They Cannot Be Sold Abroad

FOOD SURPLUSES

To the textbook economists the problem is simple: the U.S. has too much food, and much of the world too little. So why not ship U.S. surpluses abroad? But the U.S. has found that what makes textbook economic sense does not necessarily make political sense. The fact is that in its worldwide effort to win friends and influence people for freedom, a major obstacle is the U.S. agricultural surplus. The total value of that surplus now stands at more than $7 billion. It is rising so fast that the Agriculture Department last week was getting ready to ask Congress to boost the borrowing authority of the Commodity Credit Corp. from $10 billion to $12 billion. This mountain of food has caused the U.S. to impose strict import quotas on agricultural commodities, a policy which is not only condemned by foreign nations, but is opposed by the U.S. itself when other nations practice it. Furthermore, the U.S. angers its friends almost every time it tries to get rid of its surpluses abroad at competitive prices. Example: U.S. attempts to sell butter abroad, said Chairman William Marshall of New Zealand's Dairy Products Marketing Commission, constitute "pure and unadulterated dumping of surpluses" in violation of international trade agreements.

Last year the Commodity Credit Corp. sold $506 million worth of surpluses abroad at competitive prices, and gave away another $150 million. But this was less than half of what CCC bought from U.S. farmers. It offered 375 million Ibs. of butter, was able to sell only 1.4 million Ibs. It offered 20 million bushels of oats, sold only 3.5 million. CCC did not even try to sell its vast holdings of twelve other commodities, including cotton and wool, and wheat, the biggest surplus of all (661 million bushels in inventory). In most cases the reason for holding back was to avoid upsetting world prices or interfering with normal commercial exports.

Complex exchange and import controls and the delicately balanced state of U.S. popularity in many nations block the sale of surpluses almost everywhere. Bulk buying contracts, such as the United Kingdom has for Argentine meat, often make it impossible for the U.S. to work into new markets. In Hong Kong there is a rule that 25% of the cotton used by the crown colony's mills must come from Commonwealth sources. When the U.S. offered to sell butter to France so that every schoolchild would get a pat of butter with his lunch. French dairymen objected.

They argued that if a child got butter at noon, his family would cut his suppertime butter portion at home.

Almost every barrier the U.S. meets abroad is matched by wrangling at home. The Agriculture and Treasury Departments, which bear the brunt of the surplus costs, will go for almost any scheme to move commodities into the market place and lessen the load.

But the Defense and State Departments, along with the Foreign Operations Administration and other agencies, have their own ideas. Last year, for instance, Congress authorized the Administration to sell $700 million worth of surplus commodities abroad for nonconvertible currencies over a three-year period. The Agriculture Department, buried to the eyes in its surpluses, wanted to use up all the authority in the first year, then go back to Congress for more authority; the State Department, however, wanted the program carried out in equal annual installments, to lessen the effect on world markets. President Eisenhower finally stepped in with a compromise solution: $453 piillion in the first year. The State Department wants most of the foreign-currency deals made in such key cold-war areas as India, Pakistan and Japan; Agriculture, on the other hand, wants to make deals where there is more of a chance of developing permanent markets.

The same kind of scuffle dusts up the question of how the surpluses shall be paid for. FOA and the State Department like arrangements that help foreign nations develop their resources, e.g., Peru's recent $3,630,000 loan from the U.S., to buy wheat and butter, included $2,000,000 to complete a huge irrigation system. The Defense Department and the Treasury prefer deals by which foreign currencies help defray U.S. costs abroad. But not surprisingly, countries where the U.S. has military bases or expensive economic missions figure that the U.S. will have to pay its expenses anyway. So why not hold out for dollars, rather than food, in payment?

Agriculture Secretary Ezra Taft Benson is well aware that the U.S. needs a more effective and better integrated policy for selling its agricultural surpluses abroad. To this end, both Secretary Benson and General Foods' ex-Chairman Clarence Francis, head of a surplus disposal committee, are hard at work. But with farm output steadily rising throughout the world, the prospect is growing dimmer and dimmer that the answer to the U.S. surplus problem is the disposal of food abroad.

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