Public Law 480: "Better than a bomber"

published in MER145

The US food aid program originated in 1954 as a means of disposing of costly domestic agricultural surpluses. In that year, Congress passed the Agricultural Trade Development and Assistance Act, known as Public Law 480. PL 480 enables food-deficit “friendly countries” to purchase US agricultural commodities with local currency, thus saving foreign exchange reserves and relieving US grain surpluses.

Under PL 480, close to $35 billion worth of farm commodities have been shipped abroad since 1955. Half of this has been wheat and wheat flour. During the late 1950s and early 1960s, the value of PL 480 reached one-third of total US agricultural exports. Today, food aid constitutes less than five percent of all agricultural exports. Less than four million metric tons of wheat products annually are now shipped under the program, compared with a peak of 15 million metric tons in the early 1960s.

More than 70 percent of the value of all shipments have been in the form of government-to-government concessional sales, the rest grants. Prior to 1972, food supplied under the program was paid for in the local currency. But after the United States accumulated large amounts of currencies which it could not spend, the law was amended to provide long-term credit sales agreements payable in dollars or in local currency, at the option of the US government.

Initially, the Department of State did not view PL 480 favorably. The advantages of food aid as a foreign policy tool were not clear. For one thing, the US was so desperate to dispose of surplus food, that food aid recipients enjoyed a certain amount of bargaining leverage. Furthermore, the program created frictions with other agricultural exporters, including allies such as Canada, Australia, Argentina and New Zealand.

In the late 1950s, Senator Hubert Humphrey pushed PL 480 as an explicit foreign policy instrument. He submitted a report to the Senate Agriculture Committee, entitled “Food and Fibre as a Force for Freedom,” calling for multiyear appropriations, rapid expansion of shipments to strategic Third World countries, and appointment of a full-time “Food for Peace” administrator to coordinate the activities of the Agriculture and State Departments. President Dwight Eisenhower preempted Humphrey’s legislative move in the spring of 1959 by renaming PL 480 the “Food for Peace” program and appointing a Food for Peace Director.

PL 480 exports increased by roughly 40 percent during the Kennedy administration. George McGovern, then director of the Food for Peace program, believed that food aid was “a far better weapon than a bomber in our competition with the Communists for influence in the developing world.” But despite many attempts to manipulate food aid to secure foreign policy gains, there is little evidence that US food aid policy successfully served US diplomatic interests.

The effort to use food as a weapon became more pronounced after 1969, as “food aid programs were conspicuously recast to serve US military and security objectives, first in Southeast Asia and then in the Middle East.” By 1973, almost half of US food aid was going to South Vietnam and Cambodia. After the US defeat in Indochina, food shipments were rerouted to the Middle East, and Egypt emerged as the largest recipient of PL 480 allocations, receiving five times more than any other country.

One reason why food aid came more under the influence of foreign policy officials in the 1970s was that the Department of Agriculture no longer considered these shipments an important part of US grain policy. US dollar devaluations in 1971 and 1973 made American agricultural prices more competitive. In 1973, world grain prices skyrocketed. As a result, US wheat stocks decreased and grain exports supplanted food aid. In the 1980s, though, increased competition and an overvalued dollar have hurt US wheat exports, and the period has been marked by a growing agricultural trade war between the European Economic Community (EEC) and the US. Egypt and North Africa have emerged as the major battlefield. Washington has complained that France, in particular, has subsidized sales in an effort to break into US markets. USDA, under pressure from the US farming industry to reduce the decline in food exports, targeted a number of programs at the Middle East and North Africa. The Blended Credit program, from 1983 to 1985, mixed interest-free government credit with guaranteed bank credit at commercial rates. The Export Enhancement Program (EEP), created in 1985, combines free government food stocks with commercial exports to reduce the overall export price. The latest tactic is the General Sales Manager (GSM) 102 program. This backs agricultural exports with US government guarantees for credits with repayment terms of up to 10 years. Egypt is now a major recipient of both the EEP and GSM 102 programs.

The growth of these other concessionary programs explains PL 480’s declining importance as a percent of all US agricultural exports. The program has largely outlived its usefulness as a surplus-disposal mechanism and there will likely be attempts to restrict food aid in the future. The continuation of a large food aid program to Egypt is an exception to this new trend. Egypt currently receives over one-third of all US food aid.

 

Sources: William J. Burns, Economic Aid and American Foreign Policy Toward Egypt, 1955-1981 (Albany: Suny Press, 1985), p. 126; R. Paarlberg, Food Trade and Foreign Policy, 1985, p. 118.

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