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g) Utilization of surpluses as food aid

61. Some delegations stressed that, on the basis of up-to-date projections of agricultural production, population and income in the developing countries it appeared that the gap between the food needs of these countries and their agricultural production was widening. Balance of payments prospects of developing countries indicated that only part of this food gap could be filled by imports on commercial terms. It appeared to these delegations, therefore, that there was a prospective need for a great expansion of food aid at concessional terms and, if this were to be the case, food aid could no longer be considered mainly on a bilateral basis but would have to be envisaged on a more comprehensive multilateral basis.

62. While recognizing the beneficial role that food aid could play in the economic development of developing countries, other delegations considered that it should be confined to the distribution of such surpluses as arose unavoidably from a combination of the rapid increase in agricultural productivity and domestic support policies in developed countries. They thought that the need for more food aid should not be regarded as a reason for raising agriculture support levels or for greater agricultural protection in industrialized countries and that the narrowing of the food gap in developing countries should, as far as possible, and as soon as possible, be achieved by increasing agricultural production in these countries and by helping them to reach the stage where they could purchase commercially the food supplies they needed. Thus, the same delegations expressed the view that food aid should be used in the main to encourage the development of the recipient countries so as to avoid excessive dependence on food supplies imported at concessional terms. The Conference stressed the importance of maintaining adequate guarantees against harmful interference with normal patterns of production and international trade, particularly of developing countries.

63. In its consideration of problems of food aid, the Conference had before it a report on Changing attitudes toward agricultural surpluses (CCP 63/20) prepared by a working party of the CCP Consultative Subcommittee on Surplus Disposal (CSD). The Conference commended CSD for the analysis made and for providing a study which would prove useful in further discussion and action on surplus disposal matters. The report indicated that attitudes toward surpluses and surplus disposal were undergoing substantial changes, including, in some quarters, the evolution of the concept of deliberate utilization of excess agricultural productive capacity for meeting needs of developing countries either for economic development or for humanitarian reasons. In reviewing the conclusions and recommendations set out in the report, the Conference felt that further consideration by governments would be required before the implications of a concept of planned surplus production and its impact on consultation machinery and procedures could be considered.

64. The Conference agreed that there was a need for further information on the implications of concessional and surplus disposal transactions on the economies of countries, both developed and developing, heavily dependent on commercial exports of agricultural commodities. The Conference also agreed that the effects of the utilization of surpluses in aid of economic development had also to be considered in respect to the economies of the countries receiving such aid. The Conference noted that the wide program of studies to be undertaken by the World Food Program provided for consideration of these questions and related matters, and that certain practical though limited aspects of these questions would be considered in the course of the usual work undertaken by the Consultative Subcommittee on Surplus Disposal. However, the Conference considered that this work would not cover all commodities and all aspects of commodity disposal programs and therefore urged the Director-General, as appropriate and in co-ordination with the World Food Program, to widen this field of study within the limits of available resources.

h) International rice year

65. The Committee on Commodity Problems and the Council placed before the Conference a recommendation of the CCP Consultative Subcommittee on the Economic Aspects of Rice that the Director-General declare 1965 as an International Rice Year. The objectives of the proposal were "to encourage governments and rice industries to make a concerted effort to promote, where appropriate, production, consumption, marketing and trade, as well as economic and technical research on rice; to focus world attention on the role that rice could play in furthering the aims of the Freedom from Hunger Campaign; and to improve international understanding of the rice economy." Both CCP and the Council had agreed that it was not ordinarily desirable for the Organization to participate directly in the operation of promotional schemes to encourage consumption. The Council, however, had supported the objectives of the proposal on the understanding that implementation would not conflict with the decision on promotional schemes, or with the principles and policies of the Organization, and that any expenditure involved for the Organization would be within the resources and budget of the Organization. Moreover, the Council had agreed that a final conclusion on the proposal could not be reached until there were more specific details of methods of operating and financing such a scheme.

66. At the request of the Council, the Director-General had informally consulted interested member countries as to the arrangements which would be needed to implement an International Rice Year, and a number of governments had suggested specific schemes which could be organized. In the view of the Director-General, while such action programs would be carried out by governments and local rice industries, it would be essential for the Organization to play a positive role in order to guide and stimulate national action. In his opinion, unless well prepared and accompanied by an effective supporting program by the Organization, the activities associated with a Rice Year would not have a lasting or widespread impact. Such a supporting program, according to the Director-General, would involve extra expenditure for the Organization in the 1966-67 biennium.

67. The Conference recognized that measures to improve the efficiency of food production and distribution were among the basic tasks of FAO and agreed that rice should receive an appropriate priority in the Organization's program of work. In the light of these considerations, the Conference endorsed in principle the proposal to declare an International Rice Year, but took no decision on the precise role which the Organization could appropriately play in the year. The Conference agreed with the Director-General that it would be preferable for the International Rice Year to be held in 1966 so as to allow time for adequate preparation. It would be the responsibility of the governments and rice industries in interested countries to arrange and finance their own programs according to their needs.

68. The Conference requested the Director-General to hold consultations with governments of the main rice-producing and consuming countries, possibly through the CCP Consultative Subcommittee on the Economic Aspects of Rice, and the technical working parties of the International Rice Commission, and to submit to the Council and its appropriate committees specific proposals as to the steps by which the scheme should be implemented so that operative conclusions could be reached. It would be open to all interested countries to put forward their views.

69. In considering this proposal, the Conference took account of the position of rice as a basic food for a large part of the world, and particularly in developing countries. It agreed that this type of action should be altogether exceptional in character and that any similar proposals for other commodities should be carefully considered by CCP and the Council before being submitted to the Conference for its decision.

Regional economic integration

70. The Conference had before it document c 63/10 entitled Regional economic integration, which had been prepared in accordance with the request made to the Director-General in Resolution No. 4/61 of its Eleventh Session to "continue to review and report on developments in the field of regional economic integration." The Conference took note of the extensive information provided in the document, particularly in respect of the developments within the European Economic Community.

71. The Conference noted the growing awareness in the world of the benefits which might derive from regional economic integration, particularly among developing countries and the progress already made in many regions toward this end. In this connection, it expressed the wish that FAO should maintain close working relations with regional and subregional organizations, and asked the Director-General to continue to keep the development of integration arrangements under review. Reports should continue to be made from time to time to Member Governments on the progress made in such arrangements, since comparisons of experience in different parts of the world, especially so far as agriculture and agricultural trade were concerned, would be particularly valuable in furthering economic growth.

B. Agriculture in economic development

72. As its main theme, the Conference examined the place of agriculture in economic development, in the light of the secretariat document Agriculture in economic development (c 63/11). There was general agreement with the analysis presented in this paper, which was commended by the Conference as a comprehensive, well-balanced report on the subject, which would be of assistance not only to agricultural ministries but also to other development ministries and planning agencies. While the precise role of agriculture could only be determined specifically in the context of a particular country and would vary with the stage of development reached, the Conference considered that the report contained useful guiding lines for over-all development strategy and policy in developing countries.

73. The Conference recognized that the United Nations Development Decade and the FAO Freedom from Hunger Campaign, by setting before the world targets of better nutrition and economic and social development over a wide front, had thrown into further relief the past unsatisfactory rates of progress in most of the newly developing nations. The governments of developing countries were increasingly committing themselves to new plans and more intensive efforts to initiate more rapid advances. The Conference agreed that it was timely for FAO again to draw attention to the part that the agricultural sector had to play, so that its possibilities and needs could be more fully taken into account in national planning for economic development.

74. Of the various aspects of agriculture's contribution, responsibility for the supply of food and raw materials adequate to improve levels of nutrition and to meet the growing needs due to rising populations and economic expansion was the most basic. At current and projected rates of population increase, the average annual increase of domestic food production in developing regions would have to be raised from the current trends of 2.0 - 2.5 percent to around 4.0 percent by 1970, if the 5 percent annual economic growth target set for the United Nations Development Decade was to be achieved. While this acceleration of the agricultural output rate in developing regions was a formidable task, its achievement was feasible, provided that over-all and agricultural development policies and plans were well directed and more effectively implemented.

75. The demand for food in the urban areas of developing countries was growing many times faster than 4 percent annually, because of migration from rural areas and higher urban income levels. In many cases increases in urban food demand were being met from overseas. The problem was not only one of domestic production but also of domestic food marketing, since it was often easier to import food from other countries than from the domestic hinterland. The Conference strongly emphasized the importance of improvements in food marketing especially in the developing countries, if domestic agriculture was to increase output for the growing urban markets.

76. The Conference gave most attention to the contribution of agriculture as the principal earner of foreign exchange in the majority of developing countries. In view of the problems facing world trade in agricultural commodities, agricultural exports were ceasing to be a dynamic growth factor in their economies. The Conference emphasized the conclusion in the report that, so long as developing countries depended on the export of primary products and on current marketing conditions, they could not expect to raise their export capacity at a rate sufficient to enable them to meet their need for development and related imports. Hence, their rising interest in diversifying their economies and in seeking export markets for manufactured and semimanufactured goods, and their high expectations from the forthcoming United Nations Conference on Trade and Development.

77. Considerable discussion took place on the role of agriculture as a base for industrialization in developing countries. There was general agreement that industries that process products of farms, forests and fisheries were among the most appropriate starting points. Apart from the local availability of the raw materials, the advantages of such industries lay in the flexibility of their requirements of both capital and labor. This did not mean, however, that processing industries had always to be started on a small scale. Where resources were available, and market prospects were good, especially if an export outlet seemed likely, and general conditions were favorable, large-scale plants might be established from the first. This could apply particularly in the case of some forest industries. Some delegates pointed out that in certain countries or at a certain stage of development, the emphasis in industrialization might have to be placed on capital goods industries. Some delegates suggested that it would be helpful to have further information on the cost structure of various agricultural-processing industries.

78. A prosperous agriculture could also promote industrial development by providing a growing market for industries producing farm requisites such as fertilizers, tools and machinery, and also for many consumer-goods industries. In fact, at an early stage of industrialization there could be no mass market for domestic manufactures unless money incomes were rising in agriculture.

79. Other aspects of the interrelationships between agriculture and the rest of the economy were also noted by the Conference. The extension into the countryside of the infrastructure of industry, especially transport and power, could be a potent instrument, along with growing urban demand, for conditioning traditional agriculture to produce for the market. Again, the movement of labor to nonfarm work led, especially in the later stages of development, to higher productivity and higher incomes for those who remained in agriculture.

80. It was agreed that agriculture had an important part to play in capital formation in developing countries. The general opinion was, however, that this was more difficult than in the past. In many countries the weight of taxable capacity had already shifted to the more rapidly expanding nonagricultural sectors. Moreover, the slow expansion of agricultural export earnings made it more difficult to achieve a capital surplus in the agricultural sector, though this was to some extent offset by the availability of foreign aid.

81. The capital needs of agriculture itself had to be considered. The taxation of this sector had to be accompanied by effective measures to enable farmers to increase productivity. Marketing and credit systems also had to be improved. Otherwise, there was a danger that the tax burden, combined with private transfers to traders and moneylenders, might lead to rural distress and stagnation. Reference was made to the potential role of farmers' cooperatives as institutions for mobilizing rural savings for productive investments in agriculture.

82. The release of workers from agriculture for the expansion of other sectors was a well-known contribution of the farm sector to over-all development. The difficulty here was considered to be relatively slow expansion of job opportunities in the small urban sector, compared with the accelerating natural growth of the large rural population. With the maximum feasible rate of investment in industry in newly developing countries, the actual numbers of people on the land must continue to rise for several decades.

83. In many countries rural workers were moving to towns in advance of employment opportunities, thus adding to the urban unemployment problem and in some cases reducing the national product. The Conference recognized the importance of finding means of mobilizing the rural labor force, many of whom were not fully employed, for a larger contribution to development and capital formation. Some delegates mentioned the possibility of a wider use of surplus foods to facilitate this process. Others stressed the need to strengthen the economic incentives to increased agricultural production.

84. The Conference endorsed the view that industrialization and urbanization in developing countries were of vital importance for a prosperous agriculture. It stressed, on the other hand, that attempts to concentrate on rapid industrialization without adequate attention to agricultural development had given rise in many countries to great difficulties. While complete balance between the two sectors was almost impossible to achieve and a small imbalance might at times even stimulate development, a continuing and substantial imbalance could badly slow down the over-all rate of growth.

85. The Conference thus emphasized the importance of careful and integrated national planning for the development of the agricultural and other sectors of the economy, and noted that nearly all developing countries had made progress in this direction. It recognized that there was a large element of tradition and isolation in the agricultural sector of newly developing countries, so that the sector making it was likely to lag and to hold back the whole economy if not stimulated into progress. In addition to direct investments in agriculture, it was important for governments when plans for industrial development were being formulated to take into account the potential stimulus to this sector of industries linked with agriculture for supplies of raw materials or for a mass market. Plans for investment in infrastructure and the related question of the location of industries should also be considered in the light of the great potential development impact on agriculture of transport, power and the commercial network. The importance of education, especially general education in rural areas and adequate programs of agricultural and nutrition education, was also stressed.

86. The Conference considered that the Organization should confine its analysis of the place of agriculture in economic development. It was suggested that more attention might be given to studies of agriculture in the economies of particular countries. More economic analysis of national development plans from this point of view were also sought. Some delegations thought that this work might usefully prepare the way for governmental or expert meetings for confrontation of national agricultural plans and problems. The preparation of an indicative world plan in the form of a quantitative picture of prospects for world production and consumption of and trade in agricultural products might evolve out of such studies.

87. The Conference emphasized strongly that the work of FAO in the fields of agricultural development programing, including food and nutrition policy, agricultural education, and agricultural processing and forest industries was of great significance, not only for the advancement of agriculture, but also for general economic and social progress in developing countries.

88. The Conference adopted the following resolution:

RESOLUTION No. 2/63

Agriculture in economic development

THE CONFERENCE

Recognizing that in newly developing economies, where the agricultural sector is predominant, this sector has indispensable contributions to make to economic development,

Recognizing also that the relationship between agriculture and the rest of the economy is essentially two-way, in that in a developing country

Realizing that at current and projected rates of population increase, the rate of growth in agricultural output in the developing regions must be raised from the current average levels of 2.0 - 2.5 percent annually to around 4.0 percent annually if the 5 percent annual growth target set forth in the United Nations Development Decade is to be achieved, and that this is a feasible though formidable task,

Urges the governments of developing countries to intensify their efforts to speed up their agricultural growth rates, especially the production of basic and nutritious food for their domestic markets with due consideration also to export opportunities, and to this end emphasizes the importance of:

Urges the developed countries to give full consideration to the impact of their foreign trade on the development of the developing regions of the world when shaping their policies; and

Requests the Director-General to press forward vigorously the following activities of the Organization, which are of great significance not only for the advancement of agriculture but also for general economic and social progress in developing countries:

(Adopted 5/12/63)

C. World food program

89. The Conference considered this item on the basis of the first report of the UN/FAO Intergovernmental Committee of the World Food Program to the Economic and Social Council of the United Nations and to the FAO Council (c 63/12) and the introductory statement by the Executive Director (c 63/LIM/80).

90. The Conference endorsed the recommendation of the Council at its Thirty-Ninth Session that the membership of the Intergovernmental Committee be increased from twenty to twenty-four.

91. The Conference further expressed general satisfaction with the progress so far made by the Program and, in taking note of the Intergovernmental Committee's recommendation on the need for raising resources to the original target level, decided to appeal to Members and Associate Members to take appropriate steps to achieve that goal, and particularly its cash component.

92. The decision by the Intergovernmental Committee that not more than 25 percent of the Program's commodity resources should be earmarked for emergency aid in 1964 and 1965 was endorsed. In that connection, several delegations drew attention to the detrimental effects on the Program as a whole and its activities in the field of economic and social development that might result if too large a proportion of its scarce commodities and cash resources were absorbed in emergency operations.

93. While several delegations favored the principle of an immediate extension of the Program beyond the three-year period expiring at the end of 1965, the Conference was of the opinion that the decisions already taken in this respect should be maintained, as it was felt that the Program's future could not usefully be determined until after the submission to the United Nations General Assembly at its Twentieth Session and to the Conference at its Thirteenth Session of a general review of the results achieved and the studies undertaken, together with recommendations as to further developments. In this connection, the arrangements for such submission proposed by the Executive Director and approved by the Intergovernmental Committee at its Fourth Session received general endorsement.

94. The view was expressed that excessive caution was applied in safeguarding commercial markets from possible adverse effects of the Program's operations and that the existing consultative procedures could usefully be simplified. The consensus of opinion was, however, that existing procedures on consultations and sales were very necessary safeguards and that they did not significantly delay operations.

95. The Conference adopted the following resolution:

RESOLUTION No. 3/63

World Food Program

THE CONFERENCE

Having considered the first report of the UN/FAO Intergovernmental Committee of the World Food Program to the United Nations Economic and Social Council and to the FAO Council,

Having considered Resolutions 937 (XXXV) and 971 (XXXVI) of the United Nations Economic and Social Council and Resolution No. 1/39 of the FAO Council,

Noting the recommendations embodied in the above resolutions that before the end of 1963 the membership of the UN/FAO Intergovernmental Committee of the World Food Program should be raised from twenty to twenty-four through the election of two additional members by the Economic and Social Council and two by the FAO Council,

Noting the wishes expressed by the Economic and Social Council, the FAO Council and the Intergovernmental Committee that the target of $ 100 million set for the resources of the Program should be attained as soon as possible and further noting the recommendation made by the Intergovernmental Committee at its Fourth Session that the matter should be brought to the attention of the General Assembly of the United Nations and of the FAO Conference,

Noting that the studies referred to in paragraph II.4 of Resolution No. 1/61 of the Eleventh Session of the FAO Conference are being undertaken, and

Having been informed of the arrangements which, with the endorsement of the Intergovernmental Committee, are being made by the Executive Director of the World Food Program for a general review by the Conference and the United Nations General Assembly of the results attained,

Expresses satisfaction with the progress made so far by the Program;

Decides that, subject to parallel action by the General Assembly of the United Nations, the membership of the Intergovernmental Committee established under paragraphs 1.3 and 1.4 of Resolution No. 1/61 shall be raised from twenty to twenty-four;

Requests the FAO Council at its Forty-Second Session to proceed with the election of two of the new members, taking into consideration the need for balanced representation and other criteria outlined in paragraph I.4 of Resolution No. 1/61;

Appeals to all Members and Associate Members who have not yet pledged contributions to the Program to make such pledges and to those who have made pledges to consider adjusting them in such a way that a cash component of at least one third of the total contributions may be attained; and

Concurs with the arrangements proposed by the Executive Director for the general review of the results attained by the Program, namely that this review, together with the comments and recommendations of the Secretary-General of the United Nations and the Director-General of FAO should be considered by the Intergovernmental Committee and submitted to the United Nations Economic and Social Council and the FAO Council at their spring sessions of 1965, and thence to the Conference at its Thirteenth Session and to the General Assembly at its Twentieth Session.

(Adopted 5/12/63)

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