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

258. Minutes of the End Hunger Initiative’s Coordinating Committee Meeting¹

Washington, May 11, 1988

Attendees.

The meeting was chaired by A.I.D. Administrator, Alan Woods, and co-chaired by Deputy Secretary of the Treasury, Peter McPherson.

In attendance were: Walter Barrows (CIA), Carroll Bouchard (Peace Corps), Peter Cashman (Commerce), Michael Driggs (Spec. Asst. to President for Pol. Devel.), Philip DuSault (OMB), Eugene McAllister (State EB), Peter Myers (USDA), Leonard Robinson (ADF), Peter Rodman (Spec. Asst. to President for Nat. Sec. Affairs), Jon Rosenbaum (USTR), Roy Stacy (State AF), and Gerald West (OPIC).

Brooke Amendment.

Alan Woods opened the meeting by saying that its purpose was to consider reports by the working groups on the issues of the Brooke Amendment,² African food aid, and investment.

On the Brooke Amendment, Peter McPherson reported a decision by the informal Deputy Assistant Secretaries Africa debt group to take steps to speed up the U.S. Government’s processing of rescheduling agreements after a Paris Club agreement,³ rather than to seek legislative change in the terms of Brooke. Such speeding up would help a country that is agreeing to a reform program to get out of arrears to the U.S. more quickly, thus allowing Brooke sanctions to either be avoided or ended sooner.

Mr. Woods asked who would oversee implementation of the proposed changes. William Milam of State said that was State EB’s responsibility. Mr. Milam noted that work was already fairly far along on a short, standardized agreement for debt rescheduling, which would speed up the process considerably.

Mr. McPherson asked if EB could report in three months on progress made, and Mr. Milam agreed.⁴

Food Aid.

Walter Bollinger of A.I.D. reported on the work of the food aid working group chaired by A.I.D. He thanked the working group for a series of productive meetings. He reported that the group did not support a legislative option for an Africa food fund, analogous to the Development Fund for economic assistance. It did, however, agree to a package of management and allocation changes to the existing DCC food aid process, aimed at more effective use of African food aid for policy reform.

These changes include: 1) expedited decision-making for a priority list of countries; 2) development of policy reform criteria by which to determine priority countries; 3) greater concessionality (i.e., more use of Title III and Section 206); 4) multiyear programming; and 5) payment of ocean freight for the most debt-distressed countries.

The working group also agreed to develop specific targets or benchmarks, in many cases quantitative, for judging progress in the implementation of these changes.

Mr. Bollinger mentioned two other issues that had been discussed in the working group. One was the importance of quick approval of new simplified guidelines for Title III. The other was the trade-off between emergency and development uses of food aid in Africa, and the possibility of sharing the burden of African emergencies globally.

Mr. Bollinger proposed two actions for a follow-on meeting of the Coordinating Committee in June:⁵

1) The working group will develop benchmarks for the agreed changes in the current process, and present them to the Coordinating Committee for approval.

2) A.I.D. will develop a legislative proposal for food aid, which the committee can consider for possible recommendation to the next administration (e.g., for possible inclusion in the 1990 reauthorization of the farm bill).

Owen Cylke of A.I.D., who had chaired one of the food aid working group meetings, added two points to Mr. Bollinger’s presentation. First, he felt that most of the potential for improvement was in Title I/III, because of the structural constraints in Title II (the mandated sub-minimum for private voluntary organizations). Second, he thought it was important to have the working group report to the Coordinating Committee on implementation of the proposed changes on an on-going basis.

Walter Barrows said that he felt that the working group’s analysis of needed changes in the food aid program was excellent, and that he hoped the food fund concept⁶ would not be dropped.

Mr. Woods said that A.I.D. would pursue the food fund idea, but that there was not a lot of enthusiasm among others for the legislative option. As a practical matter, he noted, any legislative action would have to be in the next administration. He noted OMB’s concern about earmarking, and said that he shared that concern. Mr. Woods said that he felt it was important to develop a legislative proposal for the next administration, and that A.I.D. would work on that.

Jon Rosenbaum raised the problem that a permanent food fund might conflict with trade agreements in the area of food security that are being considered in the GATT negotiations. Mr. Woods said that this should be looked into.

Philip DuSault said that, in his view, the review of food aid had been constructive, and that there were some things that could be done now. He stated that there were problems with the proposed use of non-food commodities, and that this issue was to be addressed at the subcommittee level of the DCC.

Michael Driggs said that the purpose of food aid changes should be to improve management and effectiveness, not just to increase resource levels. He asked whether the short-term option being considered covered everything that could be done to make food aid more effective without new legislation. Mr. Bollinger answered that, in his opinion, it did.

Mr. Driggs also suggested that it would be desirable to identify the constraints that the current legislation imposes. Mr. Bollinger said that A.I.D. would do that as part of its work on the longer-term option.

Mr. Woods said that there was one issue that was not definitively addressed in the proposed short-term option—the trade-off between emergency food and use of food for development. He felt that was an important problem to look at.

Mr. DuSault said that, in his view, the notion that there is a trade-off between use of food for emergency and development is a misperception. He cited figures showing that the share of food aid going for development has been fairly constant over the years, with both emergency and development levels increasing in FY85 and both declining since.

Mr. Bollinger argued that the 1985 figures are not representative because there was a substantial supplemental appropriation for emergencies that year. In years without emergency supplementals, he argued, there is a one-for-one trade-off between emergency and development dollars.

Roy Stacy said that the Initiative envisioned increased use of Section 206 in Africa, and that this will not be possible under the current system. This is one reason why a food fund is needed in the long term.

Mr. DuSault said that we are not out of money yet in FY88, that the Title II reserve is about $40 million, and that emergency needs in Afghanistan should only take about half of that. Thus, if there is no further demand in Ethiopia, there could be additional resources available.

Mr. Cylke said that there are other problems with using this money in Africa. First, A.I.D. has to have predictability in food aid programs if it is to engage in serious policy dialogue with African governments. Development programs cannot be designed at the last minute. Second, there is a $40 million shortfall in the PVO sub-minimum, which means that much of the remaining money will go to PVO projects, for the most part in other areas of the world.

Investment.

Rodney Bent of OMB, co-chair with Gerald West of the investment working group, reported on two proposals that had been examined by the working group:

1) An OPIC proposal for feasibility studies and other assistance to American firms interested in investing in Africa. (This issue was discussed at the last Coordinating Committee meeting.)

2) An OPIC proposal to develop, in coordination with A.I.D., an enterprise development zone (or free trade zone) in a single African country and to promote the concept in other African countries.

Mr. West added the following comments on the investment encouragement program:

—Policy reform is crucial for Africa to become an attractive investment environment, but positive inducements for policy reform are needed.

—The cost of the feasibility study program is only about $750,000 in FY89, which is not a large amount, even if an offset is required in the 150 account.

—In the FY82–85 period $58 million of new investment was generated worldwide for about $2 million expended for investment encouragement programs like those being proposed for Africa. Ten percent of the programs resulted in actual investments. Given that those programs were focused on small business and in the least developed countries, this was a good success rate.

Mr. Bent said that OMB’s main objection to the investment encouragement program was to the additional budget cost, and that a trade-off within OPIC’s existing budget would be a different matter. Concerning the proposal for an enterprise development zone, Mr. Bent noted that such zones had been tried unsuccessfully in several African countries, and that only Mauritius was a success story. He also suggested that such a program might be more appropriately pursued by A.I.D.

Mr. Gladson responded that several missions (Kenya and others) were looking at the free trade zone concept as part of A.I.D.’s private sector plan, and that A.I.D. would be happy to work with OPIC in this area.

Matt Hennesey of Treasury observed that both proposals seemed constructive, but raised a question concerning the relationship between a free trade zone and broader attempts to influence the policy environment: Could a free trade zone divert attention from reform of the system as a whole, which should be the main objective?

Mr. Woods responded that a free trade zone could have a demonstration effect, and thus support, rather than conflict with, broader policy reform. Mr. West reinforced this point, noting that selection of a country in which to create a free trade zone would be based in part on policy reform performance, thus creating some leverage for reform.

Larry Saiers of A.I.D. argued that the value of free trade zones in Africa is that they are simpler way to promote trade, compared to other methods such as rebates on export taxes or tariff changes, which are administratively complex.

Jon Rosenbaum said that he felt the free trade zone proposal was an excellent idea. He noted that similar programs in the Caribbean were working well, after initial problems. However, such programs have encountered political criticisms in the U.S. over the question of subsidizing foreign investment in countries where labor practices may be exploitative. Mr. Rosenbaum suggested that any Africa program should take account of this domestic concern.

Mr. Bent and Mr. West said that they would continue working on the investment encouragement and free trade zone issues. Mr. West said that he would consult with OPIC management on whether or not to bring the investment encouragement and enterprise zone issues before OPIC’s Board of Directors, which is meeting on June 7.⁷

Report to the President.

The last issue discussed was the report to the President on the End Hunger Initiative due in June. Mr. Woods noted that this report is to be submitted by the Secretaries of State and Treasury, and suggested that those agencies prepare a draft, with the assistance of the A.I.D. secretariat of the Coordinating Committee and with comments from other agencies. This draft would be reviewed at the next meeting of the Coordinating Committee, tentatively scheduled for early to mid June.⁸

Mr. Woods said that he thought the report should be a public document, suitable for distribution to interested public groups.

Also at the June meeting, Mr. Woods said, A.I.D. would report on the Development Fund for Africa and policy reform, as requested by OMB and others at the last meeting.

Peter Rodman commended the working groups for their efforts, which he cited as a model of creative work with limited resources.

1. Source: Reagan Library, Rosenberg Files, Coordinating Committee 04/06/1988–05/11/1988. No classification marking.
2. See footnote 5, Document 243.
3. Reference is to the Paris Club, a group of financial officials from creditor nations that discusses debt rescheduling and relief.
4. Not further identified.
5. Under a July 14 memorandum to Rodman, Woods forwarded the minutes from the June Coordinating Committee meeting. (Reagan Library, Rodman Files, African Hunger Initiative: 06/15/88–08/01/88)
6. In a May 11 paper, a working group provided a report to the Coordinating Committee on a proposed food fund for Africa. (Reagan Library, Rosenberg Files, Coordinating Committee 04/06/1988–05/11/1988)
7. No record of this meeting has been found.
8. See footnote 5, above.