Foreign Relations of the United States, 1981–1988, Volume XLI, Global Issues II

244. Memorandum From Richard Levine of the National Security Council Staff to the Executive Secretary of the National Security Council (Kimmitt)¹

Washington, March 11, 1985

SUBJECT

• “Food for Progress” Implementation

Attached is a memo from you to the agencies forwarding the funding and management option papers for “Food for Progress.” This is a pro forma step. With the concurrence of the Admiral,² I have already worked out a compromise with McPherson, Keel, Amstutz and Derwinski. OMB agreed to AID’s managing this program by appointing a special Ambassador. In exchange, the funding issue will be left open for the time being, to see if we could rechannel any new money pushed on us by the Hill for food aid to the “Food for Progress” program. Al Keel will hold a meeting on March 22 where this deal will be formalized,³ and I will then write the implementing NSDD for the “Food for Progress” program. Future funding issues will be decided through the OMB interagency process.

Recommendation

That you sign the memo to the agencies at Tab I.⁴

Tab I

Draft Memorandum From the Executive Secretary of the National Security Council (Kimmitt) to Multiple Recipients⁵

Washington, undated

SUBJECT

• “Food for Progress” (U)

Attached for your comment are three papers pertaining to the President’s “Food for Progress” aid program. These papers were developed by the implementation group on “Food for Progress” set up by the NSDD on this subject. (U)

Attached at Tab A is the options paper for funding; at Tab B is the paper on country selection criteria on which there is interagency consensus; and, at Tab C is the management options paper. (U)

Agency views on these papers are requested in 5 working days from the date of this memo. Dr. Alton Keel will hold a senior-level meeting to consider the funding and management of the “Food for Progress” program on March 22. Invitations have already been extended to principals for this meeting. (U)

Robert M. Kimmitt

Tab A

Paper Prepared by the Food for Progress Implementation Group⁶

Washington, February 19, 1985

Food for Progress
Funding Options⁷

Summary of Options:		Budget Cost to USG Over 4-years($ Millions)
Option I:	Commodities provided by CCC without appropriation8	245
	Transportation financed by appropriation	160\4059
Option II:	Commodities financed by new appropriation	231
	Transportation financed by new appropriation	160\391
Option III:	Commodities allocated from Title I	0
	Transportation financed by new appropriation	160\160
Option IV:	Commodities allocated from Title I	0
	Transportation costs financed from Title I budget	0/0

Option I

Up to 500,000 tons per year of CCC-held cereals (wheat, corn, rice and sorghum) would be committed for the next four years (1986–89) to multiyear grant food aid programs for Sub Saharan Africa governments undertaking agricultural policy reform. An expansion of authority under Section 416 would be sought to provide the commodities and to authorize their use for this purpose. Transportation and handling costs would be financed by an appropriation.

Pros:

• Provides additional food aid resources with no on-budget outlays in the short/medium term, except transportation.

•Uses commodities already held in government-owned stocks and achieves storage cost savings estimated at $89 million over four years.

•As a separate program from PL 480, Food for Progress would be less susceptible to the pressures of multiple, competing objectives.

•May lend itself to coordination with World Bank and other donor lending for LDC agricultural policy reform.

•Would use (for a transitional period) a portion of temporarily abundant U.S. food stocks to encourage important agricultural reform in key Third World countries.

Cons:

• Could create pressure to expand the program’s size and duration in the out years.

•In longer-term there is a budget impact because future income is foregone; CCC assets are given away at rate of $61 million per year.

•Understates cost of foreign assistance programs by using CCC resources, which are generally intended to support the U.S. domestic agricultural sector.

•The commodities held by the CCC in any given year may not be those most suitable for the Food for Progress program.

Agency Positions:

Hill Perspective:

Option II

For use in carrying out the provisions of Food for Progress, the Administration would seek an authorization of $391 million in no-year funds and obligational authority to expire in FY 1989–90. Appropriations would be provided for up to $98 million per year for commodities and transportation.

Pros:

•Ensures “additionality” consistent with the Food for Progress proposal.

• Distinguishes Food for Progress from existing USG aid instruments.

•Eases USDA concerns about encumbering CCC borrowing authority and shows cost of program on budget.

• May lend itself to coordination with World Bank and other donor lending for LDC agricultural policy reform.

Cons:

•Requires additional “on budget” appropriation and adds $98 million per year to budget outlays.

•Inconsistent with budget freeze proposal.

• Unlikely Congress would agree to multiyear appropriation possibly leading to program difficulties.

Agency Positions:

Hill Perspective:

Option III

Restructure Title III to meet Food for Progress objectives. Allow up to $58 million per year in Title I funds for purchase of commodities. Appropriate new money ($40 million per year) for transportation costs.

Pros:

•Does not place additional transportation burden on Title I funds which would otherwise be used only for commodity purchases.

•Avoids adding to CCC’s net realized losses.

•Saves budget outlays by using existing authorities for commodities and shows transportation cost of program.

•Provides President with an initiative with the objective of ensuring more effective use of existing resources.

• Reform of ineffective Title III will enhance Administration’s credibility in administering the food aid program.

Cons:

•Provides no additional food aid resources.

•Food for Progress could become indistinguishable from existing U.S. aid instruments.

•New appropriation and $40 million annual outlay is required.

•Disruptive effect on FY 86 Title I allocation process.

Agency Positions:

Hill Perspective:

Option IV

Restructure Title III to allow Title I funds up to $98 million per year to be transferred for 4 years (including freight) to be provided on a grant basis to support Food for Progress objectives. The amendment would provide for use of transferred funds and obligation authority on no-year basis to expire FY 89–90.

Pros:

• Gives highest priority to using existing resources and supports President’s budget freeze proposal.

• Shows the actual cost of the program on-budget.

• Provides the President with an initiative with the objective of ensuring a more effective use of existing resources.

• Reform of ineffective Title III will enhance Administration’s credibility in administering the food aid program.

Cons:

• Does not provide additional food aid for the President’s new program.

• Part of PL 480, Food for Progress would be susceptible to the objectives which have limited achievement of LDC agricultural policy reform in the PL 480 programs; it could thus become indistinguishable from other aid instruments.

• Puts an additional freight cost burden on Title I budget at the expense of commodity purchases.

• Disruptive effect on FY 86 Title I allocation process.

Agency Positions:

Hill Perspective:

Tab B

Memorandum From the Deputy Assistant Administrator of the Program and Policy Coordination Bureau, Agency for International Development (Herrick) to Richard Levine of the National Security Council Staff¹⁰

Washington, February 19, 1985

SUBJECT

• Report of Subgroup on Country Selection Criteria

1. The Subgroup concludes that Food for Progress should be a program separate from the African Economic Initiative for policy reform. However, as both programs are addressed to improvements in the policy environment for economic growth, they could very well operate in the same country. Food for Progress will be tied to reforms to stimulate agriculture; the Economic Initiative could address other reforms as well.

2. The Subgroup reviewed the following possible criteria for selection of participating countries.

—Strategic and foreign policy importance of the country

—Potential impact in the context of other donor programs (possibility for impact through co-financing)

—Potential to leverage additional development resources

—Need for non-emergency food aid

—Potential for trade development

—Existing policy climate

—Commitment to policy reform

—In-country capacity

3. Subgroup conclusions are set forth below.

Country Selection Criteria

U.S. strategic and foreign policy interests must be served by the Food for Progress program. Once these interests are deemed to be satisfied, the following criteria should be assessed for their relevance to individual proposed country programs. The criteria should be considered in the following general order of importance.

Criterion of ABSOLUTE importance:

—Commitment to reform and implementation of policy decisions

Criteria of HIGH importance:

—Need for non-emergency food aid

—In-country capacity to carry out reform

—Evidence of policies conducive to improvement in agriculture

Criteria of MEDIUM importance:

—The potential for economic growth that will lead to the country’s ability to participate in international trade and to import U.S. commodities.

—The potential for or existence of other donor support for agricultural programs and agricultural policy reform (as indicator of potential for co-financing) and synergetic effect of influence on policy reform)

Tab C

Paper Prepared by the Food for Progress Implementation Group¹¹

Washington, undated

FOOD FOR PROGRESS

ALLOCATION AND MANAGEMENT OPTIONS

I. INTERAGENCY ALLOCATION THROUGH EXISTING FOOD AID COMMITTEE

Following existing allocation procedures for food aid, a new working group of the food aid subcommittee of the DCC would be established to allocate Food for Progress resources. AID would provide staff support and management of the program in-country. If the budget option to restructure Title III is selected, the existing Title III allocation process would be used. (No budget cost.)

II. CREATE SPECIAL AMBASSADOR POSITION AND STAFF

A special ambassador would be appointed by the President to run the program. A small staff would be necessary to provide support to the ambassador. AID would provide management support. (Budget cost to provide new office with ambassadorial rank.)

III. AID ALLOCATION WITH INTERAGENCY CONSULTATION

Following the EPI allocation process, AID would consult with other agencies but have the authority to allocate and manage the program. (No budget cost.)

AID Recommendation for Administration of Food for Progress

AID recommends that the Secretary of State recommend and the President appoint an individual of ambassadorial rank with experience in foreign affairs as Special Administrator of Food for Progress.

—The Special Administrator would represent the President to present the Food for Progress program to other donors and cooperating countries.

—The Special Administrator would report to the Administrator of AID in day-to-day conduct of the program.

—An interagency group would support the Special Administrator by:

—Recommending a preliminary allocation of up to $90 million per year among developing countries of Africa in accordance with MAUT principles and the country selection criteria established for the program;

—Reviewing proposals for participation in Food for Progress submitted by developing countries and recommending for or against negotiation of a country program.

—The Departments of State and Agriculture and AID would be represented on the interagency group.

—Final decisions on country selection and program levels would be made by the Special Administrator.

—Negotiation of an agreement with a participating country would be carried out by the AID Mission in country in accordance with guidance from the Special Administrator.

Factors Favoring this Recommendation:

—It would demonstrate the personal interest of the President through appointment of a high level administrator. The President could launch one of the early programs at the White House or through his Special Administrator.

—It would assign day-to-day responsibility within the Agency responsible for administering both emergency and non-emergency food aid and other economic aid programs.

—The Agency for International Development can ensure that the program retains its strong and unique focus on the objective of agricultural policy reform and that Food for Progress, the African Economic Policy Initiative and regular AID programs directed toward such policy reform are mutually reinforcing.

—It would insulate the program from the sometimes cumbersome consensus process of the established PL 480 programming process and from the conflict of interests among agencies inherent in that process.

Issues Raised by this Recommendation:

—Additional staff may be needed to support the Special Administrator. AID believes that support staff of one person would be sufficient as AID has regular staff experienced in analysing agricultural policy and other economic issues and in administering food aid programs. AID would coordinate with USDA on such operational matters as establishing the Usual Marketing Requirement for the participating country and identifying the most appropriate commodity mix.

—OMB and Treasury, both very active in the Working Group of the Development Coordination Subcommittee dealing with allocation of food aid, may want to be represented on the interagency consultative group. The recommendation is intended to include the agencies responsible for actual implementation of food aid programs whose representatives overseas (Ambassador, Agriculture Attache, AID Director) are likely to be active in formulating and negotiating the Food for Progress agreement.

—A change in the authorizing legislation, the Agricultural Trade and Development Act of 1954 as amended, would be required if the program is funded by a transfer under Title I of the Act. The Development Coordination Committee is the designated administrative body for Title I.

1. Source: Reagan Library, Rosenberg Files, Food for Progress—Keating Group (Famine) 03/07/85–09/30/85. Confidential. Sent for action. Soos and Portier concur.
2. Reference is to Poindexter.
3. No record of this meeting has been found.
4. There is no indication of approval or disapproval of the recommendation.
5. Confidential. Sent to the Executive Secretaries of the Departments of State; the Treasury; Agriculture; AID; the Associate Director for National Security and International Affairs, OMB; and the President’s Council of Economic Advisors.
6. Confidential.
7. An important feature of Food for Progress is multiyear program funding from FY 86 to 89–90 which would allow flexibility in programming and obligating resources. [Footnote is in the original.]
8. Under the Administration’s 1985 Farm Bill, CCC stocks will diminish over time, therefore, in order to maintain CCC’s assets, any release of CCC stocks must be accompanied by a reimbursement to the CCC. [Footnote is in the original.]
9. Alternatively, in the absence of new budget authority, transportation costs could be met through CCC outlay or Title I reserves. [Footnote is in the original.]
10. No classification marking
11. No classification marking.