A World Food Reserve

MAC/WFY

Page-54

0230_553559_09_cha05

194570. Early Attempts: FAO's Pioneering Work

work through increased employment, it can offset some of its own expenditures
by its own increased production. Third, a long period of commitments was
needed for supplies of surplus products. And, to cover increased development
expenditures without inflation, it was necessary to provide some cash as well
as surplus commodities. Additional foreign financing was needed in addition
to surpluses.

These possible uses of agricultural surpluses gave rise to the idea of the creation

of a World Food Capital Fund (WFCF), an international fund composed of surplus
food stocks either as a stand alone fund or as an additional part of the proposed
SUNFED. The main purpose of a WFCF would be to provide assistance for the
economic development of developing countries. Such a fund should not be
regarded as a substitute for, but as an addition to, other forms of financing. It
should be composed of as wide a market basket of foods habitually consumed
in potential recipient countries. Stocks owned by the fund would remain in the
country of origin and marked for use by the fund. Continuity of the fund's
resources should be assured. And if assistance from the fund was made avail-
able in the form of long-term loans rather than outright grants, supplies should
be delivered to recipient countries at prices not higher than the corresponding
domestic prices in those countries. The fund's resources could be used not only for
financing the expansion or acceleration of investment programmes in developing
countries but also for building up national reserves to serve various purposes. They
might also provide emergency relief for which replenishment provisions would
have to be made. It would not be possible to combine the non-self-liquidating
functions of the fund, operating within the framework of international economic
assistance, with the use of the same capital resources for the very different func-
tions of self-financing world buffer stocks for stabilization purposes. The joint
administration of such diverse arrangements by one single international agency,
`while not perhaps entirely beyond the realms of administrative possibilities',
would be `a very difficult thing to do', and might lead to frustration in over-
complicated and competing objectives. For these reasons, it was considered advis-
able to keep them separate.

FAO principles of surplus disposal

Recognition of the potential positive uses of agricultural surpluses and their
potential negative effects on agricultural production and trade, together with the
continued accumulation of surplus stocks in major producing countries led to the
formulation of the FAO Principles of Surplus Disposal (Blau, 1954; FAO, 1954b).
A FAO study distinguished between the common usage of `surplus' as `that which
remains when use or need is satisfied' (Webster) and its economic meaning, which
distinguished between `the intrinsic usefulness of goods (i.e., their capacity for
satisfying needs) as against effective demand (i.e., the potential consumer's ability
and willingness to buy these goods at given prices and on given conditions of sale'.
Supplies of commodities could, therefore, be in `excess' or `surplus' even though
the needs of potential consumers may be far from satisfied (Blau, 1954). A Working

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Useful links	A World Food Reserve MAC/WFY Page-54 0230_553559_09_cha05 54 194570. Early Attempts: FAO's Pioneering Work work through increased employment, it can offset some of its own expenditures by its own increased production. Third, a long period of commitments was needed for supplies of surplus products. And, to cover increased development expenditures without inflation, it was necessary to provide some cash as well as surplus commodities. Additional foreign financing was needed in addition to surpluses. These possible uses of agricultural surpluses gave rise to the idea of the creation of a World Food Capital Fund (WFCF), an international fund composed of surplus food stocks either as a stand alone fund or as an additional part of the proposed SUNFED. The main purpose of a WFCF would be to provide assistance for the economic development of developing countries. Such a fund should not be regarded as a substitute for, but as an addition to, other forms of financing. It should be composed of as wide a market basket of foods habitually consumed in potential recipient countries. Stocks owned by the fund would remain in the country of origin and marked for use by the fund. Continuity of the fund's resources should be assured. And if assistance from the fund was made avail- able in the form of long-term loans rather than outright grants, supplies should be delivered to recipient countries at prices not higher than the corresponding domestic prices in those countries. The fund's resources could be used not only for financing the expansion or acceleration of investment programmes in developing countries but also for building up national reserves to serve various purposes. They might also provide emergency relief for which replenishment provisions would have to be made. It would not be possible to combine the non-self-liquidating functions of the fund, operating within the framework of international economic assistance, with the use of the same capital resources for the very different func- tions of self-financing world buffer stocks for stabilization purposes. The joint administration of such diverse arrangements by one single international agency, `while not perhaps entirely beyond the realms of administrative possibilities', would be `a very difficult thing to do', and might lead to frustration in over- complicated and competing objectives. For these reasons, it was considered advis- able to keep them separate. FAO principles of surplus disposal Recognition of the potential positive uses of agricultural surpluses and their potential negative effects on agricultural production and trade, together with the continued accumulation of surplus stocks in major producing countries led to the formulation of the FAO Principles of Surplus Disposal (Blau, 1954; FAO, 1954b). A FAO study distinguished between the common usage of `surplus' as `that which remains when use or need is satisfied' (Webster) and its economic meaning, which distinguished between `the intrinsic usefulness of goods (i.e., their capacity for satisfying needs) as against effective demand (i.e., the potential consumer's ability and willingness to buy these goods at given prices and on given conditions of sale'. Supplies of commodities could, therefore, be in `excess' or `surplus' even though the needs of potential consumers may be far from satisfied (Blau, 1954). A Working back to top Next page
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