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How Governments and International Organizations Can Help to Give Effect to policies on selective expansion

63. Governments. Once national policies of selective expansion have been developed, considered in the light of their possible international repercussions and relations, and approved, there are many different ways in which governments can encourage, or assist farmers to put them into effect. Among the means which have been used are

(i) Education and information. Informing farmers of the prospective situation, of the desirable adjustments, and of the prospective economic situation which makes those adjustments desirable.

(ii) Provision of credit. In providing credit to farmers, from private or public agencies, emphasis can be placed on selected products where expansion is most important, or conditions can be placed on the use of the credit.

(iii) Price policies. In providing price or income guarantees or supports or in offering incentive prices, emphasis can be placed on the selective expansion of the products desired.

(iv) Production requisites. Where production requisites are under the direct or indirect "control of governments, they can ensure that adequate supplies of essential requisites are available for the production of commodities selected for expansion.

(v) Storage or marketing facilities. Attention to the provision of necessary storage and marketing facilities, through private, co-operative, 07 public agencies. may also be needed to facilitate the expansion. In some cases (e.g. some textile or oil crops) facilities for first processing may be needed also.

(vi) Setting of goals. Where farmers base their production in part on regional, local, or farm goals, translation of the desired emphasis in production into corresponding goals for production, in discussion and cooperation with the farmers concerned, may assist in securing their understanding, support and co-operation.

(vii) Financing of development. Where funds for general development are under direct or indirect public control, the use of those funds to provide necessary prerequisites for agricultural expansion such as roads, other communications, marketing and processing facilities, electricity, etc. may be guided towards projects which will facilitate and encourage agricultural expansion along the lines desired.

(viii) Production controls and marketing regulations. In countries where direct controls of acreage, production, or marketing exist, these have been used as a last resort. They will best support the program of selective expansion if they are used not solely to limit production, but rather to stimulate the redirection of resources from products which are less needed to those selected for expansion, and if they are accompanied by the other types of explanation, assistance, or encouragement already mentioned.

(ix) Storage and disposal operations. Finally, where governments can afford to develop storage reserve operations to even out supplies between good seasons and poor ones, the use of such facilities and reserves may make it possible to continue policies of selective expansion with less need of sudden shifts in the event of good crops, or of the danger of grave scarcities in the event of poor ones, than would otherwise be the case.

64. FAO and Other International Organizations. International organizations and regional or national agencies operating in the international field can assist Member Nations in the following ways:

(i) By directing the provision of technical assistance to countries, from FAO regular programs, from ETAP or from other programs of technical assistance. So long as technical assistance funds and numbers of available experts are limited, they should be applied to those projects which best fit the needs for selective expansion.

(ii) By directing the flow of available investment funds to the programs and projects which seem most suitable in the light of the needs for selective expansion (International Bank, Colombo Plan, Export Import Bank, Colonial development funds, etc.).

Financing economic development in agriculture

65. Progress of International Investment. Since 1951, investment funds available to less developed countries, directly or indirectly, have been affected by the development of a number of international, regional, and bilateral programs in aid of economic development, and by the continued expansion of investment of metropolitan countries in their dependent territories. The total flow of international investment into the less developed regions of the world, and the amount of those funds going directly into agricultural projects, have both been increasing only very slowly, even when account is taken of capital made available through public and private investment and all types of international and bilateral aid programs other than military. Compared with rough estimates of international investment needed for a satisfactory rate of economic development, the available funds cover only a fraction of the need, either world-wide or by major regions. Except for the International Bank for Reconstruction and Development and efforts by metropolitan countries to stimulate development of their dependent territories, only a gradual improvement seems likely in the flow of public international funds until the time when curtailment of armament expenditures will release funds which-according to the recent resolution of the United Nations-could be used for economic development. The prospects of a greater flow of private international investment funds, at present not encouraging, may improve with the increasing interest in such investment shown in some capital exporting countries, and with measures being adopted by many capital importing countries, to increase the security of foreign investments and to facilitate the transfer of returns. The renewed interest in the proposed International Finance Corporation manifested at the recent Session of the United Nations General Assembly may eventually yield an important improvement in the flow of private investment capital.

66. The total flow of investment funds to underdeveloped regions is also of concern to agriculture because an increasing market for farm products depends on general economic development, and progress in industrialization is essential to provide employment for surplus farm population where it exists or threatens to develop. The recent totals of international investment funds available to under-developed regions represent less than one-third of the amount which the United Nations experts have estimated as the minimum needed for a satisfactory minimum rate of growth. Even allowing for possible wide margins of error in the estimates of requirements and of international investment, it would appear that total international funds for investment in under-developed regions as well as those directly for agriculture, are both still gravely insufficient.

67. There are limitations to the volume of investment funds which can be effectively utilized at any one time, especially in less developed countries. Scarcity of skilled manpower, inadequate administrative services and lack of comprehensive domestic economic policies are some of the major obstacles which have to be overcome before large capital investments can be usefully made. Nevertheless, the gap between needs and actual flow of funds is so substantial that the latter could safely be speeded up considerably without reaching the present limit of possible effective utilization. The International Bank has again declared its willingness to finance economically sound agricultural development programs and has ample loanable funds for doing so, although it is not in a position to make special rates in cases where the Banks regular charges are too heavy for particular projects to bear. It usually cannot finance expenditures in local currency-particularly in connection with changes in agrarian structures but it can aid measures of land reform by providing funds for related investments connected with the setting up of new farms. It also can provide local funds indirectly through counterpart funds established from sales of imported machinery and equipment financed by long term International Bank loans.

68. Domestic Investment. In spite of the quite substantial amount of international investment for agriculture, the bulk of capital for agriculture has to come from domestic sources, particularly from farmers themselves. Governments are contributing to such investment in many countries but not always to an extent commensurate with the economic importance of agriculture. The Conference therefore urged governments to devote an adequate share of revenues to agricultural investment. In addition, any action to increase incentives to farm operators, to strengthen the security of land tenure and the stability of farm incomes raises the attractiveness of agriculture as a field of domestic investment. This provides a further reason for governments to increase their efforts in this field. Little is yet known of the amount of domestic capital invested annually in agriculture, and the Conference requested the Director-General to start collecting available data on domestic investment in agriculture beginning with public investment and to report to the Eighth Session of the Conference.

69. Farm Credit. Substantial progress is being made in developing farm credit, mainly however, in the more highly developed regions. The Conference took particular note of governmental institutions providing farmers with cheap credit, and of special arrangements for providing newly settled farmers and/or those with little or no bankable assets with sufficient credit at moderate cost. On the other hand, facilities for farm credit, particularly for medium term loans, are still quite inadequate in most underdeveloped regions. Information on the amount of farm credit in use will become available in 1954 from current replies to the farm credit questionnaire. The Conference stressed once more the importance of satisfactory credit facilities at reasonable terms and within easy reach of farmers for the development of agricultural production, and emphasized particularly the advantages of systems of directed agricultural credit coupled with effective technical advisory services as a means for the selective expansion of agricultural production. The Conference drew the attention of governments to assistance available under the Expanded Technical Assistance Program for developing systems of directed credit, and to the advantages to be gained from pooling their efforts and experience on a regional basis.

70. Appraisal of Agricultural Development Projects. Despite efforts by the Director General to give more attention to appraising investment needs and aiding countries to secure the necessary financing for technical assistance projects, only limited progress has been possible. The great majority of the projects have been of a character that did not involve extensive financing. Experts selected for their qualifications in agricultural technology have not generally been in a good position to deal with such financial and economic problems; budgets have been inadequate to provide special economic and financial experts to conduct such appraisals in the field. Furthermore, few countries asked for special assistance in selecting projects for international financing or in the preparation of loan applications. Nevertheless, the Conference considered it necessary that the Director-General continue his efforts to provide the economic and financial appraisal of as many technical assistance projects as possible where such appraisal is pertinent, and adopted the following resolutions:

Resolution No. 8

Near East Training Center for the Appraisal of Agricultural Development Projects

The Conference

Notes the holding of special training centers on the formulation and economic and financial appraisal of agricultural development projects;

Endorses plans for another such center in the Near East including facilities for the Arabic speaking countries as recommended by the third Regional Meeting field in Cairo;

Recommends that this new center be conducted as early in 1954 as feasible.

Resolution No. 9

Financing of Agricultural Development

The Conference

Notes the progress made under its previous resolutions on investment and credit; and

Requests the Director-General to continue with these efforts and to report further developments to the next Session of the Conference.

Adequacy of government services to agriculture

71. The Conference reviewed a preliminary study of government services to agriculture -Adequacy of Government Services to Agriculture- and appreciated the approach of the Director-General to the work in this important field. It was apparent that governments of many under-developed countries had not paid enough attention to the importance of adequate services to agriculture, even though the bulk of the population is engaged in farming. For example, annual government expenditure for agricultural services, converted into US currency, varies from as little as 40 cents per caput of agricultural population to over $50 in a number of the more highly developed countries. Similarly among the less developed countries, the proportion of total government expenditure devoted to agriculture varies from as much as 13 percent in one country and 5 to 10 percent in a few others, to less than 3 percent in most, and to as little as under I percent in some. It should be borne in mind that expenditures on agricultural services are also incurred in some countries by other bodies, e.g. local authorities or farmers co-operatives. Agriculture as a profession has not yet acquired the necessary esteem and does not offer the financial rewards to attract the younger people in many less developed countries.

72. The Conference recognized that an integrated and well balanced program, including a wide variety of services, is essential to the modern needs and demands of agriculture, rational increases in production, and improvement of living in rural areas. Such services directed to the enlightenment of the farmer should include a well coordinated long-term program of agricultural education, agricultural research and agricultural extension and demonstration. Such services are basic to the development of an informed agricultural population, a trained staff of technical workers, and a fund of scientific information adopted to local conditions and applicable for use in solving problems of food and fiber production, distribution and human nutrition. In addition, as agriculture progresses a variety of services will be required, whether provided by the government or otherwise, such as soil conservation services; multiplication, testing and quality control of improved planting materials; supervision of distribution of production supplies such as pesticides and fertilizers; protection of crops and livestock from parasites and disease; guidance in the choice of production enterprises; and many others.

73. A farmer also needs protection from the hazards always present in agriculture if he is to contribute the maximum to the national economy. To speed the improvement of efficiency and reduction of costs in both production and marketing, so needed today to encourage the expansion in food consumption, government services to farmers are also needed in many economics fields. These include the provision of current economic intelligence and market news, analysis of problems of production economics, improvement of marketing methods, provision of adequate credit, and extension services to farmers on economic problems, and the provision of adequate professional training in agricultural economics.

74. The inadequacy of government services in under-developed countries was considered by the Conference to be one of the most important obstacles to the development of agriculture. Unless Member Governments are prepared to take vigorous steps in strengthening and balancing their government services for agriculture, assistance rendered to increase production is likely to be spotty and temporary. The Conference further considered that if governments of less developed countries were to meet their responsibilities for the development of their government services, FAO would need to devote special attention to this aspect of the program It would also be necessary for FAO to gather further information on present services to agriculture, analyze this information, and upon request to advise and assist member governments in the problems of organizing, administering and strengthening of such services.

Resolution No. 10

Adequacy of Government Services to Agriculture

The Conference

Having examined available information on the adequacy of government services to agriculture;

Considers that in many member countries the importance of agriculture is not reflected in the volume of government effort to provide the services essential to its development; that agriculture as a profession to held in too low esteem to attract and retain the best people to this field; that adequate agricultural research, education and extension services are essential for the technical, economic and social development of any country; and that these services should be integrated with other economic and social services to form an environment conducive to agricultural development;

Suggests that Member Governments:

(i) Examine the proportion of their total budgets devoted to agricultural improvement, to see if the expenditures on agriculture are consistent with its importance in their economy;

(ii) Examine their present systems of agricultural services as to extent of government effort, co-ordination and integration of services to rural areas, and effectiveness of such services in meeting the needs of all rural groups and areas;

(iii) Take necessary steps to establish, strengthen or improve those services where they are now inadequate;

(iv) Give special consideration to the development of those agricultural research, education and extension services needed in each country, thus providing the scientific leadership necessary for continuing technological development;

(v) As an aid to the selective expansion of production and encouragement of consumption, also give special consideration to the development of those economics services which are necessary and desirable as agriculture progresses, including economic intelligence and market news services;

Requests the Director-General

(i) To continue progressively the study of the adequacy of government services to agriculture;

(ii) To continue to give on request all possible assistance to Member Governments in improving the effectiveness of their services to agriculture.

75. The Conference noted that in view of the differences in local conditions, and of the difficulties often encountered in applying the results of research in one area to agriculture in another without considerable modification, agricultural research and experimental stations are necessary in underdeveloped countries, initially to concentrate on major local problems, in order to provide a sound base for their farm advisory and extension services. The Conference adopted the following resolution:

Resolution No. 11

Research and Experimental Centers

The Conference

Recommends that FAO continue to assist underdeveloped countries to establish research and experimental centers to deal initially with local agricultural problems and to provide the basis for sound extension services.

General commodity problems

76. In considering agricultural commodity problems, the Conference gave special attention to the main tendencies which had become apparent since the last Conference Session and were broadly stated in the Director-General's Report on Intergovernmental Policies and Arrangements as:

(i) Large, or increasing, discrepancies in the levels of economic progress achieved in different parts of the world;

(ii) Growing accumulation of surplus supplies of agricultural commodities in some regions contrasted with deficits or low consumption standards in others;

(iii) Sharp and excessive fluctuations of prices of primary products;

(iv) Obstacles to trade in agricultural products;

(v) The continuation of differential price levels, and conflicting national agricultural policies.

77. The previous section of this Chapter has been concerned primarily with the statement of fundamental criteria to be taken into account in national agricultural production programs and the measures needed to carry these into effect, bearing particularly in mind the desirability of coupling policies of selective and efficient expansion of production with active steps to raise consumption, especially where the need is greatest. The following findings and recommendations on some outstanding commodity problems must be viewed in close conjunction with the general basic criteria stated above and the measures recommended to attain them.

Price stabilization

78. The Conference noted that a major characteristic of agricultural commodity developments since the Sixth Session of the Conference had been the recurrence of extreme short-period price swings in the world's primary markets, particularly in those for raw materials. The Conference emphasized once more the harmful effects to producers as well as to consumers of excessive price fluctuations for primary products. There was unanimous agreement on the need to secure greater stability in commodity markets and the Conference again reaffirmed its faith in commodity agreements as a means of achieving this.

79. The Conference generally endorsed the commodity-by-commodity approach to international stabilization arrangements, particularly in the initial stage, as being realistic. At the same time it recognized that consideration also should be given to multi-commodity arrangements, in view of economic inter-relationships between commodities. Moreover, other approaches to the objective of price stability should be continuously explored, with reference to national policies and to bilateral and regional arrangements. In all cases every effort should be made to ensure equitable terms of trade in international markets. Recognition was given to the results obtained in this field since the last Session of the Conference and satisfaction expressed with the renewal of the International Wheat Agreement, the signing of a new International Sugar Agreement, and consultations on agreements for other commodities. It was painted out that these agreements and consultations helped in gaining experience and understanding in regard to the three major elements of international commodity stabilization arrangements, namely multilateral contracts, quotas, and buffer stocks. The difficulties in the way of concluding commodity agreements were also emphasized and the view was expressed that progress to date had been limited.

80. The importance of initiating studies directed towards the conclusion of agreements before a crisis arose was stressed. The Conference gave considerable attention to the Director General's report on Intergovernmental Policies and Arrangements, and in particular expressed its interest in the steps proposed by the Director-General with a view to promoting the chances for concluding international commodity agreements. The Conference noted the interest which the CCP had taken in international stabilization measures, and made a number of suggestions for the continuation and further development of these activities in close cooperation with other competent organs.

C. International effects of national agricultural policies

Obstacles to trade in agricultural products
Surplus disposals

81. Some aspects of national policies have important effects on the economies of other countries and these effects tend to be particularly pronounced in periods of contracting markets. The Conference therefore felt that there was a need for a study of national policies seen in the light of their international effects, and that FAO was an appropriate body for the consideration of these questions. Work of this kind would help to create an understanding of agricultural commodity problems and would facilitate the adjustment of national policies to each other and the conclusion of agreements. Such studies should be concentrated primarily on the agricultural commodities that are important in international trade, if not undertaken by other competent bodies, and special attention should be given to the effects of national price policies on international markets. The attention of Member Governments was drawn to the importance of assisting FAO in these studies. It was felt that a regional approach was possible in the study of policies for some commodities but for others a wider approach was required.

Resolution No. 12

Implications of National Policies

The Conference

Being convinced that the examination of the international effects of national policies forms an important part of the review of commodity problems;

Requests the Director-General to continue to develop his reviews of national agricultural policies and of their international effects, with special reference to production, trade, consumption and prices of the most important commodities.

Obstacles to trade in agricultural products

82. Obstacles to trade continue to impede the expansion of trade in agricultural products and consequently hamper economic development. The assistance of hard currency countries is especially needed to overcome trade difficulties by means of liberal import policies. The Conference stressed the need to consider fully the implications of protective policies for agricultural products and the need to reconcile such policies, as far as possible, with the efficient utilization and development of productive resources.

83. The Conference considered the effects of the dollar shortage as one of the factors leading to trade restrictions and noted with satisfaction the recent improvements in the dollar situation. In this connection, it expressed its appreciation of the valuable aid given to its discussions by the analysis of the subject submitted to it by the International Monetary Fund. It expressed the hope that such surveys of the dollar problem in its general aspects and of its bearing on agricultural trade problems and production policies could continue to be made by FAO in close co-operation with the International Monetary Fund and the International Bank for Reconstruction and Development. The Conference also noted the role that could be played in the further narrowing of the dollar gap by well-planned measures of expansion of production in underdeveloped countries, helped by technical assistance and financial aid.

84. It was generally agreed that FAO should, through its Committee on Commodity Problems, continue to review and study obstacles to trade in agricultural commodities in close co-operation not only with the IMF but also with other organizations having primary responsibility in these fields, notably GATT. In developing such co-operation, it was important to see trade restrictions on agricultural products in perspective, and not to overlook similar restrictions on manufactured products and foreign exchange controls, and that these problems should be considered both generally and regionally.

Resolution No. 13

Obstacles to Trade

The Conference

Having noted the seriousness of the effects of trade obstacles for agricultural products on the economies of many countries;

Recognizing in particular the growing importance of these problems in a period of increasing difficulties of distribution;

Emphasizes the importance of continued close co-operation of FAO with GATT and with the IMF on these questions;

Requests that FAO, through the medium of its Committee on Commodity Problems, continue to examine the international effects of national agricultural policies which give rise to significant obstacles to trade in important agricultural commodities, keeping Member Governments informed on this matter;

Recommends that Member Nations should endeavor to reduce obstacles to trade in agricultural products.

Surplus disposals

85. In its review of the world agricultural commodity situation, the Conference gave special attention to the growing difficulties encountered in absorbing supplies of certain commodities. While recognizing that the term surpluses was capable of varying interpretations and that so far only one government had stated that it had surpluses of some commodities, the Conference stressed the urgency and importance of a constructive approach to the problem of disposing of supplies of food and agricultural products for which no adequate effective demand exists.

86. It was recognized that current distribution difficulties had to be seen in perspective and that they should not be allowed to interfere with the wholehearted pursuit of well conceived long-term agricultural development programs; but it was also pointed out that the very progress of such orderly development could be seriously jeopardized by the deterrent effects of surpluses overhanging the market, particularly to the extent that they disturb patterns of production and international trade. In this connection, emphasis was laid on the delicate nature of world market equilibria which might be disproportionately upset by the effects of marginal excess supplies. It was noted, moreover, that curtailed production of one commodity might in some measure merely shift rather than solve the problem of excess supplies.

87. In its review of possible remedies, the Conference stressed the fact that, in accordance with FAO's basic aims, the foremost remedy for the absorption of excess supplies was to be seen in courageous policies for increasing consumption. The narrowing of the gap between effective demand and adequate nutritional standards depends essentially on progress made in raising the efficiency of production and distribution systems to the mutual benefit of consumers and producers, and, on the other hand raising the levels of both general and external purchasing power, particularly but not exclusively in countries with low consumption standards. It was also noted that problems of inadequate outlets differed widely from product to product and, therefore, had to be considered both generally and on a commodity by-commodity basis. For some commodities, such as fruit and vegetables, a regional approach might be desirable, but in regard to others, including grains and other important staples, a world-wide consideration of consumption problems was required.

88. Notwithstanding the importance of basic development and consumption programs, it was generally felt that full consideration had to be given in the period now ahead to special measures for keeping consumption in step with expanding production. The Conference urged that full use should be made of the experiences gathered on such special programs, both national and international, and that FAO should consider, together with UNICEF and WHO, possibilities of developing special distribution programs. Stress was laid on the importance of considering how far long-term development aspects could be reconciled with temporary measures.

89. It was noted further that intergovernmental examination of the movement of surpluses into consumption required full consideration of the possible international repercussions of such measures, including the effects not only on competing exporters of identical or related products, but also on production and the economic development within receiving regions. To promote constructive action and to relieve the anxieties of all interested governments, the Conference regarded it as highly desirable that FAO should try to draw up principles and standards which might be applied in the disposal of agricultural commodities in surplus supply.

90. The Conference noted with interest the consideration given by the United States Government to international safeguards in the formulation of Section 550 of the Mutual Security Act. The provisions of this Section, while constituting only one of the existing special disposal measures, were found of interest not only because of their topical importance but also because of their general significance. It was noted, moreover, that the application of these standards had been sincerely followed in negotiations initiated so far. Nonetheless, the Conference was concerned about the international repercussions of this and similar programs, especially if their application were widened. It was concluded that the effects of such measures should be considered in an international forum.

91. The Conference noted that the necessary machinery for such consultations was readily available within FAO through the medium of the CCP which, on grounds of both past experience and current competence, was well equipped for dealing with these matters. It, therefore, concluded that progress could best be made by the CCP undertaking as speedily as possible a review and study of the questions involved to serve as a basis for the formulation of principles.

92. The Conference considered that because of the need to give urgent consideration to the problem of surplus disposal, the CCP should set up a Working Party to meet in Washington early in 1954, to consider the best means of the disposal of agricultural commodity surpluses and the establishment of the necessary safeguards; and that the findings and recommendations of the Working Party should be sent to governments in advance of the Twenty-Third Session of the CCP which should be held not later than at the end of June 1954. It was also considered that further meetings of a sub-committee might be considered in Washington in 1954 and 1955.

Resolution No. 14

Disposal of Agricultural Surpluses

The Conference

Recognizing the need to improve consumption levels for agricultural products, and in particular to raise nutritional levels in under-developed areas and among children and other vulnerable groups;

Noting the existence of surpluses of some agricultural commodities and the fears of many Member Nations that the disposal of surpluses might have harmful effects on the economies of many countries;

Recognizing the urgent necessity of finding ways and means of moving surpluses into consumption without harmful interference with normal patterns of production and international trade;

Recommends for the attention of Member Governments the following principles to be taken into consideration in the disposal of agricultural surpluses,. with full regard to the need for active steps to raise consumption levels, as stated above:

(i) That Member Governments which have excess stocks of agricultural products should dispose of such products in an orderly manner so as to avoid any undue pressure resulting in sharp falls of prices on world markets, particularly when prices of agricultural products are generally low; l

(ii) That where surpluses are disposed of under special terms, there should be an undertaking from both importing and exporting countries that such arrangements will be made without harmful interference with normal patterns of production and international trance;

Requests the Committee on Commodity Problems, at the earliest possible date, and not later than the end of June 1954, in elaboration of the findings of the Conference and with a view to making recommendations for transmission to Member Governments, to consider:

(i) The most suitable means of disposing of surpluses including proposals for setting up consultative machinery through which the disposal of agricultural surpluses can be facilitated;

(ii) The principles which should be observed by Member Nations in order that the disposal of surpluses he made without harmful interference with normal patterns of production and international trade.

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