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GENERAL AGREEMENT ON                                       TN.64/Ce/10
                                                           8 June 1967
TARIFFS AND TRADE                                          Special Distribution

Group on Cereals                                           Original:   English

                            INTERNATIONAL GRAINS AGREEMENT
            Document submitted by the Food and Agriculture Organization
                             and the World Food Program

A.   Interpretation of GATT Memorandum of Agreement (document

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.
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
(iv) allocation of the prescribed portion of grant funds set aside in the
     Agreement for purchasing grain produced in developing exporting member
(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.
                                                                  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
      emergencies, many of which in the past were met by bilateral programmes;
(iv)   establishment of national food reserves in developing food deficit
(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.
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

     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.
                                                              Page 5

 (vi) purchase of shipping space within the FAO financial regulations on a
      strict commercial basis, with discounts from Conference Lines where
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.
Page 6
         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.
                                                                        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
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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