground that the argument would not be well received by Congress.

e) Should legislation be enacted early enough in the fiscal year. Agriculture would desire to use funds this fiscal year. Budget objected to any expenditures over current basis.

f) There was unanimous agreement that including P.L. 480 transactions in calculations affecting price support was wrong in principle.

There was disagreement on the inclusion of such a correcting measure in the law as contrasted with its inclusion elsewhere as is now contemplated by Agriculture. While all would like to see correction, Budget was the primary exponent of “Do It Here and Now” and Commerce predicated its approval of any extension on the exclusion of this provision although it would not argue the tactical question. There was unanimous agreement that there is not now sufficient evidence of the effectiveness of the Cooley Amendment to warrant a judgment about it.

There was agreement that no recommendations pertaining to the Battle Act³ be included in this Bill.

Speaking personally I am continually disturbed by our supply and demand position. It is not improving noticeably despite many palliatives. Throughout the world our current customers are endeavoring to become self sufficient on food and fibre needs. As they succeed in increasing supply at home, demand for our products will lessen and while that is proceeding we provide an incentive support at home at such a level as to guarantee a profit even to the inefficient producer.

Public Law 480 fails to strike at the root of our trouble and may even create greater problems.

However, until something more basic is in sight, I conclude that a continuance of P.L. 480 is advisable. I am led to believe that the Secretary of Agriculture proposes to recommend some fundamental changes in the price-support and other domestic programs, but we are understandably not privy to these plans and must therefore make judgments on the basis of the present.

I concur in the majority opinions above expressed.

As regards the financial authorization on where there is divided opinion, I prefer the higher figure. With that amount shipments might well be maintained at current levels. The choice seems to lie between increased authorization and increased surpluses. I prefer the former and experience indicates we can maintain that rate without ill effects—State and ICA seemingly would join me in that statement. I am not impressed with the sentiment expressed that an authorization larger next year than this would create misunderstanding. By authorizing a smaller amount, I think we would be fooling ourselves more than our neighbors.

In conclusion, I recommend an extension of P.L. 480 for one year (through June, 1959) with an additional authorization of $1.5 billion for Title I, no change in Titles II and III. I further recommend that the Administration assure itself that P.L. 480 disposals are excluded from the escalator provision of price-support calculations. I am not prepared to argue tactics, but the present situation is wrong in principle, and unless we are assured of accomplishing the change by other means, then I recommend it be included in the P.L. 480 legislation.⁴

1. Source: Department of State, E–CFEP Files: Lot 61 D 282A, Extension of P.L. 480 for FY 1959–CFEP 558. Official Use Only. A copy of this memorandum was forwarded to the Council on Foreign Economic Policy under cover of a memorandum from CFEP Secretary Cullen on November 7.
2. All members present: Agriculture, Budget, Commerce, ICA, State, Treasury. [Footnote in the source text.]
3. Reference is to the Mutual Defense Assistance Control Act of 1951 (P.L. 213) sponsored by Congressman Laurie C. Battle of Alabama and enacted on October 26, 1951. It provided for the suspension of U.S. economic aid to nations supplying strategic materials to Communist nations. For text, see 65 Stat. 644.
4. On November 12, the Council on Foreign Economic Policy agreed to a 1-year extension of Public Law 480 and an additional $1)1/2 billion authorization for Title I foreign currency sales. The Council further agreed that the legislation should be considered temporary and that the current U.S. policy of exercising restraint in barter transactions and foreign currency sales should be continued. (Eisenhower Library, CFEP Records, Significant Actions in the Field of Foreign Economic Policy)