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C. Guiding principles for agricultural price stabilization and support policies with special reference to the need to minimize adverse effects on international trade


1. There are set out below certain principles for the guidance of FAO Member Governments in establishing or reviewing their agricultural price stabilization and support policies. They have been prepared in accordance with Resolution No. 8/57 of the FAO Conference, of which the main points were as follows:


Recognizing the desirability of adjusting the supply of agricultural commodities as closely as possible to demand

Recognizing also the importance in many countries of price and income supports as a means of ensuring a reasonable level of income for farmers as compared with other sectors of the community;

Recognizing that in certain circumstances national agricultural policies may have undesirable repercussions on the level of production and supplies of commodities, and, consequently, on normal international trade and conditions in other countries...;

Endorses the need for agreed principles to serve as guidelines for use by Member Governments in establishing or reviewing their agricultural price and income support policies in order to ensure that such policies will be effective in achieving their objectives, but will have minimum adverse repercussions on the pattern of production and trade of other countries."

The Conference therefore requested that a panel should be set up to undertake further study and:

" to recommend guiding principles designed to minimize the adverse effects of agricultural support policies on international trade, and to be taken into account by Member Governments in establishing or reviewing their agricultural policies. In developing such principles the panel shall have full regard to the special circumstances and problems of countries. "

2. The principles are necessarily framed in general terms because of the very wide variety of conditions in the countries concerned and in the problems to which these conditions give rise. Allowance must be made for the differences between countries which are primarily exporters and those which are primarily importers; between countries in which agriculture plays a dominant part in the economy and those in which it is relatively less important, and especially between countries at different stages of economic development. It is therefore important to emphasize that the principles proposed will need to be considered by each country in the light of its own circumstances and the particular objectives of its agricultural policies. Similarly, governments should take account of all the objectives of FAO (Annex).

3. It must also be recognized that many countries have long-standing and established measures of agricultural price stabilization and support which have been devised with special reference to their own problems and their social. economic and political circumstances. Where conformity with the principles would involve changes in these measures, it might be difficult to make them rapidly; the guiding principles proposed must therefore be regarded as aims to which countries should attempt to conform over a period of time. In countries where such policies are still being developed these aims may be attained more quickly.

Agriculture in relation to the rest of the economy

4. The interrelationship between conditions in agriculture and those in the rest of the economy should also be borne in mind by governments in framing agricultural price stabilization and support policies. A prosperous and expanding general economy is a prerequisite for a prosperous agriculture. Equally, a high and stable level of income in agriculture will itself contribute to the development of the national economy. Appropriate measures which lead to greater prosperity in agriculture will thus also benefit the entire economy.

5. Nevertheless, it is essential that governments should, to the greatest extent practicable, bear in mind the impact of their agricultural price stabilization and support policies on other countries, especially countries whose earnings of foreign exchange depend essentially on the export of agricultural products. The long-term aim, to which all countries could subscribe, should be an increase in world prosperity and international trade, arising from a more balanced and rational use of resources within and between countries and the avoidance of disturbances in international markets.

Price and nonprice measures

6. In the Guiding Principles which follow an important distinction is made between agricultural stabilization and support measures which directly influence price, and " nonprice " measures, i. e., measures which do not directly influence prices to farmers, but which attempt to raise farm incomes by reducing costs or raising productivity. Each of these two broad types of measures, " price " and " nonprice, " will usually be more effective when used in conjunction with the other. The relative emphasis which governments should give to each type, and the choice of nonprice measures, will depend on the conditions in each country and the objectives in view. It is generally recognized that such nonprice measures as agricultural research, education and extension, government services for the control of diseases and pests of crops and livestock, and measures to improve agrarian structures are among the most suitable means of increasing the efficiency and competitiveness of agriculture. Such measures may thus permit farm incomes to be maintained with a lower level of support than would otherwise be possible. Some nonprice measures have the advantage of being flexible and can often be used more selectively than price supports. They are therefore often better adapted to achieving particular objectives. Some types, e. g., assistance to improve farm buildings or relief from some forms of taxation, can help to increase productivity without necessarily involving increased production. Other types of nonprice measures, e. g., subsidies on fertilizers or lime, or for small-scale irrigation, may be particularly useful when a rapid increase in production is sought. Whatever stabilization and support measures are adopted, it will be an advantage, both to governments and producers, if the measures are considered in the light of information on the probable course of development of demand and supply for the main agricultural products.


General aims and criteria

The aims of agricultural price stabilization and support policies and the criteria which may be used in judging them should be as follows:

(a) an agriculture economically capable of providing for farmers and farm workers a level of living adequate in relation to the general levels of the country;

(b) an increase in the efficiency and competitiveness of agriculture, particularly where this would facilitate the reduction of protective measures;

(c) the avoidance of excessive fluctuations in agricultural prices and incomes;

(d) the greatest practicable flexibility of agricultural production in its adjustment to effective demand, with the object of avoiding either shortage or burdensome surpluses;

(e) a balanced and expanding consumption of agricultural products and reasonably stable prices at a level equitable to both producers and consumers;

(f) a balanced development of the economy as a whole without excessive transfer payments from agriculture to other sectors of the economy (as in many economically less developed countries) or from other sectors of the economy into agriculture (as in many more developed countries);

(g) the improvement of the international distribution of primary products, bearing in mind that the attainment of such an objective is a responsibility to be shared jointly by importing and exporting countries.

General guidelines


(a) Account should be taken of the fact that in many countries especially economically less developed countries, the full effect of price supports, particularly when used as incentives to increase production, will not be obtained unless parallel improvements can be made in institutional factors, such as marketing, the provision of credit, and sometimes the system of land tenure, to ensure that price changes actually affect the farmer. Equally, improvements in these institutional factors and other nonprice measures to raise output and productivity will often not be fully effective unless they are combined with measures to support and stabilize prices.

(b) Particular emphasis should be given to appropriate nonprice measures when it is intended to direct support to specific groups of farmers, e. g., IOU-income farmers or those in regions where farming conditions are difficult. The use of nonprice measures could be limited in scope and thus would be less costly than a general increase in farm prices.


The level at which farm prices are supported is of particular importance in its effect on international trade as weld as on production and consumption.

International trade

(a) Where prices are supported at a level which is high in relation to prices in international trade, the result may be an intensified use of import restrictions or of export subsidies. Recognizing this, governments should adopt measures which make it possible to avoid or reduce serious differences between price levels on the home market and the general level of prices over a period in international trade, where this trade is substantial, and with due allowance for any influence of export subsidies on international price levels. For so long as governments find it necessary because of established policies, to support prices at levels above those in international trade, it is essential that these policies should include measures designed to avoid or reduce disruptive effects on international trade in primary products.


(b) Farm price and income supports should not be at so high a level as to encourage or perpetuate production in excess of effective demand. They should not be so high as to retard the development of a more efficient farm structure, or the movement of manpower and other resources from agriculture to other occupations if this transfer would result in a more effective contribution to the national output.

(c) On the other hand, farm price levels should not be so low as to retard the adoption of more efficient methods of farming, or to act as a disincentive to increased production in countries where a continued expansion of the production of some commodities is necessary, notably, but not exclusively, in economically less developed countries.


(d) Where, in the interest of producers, agricultural prices are supported at a high level, governments should give careful attention to the possible effects on consumption, particularly where there is a risk of surpluses, or where nutritional standards are low.

(e) Where farm prices are kept at a relatively low level in the interests of consumers, governments should give adequate consideration to the effect on farmers' incentives to produce, and on the flow of supplies to the market.


(a) In establishing agricultural price levels, governments should give full consideration to all relevant factors including the probable effect on consumption, production, and changes in productivity, and as far as possible should leave the market to play its part in the formation of prices.

(b) Exporting countries should take into account the likely levels of demand in importing countries. Importing countries should take into account likely supplies in the exporting countries (other than surplus stocks).

(c) In their producer price policies, governments should seek to avoid too great a degree of rigidity in prices while at the same time ensuring to producers the desired degree of security. For example, by permitting price variations from year to year within prescribed limits, price flexibility may be combined with a considerable degree of security to farmers.

(d) Care should be taken to maintain a reasonable relationship between the prices of different agricultural products so that production in each sector corresponds to effective demand.

(e) Where production costs enter into the determination of prices, they should be derived from farms concerned which are economically sound under normal conditions, and they should be used principally as an index of cost movements.

(f) Where formula methods or index numbers are used to establish price levels, they should not be based on a remote reference period and should be capable of being applied flexibly.


Agricultural price stabilization and support policies will often be more effective if farmers themselves take an active part in carrying them out. Governments should encourage farmers to contribute toward the achievement of a more stable and efficient agriculture by improving their marketing methods, e. g., through the development of producer co-operatives and by adopting improved farming techniques and better methods of farm management. Farmers and farm organizations should participate in the administrative and financial responsibilities of support schemes as far as is practicable.

Methods of implementation

The choice of method must depend largely on the objectives sought and on the circumstances of the country concerned including its financial and administrative resources. One criterion, however, which governments should always bear in mind in choosing the methods to implement their agricultural price stabilization and support policies is the desirability of interfering as little as possible with the flow of international trade in primary products. In choosing such methods governments should also take into account the following considerations:


Since there may be particularly adverse effects on international trade when price supports are implemented primarily by measures which aim at regulating the volume of imports or exports, governments should exercise restraint in the use of these measures.


(a) Where price supports are implemented by deficiency payments to avoid the direct regulation of imports and also to avoid consumption being restricted by high consumer prices arising from price supports, governments should seek to ensure (as with other methods of price support) that returns to farmers are not guaranteed at a level which would encourage uneconomic production and reduce the scope for imports from more efficient producers.

(b) In view particularly of the financial and administrative difficulties, deficiency payments appear to be less applicable in economically less developed countries, and also where agriculture is a substantial component of the whole economy, where a large part of the food supply is domestically produced, or where a large part of the production is for export.


Where appropriate, use should be made of stabilization funds financed by the producers themselves. These are essentially an insurance to limit the effect of short- and medium-term price fluctuations on farmers' incomes and can be of special value for export products, since individual exporting countries usually have little scope for stabilizing prices on international markets. Such stabilization funds are thus of particular importance to countries heavily dependent on agricultural exports.


(a) Where the main objective is to reduce short-term fluctuations in prices, a cautious buffer-stock policy has considerable advantages and, if effectively managed, can be self-financing; this financial consideration is important in less developed countries, where such price stabilization is usually a primary objective.

(b) Buffer stocks, however, may lead to heavy losses, especially if they become too high, and it seems advisable always to set a ceiling to the level of holdings, though experience shows that under some forms of price support it is extremely difficult to prevent the ceiling from being raised in an emergency.


(a) Where production, as a result of high price or other support measures, tends to be in excess of normal domestic and export requirements, and where this excess, with the assistance of subsidies or special terms, is likely to enter the flow of international trade and to disturb international markets, governments should endeavor to meet the situation by appropriate measures affecting production and consumption. Similar action should be taken by governments in importing countries in cases where high price or other supports encourage uneconomic production and reduce the scope for imports from more efficient producers.

(b) For commodities where production does not respond readily to downward price changes, other means of limiting output, e. g., by production quotas, may be necessary either in importing or exporting countries. Quotas on a tonnage basis may often be more useful than acreage quotas, since the latter may become ineffective as a result of intensive methods of cultivation to raise yields.

(c) Where in order to prevent burdensome surpluses the scope of price guarantees is limited, e. g., to estimated domestic requirements (including essential reserve stocks), the support price should not be so high as to nullify the desired effect on output.


(Extract from the Preamble to the Constitution)


The Nations accepting this Constitution, being determined to promote the common welfare by furthering separate and collective action on their part for the purpose of: raising levels of nutrition and standard of living of the peoples under their respective jurisdiction; securing improvements in the efficiency of the production and distribution of all food and agricultural products; bettering the condition of rural populations; and thus contributing toward an expanding world economy;...

D. Statutes of the codex alimentarius commission

1. Subject to Article 5 below the Codex Alimentarius Commission shall be responsible for making proposals to, and shall be consulted by, the Director[s]-General of the Food and Agriculture Organization (FAO) [and the World Health Organization (WHO)] on all action to be taken in the under-mentioned fields:

(a) Promoting co-ordination of all food standards work undertaken by international governmental and nongovernmental organizations;

(b) Determining priorities and initiating and guiding the preparation of draft standards through and with the aid of appropriate organizations;

(c) Finalizing standards elaborated under (b) above and after acceptance by governments, publishing them in a Codex Alimentarius together with international standards already finalized by other bodies under (a) above, wherever this is practicable;

(d) Amending published standards, after appropriate survey, in the light of developments.

2. Membership of the Commission is open to all Member Nations and Associate Members of FAO [and WHO] which are interested in international food standards. Membership shall comprise such of these nations as have notified the Director-General of FAO [or of WHO] of their desire to be considered as members.

3. Any Member Nation or Associate Member of FAO [or WHO] which is not a member of the Commission but has a special interest in the work of the Commission may, upon request communicated to the Director-General of FAO for WHO, as appropriate], attend sessions of the Commission and of its subsidiary bodies and ad hoc meetings as observers.

4. Nations which, while not Member Nations or Associate Members of FAO [or WHO], are members of the United Nations, may be invited on their request to attend meetings of the Commission as observers in accordance with the provisions of FAO [and WHO] relating to the grant of observer status to nations.

5. The Commission shall report and make recommendations to the Conference of FAO [and the appropriate body of WHO] through the [respective] Director[s]-General. Copies of reports, including any conclusions and recommendations, will be circulated to interested Member Nations and international organizations for their information as soon as they become available.

6. The Commission may establish such subsidiary bodies as it deems necessary for the accomplishment of its task, subject to the availability of the necessary funds.

7. The Commission may adopt and amend its own rules of procedures, which shall come into force upon approval by the Director[s]-General of FAO [and WHO], subject to such confirmation as may be prescribed by the procedures of the[se] Organization[s].

8. The operating expenses of the Commission and of members of the secretariat[s] of FAO [and WHO] directly serving it shall be defrayed by a special Trust Fund administered by FAO [on behalf of the two Organizations] in accordance with FAO Financial Regulations. Contributions to the Trust Fund shall be accepted only through or with the approval of participating governments. At the end of each year unused sums shall be returnable to contributors or carried over to the following year.

9. All expenses involved in preparatory work on draft standards undertaken by participating governments, whether independently or upon recommendation of the Commission, shall be defrayed by the government concerned.

E. Amendments to the constitution, general rules of the organization, financial regulations, and to the rules of procedure for the council of FAO

As the result of the amendments to the Constitution, General Rules of the Organization, Financial Regulations, and to the Rules of Procedure for the Council of FAO adopted by the Eleventh Session of the Conference and the Thirty -Seventh Session of the Council, the texts given below are to be substituted for the texts appearing in the 1960 edition of Volume I of the Basic texts of the Organization:

ARTICLE III.2 (page 10)

" 2. Each Member Nation and Associate Member may appoint alternates, associates and advisers to its delegate..."

ARTICLE V.1 (page 11)

" 1. A Council of the Organization consisting of twenty-seven Member Nations shall be elected by the Conference..."

ARTICLE VII.1 (page 14)

" 1. There shall be a Director-General of the Organization who shall be appointed by the Conference for a term of four years.

" 2. Upon expiry of the term of four years the Director-General may be reappointed for a term of two years. Upon expiry of this term of two years, the Director-General may be reappointed for a further term of two years, after which he shall not be eligible for reappointment.

" 3. Appointments and reappointments under this Article shall be made by such procedures and on such other terms as the Conference may determine.

" 4. Should the office of Director-General become vacant during any of the above-mentioned terms of office the Conference may appoint a successor to serve for the then unexpired portion of that term of office. Such successor may again be appointed or reappointed in accordance with the provisions of paragraphs 1, 2 and 3 of this Article, provided that the total of his terms of office does not exceed eight years."

The two last paragraphs of the present text are to be renumbered 5 and 6.

General Rules of the Organization
RULE III.1 (page 32)

" 1....that is to say, its delegate, and his alternates, associates and advisers."

RULE XV.3 (page 53) (new paragraph)

" 3. The Conference may at any session establish committees for the consideration of the technical activities of the Organization, to meet prior to the next session of the Conference, at such time as may be determined by the Council. These committees shall consider such items of the provisional agenda of that session of the Conference as may be referred to them by the Council and shall report to the appropriate commission of the Conference."

RULE XXII. I (b) (page 59)

" 1. (b) The Conference shall make such provisions as will ensure that the terms of office of nine Members of the Council shall expire in each calendar year."

RULE XXX.1 (page 81)

" 1. The Committee on Constitutional and Legal Matters provided for in paragraph 6 of Article V of the Constitution shall be composed of not more than seven Member Nations elected by the Council for a period of two years at the session of the Council immediately following the regular session of the Conference."

RULE XXX.3 (page 82)

" 3. The Committee shall hold sessions to consider specific items referred to it by the Council or the Director-General which may arise out of: ... "

The last subparagraph of paragraph 3 on pap 83 starting with " When the Committee is in session,... " is to be deleted.

RULE XXX.4 (page 83)

" 4. The Committee shall elect a chairman and a vice-chairman from among its members."

RULE XXXII.1 (b) (page 84)

" l.(h) Subject to the provisions of Article VII, paragraphs I to 4 of the Constitution, the terms and conditions of appointment of the Director-General, including the salary and other emoluments attached to the office, shall be determined by the Conference, having regard to any recommendations submitted by the General Committee, and shall be embodied in a contract signed by him and by the Chairman of the Conference on behalf of the Organization."

Financial Regulations

FINANCIAL REGULATION 4.4 (b) (iii) (page 92) (new subparagraph)

"4.4 (b) (iii) Notwithstanding the provision of Financial Regulation 4.4 (b) (i) and (ii) above, the Director-General may effect on his own authority between-chapter transfers of Allowances articles."

FINANCIAL REGULATION 4.5 (a) (page 93) (last sentence)

" 4.5 (a) ... There shall be no concentration of obligations or expenditure in any one calendar year, except as approved by the Conference, and under no circumstance shall any savings accruing during the financial period be used for any projects or activities which may involve additional obligations for Member Nations and Associate Members in future financial periods for the continuation of such projects or activities."

FINANCIAL REGULATION 5.9 (page 96) (new paragraph)

" 5.9 Non-Member Nations of the Organization that are members of commodity study groups or of bodies established by conventions or agreements concluded under Article XIV of the Constitution, shall contribute toward the expenses incurred by the Organization with respect to the activities of those groups or bodies in an amount determined by the Director-General except as otherwise decided by the Conference or the Council."

The present paragraph g is to be renumbered 10.

Rules of Procedure for the Council of FAO
Rule 11.2 (page ill)

" 2. As provided for in Rule XII.2 (a) of the General Rules of the Organization, the majority of the Members of the Council shall constitute a quorum, except as otherwise stipulated in the Constitution or the General Rules of the Organization."

F. Amendments to the agreement for the establishment of the general fisheries council for the Mediterranean


Amend Article II.6 to read:

"The seat of the Council shall be at the Headquarters of the Food and Agriculture Organization of the United Nations. "

Add new Article XI.1 to read:

" This Agreement shall automatically be terminated if and when, as a result of withdrawals, the number of Members of the Council drops below five, unless the remaining participants unanimously decide otherwise. "

Rules of Procedure

Add new paragraph 7 to Rule IX to read:

" In addition to the above Rules, the provisions of Rule XII of the General Rules of the Organization shall apply mutatis mutandis. "

Amend Rule XI.2 to read:

" A proposed budget of the Council for the next succeeding financial year consisting of proposed expenses of the secretariat, including publications and communications the proposed travelling expenses of the Chairman and the Vice-Chairmen, when engaged in the work of the Council between its meetings and the expenses, if any of the Committee shall after approval by the Council be submitted to the Director-General for consideration in the preparation of the general budget estimates of the Organization. "

Add new paragraph 5 to Rule XI to read:

" All co-operative projects shall be submitted to the Council or the Conference of the Organization prior to implementation."

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