CONFIDENTIAL GENERAL AGREEMENT ON TN.64/Ce/10 8 June 1967 TARIFFS AND TRADE Special Distribution Group on Cereals Original: English PROCEDURES AND CONDITIONS GOVERNING THE MULTILATERAL USE OF GRAINS CONTRIBUTED AS FOOD AID UNDER PROPOSED INTERNATIONAL GRAINS AGREEMENT Document submitted by the Food and Agriculture Organization and the World Food Program A. Interpretation of GATT Memorandum of Agreement (document TN.64/7) 1. It is understood to be the intent of all parties to the GATT Agreement that the food aid commitment will be additional to present levels of food aid., either bilateral or through the World Food Program (WFP). The annual levels of pledges to WFP during 1966/68 are listed by country in the annex to this document. 2. It is understood that obligations (stated in physical terms) will be discharged on the basis of the value of wheat. For donor countries where the minimum export wheat price is below the reference price of $1.73 per bushel, the tonnages of wheat have been adjusted upwards on a price equivalent basis. No downward adjustments have been made for wheat the minimum price of which is above the reference price. Tonnages of coarse grains delivered will be adjusted upwards on the basis of price relationships with Hard Red Winter No. 2 at Gulf Ports (minimum price of $1.73 or actual price at the time?). 3. It is understood that the statement in paragraph 5 on page 9 of the GATT Memorandum of Agreement, indicating that donor countries could specify the recipient "country or countries" for their food aid contributions, had been interpreted throughout the discussions as allowing the designation of WFP as a multilateral international agency to handle supplies originating under the proposed Grains Agreement. 4. It is understood that the precise terms under which WFP would handle such food aid as may be channelled through the WFP need not be included in the Grains Agreement proper, but could be stipulated in a separately agreed memorandum or annex providing inter alia for direct negotiation between WFP and interested donor countries. TN.64/Ce/10 Page 2 5. It appears that no provision is made for the cost of ocean freight, overland transport costs to the closest border of landlocked countries, insurance, superintendence (and administrative overheads in the case of grain moving through multilateral channels).. In view of the experience of WFP to date, these costs would need to be covered by cash contributed along with the grain. It is believed that cash equivalent to 20 per cent of the value of the grain would be sufficient for the purpose. B. Guidelines elating r to food aid in Grains Agreement It is understood that the proposed Grains Agreement will include general guidelines on: (i) procedures for reporting food aid contributions and transactions in fulfilment of the obligations and provisions of the Agreement; (ii) safeguards to avoid harmful interference with normalcommercial trade; (iii) safeguards to ensure the food aid contributes to the economic development of the recipient country and avoids adverse effects on its domestic agriculture; (iv) allocation of the prescribed portion of grant funds set aside in the Agreement for purchasing grain produced in developing exporting member countries; (v) use of such other cash contributions as are allocated for purchasing of grain by the WFP; (vi) eligibility of recipient countries for food aid under bilateral programmes (i.e. definition of "developing country" as stated in the GATT Memorandum of Agreement); (vii) liaison between Grains Council and WFP, United Nations; FAO, and other international agencies concernod. C. Use of grains designated for multilateral distribution 1. Any grains aid (including cash contributions) channelled through the WFP would be handled under the same conditions rules and regulations as apply to supplies pledged under the currentWFP programme, whether used for emergencies or economic development. TN.64/Ce/10 Page 3 2. The present General Regulations of the WFP provide that: "The Program shall, on request, provide aid for: (a) meeting emergency food needs and emergencies inherent in chronic malnutrition (this could include the establishment of food reserves) [see General Regulations Part B, 5(a) and 6]; (b) implementing projects, using food as an aid to economic and social development, particularly when related to pre-school and school feeding, increasing agricultural productivity, labour- intensive projects and rural welfare" [General Regulations Part B, 5(b)]. 3. The availability of substantial additional quantities of grains for multilateral distribution by WFP would entail an intensification of WFP activities along present lines and possibly some re-orientation. With its present resources, WFP is unable to meet all the requests forthcoming for aid for projects and emergencies. These operations would continue but projects not already sanctioned would be reviewed in the light of the new circumstances. With adequate advance planning the WFP would be able to introduce new types of food aid operations and to initiate activities on a larger scale. 4. The main types of operation which can be presently envisaged are: (i) specific projects for economic and social development involving identified population groups and requiring grains. The average size of such projects could be increased with additional resources in grains; (ii) sectoral and area projects involving a whole sector of the economy, e.g. river basin development; (iii) famine and emergency relief. At present the Director-General of FAO has drawing rights on WFP resources of $10 million to meet requests for emergency food aid. This has been increased by $5 million in each of the years 1966 and 1967. The availability of larger quantities of grain with WFP would result in increased requests to WFP meeting sudden for emergencies, many of which in the past were met by bilateral programmes; (iv) establishment of national food reserves in developing food deficit countries; (v) a much larger contribution might be made towards filling the structural food deficits of developing countries with balancu-of-payment difficulties, in order to assist their economic development. This type of food aid might be acceptable to recipient countries delivered on an f.o.b. basis. TN.64/Ce/10 Page 4 D. Procedures and criteria 1. Current procedures for WFP operations include: (i) direct negotiation by WFP with donor countries on the supply of a particular grain, made available from the amounts pledged for multilateral use, to a proposed recipient country for a specific purpose. Donor countries may refuse to supply grain for a proposed recipient country, but cannot specify a recipient country; (ii) technical scrutiny of requests from eligible recipient countries, including the possible adverse effects on commercial trade and domestic agriculture, in collaboration with FAO, United Nations and other competent international agencies, (iii) submission of all project proposals to the FAO Consultative Sub-Committee on Surplus Disposal1 to establish if the project accords with the FAO Principles of Surplus Disposal.2 In connexion with food aid under the proposed Grains Agreement, this would also serve to safeguard the normal commercial trade of non-member grain exporting countries; and commercial trade in related products outside the Grains Agreement (e.g. rice); (iv) submission to WEP Intergovernmental Committee (IGC)3 for approval of all projects with a total commodity cost of $750,000 or above. Authority to approve projects of less than $750,000 is delegated to the Executive Director of WFP on the understanding that they would be subsequently reported to the IGC; (v) purchase of grains on the basis of the most favourable offer in commercial markets, taking into consideration location of project, delivery dates, and the general preference given to supplies available in developing countries; 1The Consultative Sub-Committee is open to all interested FAO member nations and meets regularly each month in Washington D.C. 2It is believed that the FAO Principles continue to provide a valid international code of conduct and an agreed framework for prior consultations on food aid transactions, in addition to such surplus disposals as still take place from time to time. 3Membership of IGC consists of twenty-four nations, of whom half are elected by the FAO Council and half by the ECOSOC. TN.64/Ce/10 Page 5 (vi) purchase of shipping space within the FAO financial regulations on a strict commercial basis, with discounts from Conference Lines where possible. 2. Specific criteria and procedures addilional to those now in effect as summarized above, might have to be developed to provide for larger-scale multilateral food aid operations, particularly for evaluation of requests. 3. Decisions on the amount and timing of large-scale food transfers for development aid should be taken only after the most careful appraisal of the food and agricultural situation in the recipient country in the context of its general economy. For such appraisals the WFP would necessarily rely on the International Bank for Reconstruction and Development, the international Monetary Fund and FAO. A key feature would be the forward estimating of food requirements and deficits in the requesting countries, a task that falls within the competence of FAO. 4. Procedures and criteria would be required to evaluate requests for large- scale emergency assistance such as may arise from widespread crop failures. Such procedures could include a survey of the actual food situation in the applicant country, the extent and causes of the crop shortfall, the level of national stocks, the economic condition of the country and the scope for increased commercial imports. 5. The GATT Memorandum of Agreement envisages the provision of food aid either as a grant or against payment in the currency of the importing country. In either case, funds may be accumulated from the sale of the grain in the local market. Where these funds are large, the way in which they are used may have a significant impact on the economy. 6. In general, the use of local proceeds should be determined in the light of the overall economic situation and policies of the recipient countries. It should be noted that the aid content of grain sales for recipient countries' currencies is reduced to the extent that proceeds from their local sales are used in ways that diminish the recipient countries' potential foreign exchange earnings, and this should be avoided. Moreover, in the interest of a long-term solution to the food problem of the developing countries use should be made of the local currency funds, where possible, to promote agricultural development. Guide lines or rules on the allocation of such proceeds may have to be drawn up. 7. To permit adequate preparation and planning of projects and operations, pledges of multilaterally designated quantities should allow for a six-morth delay in disbursements i.e. grains pledged to the WFP for a given calendar year under the proposed Agreement should remain available for eighteen months. TN.64/Ce/10 Page 6 ANNEX (1966-68) Statement of Pledges to UN/FAO/WorldFood Program in US Dollars as at 31 May 1967 - Contributing countries Coimmodities Services Cash T Total Afghanistan 2,000 2,000 Algeria 20,000 20,000 Australia 1,800,000 450,ooo 2,250,000 Austria 1,100,000 275,000 1,375,000 Belgium 420,000 180,000 600,000 Botswana 1,565 1,565 Brazil 250,000 250,000 Cameroon 2,041 29041 Canada 20,625,000 69875,000 27,500,000 Ceylon 30,000 30,000 Chad 2,000 2,000 Chile* 114,068 114,068 China 184,660 184,660 Colombia 609000 60,000 Congo (Kinshasa) 5,000 59000 Costa Rica 1,500 1,500 Cuba 320,000 3209000 Cyprus 840 840 Denmark 4,869,359 2,333,333 7,202,692 Dominican Republic 1,000 1,000 Ecuador 912 912 Ethiopia 5,000 5,000 Finland 650,000 650,000 France* 1,989,795 1,068,537 3,058,332 Germany 3,975,000 1,590,000 2,385,000 7,950,000 Ghana 35,000 35,000 Greece 205,000 205,000 Guinea 60,000 60,000 Iceland 5,000 5,000 India 500,9000 250,000 7509,000 Iraq 40,000 20,000 60,000 Iran 100,000 100,000 Ireland 1,260,151 420,050 1,680,201 Israel 15,000 15,000 Italy 500,000 1,000,000 1,500,000 Jamaica 6,000 6,000 Japan 150,000 1,483,333 1,633,333 Jordan 9,000 9,000 Korea, Republic of 6,000 6,000 Kuwait 150,000 1509000 Laos 3,000 3,000 1Ecuador's pledge owing to difference in rate of exchange is for the time being reduced to $912. New or altered pledges. TN.64/Ce/10 Page 7 Contributing countries Commodities Services Cash Total Lebanon 15,000 15,000 Liberia 3,000 3,000 Libya 15,000 15,000 Luxemburg 15,000 15,000 Malaysia 4,950 4,950 9,900 Mali 2,000 2,000 Malta 100 100 Mexico 100,000 100,000 Morocco 25,000 25,000 Nepal 1,000 1,000 Netherlands 4,000,000 2,000,000 6,000,000 New Zealand 375,000 375,000 750,000 Nigeria 1,400 ^ 2,800 4,200 Norway 3,079,938 1,538,750 4,618,688 Pakistan 173,246 173,246 Saudi Arabia 10 9000 10,000 20,000 Senegal 6,000 6,000 Spain 22,000 10,000 32,000 Sweden 4,000,000 4,000,000 8,000,OOO Switzerland 324,074 1,168,981 1,493,055 Syria* 24,038 24,038 Tanzania 14,000 14, 000 Thailand 70,000 70,000 Turkey 100,000 100O000 Tunisia 28,715 28,715 United Arab Republic 100,9000 3,100,000 100,000 United Kingdom 3,100,000 6,200,000 United States of America 92,000,000 32,000,000 6,000,000 130,000,000 Venezuela 100,000 100,000 Viet-Nam 1,000 1,000 Yugoslavia 250,000 250,000 Zambia 2 2,800 2 800 Holy See 11.000 11.000 146,382,959 34,090,000 135,515,9 3,55,2721,98,8 Resources actually available 110,517,574 21,615,083 35,515,927 167,648,584 1Switzerland has made a pledge for four years (subject to Parliament's approval) of $1,990,740 but its composition is not known yet and has been con- sidered as cash for recording purposes. 2Gift of the Holy See. * New or altered pledges.
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