Mr Chairman,
This Sixtieth Session of the Council meets at a time when there is an unmistakable and mounting sense of uneasiness and foreboding about the world's food and agriculture. We are passing through a period when there is not only serious cause for concern, even alarm, in many places but also more widespread uncertainty than there has been, perhaps, since the years immediately following the Second World War. Developments on the world agricultural scene in the last year or so have not only been dismaying in several ways. There have also been indications that a radical process of change is going on, out of which - for good or ill - a new world pattern may emerge. At the same time, there have been fluctuations making the outline of the future somewhat hazy. In the last few months, we have been constantly evaluating the situation. I feel it is now essential to put my current assessment of at least some parts of the general picture before this Council.
In doing so, I am most anxious to hear the views of the Council, established as it was by the FAO Conference in 1947 as the main FAO body on world food questions and specifically empowered to advise on the adequacy of food supplies. We must act together for the purpose of making FAO's voice clearly heard in circumstances like those now confronting us. It was indeed for such a purpose that this Organization was created.
The most evident features of the present highly disturbed situation are already well-known. There is the threat of food shortages in many parts of the world - a threat which has already become a harsh fact in certain places like the Sahelian Zone of West Africa. Related to this threat - although in differing degrees - are factors such as the immensely heavy purchases of grain by the Soviet Union, the rapid depletion of world reserve stocks of cereals and the inability of most of the developing world in 1971 and 1972 to increase its agricultural production fast enough. At the same time, there has been a notably quickening trend for prices to rise sharply over a very wide range of agricultural products - foodgrains, coarse grains, rice, meat, sugar, cocoa, timber, cotton, natural rubber and others.
Why is all this happening together? Is there a general underlying cause? Is it a series of coincidences? Is the threat of a world food shortage a real one? And, if so, is it a lasting one? What, more generally, is going to happen to the world's agriculture over the longerterm? These are some of the questions that crowd in on the mind and which we are continuously analysing. One cannot of course answer them all at the present stage. But, as a start, one must try and separate some of them.
Let me take the threat of a world food shortage first. Yes, it is a real one. I made this clear when I first described the danger at a Press Conference at the beginning of February. But in some ways the outlook has worsened since then.
I stated my view at the time that there was little likelihood of immediate widespread famine in the next few months. Those months have now passed, but in the meantime famine has drawn perilously close - certainly in the Sahelian Zone and probably in parts of some other countries although reports from there are not definite.
In February, I also said there were some hopeful signs based to a considerable extent on prospects for bumper crops in the United States and Canada. Due to climatic conditions these prospects are now much less certain. Moreover, the food situation in the Far East has become still more difficult. For these and other reasons, it now seems clear that the lowest foreseeable wheat requirements in the 1973–74 season cannot be covered from 1973 production. This means that wheat stocks in the exporting countries - already at their lowest level for over 20 years - will have to be drawn down still further. The world, whose population grew by 50 per cent in this same period of about 20 years, will thus be left with even less protection in the 1974–75 season.
In addition, there is already a physical deficit of rice - export supplies are about 2 million tons short of foreseeable import requirements. Moreover, there is a rising demand for coarse grains and, if the maize crop in the United States is not up to earlier expectations, more wheat will probably be fed to animals. All this puts still greater pressure on wheat supplies.
If there were to be a further serious deterioration in crop conditions in North America or the Far East, there could well be a world-wide grain shortage. The period from now until the end of September is the critical one, during which we shall continue to live in an atmosphere of troubled uncertainty, assuming that uncertainty is not cut brutally short by a sudden disaster. The real measure of our anxiety, however, is to be found in the fact that, while a marginal shortfall in expected production in a major area could lead to a serious deficit at the world level, a marginal improvement in output would not relieve what is already a tight situation.
The main cause of the predicament in which the world now finds itself has of course been drought and other adverse weather conditions over the last two years. I have said on previous occasions this year that it is intolerable that, in this last third of the Twentieth Century, the world should still find itself almost entirely dependent on a single season's weather and crop conditions for its basic food supplies. It is to help rectify this anomaly that I am putting forward a specific long-term proposal to governments which I will come to in a few minutes. But first I would like to press on with my examination of the general situation.
Weather alone cannot account in full for the seriousness of the present world food situation. Nor, let me stress, is it this present food situation alone that is a cause for deep concern. World agriculture in general is going through an extremely disturbing period. The situation is highly complex. Some of the factors are new, others are not. Some of them may only be of short-term significance. Others have implications which reach ahead perhaps for many years. Let me take what seem to me the most important.
In the first place, there is the now accepted fact that, regardless of the weather, the developing countries as a whole have not in the last few years been making the advances in their agriculture which they need to make and which, in the quite recent past, were prematurely regarded in some quarters as being within relatively close reach as a result of technological strides like the development of the high-yielding varieties. In the first two years of the Second Development Decade, they have fallen far short of the annual target for increased agricultural production set for this period. Some of the reasons for this may turn out to be of comparatively limited duration - such as the recent problems of world fertilizer prices and supplies. And, although greater efforts to increase agricultural production are vital, they cannot be given such an absolute priority, even in the agricultural sector, as to stifle such progress as has now been started towards equally important and related social objectives - progress that, in most cases, has been all too tentative. It nevertheless remains true that, in face of the tremendous rise in population in the developing countries, the growth of their agricultural production is alarmingly slow.
I have already often analysed the various reasons for this - all the technical, economic, social and sometimes political difficulties with which these countries are faced and for which they are by no means entirely responsible. But I must repeat yet again that, unless the developing countries make much more dynamic improvements in the agricultural sector - and unless the developed countries help, them to do so to a larger extent than at present - I can see little hope of significantly greater stability and prosperity on the world agricultural scene for a longer time than I care to contemplate.
But, even allowing for the fact that population in the developing countries is growing all the time and placing increasingly heavy pressure on resources, the insufficient growth rate of the agricultural sector in those countries is not a sudden new factor capable of bringing about the change in world conditions that we now appear to be witnessing. What factors, then, are new?
One of course has been the uncertainty caused by the plague of monetary crises over the last two years coupled with fiercer inflationary pressures in much of the developed world. But, although this ultimately hits the developing countries hardest and although those countries are particularly dependent on their agricultural exports for trade earnings, it is not of course something which affects agriculture alone. To grasp what seems to be happening in world agriculture, it is more important to look at another set of circumstances.
The central fact is that, for about the last 20 years, the continuation of surplus stocks of grains in the major exporting countries has provided the world with a kind of cushion against adversity. In the first place, to revert to the problem of shortages, the physical existence of these stocks meant that there was a security reserve for the world as a whole. Secondly, and more relevant to what I am now going to say, these stocks of grain - both in themselves and because of the importance of grain for the livestock industry - afforded comparative price stability for the main temperate zone foodstuffs over these 20 years.
This situation has now changed. The major exporting countries have been successfully applying national supply management policies to reduce these surpluses, which are to them mostly a burden, and have no intention of continuing to be counted on to provide the world's reserve supplies. To complement this, there has been the massive entry of the Soviet Union into the world market. In addition, there have been reports of drought in China, although we do not know what effect this will have on their import requirements for grain next year.
Thus, the surpluses have more or less disappeared. We should not of course forget that in the past these have had serious depressant effects on markets. But things have now swung to the other extreme. Stocks are now so low that they no longer offer security against widespread shortage such as those now facing us nor provide the kind of ballast they did previously on the angry sea of international agricultural prices.
I am not suggesting that surpluses are a thing of the past. The capacity in the United States and other countries for producing in excess of demand will still of course remain. What seems to me quite likely to happen is that, given on the one hand this excess productive capacity and on the other a variety of factors such as the weather, cyclical patterns of demand and industrial booms gobbling up agricultural raw materials, the world in the next ten years or so may have to live through and with a series of sometimes violent fluctuations in agricultural supplies, made sharper by the increase in population. I need hardly point out, generally speaking, how undesirable such fluctuations would be for nearly everybody. They would immeasurably increase the difficulties of orderly planning.
Such a prospect, indeed, strongly underlines the general importance of orderly international agricultural adjustment. Some people may be inclined to think that the question of adjustment loses some of its importance in a crisis like the present when the main problem is no longer that of surpluses. This is not so at all. It is taking much too narrow a view of adjustment. For adjustment is not only concerned with a more equitable sharing of markets for agricultural products but with a much wider range of production and trade policies in both developed and developing countries with a view to a far greater general harmonization of the patterns of world agriculture. It is only to the extent that this harmonization is achieved - which is not noticeably occurring at present - that adjustment can lose any of its importance.
In any event, the general question of adjustment is going to be fully discussed at the Conference. Let us for the moment look at what has already happened to prices over the short run. The wide range of agricultural price increases which I mentioned earlier takes on especially ominous significance when broken down between temperate zone commodities and tropical products. By and large - and with a few obvious exceptions, sometimes of truly mountainous proportions such as butter in the developed countries - the prices of temperate zone products have risen much more steeply than those of tropical ones.
This leads on to a general point about the effects of the sharp fluctuations I have envisaged - namely, that the greatest sufferers in such a situation are undoubtedly, once again, the developing countries. While some of them may derive some temporary advantages from higher prices for a few agricultural products, the benefits to these countries as a whole are very unevenly spread and, except in the case of such a special commodity as oil, minimal in comparison with the general disadvantages they suffer. Lack of stabilized prices, especially for basic foodstuffs, inflicts great hardship on the developing countries in general, causing not only economic dislocation but often serious social unrest.
It is highly inequitable that the weaker members of the international community of nations should consistently be the ones that have to shoulder the heavier new burdens caused by changes on the world economic scene. Above all when you think of their individual consumers, their peoples. Consumers in the developed countries, faced with rising food prices, are at least protected to a considerable extent by such leavenings of general prosperity as the chances of increased wages or the machinery of social security. In the developing countries, higher food prices for most consumers simply mean greater security of being hungry, increased chances of malnutrition.
Mr. Chairman, the whole situation regarding the world's food and agriculture at present is clearly a difficult and perplexing one. Some aspects of it will require deeper and more searching study to identify the underlying causes of the disarray and work out the kinds of initiative that need to be taken. Other aspects demand rapid and incisive action.
With regard to basic inequalities that are being prolonged or aggravated by fundamental changes in world agriculture now taking place, I very much hope that the forthcoming negotiations in GATT will mark a decisive step forward in the world's sense of responsibility for dealing with them. There is clearly a need for more rational international policies leading, among other things, to a much greater degree of price stabilization for agricultural products throughout the world. A larger number of valid commodity agreements is one obvious means of promoting such stabilization. In any event, FAO, both in its specific work on commodity policies and its more general involvement in the adjustment question, has an essential role to play in the processes whereby greater order and balance must be brought into the way in which the world lives from its agriculture.
The presence and threat of actual food shortages in many parts of the world call for responses which can produce more speedy results. I have informally consulted a number of governments on the general situation, and I have also drawn it to the attention of the Economic and Social Council of the United Nations which last month adopted, with no dissenting vote, a resolution in which it welcomed my intention to submit to this Council and to the Conference concrete proposals designed to implement the concept of minimum world food security. My proposal on international action to assure adequate basic food stocks is before you. I will speak on this proposal in detail when it comes up as an item on the agenda. I would only say at this point that the idea of minimum world food security, apart from its central importance in the context of action to combat food shortages, has been described by the Secretary-General of the United Nations as a vital element in the more general concept of the collective economic security of the world which ECOSOC was discussing at its session last month.
I should add that, in my contacts with governments of the main grain-exporting countries, I have pointed out that, while the present situation is still uncertain, it could worsen rapidly to the extent that very quick action would be needed. I have thus mentioned that some contingency planning should perhaps be started, a point on which I shall elaborate a little when we come to the agenda item on food stocks.
Finally in this context of action to combat food shortages, I should mention our relief operation in the Sahelian Zone of Africa. While, again, I shall report on this matter more fully when it comes up as an item on the agenda, I might briefly say now that FAO has been entrusted with the task of acting as the focal point to concentrate the efforts of the United Nations system in providing assistance to the stricken countries. As of now, we are of course chiefly concerned in helping to relieve the present emergency. But we shall increasingly be working in concert with other agencies to try and find solutions to the longer-term problems in these countries which the emergency has thrust into stark prominence.
I must now, Mr. Chairman, turn to a totally different subject - the financial situation of the Organization and the Programme of Work and Budget for 1974–75.
Let me first deal with the financial situation in the present biennium. You will recall that, at the last session of the Council, I reported on the serious financial situation in which the Organization found itself as a result of changes in currency rates and the acceleration of general inflationary pressures which meant that we had to absorb unbudgeted costs for the biennium estimated as amounting to $6.5 million. This has in fact been done by measures involving enforced savings which were designed to avoid our having to call on the Working Capital Fund. As you know, however, the rate of increase in costs has not slowed down. On the countrary. Furthermore, we have recently been subjected again to considerable fluctuations in currencies. It is impossible to predict what may happen in the remainder of the year. I still hope to manage the financial situation in 1973 without having recourse to the Working Capital Fund and I am keeping a constant watch on the position to this end.
The Council will also recall that the financial crisis blew up at a point when I had decided that the time had come to take heed of the strong recommendation of the last Conference that the Organization should review its priorities and, where appropriate, to switch resources from lower to higher priority activities. Thus, it was important to fit the economies we were being forced to make together with this priority exercise. This led to a number of adjustments in the programme and also to a rationalization of the Headquarters structure which the Council approved and which has now been implemented, although, as you will see, I am proposing a few other structural changes for prior approval by our Governing Bodies.
Thus, the measures taken with the approval of the Council as regards economies, priorities and consequent streamlining have led us to a situation where, despite severe difficulties, the budget of the Regular Programme remains in balance and where we have at the same time managed to evolve what I am convinced is a more effectively patterned programme, given the ressources that we have. I would like to say a little more about the importance of the link between the determination of priorities and the availability of resources when I come to the Programme of Work and Budget for 1974–75. But first I am afraid I have to report that, for reasons which are again largely beyond our control, we have run into a difficult situation on the extra-budgetary side, notably with regard to our Agency Overhead Costs.
As the Council may know, the proportion of UNDP funds assigned to projects within FAO's field of competence has been declining. At the same time, the total size of the UNDP programme in real terms has now roughly levelled off. For this and other reasons such as the currency changes and cost inflation, FAO is at present spending considerably more on its establishment financed from Agency Costs than it is earning or is likely to earn in the near future. In addition, there are certain contingent payments or reimbursements that we may be called upon to make and that could not have been foreseen. The result of all this is that we are facing a deficit which, unless urgent action is taken, would be more than $1 million in 1973 and considerably greater in 1974. I have thus decided that immediate action is essential to reduce our Agency Cost expenditures. After using certain temporary expedients available only in 1973 to reduce charges to UNDP Agency Overhead Costs, the original allotments to Divisions for this year will undergo an across-the-board cut of three per cent as from 1 July - that is to say, six per cent for the second half of the year. There will also be a provisional reduction of 10 per cent for 1974.
These measures have now been announced to the Divisions. They will undoubtedly cause a number of practical problems, but they are unavoidable under the circumstances, and I am confident that, as on other difficult occasions, all those concerned will cooperate loyally and constructively in the interests of the Organization as a whole. The important thing for the organization is that we should combine whatever reduction in staff that may be necessary with a determined effort to increase efficiency still further. The whole matter is indeed closely bound up with the proposals I am developing for the general re-structuring of our field operations. These proposals are not yet in a sufficiently definite form for me to be able to bring them before this session of the Council. But I shall be putting them to the next session of the Programme and Finance Committees in the early autumn and subsequently to your own next session.
I come now to the Programme of Work and Budget for 1974–75. Under the new procedure, you have before you the Summary Budget which has already been discussed by the Programme and Finance Committees. Their comments are also before you in their Reports. Broadly speaking, they generally endorsed the contents of the Summary Budget and the budget level proposed therein of about $98.9 million. However, since this figure was established, there have been a few new developments mainly affecting costs - for example, the continuing rent for Building F. The principal addition, however, is to provide for the gradual introduction of the Chinese language following China's resumption of membership in the Organization on 1 April. These additions, details of which will be given when you deal with the agenda item on the Programme of Work and Budget, bring the total to approximately $101.5 million. I must mention, however, that there is the contingent possibility of the Organization being faced with a yet further addition to costs as a result of a very recent recommendation by the United Nations Expert Panel on Post Adjustments that at least four classes of post adjustment should be consolidated into the professional base salary scale as of 1 January 1974. This will have to be considered by the General Assembly later this year.
Aside from these factors, there is the overriding uncertainty about the exchange rate. All our calculations so far have been made at the rate of 582 lire to the dollar. This has been done for the sake of comparability between the provisions of this biennium and the next and because of uncertainty about fluctuations in rates of exchange between now and November. I propose to give the Conference a figure which represents my best judgment at that time of what rate should be used for the purpose of approving the budget. I would ask the Council to bear this in mind in its discussions on the budget and on the related question of a safeguard against unforeseeable and unfavourable developments in our financial situation during 1974 and 1975.
There are some other respects in which the Summary Budget is not of course complete, since it is only a summary budget. Its purpose, as you will recall, is to provide all the essential information on policies, priorities, programmes and proposed use of resources by chapter and by organizational unit to enable the Council to make recommendations to me and to the Conference. Although certain aspects will receive fuller treatment at this session when they come up as individual items on the agenda, it will be necessary to wait for the full version of the Programme of Work and Budget - which is to be submitted to the Programme and Finance Committees and the Council at their autumn sessions - to see all the detailed information regarding sub-programmes, man-months and so forth.
Another matter for which the Summery Budget does not provide definitive figures is in connection with the joint programming exercise between Headquarters and the Regional Offices which took place earlier this year. As the Council will see from the Section in the Summary Budget entitled “The Single Programme Concept” - a concept to which I attach the greatest importance and which was accepted by the Council at its last session - this exercise went extremely well in the sense of providing Headquarters and the Regional Offices with a much better understanding than ever before of each others' planned programme activities and bringing out a more unified picture of the activities of the whole of FAO in terms of organizational, geographical, conceptual and programme components. A number of detailed points, however, still had to be worked out after the production of the Summary Budget. This work is now nearly finished and the results will shortly be incorporated in the full Programme of Work and Budget.
I should also mention the subject of our Country Representatives. The new Weisl Report has now been received and, in my view, clearly shows once again the value of the present system. I know that the Administrator of UNDP is making provision for continuation of the system in 1974, and this confirms me in my proposal, already foreshadowed in the Summary Budget, to make the same allocation for Country Representatives in the next biennium, subject to cost increases, as I have made in the present one.
A further matter to which I should refer is the complicated question of the comparison between the approved budget level for the present biennium and that proposed for 1974–75 - and most particularly insofar as it concerns the real programme increase. You will see a true analysis of the situation in the Summary Budget, as simplified by the Finance Committee in its Report, and I do not wish to repeat here the figures and the explanations that are given there. What I would just like to make clear now is that, within the overall figure of $101.5 million which I am putting forward, I am proposing a programme of roughly the same size as that which was approved last time, but which had to be reduced in our exercise of making economies and switching resources from low priority activities to those of higher priority. It is clear from this of course that, although the size of the programme is about the same, the priorities and thus its true value are different.
Just a few more words on this matter of priorities. I hope it is clear from what I have said that what we have been doing in this biennium is to combine the unwelcome task of containing cost increases with a positive and creative effort to streamline FAO's activities and programmes and thus make them more effective. Some people might regard this as making a virtue out of necessity. No matter. I shall be content if the virtue, as well as the necessity, is appreciated in its true light. The positive objective of the whole exercise has been to create a healthier programme structure reaching through the 1974–75 biennium. Thus, obviously, the savings we have achieved are not going to be ploughed back into previous activities which have been reduced or eliminated.
They are being used, as I have indicated, for re-distribution to new or higher priorities. In addition, I am also attempting to achieve greater flexibility by such means as making increased provision for consultants rather than continuing to adhere as rigidly as in the past to the pattern of permanent posts. Our proposed priority allocations for the next biennium are shown in Table 6 of the Summary Budget as amended.
It is my intention to continue with the kind of reappraisal of priorities that we have undertaken on this occasion. But, frankly, the main purpose should not be to achieve savings. If I am able to exercise proper judgment as to the most important priorities for this Organization in the service of its Member Countries, it is essential that additional resources be provided to the extent that they are clearly necessary. On this occasion, my judgment regarding the total budgetary level was circumscribed by what I thought to be reasonable in the light of the present cost increases - these cost increases which have come to represent an extremely heavy burden. It would, I think, be unreasonable that any Director-General again should have to allow his carefully considered plans for the vital work of this Organization in the world to be unduly subjected to this burden.
Having said all this, I nevertheless believe that we have managed to produce a programme and budget for 1974–75 that is in many ways an improvement on the past. I think that delegates will be inclined to agree with this when they see not only the final Programme of Work and Budget, which will give the full story, but also our paper on Medium-Term Objectives which will be available in the course of the present session of the Council, although not for discussion. For it is in the light of our broader view over the mediumterm that our plans for the next biennium can be seen in their true and, I hope, most invigorating perspective.
Mr. Chairman, as I come to the conclusion of my statement today to this particularly important session of the Council, let me revert for a moment to what I said earlier about the disturbing state of the world's food and agriculture at this time. It must, I think, be clear that, for reasons which in themselves are no cause for satisfaction, FAO has now reached a new stage in the extent to which it must be prepared to face up to the responsibilities befalling it as an international organization. If the individual nations of the world are to take determined and effective action to set the present agricultural situation to rights, they must work together as never before. And for this they will need FAO as never before. This Organization was created to be an impartial, world-wide focal point, capable of proposing initiatives for the benefit of all its Member Countries and at the same time offering them an international forum for the settlement of their agricultural problems. Now, more than ever, is the time for it to be of service.
Having just mentioned FAO as an international forum, let me end by extending my customary welcome to the distinguished delegates and observers who are present here. And may I, on behalf of the whole staff of FAO, voice a very special welcome to the observers from the People's Republic of China, who are here for the first time as a result of China's acceptance of the invitation by the Conference to resume its place in the Organization. There is something at once solemn and exhilarating about the realization that we now have in our midst representatives of the largest nation on earth, of some 750 million people, whose struggles for a better life have in the last few years been among the wonders of the world. I am sure that China will have much of singular value to offer FAO, not least the fact that, by its very presence among us, it is making a vast contribution to the ideal of universality which is essential if this Organization can truly be said to be serving the whole world.
Thank you.
