NSSD 1-84 - PART II OF THIRD WORLD HUNGER STUDY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP90B01013R000400030003-8
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 52
• Document Creation Date: December 27, 2016
• Document Release Date: January 30, 2013
• Sequence Number: 3
• Publication Date: January 7, 1985
• Content Type: LETTER

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DOCUMENTS CROSS-REFERENCED
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EXECUTIVE SECRETARIAT
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SUSPENSE
Remarks
STAT
Executive Secretary
7 Jan 85
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STAT
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U1211.CU ouncs Jut:1hall.1111;111.
Washington, D.C. 20520
'January 4, 1985
TO Mr. Robert C. McFarlane, The White House
FROM : Ambassador Robert B. Keating
Chairman, Third Third World Hunger Study
SUBJECT: NSSD 1-84 - Part II of Third World Hunger Study
NSSD 1-84 established the terms of reference for a study
aimed at making better use of U.S. food aid for Third world
emergency and non-emergency food problems. In Part I of our
work, completed in July1984, we made ten recommendations
for achieving a more rapid, high-visibility response to
acute hunger crises in the Third world. These recommendations
were accepted by the President and promulgated in NSDD 143.
In Part II of our assignment, we gave priority attention
to making more effective use of food aid to promote better
agricultural policies in key Third World countries. The
United States has encouraged agricultural reform through
existing food aid programs with insufficient results, partic-
ularly in sub-Saharan Africa. Changing economic circumstances
in the Third World are creating a new context and new oppor-
tunities for U.S. foreign policy. Socialist economic models
have failed to generate growth for Third World countries, and
many Third World leaders are now experimenting with more
market-oriented approaches in four critical areas:
-- agricultural price policy;
-- marketing reform and liberalization;
-- input supply and distribution policy, and
-- private sector involvement.
However, many of these leaders fear the political risks
of food shortages during the transitional period to a more
market-oriented economy. To overcome these concerns, we need
an innovative and flexible instrument that would provide addi-
tional food assurance as an inducement to policy changes con-
sistent with the Reagan Administration's objectives.
Conclusion: Mindful of the need for budgetary stringency
in implementing an additional food aid program, we recom-
mend an expansion of Section 416 authority for a four-year
period in order to match the temporary availability of
USG-acquired food stocks with the transitional needs of key
Third World governments; initially in sub-Saharan Africa.
We have called this new Presidential initiative to provide
additional food aid, "Food for Progress" (a fuller explan-
ation of this new program is appended).
1
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In addition to developing the new "Food for Progress"
initiative, we examined the complex interagency decision-
making process for allocating food aid under the major
non-emergency food aid programs (PL 480 titles I/III). This
complex process involves the interplay of important multiple
objectives, competing interests and sometimes conflicting
criteria advanced by USDA/State/AID/OMB/Treasury in a
time-consuming adversarial exercise. We found, however, it
is possible to apply a more analytical and rational method
for illuminating issues and facilitating decision-making.
Improved analysis would assist decision-makers in the weigh-
ing of priorities and recognition of trade-offs.
Conclusion: An analytical framework is needed for a
rational examination of the many factors which interact,
influence and condition our response to Third World
food problems and the achievement of U.S. food aid
goals. The decision-analysis methodology (multi-
attribute utility theory) tested in this study ,merits
its, use in allocating food aid for multiple objectives,
and in determining the appropriate mix of food aid
instrumentalities.
We also studied the array of existing commercial and
concessional credit and grant aid programs through which the
USG directly influences the flow of over $6 billion worth of
U.S. foodstuffs for Third World countries. We found that
any attempt to improve the fit between the agricultural
potential of the U.S. and the chronic food deficits of Third
World countries came up against the dilemma that many Third
World countries are unable to pay cash for U.S. food while
we are limited in the amounts we can give or sell on credit.
Moreover, there are formidable institutional and political
barriers to revising our international approach. No concen-
sus existed among the lead agencies on the direction of needed
changes, particularly in light of our difficult budgetary sit-
uation, on the following key programs issues:
. Whether to initiate intermediate credits of 7-10 years
to help key Third World countries with their food
needs during a period of debt crisis.
. If so, whether to seek intermediate credit guarantee
authority from Congress.
. Or, whether to seek funding for the defunct intermedi-
ate direct credit program on the books.
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. Whether to revise the terms for PL 480 Title I conces-
sional loans and Title III conditional grant programs.
. Whether to turn Title I into a multiyear program and
scrap the separate Title III.
. Whether to provide a higher overall level of PL 480
food aid.
. Whether to challenge the legislatively prescribed minimum
level for Title II non-emergency regular programming
of private voluntary ortanizations.
Conclusion: It will require considerable time to develop a
clear consensus on the revision of the existing array of pro-
grams. The structure of U.S. programs of food aid and credit
has evolved over thirty years in response to circumstances and
pressures. Taken together, these programs are performing useful
functions. Some are excellent instruments (e.g., the GSM-102
3-year credit guarantee program) for meeting their stated objec-
tives. On the other hand, the PL 480 Title III program which
refocussed a portion of Title I resources in the hopes of achiev-
ing important economic development changes is an instrument
which failed to fulfill its promise.
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?
The New Initiative - "Food for Progress"
The "Food for Progress" initiative will absorb 500,000
metric tons annually of USG-owned food resources for a period
of four years. These food resources would come from the 17.5
million metric tons of surplus commodities acquired by the Com-
modity Credit Corporation (CCC) through extending the authority
of Section 416 of the Agricultural Adjustment Act. The sole objec-
tive of the program is to provide additional food assurance for
key Third World countries during a transitional period of agri-
cultural policy reform. This special program is not open-ended
and no extension beyond four years is foreseen.
The CCC inventories have again reached burdensome levels in
1984, overhanging markets and depressing farm prices. Projections
are for continued weak exports of U.S. agricultural commodities.
This being the case, the expected continuing high level of surplus
commodities held in CCC inventories should not present a problem
of unavailability of supply for the relatively small quantities
of food involved in the "Food for Progress" proposal. CCC storage
costs now stand at about $.33/bushel. For the 500,000 metric bons
each year recommended for the new program, there would be a savings
of $6 million per year in storage costs or $60 million over the
four-year period.*/
As consideration is given to the 1985 Farm Bill, decisions
must be made about the disposal of these stocks in a manner which _
would help rather than hinder the shift to a more market-responsive
U.S. agricultural policy. It should be borne in mind that both the
Department of Agriculture and OMB's proposals for the 1985 Farm Bill
would terminate the farmer-owned grain reserve (FOR) and fold all
stocks into the CCC-owned inventories when the three-year grain
reserve contracts expire. However, the two agencies make no spe-
cific proposals as to how these augmented CCC inventories would be
drawn down. With the depressed state of the farm economy, it is
important that they be drawn down in a manner which would not fur-
ther depress market prices. Accessing these stocks for "Food for
Progress" is consistent with this criterion and the objective of
creating future credit-worthy Third World markets for U.S. food
exports.
The underlying premise of the "Food for Progress" program is
that it could be operated more effectively in helping achieve policy
reform in key Third World countries than the food aid instrumentali-
ties inherited by the Reagan Administration. To accomplish this
single objective in a program of limited duration requires a more
innovative and flexible instrument than the PL 480 programs. We can
*
500,000 MT X 36.7 bu/MT x .33 cents/bu = $6.05 million/yr
savings in storage costs
6M for 1 yr plus 12M for 2 yrs plus 18m for 3 yrs plus 24M
for 4 yrs = $60M total savings in storage costs
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find the attributes needed by expanding the Reagan administration's
Section 416 authority to cover a wider range of commodities and
their use for a new program. Under this implementation plan, "Food
for Progress" would:
1. make clear President Reagan's intent to match the temporary
availability of USG-acquired food stocks with the food needs
of key Third World governments during their transition per-
iods to more market-oriented agricultural systems, initially
in 6-8 sub-Saharan African countries;
2. be the only U.S. food aid instrument employing additional
food resources solely for the purpose of leveraging agri-
cultural policy reform in key Third World countries;
3. use food resources already acquired by the USG. There
would be a new additional cost for transport (est.$40
million/yr.) with a savings in domestic storage (est.
$6 million/yr. or $60 million over four years);*
4. not disrupt the food aid levels of other PL 48,0 programs,
nor impair achievement of their important multiple aims;
5. permit multiyear food aid programming free from "use or
lose" annual appropriation constraints, and the associated
pressures from commodity interest groups affecting PL 480
Title 1/Ill programs;
6. enjoy broad congressional support as a new initiative with
greater promise of achieving agricultural policy reform
in key Third World countries than the usual food programs
under PL 480.
*/ As with other draw-downs of CCC-acquired stocks (e.g., for
the $9 billion domestic PIK Program), the CCC would require
replenishment of its capital stock to cover the cost of
the commodities at a future date.
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Third World Hunger Study
Part II
(Non-Emergency, Chronic Food Deficit Problems)
Chairman: Ambassador Robert B. Keating
Date: December 20, 1984
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Third World Hunger Study, Part II
A. Actual Food Aid Decision-Making Process
1. Actual Decision-Making Process for PL 480
Title I. Programs
2. Areas of Inter-Agency Conflict
3. Actual Allocation Criteria for Inter-Agency
Decision-Making Process
4. Multi-Attribute Utility Theory
5. Inter-Agency Food Aid Decision-Making
B. A New Food Aid Initiative
1. US Food Export Policy Dilemma
2. The Changing Economic Circumstances of Third
World Countries
3. "Food for Progress" to Back Up Agricultural
Policy Reform in Key Third World Countries
4. Reasons for "Food for Progress" Initiative
5. Size and Cost of "Food for Progress" Initiative
6. "Food for Progress" to Back Up Agricultural
Policy Reform
7. USG-Owned Grain Stocks
8. Sub-Saharan Africa Food Import Needs
9. Sub-Saharan Africa Long-Term Decline in Per
Capita Grain Producti;n ams.ption
10. "Food for Progress" Decision Analysis for Selection
of Recipient Countries (Illustrative)
11. The Leveraging of Agricultural Policy Reform
12. Selection of "Food for Progress" Policy Targets
13. Implementation of "Food for Progress" Overtime
14. USG Bi-Lateral Assistance Programs
15. An Integrated Food Aid Program for Sub-Saharan Africa
16. Why Should We Use USG-Owned Food Stocks?
17. Why Would Reprogramming of Existing PL 480
Instrumentalities Fail to Accomplish the "Food for
Progress" Objective?Agricultural Policy Reform?
18. Program Characteristics Needed to Promote Agricultural
Policy Reform in Sub-Saharan Africa
19. Why Would the "Food for Progress" Initiative Based
on the Use of Surplus Commodities Owned by the
Commodity Credit Authority (CCC?Section 416)
Succeed Better Than Existing Food Aid Programs
in Achieving Agricultural Policy Reform?
20. US Domestic Political Acceptability of the "Food for
Progress" Initiative
1-26 1-66
?
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Actual Allocation Criteria for Inter-Agency
Decision Making Process
USDA
? Develops markets for US commercial exports of food.
? Disposes of surplus agricultural produce.
State
? Avoids trade frictions.
? Protects strategic balance and political objectives worldwide.
Treasury
? Maintains stability of international financial system.
OMB
? Limits USG spending.
AID
? Promotes effective economic development using local
currency proceeds.
? Responds to real food shortfalls.
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?KEAT01.022 STAFF 2/0 U.
,
U.,
iec'sion-Making'Process for PL 480
AID Desks
AID
Regional
Bureaus
Ale I Proarams
" Lines indicate degree. of interaction between IAD agencies .during decision-Making process.
Primary Secondary ------ Occasional
AID/ FFP
Decision
1
Treasury (Veto Power)
State/ OFP
AF EAP
NEA
State Desks
KEATO1 0.2'2 STAFF 2 0
Country Team Recommendation
OMB (Veto Power)
USDA! EC
Asia/ Near East
(EC)
AF/ EUR
(EC) (EC)
t #
Commodity Interests
IAgricultural Attaches
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Areas of Inter-Agency Conflict
? Diagram three key agencies and six recurring areas of
substantive conflict.
? Red line indicates inter-agency areas of conflict.
? Yellow line highlights crucially important role of third agency
in reconciling conflicts between other two agencies.
? OMB and Treasury can exercise veto power, but are not generally
involved in formulating specific aspects of PL 480 programs.
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A 88.S o :nter-Agency Conflict
Politically
Costly
Self-Help
Measures
STATE/EB
KEATO1 028 STAFF 2 0
UMR
Level
AID/FFP
Self-Help Measures
Designed to Supplant
Agricultural Imports
Commodity
COMpOsition
USDA/EC
UMR
(Tied to U.S. Market)
Balance of Payments
Support (Food Aid
Reduces Need for
Commercial Imports)
Agency at. origin of arrow. takes'role
of disinterested intermediary in
resolving dispute
Indicates fundamental conflict of
interest between two agencies
UMR - Usual Marketing Requirement (Commercial import levels)
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Actual Allocation Criteria for
Inter-Agency Decision-Making Process
USDA?Promote U.S. Agricultural Exports and Support Domestic Farm Income
STATE?Support Allies and Avoid Trade Friction
AID? Promote Economic Development in Recipient Countries
TREASURY ? Protect Stability of International Financial System and Evaluate Credit
Worthiness of Sovereign Borrowers
1
Dispose of Surplus
Commodities
4
Strategic Importance of
Recipient Country
No Disincentive
to Local Agriculture
10
Willingness to Repay
Previous PL 480 Loans
2
Protect Commerical
Food Exports
5
Willingness to Undertake
Market-Oriented
Policies
8
Willingness to Accept
UMRs
11 ?
Willingness to Undertake
Economic Adjustment
Measures
3
Increase Future Food
Exports
6
Balance of Payments
Support
9
Humanitarian Need to
Cover Food Shortfall
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Multi-Attribute Utility Theory
for Inter-Agency Food Aid Decision-Making
Purposes:
1.) Assessing the achievement of the overall objectives of PL 480
legislation: market development, foreign policy support,
economic development, and minimum cost to USG.
2.) Evaluating the allocation criteria actually used in the inter-agency
decision-making process (the attached matrix assigns a number
from -10 to +10 as a means of measuring each criterion's
importance in achieving a specific food aid objective.)
3.) Ranking allocation criteria as a function of relative weighting
of food aid objectives.
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Inter-Agency Food Aid Decision Making
PL480 Objectives
Actual
Allocation
Criteria
I II III IV
Market Minimum Foreign Economic
Development Cost Policy Development
to U.S.G Leverage
Outcome
(Depends on Relative Weights)
Even
56
H
1-=70.
25.4
11=70.
19.4
111=70'
5.6
IV=70-:
5.6
1 Willingness to Accept
Abundant Commodities
? USDA
Rank
.
Rank
o
Rank
'0
Rank
9
33
7
23
0
0
0
0
2 Non-Displacement of
U S. Food Export
? USDA
10
37
1
3
0
0
0
0
40
26.2
5.8
4.0
4.0
3 Potential Commercial
Market
-USDA
10
37
2
6
0
0
0
0
43
26.5
H
7.9
3.7
4.3
-
?
5 Pro-Private Sector
Economic Policies
AID
5
18
0
0
5
10
10
22
50
15.8
5
11
18.2
H
7 No Disincentive
to Local Agriculture
AID
-8
-29
0
0
6
12
10
22
5
-16.9
L
,5
L
7.7
13.7
9 Unanticipated Food Shortfall
-AID
0
0
0
0
5
10
6
13
23
2.3
.
2.3
83
10.1
10 Willingness to Repay
P1480 Loans
-TREASURY
3
11
9
30
0
0
3
6
47
11.3
22.7
H
4.7
8.3
11 Economic Adjustment
Measures
-TREASURY
3
11
1
3
3
6
8
17
37
10 .3 .
5.5
7.3
13.9
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US Food Export Policy Dilemma
Many Third World countries with potential growth prospects are unable
to pay cash for US food.
A
Intensify efforts to take
away commercial markets from
other food exporting countries.
PL 480
Apply additional resources to help
develop and expand the markets
of key Third World countries, and
over time have them become
credit-worthy commercial clients.
GM "Food for Progress"
Titles I ll III
102
5
301
(Dollar amount only
(3 year credit
(3 year direct
(3-10 year
slightly above 1972 level)
guarantee)
credit)
intermediate
($5 billion)
($150 million)
direct credit - $0)
Many recipient countries cannot repay
credits in three years.
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Key Question: Would not changes in our agricultural export credit
programs help expand the economies of key Third World countries and
bring a return to the US economy?
Key Considerations:
1.) The pros and cons of providing intermediate credit (say 7-10 years)
to help key Third World countries with their food needs during
a period of debt crisis.
2.) The pros and cons of new legislation permitting a GSM intermediate
guarantee program.
3.) The pros and cons of providing funding for the currently authorized
direct intermediate GSM 301 credit program (or should it be
scrapped?).
4.) The pros and cons of providing easier terms for PL 480
Titles I and Ill (including local currency repayment, less
complicated regulations and requirements).
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Key Question: Would not changes in our agricultural export credit
programs help expand the economies of key Third World countries and
bring a return to the US economy?
Key Considerations: (Continued)
5.) The pros and cons of turning Title I into a multi-year program and
scrapping Title Ill.
6.) The pros and cons of providing a higher level of overall PL 480
food aid.
7.) The pros and cons of the present level of Title II non-emergency
regular programming (1.2 million mt/yr -- too high, too low,
just right?).
8.) What is the appropriate mix of present and proposed programs
in our "food for progress" strategy?
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The Changing Economic Circumstances
of Third World Countries
Geo-Political Context (National Security Implications)
? Socialist economic model failing to generate growth for
Third World countries.
? Third World countries beginning to experiment with more
market-oriented approaches.
? US should target assistance to underwrite economic reform
efforts during transition period austerity.
? Soviets unable to offer much in the way of economic assistance.
? Demonstrated success of economic reform measures can shift
US-Soviet balance of influence in the Third World.
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"Food for Progress" to back up agricultural policy reform
in key Third World countries
Goal: To use American food resources more effectively in
support of Third World countries which have made commitments
to policy changes in four critical areas:
? Agricultural price policy
? Marketing reform and liberalization
? Input supply and distribution policy
? Private sector involvement
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"Food for Progress" to back up agricultural policy reform
in key Third World countries
? The sole objective of the "Food for Progress" initiative would be
to support the IMPLEMENTATION of policy changes over a medium-
term transition period in Third World countries of strategic value
and trade potential, initially in Sub-Saharan Africa.
? Unlike present food aid programs with comprehensive and
multiple objectives, this initiative would:
? -- Connect food aid with strategies to achieve structural reforms
in food ? pricing and marketing;
-- Involve co-financing with the World Bank and other
financing institutions;
-- Make use of government-owned food stocks (accounting
model -- President Reagan's Section 416 of the
Agricultural Adjustment Act).
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Reasons for "Food for Progress" Initiative
? In Sub-Saharan Africa, food import needs are increasing by
at least 700,000 mt per year.
? Use of 500,000 mt/yr of USG-owned food surpluses (17.5 million mt)
would increase non-emergency US food aid by 50 percent
to 1.5 million mt/yr.
? Today's emergency food crises highlight the need to tackle
the underlying structural problems of agricultural stagnation.
? US food abundance can reduce the political risks to leaders of
key Third World countries undertaking agricultural reform
measures during a transition period of economic hardship.
? The intention of this initiative is to provide incentives for
improved food production policies.
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Declassified in Part - Sanitized Copy Approved for Release 2014/06/03: CIA-RDP90B01013R000400030003-8
Size and Cost of "Food for Progress" Initiative
Duration: 4 years.
Size: 500,000 mt/year of wheat, corn and rice in addition to regular
PL 480 commodities.
Value: $90 million/year (sunk investment -- already paid for by CCC).
Accounting: The use of surplus commodities owned by the Commodity
Credit Authority (CCC) through the authority of Section 416.
Since the new initiative would use food resources already
paid for by the USG, the net cost would be transport
(est. $40 million), minus savings in storage (est. $6 million).
Recipient
Countries: Initially, 6-8 Sub-Saharan African countries.
KEAT01.010 STAFF 2/0
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Declassified in Part - Sanitized Copy Approved for Release 2014/06/03: CIA-RDP90B01013R000400030003-8
"Food for Progress" to Back-Up Agricultural
Policy Reform
1.) Price policy reform to provide incentives to farmers to produce
food on a regular basis for the market.
-- Adequate price levels for agricultural commodities.
-- Timely payment to farmers for their commodities.
2.) Other policy reform to help create an efficient internal market
for increased agricultural productivity.
-- Greater farmer access to private, competitive markets.
-- Market-determined exchange rate.
-- Adequate foreign exchange for imported inputs along with their
efficient and timely delivery (fertilizer, pesticide, credit).
-- Adequate rural infrastructure (farm-to-market roads,
collection stations, storage).
KEAT01.014 STAFF 2/0
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USG-Owned Grain Stocks
(Source: USDA)
Total: 17.5 MILLION MI ($2.6 Billion)
Wheat 8.8 Million MT (Including the International
Emergency Food Reserve of 4.0 Million MT)
Corn 5.1 million MT
Rice 0.9 million MT
Sorghum 2.3 million MT
Other Grains .4 million MT
Sub-Sahara African Food Import Needs
A) USDA projects a food shortfall of at least 3.7 million MT
in FY 1985
B) PL 480 Titles I & II will provide 1.2 million in FY 1985
C) The "Food for Progress" initiative would provide an
additional 500,000 MT/YR for four years
KEAT01.028 STAFF 2/0
PL 480 Title I
780,000 MT
PL 480 Title ll
435,000 MT
"Food for Progress"
500,000 MT
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?
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?
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Declassified in Part - Sanitized Copy Approved for Release 2014/06/03: CIA-RDP90B01013R000400030003-8
Potential
Recipients
Angola
Benin
Burkina-Fasso
Chad
Ethiopia
Ghana
Kenya
Lesotho
Liberia
Madagascar
Mali
Mauritania
Mozambique
Niger
Senegal
Sierra Leone
Somalia
Sudan
Tanzania
Zaire
Zambia
"Food for Progress"
Decision Analysis for Selection of
Recipient Countries (Illustrative)
Strategic
(FY86 ESF)
Co-Financing
Impact
(Existing W.B.
Agr. Programs)
Food Aid Needs
(USDA
Projection)
Trade Potential
(Population)
Country Ranking
Weights
.40
.20
.20
.20
Index
%
MAUT
Value
Index
%
MAUT
Value
Index
%
MAUT
Value
Index
%
MAUT
Value
MAUT
Value Total
0
0
0
0
0
0
3
3
0.6
7
7
1.4
2.0
Resource
Response
Index
(Proposed)
I
0
0
0
3
5
1.0
3
3
0.6
2
2
0.4 _
2.0
0
0
0
0
0
0
3
3
0.6
5
5
1.0
3.6
4
6
2.4
0
0
0
2
2
0.4
2
4
0.8
3.6
0
0
0
8
13
2.6
10
9
1.8
10
10
2.0
6.4
0
0
0
7
11
2.2
8
7
1.4
7
7
1.4
5.0
8
12
4.8
0
0
0
8
7
1.4
8
8
1.6
7.8
0
0
0
0
0
0
5
4
0.8
0
0
0
0.8
8
12
4.8
4
6
1.2
1
1
0.2
1
1
0.2
6.4
3
5
2.0
6
10
2.0
8
7
1.4
6
6
1.2
6.6
0
0
0
0
0
0
5
4
1.0
5
5
1.0
2.0
0
0
0
0
0
0
5
4
1.0
0
0
0
1.0
5
8
3.2
0
0
0
8
7
1.4
7
7
1.4
6.0
4
6
2.4
0
0
0
5
4
1.0
3
3
0.6
4.0
5
8
3.2
5
8
1.6
8
7
1.4
5
5
1.0
7.2
0
0
0
7
11
2.2
2
2
0.4
1
1
0.2
2.8
7
11
4.4
5
8
1.6
8
7
1.4
2
2
0.4
7.8
10
15
6.0
10
16
3.2
8
7
1.4
8
8
1.6
12.2
0
0
0
0
0
0
9
8
1.6
8
8
1.6
3.2
5
8
3.2
0
0
0
4
3
0.6
10
10
2.0
5.8
6
9
3.6
7
11
2.2
2
2
0.4
5
5
1.0
7.2
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Declassified in Part - Sanitized Copy Approved for Release 2014/06/03: CIA-RDP90B01013R000400030003-8
The Leveraging of Agricultural Policy Reform Through
"FOOD FOR PROGRESS"
The amount of "leverage" will be influenced by:
1.) The ratio of: "Food for Progress" additional food assurance
- A country's total food needs
2.) The potential recipient country's performance in implementing
agreed-upon policy reforms (World Bank/IMF conditionality).
3.) The potential recipient country's agreement to:
-- More fully implement needed policy measures if provided
with multi-year additional food assurance, or
-- To change a disfunctional economic policy.
The analytical task is to:
1.) Back-up or select those policies within a country which would
yield the largest economic return for the additional food
assurance of the "Food for Progress" program, and
2.) Then determine which countries would yield the largest potential
economic return through participation in the "Food for Progress"
program. KEATO1 015 STAFF 2/0
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KEATCt. 02.:7 STAFE2A
Consumption
El Production
Title I
PL 480
Se;e&or, of "Food for Progress" Policy Targets
Food
Production
Response
Amount of Policy Change
Through "Food for Progress"
KEATO1 027 STAFF 2/0
Select Policy "B"
as Leverage
Target Policies for Leverage
0 Farmer Prices
o Exchange Rates
o Food Subsidy Levels to Consumers
O Involvement of Private Enterprise
in Marketing System
O Fertilizer Import Regulations
LJ
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Declassified in Part - Sanitized Copy Approved for Release 2014/06/03: CIA-RDP90B01013R000400030003-8
KEAT01.025 STAFF 2/0
Recipient Country Production and Consumption of Staple Food items
Implementation of "Food for Progress" Over Time
Level of
Food
Product on
and
Consumption
Consumption Production PL 480fJ Other Donors'
Title I Food Aid
rMinimally Adequate Per Capita Food Consumption
"Food for Progress" as an
Inducement to Agricultural
Policy Reform
"Food for Progress" as an
Assurance During
Transition Period Austerity
Commercial Food Imports
timate Goal
./7
Current Situation
Time
Year 1
Year 2
Year 3
Year 4
Subsequent Years
(Food for
(Policy
(Policy
(Program Goals
(A Country Becomes
Progress Begins)
Implementation
Enhancement
Met)
Commercially Viable
Phase)
Phase)
Food Importer)
KEATO1 025 STAFF 2/0
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Declassified in Part - Sanitized Copy Approved for Release 2014/06/03: CIA-RDP90B01013R000400030003-8
USG Bi-Lateral Assistance Programs
PL 480 Title I: Food aid sold on highly concessional terms on a one-year
basis to support foreign policy, economic development, and market
development objectives.
PL 480 Title II: Food aid given away on a one-year basis to the
neediest people in a country regardless of their government's policies.
? PL 480 Title III: Multi-year food aid in support of multi-sectoral
economic development objectives.
GSM 102 & GSM 5: CCC guarantees and loans to develop markets for
US agricultural commodities (repayment on a three-year basis).
KEAT01.011 STAFF 2/0
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USG Bi-Lateral Assistance Programs (Continued)
Economic Support Fund: Grants for multi-purpose budget and balance
of payments support commensurate with foreign policy objectives
(one-year allocation).
Development Assistance: Grants and concessional loans in support of
multi-sectoral economic development projects (one-year basis allocation).
Economic Policy Initiative: Cash grants in support of multi-sectoral
economic reform in Africa (one-year allocation).
"Food for Progress": The use of USG-owned food on a multi-year basis
in support of agricultural policy reform in key Third World countries.
KEAT01.012 STAFF 2/0
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S?Strong
M?Moderate
P?Partial
N?Negligible
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USG Bi-Lateral Assistance Programs
Programs
Program
Value
(Millions)
Structure
Terms
Duration
Program Objectives
Market
Development
Foreign
Policy
Humanitarian
Assistance
to Neediest
Multi-
Sector
Economic
Development
Reform
Agricultural
Pricing
Program Results
Domestic
Political
Support
Effectiveness
in Meeting
Program
Objectives
PL 480 Title I
$730.0
Concessional
Credit (15-40 yrs)
1 Year
S
M
P
M
P
S
S
PL 480 Title II
(Section 206)
$800.0
$20.0
Grant
Grant
1 Year
3 Years
N
N
N
N
s
M "
N
M
N
P
S
P
M
P
PL 480 Title III
$106.0
Conditional
Grant
3 Years
N
P
P
S
M
P
N
GSM-102
$5,000.0
Commercial
Interest (3 yrs)
1 Year
S
N
N
N
N
S
s
GSM-5
$120.0
No interest
(3 yrs)
1 Year
S
N
N
N
N
M
P
GSM-301
0
1 Year
S
N
*
N
N
N
P
N
Economic
Support
Fund
$3,438.1
Grant
1 Year
N
S
N
N
N
P
S
Economic
Policy
Initiative
$75.0
Grant
1 Year
N
M
N
S
M
?
P
Not Yet
Attempted
Development
Assistance
$2,266.1
Concessional
Credit and Grant
1 Year
N
M
P
S
P
P
1
M
Food for
Progress
$90.0
Conditional
Grant
4 Years
M
M
N
P
s
S
Not Yet
Attempted
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Declassified in Part - Sanitized Copy Approved for Release 2014/06/03: CIA-RDP90B01013R000400030003-8
An Integrated Food Aid Program
for Sub-Saharan Africa
? "Food for Progress" and the Economic Policy Initiative (EPI)
both provide additional resources for Sub-Saharan African
countries. "Food for Progress" should not displace PL 480
Titles I, II, III, or other donors' food aid.
? Decision analysis (MAUT) can help determine the proper mix
of "Food for Progress", EPI, PL 480, and other food aid
instrumentalities for a recipient country.
ICEAT01.006 STAFF 2/0
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Declassified in Part - Sanitized Copy Approved for Release 2014/06/03: CIA-RDP90B01013R000400030003-8
An Integrated Food-Aid Program
for Sub-Saharan Africa (Illustrative)
Recipient
Countries
(by FY 85 ESF)
Other Donors
30 %
Index % MAUT
Title I
20%
Index % MAUT
Title II
5%
Index % MAUT
Food Self-
Sufficiency
45%
Index % MAUT
Country
Ranking
Appropriate
Program
Sudan
10
17
5.1
10
23
4.6
5
13
0.7
5
10
4.5
14.9
E.P.I.
Kenya
7
12
3.6
5
12
2.4
8
21
1.1
2
4
1.8
8.9
Food for Progress
Liberia
2
3
0.9
6
14
2.8
0
0
0
5
10
4.5
8.2
Food for Progress
Somalia
10
17
5.1
7
16
3.2
0
0
0
6
12
5.4
13.7
E.P.I
Zambia
6
10
3.0
5
12
2.4
0
0
0
4
83.6
9.0
E.P.I.
Zaire
2
3
0.9
6
14
2.8
5
13
0.7
1
2
0.9
5.3
Food for Progress
Zimbabwe
0
0
0
0
0
0
0
0
0
10
20
9.0
9.0
E.P.I
Sengal
10
17
5.1
4
9
1.8
10
26
1.3
6
12
5.4
13.6
E.P.I
Chad S5
9
2.7
0
0
0
5
13
0.7
3
6
2.7
6.1
Food for Progress
Botswana
3
51.5
0
0
0
0
0
0
9
18
8.1
9.6
E.P.I
Niger
1
2
0.6
0
0
0
0
0
0
4
8
3.0
4.2
Food for Progress
Djibouti
2
3
0.9
0
0
0
5
13
0.7
1
2
0.9
2.5
Food for Progress
Total Sub-Saharan
African
58
43
.
38
50
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Declassified in Part - Sanitized Copy Approved for Release 2014/06/03: CIA-RDP90B01013R000400030003-8
Why Should We Use USG-Owned Food Stocks?
? Provides needed additional food resources without raising
appropriations.
? Reduces large USG-owned food stocks overhanging depressed
agricultural markets.
? Will not disrupt food aid levels of other PL 480 programs.
? Permits greater year-to-year scheduling flexibility without
the pressures of annual appropriations and commodity interests,
thereby increasing the "Food for Progress" program's effectiveness
for recipient countries and US leverage for policy reform
in the agricultural sector.
? For the same reasons, the use of USG-owned food stocks for
the "Food for Progress" initiative would lend itself to
co-financing arrangements with the World Bank and other
financing institutions.
KEAT01.013 STAFF 2/0
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Declassified in Part - Sanitized Copy Approved for Release 2014/06/03: CIA-RDP90B01013R000400030003-8
Why would reprogramming of existing PL 480 instrumentalities fail to
accomplish the "Food for Progress" objective -- agricultural policy reform?
? Planned PL 480 resources only cover essential State/Aid/USDA requirements
to meet A.) Title I/111 multiple objectives, B.) Title II non-emergency
statutory minimum food aid, and C.) the Title II reserve for emergencies.
? Reprogramming PL 480 instrumentalities for "Food for Progress" would subject
the new initiative to unpredictability of funds and pressures from State/
Aid/USDA to add their multiple goals to the new initiative's single objective
of agricultural policy reform, and thus seriously undermine its single
objective.
? Reprogramming PL 480 instrumentalities for "Food for Progress" would
appear unimaginative and unimportant to the Hill.
? Reprogramming PL 480 instrumentalities for "Food for Progress" would
make it unattractive as a legislative proposal because of the
resulting loss of many of the unique characteristics of the new
Presidential initiative, plus the lack of clearly identified funding.
KEAT01.020 STAFF 2/0
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.0
Programs
PL 480 Title I
PL 480 Title II
PL 480 Title III
E.P.I. (E.S.F.)
Section 416
Declassified in Part - Sanitized Copy Approved for Release 2014/06/03: CIA-RDP90B01013R000400030003-8
?Food for
Progress"
(Section 416
Expanded to
Target Reform
In Agriculture)
Program Characteristics Needed to Promote
Agricultural Policy Reform in Sub-Saharan Africa
VALUE
(Millions)
TERMS
Economic
Reform
Conditionality
Multi-year
Commitment
Uses USG
Owned
Food
Free from
Annual "Use
or Lose" Ap-
propriation
Free from
Domestic
Commodity
Interest
Pressure
Free from
Competing
Agency Interests,
("BARNACLES")"
Discretionary
Control Over
Delivery
(Lends Itself
to Co-Financing)
U.S.
Domestic
Political
Support
$730.0
Concessional
Credit
P
N
N
N
N
N
N
P
$800.0
Grant
N
N
N
N
N
P
N
S
$106.0
Conditional
Grant
P
S
N
N
N
N
N
N
$75.0
Grant
S
P
N
N
S
P
P
N
Sunk
Investment
(U.S.G.-Owned
Commodities)
Grant
N
N
S
S
S
S
N
P
Sunk
Investment
U.S.G.-Owned
Commodities
Valued at $90.0
million per year
Conditional
Grant
S
S
S
S
S
S
S
S
S?Strong
P?Partial
N?Negligible
- Declassified in Part - Sanitized Copy Approved for Release 2014/06/03: CIA-RDP90B01013R000400030003-8 ?
Declassified in Part - Sanitized Copy Approved for Release 2014/06/03: CIA-RDP90B01013R000400030003-8
Why would the "Food for Progress" initiative, based on the use of
surplus commodities owned by the Commodity Credit Corporation
(CCC - Section 416), succeed better than existing food aid programs
in achieving agricultural policy reform?
? The "Food for Progress" initiative would be the only US food aid instrument
employing additional food resources specifically for the purpose of
leveraging price and policy reform in key Third World countries.
The major distinguishing characteristics of the new initiative
may be summarized as follows:
It would make clear President Reagan's intent to match temporary
USG-owned food stocks with the food needs of key Third World
countries during their transition periods to more market-oriented
agricultural systems (not a 30-year food aid program).
It would use food resources already paid for by the USG where
the net additional cost would be transport, minus savings in
storage.
KEAT01.018 STAFF 2/0
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_? Declassified in Part - Sanitized Copy Approved for Release 2014/06/03: CIA-RDP90B01013R000400030003-8
Why would the "Food for Progress" initiative, based on the use of
surplus commodities owned by the Commodity Credit Corporation
(CCC - Section 416), succeed better than existing food aid programs
in achieving agricultural policy reform? (Continued)
MP =11
ea. ONO
It would permit multi-year food aid programming free from "use or lose"
appropriations, and the associated pressures from commodity
interest groups.
It would increase our discretionary ability to vary annual food deliveries
in accordance with the changing needs and performance of
recipient countries.
It would be an efficient, carefully targetted food aid instrument
free of the "barnacles" built into PL 480 by law and agency practices',
and characterized by conflicting interests and institutional perspectives.
It would enjoy broad congressional support as a new initiative
with greater promise of achieving agricultural policy reform in
key Third World countries than the usual food programs under PL 480.
KEAT01.019 STAFF 2/0
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Declassified in Part - Sanitized Copy Approved for Release 2014/06/03: CIA-RDP90B01013R000400030003-8
Interested
parties
Farm BLOC
Private
Voluntary
Organizations
Congress
Executive
Branch
US Domestic Political Acceptability
of the "Food for Progress" Initiative
Essential Features
PL 480
Continues
Food Stockpile
Not Rebuilt
No Displacement
of Commercial
Food Exports
No Adverse
Budgetary
Impact
End Goal is Getting
KeyThird World Countries
Off Dole and Back into
International Commercial
Food Market
+
+
+
0
+
+
?
0
0
+
+
+
+
+
0
+
0
+
+
+
+ Support ? Oppose 0 Neutral/Divided
_ _ Declassified in Part - Sanitized Copy Approved for Release 2014/06/03: CIA-RDP90B01013R000400030003-8
Declassified in Part- Sanitized Copy Approved forRelease2014/06/03 : CIA-RDP90B01013R000400030003-8
Central Intelligence Agency
MEMORANDUM FOR:
Washington. D. C.20505
Robert M. Kimmitt
Executive Secretary
National Security Council
SUBJECT: NSDD on "Food for Progress"
ER 84-10343/1
19 December 1984
REFERENCE: Your memo to Multiple Addressees dated 18 Dec 84,
Same Subject
1. We believe the proposed NSW) on a "Food for Progress"
non-emergency food aid initiative for the Third World to be timely and
useful.
2. As the proposed NSDD notes, a major problem that needs to be
considered is whether, given the current and projected emergency needs
for food in Africa--due to drought, mismanagement, and dysfunctional
policies--conditional assistance is feasible. The Western response, as
reflected in US assistance to the current famine in Africa, entails
massive amounts of essentially unconditional humanitarian aid.
3, We call your attention to two relevant recent interagency
intelligence studies on this problem: IIA: Food Problems in Sub-Saharan
Africa: Prospects for 1984 and Beyond, dated 22 March 1984; and SNIE
70-84, African Famine: Short-Term Prospects, Problems, and
Opportunities, dated December 1984.
Execikti ve Secretary
CONFID NTIAL
25X1
25X1
Declassified in Part - Sanitized Copy Approved for Release 2014/06/03: CIA-RDP90B01013R000400030003-8
Declassified in Part - Sanitized Copy Approved for Release
2014/06/03: CIA-RDP90B01013R000400030003-8
EILEUU 11 V E 1 AMA 1
ROUTING SLIP
TO:
ACTION
INFO
DATE
INITIAL
1
DCI .
X
2
DDCI
X
3
EXDIR
X
4
D/ICS
5
DDI
X
\
6
DDA
7
DDO
X
8
DDS&T
9
Chm/NIC
10
GC
11
IG
12
Compt
13
D/Pers
14
D/OLL
15
D/PAO
16
SA/IA
17
AO/DCI
18
C/IPD/OIS
19
SEVECON
?X
-N--...__
20
0/0Gi
.-.,
X
21
22
SUSPENSE
? Date
Remarks To
19: Pis provide concurrence/
comments for Executive Secretary's trans-
mittal by 1500 hrs , 20 Dec 84.
STAT
Executive5e?tory
- 19 P r R4
Date
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NArIg04?114. SECURITY COUNCIL
ulowstovimicTord. ?C. 201,0111
!December 18, 1984
UNCLASSIFIED with
CONFIDENTIAL Attachmenip
MEMORANDUM FOR
MR. DONALD P. GREGG
Assistant to the Vice
President for Nation0
Security Affairs
MR. CHARLES HILL
Executive Secretary
Department of State
MR. CHRISTOPHER HICKS
Executive Secretary
Department of the Treasliry
COLONEL R. J. AFFOURTIT
,Executive Secretary
Department of Defense
MR. RAYMOND LETT
Executive Assistant
to the Secretary
Department of Agricultuge
MRS. HELEN ROBBINS
Executive Assistant
to the Secretary
Department of Commerce,
MS. LINDA AREY
Director, Executive
Secretariat
Department of
Transportation
SUBJECT: NSDD on "Food for
SYSTEM II
91256
I Executive Registry
,--
84- 10343
MR. ALTON KEEL
Associate Director for
National Security and
International Affairs
Office of Management and
Budget
Executive Secretary
Central Intelligence Agency
MR. DENNIS WHITFIELD
Executive Assistant to the
United States Trade
Representative
MR. WILLIAM NISKANEN
Member, President's Council
of Economic Advisers
MR. JOHN A. SVAHN
Assistant to the President
for Policy Development
MR. MALCOLM H. BUTLER
Executive Secretary
Agency for International
Development
MS. RAPHAELLE SEMMES
Executive Secretary
Peace Corps
Progress"
The attached NSDD on a !qiciod for Progress," non-emergency
food aid initiative results from the NSSD 1-84 interagency
study.
It is contemplated that wflen the President signs this policy
document, Richard Levine of the nsc staff will chair an
interagency group which will make recommendations on an
appropriate implementatlion, plan for this policy initiative.
John Gordley of the Ott-lice of Policy Development will serve
as vice-chair for this group.
UNCLASSIFIED with
CONFIDENTIAL Attachment;
STAT
7
'-"7
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UNCLASSIFIED with
- CONFIDENTIAL Attachment 2
?
Due to the President's interest in this matter, agency comments
are requested on this drat NSDD by close of business Thursday,
December 20,.1984.
?
Robert M. N. Kimmitt
Executive Secretary
Attachment
Draft NSDD .
4
UNCLASSIFIED with
CONFIDENTIAL Attachment
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.???
CONFIDENTIAL
.NATIONAL SECURITY DECISION
DIRECTIVE NUMBER
U.S. T11RD WORLD FOOD AID:
A "FOOD FOR eROGRESS" PROGRAM (U)
NSSD 1-84 established the terms of reference for a study
aimed at producing new, effective initiatives to addreps
Third World hunger problems; that is, both emergency
situations and 1ong-ter* problems, and how U.S. and donor
country food aid program' affect these cases. The NSSD 1-84
study of emergency food aid was completed in July 1984 and
resulted in a ten-point program to better respond to grave
food crises, as articulAted in NSDD 143. Today's food
emergency reemphasizes the need to tackle the underlying
structural problems of aiw-icultural stagnation in the Third
World. (U)
The study of non-emcrgepcy food aid has focused on how U.S.
food aid could be used ,as an incentive for Third World
countries to increase tpletr food production through
agricultural reform, noting that an adequate agricultural
sector is a prerequisit4 gor development in Third World
countries. This study an considered the economic and
political conditions in mioly Third World countries
experiencing chronic food shortages. (U)
Socialist economic systmgi, prevalent in underdeveloped
countries, have failed Ito achieve economic growth. As a
CONFIDENTIAL
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CONFIDENTIAL
2
result of this, and insufficient aid by the USSR, an
increasing number of Third World countries once dominated by
?
the socialist model are experimenting with free market
approaches. (C)
In response to this policy context, the United States
Government will begin a new food aid program to be can.ed
"Food for Progress which will use American resources to
support key Third Woxld countries which have made commitments
to agricultural policy changes in six basic areas:
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WNW MM.
IMO ?=111,
Adequate price levels; for agricultural commodities and
timely payment to indigenous farmers;
Greater farmer ace,rsq to private, competitive markets;
A market-determine 0 exchange rate;
Adequate foreign e,Kchange supplies for agricultural
Inputs (fertilizer, pesticides, equipment, etc.), along
with their efficieolt and timely delivery;
Adequate rural inffantructure (farm-to-market roads,
collection station, etc.); and
Involvement of the private sector in agriculture and
marketing. (C)
CONFIDENTIAL
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CONFIDENTIAL 3
Anierltn regbiri-s'i;irrp-p-O-a"ifiiiiip re-Me ntat cy
changes over a medium-term transition period in Third World
countries--initially those in Sub-Saharan Africa. This
Judicious use of foreign 4id--where appropriate on a
multi-year basis--will reduce the political risks to leaders
of Third World countries committed to undertaking
- ?
agricultural reform during a transition period of economic
hardship. (C)
Resources to support policy changes will be obtained from two
sources:
The African Economic Policy Initiative, a 5-year, $500
million program intended to support economic reform in
Africa. First-year funding of $75 million was provided
by. the Congress in the Economic Support Fund in 1985.
0 The P.L. 480 f orlf3id program, either through more
effective
use of eKisting Title I resources or, if
necessary, through additional resources. (C)
In contrast with other Ipx4sting.41d programs with
Comprehensive and multiiple objectives, this initiative will
have as its objective title achievement of and agricultural
policy reform in Third IfJorJd countries. "Food for Progress"
may benefit from co-finAncing with the World Bank and other
financial institutions. (tl)
CONFIDENTIAL
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CONFIDENTIAL 4
The National Security'C,ounCil will-chair an interagency group
with repreSentatives (cosi State, AID, USDA, CEA, Ota,
Treasury and the White jiouse Congressional Affairs Office to
develop an appropritite implementation plan for this
Presidential initiative. The Office for Policy. Development
will serve as vice-chair (or this. group. Priority should be
given to implementing this initiative within current. Eirograms
and budgets. Prompt an43 positive congressional action is to
be considered a signifiant concern in preparing an
implementation program-..which may include changes in existing
laws and authorities or new legislation. This interagency
group should also consicler the relationship between this
'initiative and cuTtent ,And proposed U.S. responses to the
emergency situation cre;ited by the life-threatening hunger
situation in Africa. (1p)
The interagency group sl4ou1d -forward an implementation plan,
with options as appxopriate, to the Assistant to the
President for National Security Affairs 20 working days from
the date of this memorahdum, noting agency and congressional
views, .This implementation plan will be decided upon through
the NSC and budget procIpsn. (U)
CONFIDENTIAL
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