STRENGTHENING THE WORLD ECONOMIC STRUCTURE

1.

THE LAST 30 YEARS OF OUR EXPERIENCE IN THE WORLD HAVE LEARNT THAT OUR COUNTRY'S PEACE, PROSPERITY AND VALUES ARE CRITICALLY AFFECTED BY THE CONDITIONS WHICH A PREVAIL THROUGHOUT THE WORLD. IN WHICH WE LIVE. JUST AS NO FAMILY COULD PROSPER OR BE SECURE LIVING IN A CHAOTIC AND UNGOVERNABLE CITY, SO AMERICA'S WELL-BEING CAN ONLY BE MAINTAINED IN THE CONTEXT OF AN INTERNATIONAL ENVIRONMENT THAT PROVIDES A MEASURE OF SECURITY AND A HOPE OF PROGRESS.

BUT A STABLE WORLD ORDER DEPENDS UPON AMERICA TOO. LAST NIGHT IN ST. LOUIS I SPOKE OF OUR NATION'S IMMEDIATE NEED, IN THE AFTERMATH OF VIETNAM, TO RECOGNIZE THAT AMERICA'S RELIABILITY -- THAT IS, THE SUM TOTAL OF OUR ACTIONS AND POLICIES OVER TIME -- IS A CRUCIAL ELEMENT OF A STABLE WORLD ORDER. FOR IF AMERICA'S CONSTANCY AND CONTRIBUTION AS A BUTTRESS OF PEACE ARE SEEN AS GIVING WAY

- 3 -

economic arrangements are generally considered
PRECEIVED ~~BY SOME NATIONS AS FUNDAMENTALLY UNJUST, OR IF~~
~~ECONOMIC ARRANGMENTS ARE CONSTANTLY BUFFETED BY BREAK-~~
and breaking
~~DOWN AND CRISIS. THE LAST 30 YEARS HAVE SEEN IMPORTANT~~
OUR FRIENDS,
SHIFTS IN THE DISTRIBUTION OF ECONOMIC POWER.
THE INDUSTRIAL DEMOCRACIES, HAVE REGAINED THEIR ECONOMIC
STRENGTH AND FOUND NEW UNITY; THE NEW NATIONS HAVE ACHIEVED
POLITICAL SELF-ASSURANCE AND AWARENESS OF THEIR COLLECTIVE
ECONOMIC STRENGTH AS SUPPLIERS OF VITAL MATERIALS. THE
NATIONS
INTERDEPENDENCE OF ALL PARTICIPANTS IN THE GLOBAL ECONOMY
IS AN OBJECTIVE FACT. BUT THE INTERNATIONAL SYSTEM HAS
YET TO ADJUST TO THE NEW REALITIES ~~AND TO THEIR NEW~~
~~POSSIBILITIES.~~

or in take full advantage

~~or~~

LET ME REVIEW WITH YOU THE RECORD OF OUR WORLD ECONOMIC
SYSTEM; THE CAUSES AND IMPLICATIONS OF THE CHALLENGES TO
IT; AND THE STEPS WE MUST TAKE TO STRENGTHEN IT.

OBVIOUS CRISES ARE USUALLY THE EASIEST TO DEAL WITH.
deeper
THE CHALLENGE TO NATIONS IS TO PERCEIVE WHEN FUNDAMENTAL

- 4 -

[D]

CHANGES ARE TAKING PLACE WITHOUT VISIBLE CRISIS -- CHANGES

DEAL & SELLers will have a great future
WHICH IF NOT ADDRESSED PORTEND GREAT UPHEAVALS, IN THE FUTURE.

WE live in such a time !

THE PERILS OF THE PRESENT CHALLENGES TO ECONOMIC STABILITY
ARE VAST; WE WOULD FACE A WORLD OF ECONOMIC WARFARE,
SPREADING DEPRESSIONS, AND IDEOLOGICAL CONFLICTS ULTIMATELY

BEFORE US IS A CHOICE
MEANCING INTERNATIONAL PEACE. THE TRAGEDY WOULD BE NOT ONLY

THE END OF THE UNPRECEDENTED GROWTH AND PROSPERITY OF THE
LAST GENERATION, BUT THE LOSS OF EVEN GREATER UNFULFILLED

HOPES OF UNIVERSAL PROGRESS AND POSSIBILITIES OF UNIVERSAL
PEACE.

In the hands of the people of our country

- 5 -

2: THE EXISTING SYSTEM

THE INTERNATIONAL ECONOMIC SYSTEM ESTABLISHED IN
THE IMMEDIATE POSTWAR PERIOD HAS SERVED THESE OBJECTIVES—

WELL. THE SYSTEM IS BUILT ON THREE CENTRAL CONCEPTS:

-- OPEN TRADE;

-- FREE MOVEMENT OF INVESTMENT CAPITAL AND
TECHNOLOGY; AND

-- READILY AVAILABLE SUPPLIES OF RAW MATERIALS
TO SUSTAIN AN EXPANDING GLOBAL ECONOMY.

THE RESULT OVER THE PAST QUARTER CENTURY HAS BEEN
HISTORICALLY UNPARALLELLED ECONOMIC GROWTH AND PROSPERITY
in history.

THE INDUSTRIALIZED COUNTRIES HAVE MAINTAINED AN ALMOST
CONTINUOUS RECORD OF ECONOMIC PROGRESS. ALTHOUGH PROGRESS
IN THE DEVELOPING COUNTRIES HAS BEEN UNEVEN, THEY TOO
HAVE MADE UNPRECEDENTED ADVANCES AS A GROUP; MANY OF
the companies

THEY HAVE MADE SPECTACULAR GAINS, LAUNCHING-ON RAPID INDUSTRIALIZATION AND EXPANSION OF EXPORTS.

AFTER THE BITTER EXPERIENCE OF THE 1920S AND 1930S, THE POSTWAR ECONOMIC SYSTEM WAS DESIGNED TO DEPOLITICIZE ECONOMIC ISSUES BETWEEN NATIONS, AND SUBJECT THEM AS MUCH AS POSSIBLE TO THE GOVERNANCE OF AGREED MULTILATERAL RULES AND INSTITUTIONALIZED PROCEDURES. TYPICALLY, THE RULES OF THE SYSTEM IMPOSE LIMITATIONS ON UNILATERAL ACTIONS BY ONE MEMBER NATION THAT COULD CAUSE ECONOMIC INJURY TO OTHERS. THE UNITED STATES PLAYED A LEADING ROLE IN THE ESTABLISHMENT AND MAINTENANCE OF THIS SYSTEM.

THE WORLD'S ECONOMIC GROWTH WITHIN THIS FRAMEWORK WAS SIMULTANEOUSLY THE CAUSE AND THE RESULT OF GROWING INTERDEPENDENCE AMONG NATIONS. THE GLOBAL MOBILITY OF CAPITAL, MANAGEMENT AND TECHNOLOGY HAS STIMULATED THE GROWTH OF INDUSTRY. WORLD TRADE HAS INCREASED SPECIALIZATION

-8-

TO ATTRACT NEW INVESTMENTS FROM THE NEW SOURCES OF WEALTH. AND CLOSE COORDINATION OF DOMESTIC POLICIES

HAS HELPED ALL OUR GOVERNMENTS TO COME OUT OF THE

CURRENT RECESSION IN A WAY THAT AVOIDS DISRUPTIVE MEASURES

EFFECTS IN OUR NATIONAL ECONOMIES. IN OTHER WORDS,

WE HAVE MAINTAINED THE ECONOMIC GAINS OF OUR INTER-
DEPENDENCE WITHOUT SACRIFICING OUR DOMESTIC ECONOMIC
OBJECTIVES.

AS THEY EMERGE FROM RECESSION, THIS PATTERN OF
COHESIVENESS WILL ENABLE THE INDUSTRIAL COUNTRIES TO
ACT WITH RENEWED CONFIDENCE ACROSS THE ENTIRE RANGE
OF POLITICAL, ECONOMIC, AND SECURITY ISSUES. THIS IS-
THE SIGNIFICANCE OF THE ANNUAL MINISTERIAL MEETING
LATER THIS MONTH OF THE ORGANIZATION FOR ECONOMIC
COOPERATION AND DEVELOPMENT, THIS BODY OF THE

- 9 -

INDUSTRIALIZED COUNTRIES OF NORTH AMERICA, EUROPE AND
JAPAN WILL ASSESS WHERE WE STAND AND DISCUSS EVEN CLOSER

COORDINATION AND JOINT ACTIONS IN ECONOMIC POLICIES,

States will put its recommendations for the future evolution of the world economy before the body

BUT DESPITE THE GROWING NEED FOR MULTINATIONAL

COOPERATION BROUGHT BY INTERDEPENDENCE, THE INTERNATIONAL

SYSTEM -- THE CHIEF VEHICLE FOR COOPERATION AND WIDER

PROSPERITY FOR ALL NATIONS -- HAS COME UNDER SEVERE

CHALLENGE

largely from the less developed part of the world.

- 10 -

3. CHALLENGES TO THE SYSTEM

THE CHALLENGES TO THE INTERNATIONAL ECONOMIC SYSTEM COME FROM MANY DIRECTIONS: It takes many forms;

-- ON THE SURFACE, IT IS A PROBLEM OF THE UNCERTAINTY OF THE AVAILABILITY OF VITAL NATURAL RESOURCES, PARTICULARLY ENERGY AND FOOD, BUT INCREASINGLY OTHER MATERIALS AS WELL.

-- MORE FUNDAMENTALLY IT IS A PROBLEM OF ADJUSTMENT TO A NEW DISPERSION OF ECONOMIC POWER, AMONG DEVELOPED AND DEVELOPING, THAT IS ITSELF A RESULT OF THE UNPRECEDENTED GLOBAL ECONOMIC EXPANSION OF THE LAST THIRTY YEARS. WE FACE NEW QUESTIONS OF THE ALLOCATION OF RESPONSIBILITIES IN MULTILATERAL INSTITUTIONS FOR AID AND REGULATION OF THE SYSTEM, AND OF DEVELOPING PRACTICES OF COOPERATION AMONG A GREATER NUMBER OF PARTICIPANTS IN THE SYSTEM.

- 11 -

THE NEW assertion of political and economic power by the so-called Third World is itself a political problem of significant dimensions. Their strength was real even before it was asserted; it cannot be ignored. But the world must learn that contention among blocs and resort to overt pressures can only shatter a system of free international intercourse upon which everyone's Third World prosperity depends as well as ours. There could have been no more discouraging blow to the hopes of mankind for economic development than the massive and arbitrary rise in oil prices in 1973 and the worldwide recession which it stimulated.

The wielding of power by states or blocs to achieve different and often conflicting goals can only become a source of global instability with grave implications

-12-

FOR BOTH ECONOMIC PROSPERITY AND PEACE OVER THE NEXT
GENERATION.

WE HAVE THE RESPONSIBILITY, THEREFORE, TO BE AS
FIRM IN REJECTING CHALLENGES TO THE SYSTEM THAT WOULD
EFFECTIVELY DESTROY IT AS WE MUST BE DILIGENT IN MEETING
THOSE THAT WILL STRENGTHEN IT.

- 13 -

4. THE CHALLENGE FROM THE DEVELOPING WORLD

THE CHALLENGE FINDS ITS MOST ACUTE AND ARTICULATE EXPRESSION IN THE PROGRAM ADVANCED IN THE NAME OF THE or-ollisl THIRD WORLD. THIS PROGRAM aims, ON GROUNDS OF IDEOLOGY AND NATIONAL SELF-INTEREST, AT A CONSCIOUS REDISTRIBUTION OF THE WORLD'S WEALTH, AND NEW PRACTICES OF SETTING THE PRICES OF PRIMARY PRODUCTS BY INTERNATIONAL AGREEMENTS, PEGGING THEM TO THE INDEX OF WORLD INFLATION, religion, instead of by supply and demand.

THIS IS A FUNDAMENTAL CHALLENGE TO THE LIBERAL ECONOMIC SYSTEM UPON WHICH TRADE AND OUR MUTUAL PROSPERITY HAS BEEN BASED FOR 30 YEARS. A NEW ORDER WHICH SIMPLY TRIES TO REDISTRIBUTE WEALTH TO SOME AT besting and snuffling, the expense of GLOBAL GROWTH WILL ONLY RETARD THE PROGRESS OF ALL. INDEED, HISTORY HAS PROVED THAT IT IS ONLY IN THE EXPANSION OF GLOBAL PROSPERITY THAT THE PROSPERITY OF EACH CAN BE ACHIEVED.

- 14 -

THE FACT THAT GROWTH HAS BEEN UNEVEN IN THE PAST SHOULD
NOT CONCEAL THE FACT THAT THE DEVELOPING COUNTRIES AS A
WHOLE HAVE INCREASED THEIR TOTAL SHARE OF WORLD OUTPUT.

NOR SHOULD WE BE UNDER ANY ILLUSIONS ABOUT THE EFFECT WHICH
A PROGRAM OF LARGE SCALE INDEXING WOULD HAVE, on样的前提
relating to commodity prices in a world in development.

-- FIRST, BECAUSE THE GREATEST PRODUCTION OF PRIMARY
PRODUCTS REMAINS IN THE DEVELOPED COUNTRIES, IT IS PRIMARILY
THEY WHICH WILL BENEFIT, MOST FROM SUCH A SCHEME, MAINLY
STRENGTHEN those least in need of help.
AT THE EXPENSE OF THE RESOURCE-POOR IN THE DEVELOPING WORLD.

-- SECOND, SUCH A SCHEME WOULD INTRODUCE INSURMOUNTABLE
RIGIDITIES INTO WORLD TRADE AND FINANCIAL MARKETS, RESULTING
IN MASSIVE DIVERSION OF RESOURCES, MISUSE OF SCARCE CAPITAL
AND UNDERUTILIZATION OF NEEDED PRODUCTIVE CAPACITY WORLDWIDE.

-WE MUST ALSO BE CLEAR ABOUT THE POLITICAL PURPOSES
WHICH SUCH A PROGRAM IS DESIGNED TO ACHIEVE. THROUGHOUT
HISTORY, NATIONS HAVE SOUGHT TO IMPROVE THEIR CONDITION AT
THE EXPENSE OF OTHERS. AN INTERNATIONAL SYSTEM IN WHICH

- 16 -

BY THE ENERGY AND FOOD CRISES OF THE PAST TWO YEARS.

FOR THESE COUNTRIES IN PARTICULAR, THE NEED TO FIND
WAYS TO TRANSFER WEALTH AND REAL RESOURCES IS NOT A MORAL
IMPERATIVE; IT IS THE INSURANCE THAT THE WORLD WE BUILD...
IS A WORLD IN WHICH ALL NATIONS, AND NOT ONLY THE RICHEST,
HAVE A STAKE.

THE CHALLENGE IS TO DEVELOP NEW STRUCTURES FOR
COOPERATION IN WHICH THOSE NATIONS WITH THE GREATEST
STAKE OR WEIGHT ON THE SPECIFIC PROBLEMS BEFORE US
MUST ACCEPT A SHARED RESPONSIBILITY FOR THEIR SOLUTION.
THEIR ACCEPTANCE OR REJECTION OF THAT RESPONSIBILITY
WILL DETERMINE POLITICAL AND ECONOMIC CONDITIONS OF
THE ERA WE ARE ENTERING.

WE ARE FACING THIS QUESTION TODAY IN THE FIELDS
OF ENERGY, FOOD AND PRIMARY COMMODITIES.

- 17 -

5. ENERGY

IT IS IN ENERGY THAT THE CHALLENGE TO THE EXISTING INTERNATIONAL ECONOMIC SYSTEM HAS BEEN MOST EFFECTIVE -- AND MOST DANGEROUS for global prosperity.

FOR YEARS THE UNITED STATES AND OTHER INDUSTRIAL COUNTRIES BUILT THEIR PROSPERITY ON EVER-INCREASING IMPORTS OF INEXPENSIVE FOREIGN OIL. NOW WE SEE THAT BOTH THE PRICE AND AVAILABILITY OF THOSE SUPPLIES CAN BE MANIPULATED BY COUNTRIES THAT MAY NOT SHARE AN INTEREST IN OUR WELL-BEING. WE SEE THAT OUR STANDARD OF LIVING HAS SUFFERED THROUGH JOBS LOST IN THE EMBARGO, THROUGH STEPPED-UP INFLATION RESULTING FROM HIGH OIL PRICES, THROUGH THE IMPETUS THE ENERGY CRISIS GAVE TO RECESSION.

THUS FAR THE INTERNATIONAL ECONOMIC SYSTEM HAS REACTED WELL TO THE ENERGY SHOCK.

- 18 -

EJD

INDUSTRIAL COUNTRIES HAVE RESISTED THE TEMPTATION TO PUSH THEIR OIL DEFICITS OFF ON EACH OTHER THROUGH RESTRICTIVE TRADE AND FINANCIAL POLICIES;

RICH COUNTRIES HAVE STEPPED UP THEIR ASSISTANCE TO THE POOR COUNTRIES, WHICH WERE HIT EVEN HARDER THAN WE BY HIGH OIL PRICES; U.S. FOOD AID, FOR EXAMPLE, HAS BEEN INCREASED BY OVER $600 MILLION.

INDUSTRIAL COUNTRIES HAVE DEVELOPED A COOPERATIVE PLAN TO BUILD UP STOCKS, TAKE JOINT CONSERVATION MEASURES AND SHARE AVAILABLE SUPPLIES IN A NEW EMERGENCY; AND

A $25 BILLION "FINANCIAL SAFETY NET" HAS BEEN AGREED, TO PROTECT INDUSTRIAL COUNTRIES AGAINST THE STRESSES OF LARGE OIL DEFICITS, AND POSSIBLE FINANCIAL MANIPULATION BY OIL PRODUCERS.

-19-

THE QUESTION NOW IS WHETHER THE UNITED STATES AND OTHER INDUSTRIAL COUNTRIES CAN ACT TO REMOVE THE UNDERLYING CAUSE OF THE ENERGY CRISIS: OUR EXCESSIVE DEPENDENCE ON IMPORTED OIL. FOR THAT, TWO THINGS ARE REQUIRED:

-- EACH COUNTRY MUST BRING ITS CONSUMPTION OF ENERGY UNDER CONTROL THROUGH CONSERVATION MEASURES;

-- A MASSIVE EFFORT MUST BE MADE THROUGHOUT THE INDUSTRIAL WORLD TO DEVELOP ALTERNATIVE SOURCES OF ENERGY: NEW GAS AND OIL, COAL, NUCLEAR POWER.

REDUCED ENERGY VULNERABILITY WILL PLACE HEAVY DEMANDS ON ALL INDUSTRIAL COUNTRIES IN TERMS OF FORGONE CONSUMPTION AND DIVERSION OF CAPITAL RESOURCES FROM OTHER USES ON A HUGE SCALE. FOR THIS REASON, THE MEMBERS OF THE INTERNATIONAL ENERGY AGENCY HAVE REACHED AGREEMENT ON:

- 20 -

-- SHARING THE BURDEN OF CONSERVATION; AND

-- A JOINT PROGRAM FOR PROTECTING NEW ENERGY INVESTMENT.

BUT THE KEY WILL BE WHAT AMERICA DOES. WE USE FULLY HALF OF THE INDUSTRIAL WORLD'S ENERGY. IF WE BRING OUR CONSUMPTION UNDER CONTROL, SO WILL OTHER INDUSTRIAL COUNTRIES. INDEED, OTHER COUNTRIES ARE ALREADY AHEAD OF US IN ADOPTING NEW TAXES AND OTHER PROGRAMS TO CURB ENERGY USE. But if we do not act now,

WE ALSO HAVE THE GREATEST ENERGY POTENTIAL IN THE INDUSTRIAL WORLD IN ALASKAN OIL, OUTER CONTINENTAL SHELF DEPOSITS, AND ADVANCED TECHNOLOGY ACROSS A WIDE RANGE OF NEW ENERGY SOURCES. IF WE MOVE STRONGLY TO DEVELOP THAT POTENTIAL, OTHERS WILL JOIN US.

Jayce

Please relate this article to me, Jayce. Is it better in English?

when recession causes demand for oil, are vulnerability to political pressure will multiply when consumption again In the abnormal price as one recovery agains monetarily will then be unceasingly subject to foreign political pressure.

-22-

6. COMMODITIES

IT IS IN OTHER RAW MATERIALS THAT THE NEXT

CHALLENGE TO THE INTERNATIONAL ECONOMIC SYSTEM IS EMERGING.

IN CONTRAST TO OIL, THE THREAT TO OUR NATIONAL

SECURITY FROM A DISRUPTION IN SUPPLIES OF MOST RAW

MATERIALS IS LIMITED. WE ARE ONLY 15 PERCENT DEPENDENT

ON IMPORTED RAW MATERIALS AND ONLY 3 PERCENT DEPENDENT ON

ON RAW MATERIALS FROM DEVELOPING COUNTRIES.

NATIONAL CONTENTION OVER COMMODITIES CAN BLOCK PROGRESS

ON OTHER ECONOMIC ISSUES, AS DEMONSTRATED BY THE FAILURE
OF THE ENERGY PREPARATORY CONFERENCE LAST MONTH. AND THE

FAILURE TO RESOLVE OUTSTANDING COMMODITY PROBLEMS

THREATENS US IN THE SHORT RUN WITH VOLATILE MARKETS,

PRICE GOUGING, AND INVESTMENT DISPUTES.

THE POLITICAL INSTABILITY THAT THIS CAN ENGENDER

IS IN NO ONE'S INTEREST.

-24-

-- THE HEAVY (AND PERHAPS GROWING) COST OF COMMODITY CYCLES. IN PERIODS OF SLACK DEMAND, SUBSTANTIAL EXCESS CAPACITY OFTEN APPEARS. IN PERIODS OF TIGHT DEMAND, SKYROCKETING PRICES CAUSE COSTLY ADJUSTMENTS IN MANUFACTURING PROCESSES AND PRICING; AND

-- INCREASING CHALLENGES TO THE ROLE OF PRIVATE ENTERPRISE WHICH TRADITIONALLY HAS BEEN RESPONSIBLE FOR MOST OVERSEAS MINERALS DEVELOPMENT.

TO MEET THESE PROBLEMS, THE UNITED STATES WILL ADOPT AN APPROACH BASED ON THE FOLLOWING ELEMENTS:

-- FIRST, RECOGNIZING THE NEEDS OF BOTH PRODUCERS AND CONSUMERS FOR A MORE PREDICTABLE AND STABLE FRAMEWORK FOR THEIR TRADE AND INVESTMENT POLICIES, WE WILL PROPOSE THAT THE MULTILATERAL TRADE NEGOTIATIONS NOW UNDERWAY IN GENEVA DEVELOP A NEW SET OF RULES AND PROCEDURES ON SUCH

-25-

MATTERS AS ACCESS TO SUPPLIES AND MARKETS, PROMOTION AND LOCATION OF MINING AND PROCESSING INDUSTRIES, AND SETTLEMENT OF DISPUTES WHICH MAY ARISE.

— SECOND, RECOGNIZING THAT RESOURCE RICHES AND NEEDS VARY WIDELY, WE PROPOSE THAT THE MAJOR PRODUCERS, CONSUMERS AND TRADERS CONSIDER WHETHER CIRCUMSTANCES IN PARTICULAR AREAS WOULD WARRANT NEW PRACTICES OR ARRANGEMENTS. THE UNITED STATES IS PREPARED TO CONSIDER EACH COMMODITY ON A CASE-BY-CASE BASIS.

— THIRD, RECOGNIZING THE IMPORTANCE OF COMMODITY TRADE TO THE ECONOMIC DEVELOPMENT OF THE PRODUCERS, WE WILL PROPOSE THAT THE INTERNATIONAL BANK AND MONETARY FUND EXAMINE THE NEED FOR NEW FACILITIES FOR FINANCING NEW PRODUCTIVE INVESTMENT AND THE DEVELOPMENT OF NATIONAL OR INTERNATIONAL BUFFER STOCKS TO STABILIZE EARNINGS IN THE FACE OF THE CYCLICAL FLUCTUATIONS.

-26-

WE ARE INTERESTED IN EXPLORING, WITH THESE INSTITUTIONS AND THE COUNTRIES INVOLVED, NEW TECHNIQUES FOR MOBILIZING THE CAPITAL NEEDED FOR NEW INVESTMENT, AND NEW EFFORTS TO BRING THAT CAPITAL TOGETHER WITH THE MANAGEMENT AND SKILLS WHICH CONTINUE TO BE NEEDED FROM OUTSIDE.

RAW MATERIALS ARE A NEW AND UNDEVELOPED AREA OF THE INTERNATIONAL COOPERATION. THIS IS A TEST OF THE ABILITY OF THE INTERNATIONAL SYSTEM TO ADAPT TO NEW PROBLEMS.

-27-

7. FOOD

EVEN MORE THAN ENERGY, MORE THAN RAW MATERIALS,
IT IS FOOD THAT WILL BE THE GREATEST CHALLENGE TO US
AND TO THIS WORLD ECONOMIC SYSTEM OVER THE NEXT
GENERATION. FOOD CAN ALSO BE OUR GREATEST SUCCESS.

AFTER THREE YEARS OF GROWING SHORTAGE, WE EXPECT
THAT GOOD CROPS THIS YEAR WILL EASE FOOD SUPPLY PROB-
LEMS EVERYWHERE. WE HOPE FOR CONTINUED FAVORABLE WEATHER
AND CROPS NEXT YEAR. BUT WE CANNOT ALLOW SUCH PROSPECTS
TO LULL US INTO COMPLACENCY ABOUT THE LONGER TERM. FOR
THE REALITY IS THAT THE WORLD'S TOTAL REQUIREMENTS FOR
FOOD ARE GROWING DRAMATICALLY. THE GAP BETWEEN WHAT IS
NEEDED AND WHAT IS PRODUCED IN FOOD-DEFICIT COUNTRIES
IS WIDENING RAPIDLY.

AMERICA HAS THE MOST PRODUCTIVE FARMERS IN THE WORLD.

BUT AS WE SAW LAST YEAR AND THE YEAR BEFORE EVEN WE CANNOT
ESCAPE THE HIGH PRICES AND SHORTAGES THAT ACCOMPANY

PR #477

- 2 -

act bodily, disaster will result from a failure of will; moral
cupability will be inherent in our foreknowledge.

The political challenge is straightforward: will the nations of
the world cooperate to confront a crisis which is both self-evident
and global in nature? Or will each nation or region or bloc see its
special advantages as a weapon instead of as a contribution? Will we
pool our strengths and progress together, or test our strengths and
sink together?

President Ford has instructed me to declare on behalf of the
United States: We regard our good fortune and strength in the field
of food as a global trust. We recognize the responsibilities we bear
by virtue of our extraordinary productivity, our advanced technology,
and our tradition of assistance. That is why we proposed this conference.
That is why a Secretary of State is giving this address. The United
States will make a major effort to match its capacity to the magnitude
of the challenge. We are convinced that the collective response will
have an important influence on the nature of the world that our
children inherit.

As we move toward the next century the nations assembled here must
begin to fashion a global conception. For we are irreversibly linked
to each other -- by interdependent economies and human aspirations, by
instant communications and nuclear peril. The contemporary agenda of
energy, food and inflation exceeds the capacity of any single government,
or even of a few governments together, to resolve.

All nations -- east and west, north and south -- are linked to a
single economic system. Preoccupation with narrow advantage is fore-
doomed. It is bound to lead to sterile confrontations, undermining the
international cooperation upon which achievement of national objectives
depends. The poorest and weakest nations will suffer most. Discontent
and instabilities will be magnified in all countries. New dangers will
be posed to recent progress in reducing international tensions. But
this need not be our future. There is great opportunity as well as grave
danger in the present crisis. Recognition of our condition can
disenthrall us from outdated conceptions, from institutional inertia, from
sterile rivalries. If we comprehend our reality and act upon it, we can
usher in a period of unprecedented advance with consequences far
transcending the issues before this Conference. We will have built an
international system worthy of the capacities and aspiration of mankind.

## The Food Challenge

We must begin here with the challenge of food. No social system,
ideology or principle of justice can tolerate a world in which the
spiritual and physical potential of hundreds of millions is stunted
from elemental hunger or inadequate nutrition. National pride or regional
suspicions lose any moral and practical justification if they prevent us
from overcoming this scourge.

A generation ago many farmers were self-sufficient; today fuel,
fertilizer, capital and technology are essential for their economic
survival. A generation ago many nations were self-sufficient; today a
good many exporters provide the margin between life and death for many
millions.

Thus food has become a central element of the international economy. A world of energy shortages, rampant inflation, and a weakening trade and monetary system will be a world of food shortages as well. And food shortages in turn sabotage growth and accelerate inflation.

The food problem has two levels -- first, coping with food emergency.
and second, assuring long-term supplies and an adequate standard of

WORLDWIDE FOOD SHORTFALLS. NOR WOULD WE BE PROTECTED AGAINST THE POLITICAL DISORDER, THE VIOLENCE, AND THE SUFFERING OF A WORLD IN WHICH THERE WAS WIDESPREAD,

~~CHOOSING HUNGER~~

BECAUSE OF OUR UNRIVALLED FARM PRODUCTIVITY, ONLY THE UNITED STATES CAN TAKE THE LEAD IN SEEKING SOLUTIONS TO THE WORLD FOOD PROBLEM. BECAUSE WE ~~CHOOSING HUNGER~~

CANNOT ESCAPE THE ECONOMIC, POLITICAL AND MORAL IMPACT OF FAMINE IN THE WORLD, IT IS RIGHT THAT WE ~~DO SO~~

LAST NOVEMBER THE WORLD FOOD CONFERENCE WAS CONVENED IN ROME AT US INITIATIVE. IN A DRAMATIC DEMONSTRATION OF INTERNATIONAL COOPERATION, BASIC AGREEMENT WAS REACHED ON A COMPREHENSIVE FOOD PLAN SET FORTH BY THE U.S.

TO MAINTAIN THE MOMENTUM BEGUN AT ROME, URGENT ACTION IS NEEDED IN THREE CRUCIAL AREAS:

-29-

-- FIRST, FOR THE SHORT-TERM, UNTIL A SOUND GLOBAL FOOD ECONOMY IS ESTABLISHED, FOOD AID WILL CONTINUE TO BE VITAL. THE U.S. WILL URGE EXPANDED FOOD AID AS A COOPERATIVE RESPONSIBILITY, NOT ONLY OF MAJOR FOOD PRODUCERS, BUT OF ALL FINANCIALLY CAPABLE NATIONS. THE UNITED STATES HAS PROVIDED MORE THAN FOUR MILLION TONS OF FOOD AID IN ALL BUT ONE YEAR IN THE 20 YEAR LIFE OF OUR FOOD AID PROGRAM. WE WILL DO OUR UTMOST TO MAINTAIN THIS PERFORMANCE AS PART OF OUR CONTRIBUTION TO FOOD AID NEEDS.

-- SECOND, THE LONG-TERM SOLUTION WILL REQUIRE WORLD FOOD PRODUCTION TO BE INCREASED TO ITS FULL POTENTIAL. THE U.S. WILL PLACE PRIMARY EMPHASIS ON FOOD PRODUCTION IN THE DEVELOPING COUNTRIES. FOR IT IS THE DEVELOPING COUNTRIES THAT HAVE

-30-

BOTH THE GREATEST SHORTFALL AND THE GREATEST POTENTIAL FOR EXPANDING PRODUCTION. IT IS NEITHER DESIRABLE NOR POSSIBLE FOR THE UNITED STATES AND THE HANDFUL OF OTHER FOOD EXPORTING COUNTRIES TO PRESS FINITE AVAILABILITIES OF LAND, WATER, TRANSPORT AND FINANCE IN AN EFFORT TO SUPPLY EVER-INCREASING DEVELOPING COUNTRY NEEDS. THEY MUST DO IT THEMSELVES, WITH OUR HELP, BUT IN THEIR OWN COUNTRIES.

--THIRD, TO PROTECT MANKIND FROM FUTURE GLOBAL SHORTAGES CAUSED BY CROP FAILURES, WE ESSENTIAL. ARE ESSENTIAL. WE HAVE THEREFORE PROPOSED AN INTERNATIONAL SYSTEM OF NATIONALLY-HELD GRAIN RESERVES. WE MUST START TO BUILD THEM NOW.

Such a RESERVES SYSTEM IN PARTICULAR REPRESENTS THE TYPE OF NEW POLICY DESIGNED FOR AN INTERDEPENDENT WORLD, BOTH IN OUR DOMESTIC ECONOMIC INTEREST AND THE INTEREST

-31-

OF THE REST OF THE WORLD. LET ME DISCUSS THE RESERVES
ISSUE MORE FULLY.

IN THE YEARS PRECEDING 1972, THE WORLD HAD COME TO
DEPEND UPON A FEW FOOD-EXPORTING COUNTRIES, ESPECIALLY
THE U.S., TO MAINTAIN THE NECESSARY GRAIN RESERVES.

NOW, AFTER THREE YEARS OF PRODUCTION SHORTFALLS,
ADEQUATE RESERVES FOR THE ENTIRE WORLD NO LONGER EXIST,
EVEN THOUGH OUR FARMERS HAVE MADE AN ALL-OUT EFFORT TO
MAXIMIZE PRODUCTION. WE MUST TAKE ADVANTAGE OF BETTER
CROP RESULTS BEGINNING THIS YEAR TO RECONSTITUTE THEM
ON A BASIS THAT ASSURES THE FOOD SECURITY OF ALL
PARTICIPANTS, AS WELL AS THE DEVELOPING WORLD.

TO THIS END THE U.S. WILL PRESENT PROPOSALS FOR AN
INTERNATIONAL SYSTEM OF NATIONALLY HELD GRAIN RESERVES
BASED ON THE FOLLOWING CONCEPTS:

- COMBINED RESERVES SHOULD BE LARGE ENOUGH TO
MEET VIRTUALLY ALL SHORTFALLS IN PRODUCTION OF
FOOD GRAINS.

-32-

-- GRAIN EXPORTERS AND IMPORTERS SHOULD AGREE TO SHARE THE RESPONSIBILITIES AND THE COSTS OF THE SYSTEM, TAKING INTO ACCOUNT THEIR WEALTH, AND THEIR PRODUCTION AND TRADE IN GRAINS.

-- EACH PARTICIPATING COUNTRY SHOULD BE FREE TO DETERMINE THE METHOD BY WHICH ITS RESERVES WILL BE HELD AND THUS TO APPLY SUCH INCENTIVES AS MAY BE REQUIRED FOR THEIR BUILD-UP, HOLDING, AND EVENTUAL DRAW-DOWN.

-- AGREED RULES OR GUIDELINES SHOULD PROVIDE INCENTIVES FOR MEMBERS TO TAKE ADVANTAGE OF GOOD CROP RESULTS TO BUILD UP RESERVES.

-- THE SYSTEM MUST ASSURE PRIORITY ACCESS TO RESERVES AND OTHER SUPPLIES BY PARTICIPATING COUNTRIES IN TIMES OF SHORTAGE, WITH SPECIAL PROVISION TO MEET THE NEEDS OF POOR DEVELOPING COUNTRIES.

-33-

RULES OR GUIDELINES SHOULD BE AGREED IN ADVANCE
FOR THE DRAWDOWN OF RESERVES, WHICH WOULD BE
TRIGGERED BY SHORTFALLS IN WORLD PRODUCTION.

THEY MUST ESTABLISH A CLEAR PRESUMPTION THAT
ALL MEMBERS WOULD JOIN IN MAKING AVAILABLE THEIR
RESERVE SUPPLIES WHEN NEEDED, AND, CONVERSELY,
THAT THESE RESERVES WOULD NOT BE RELEASED
PREMATURELY OR EXCESSIVELY AND THUS UNNECESSARILY
DEPRESS MARKET PRICES.

THE UNITED STATES IS PREPARED TO HOLD AN IMPORTANT
PART OF AN AGREED LEVEL OF WORLD RESERVES.

IF OTHER POTENTIAL PARTICIPANTS JOIN US IN
NEGOTIATING THIS PROPOSAL, THE OUTLINE OF AN INTER-
NATIONAL RESERVES AGREEMENT CAN BE COMPLETED BEFORE THE
END OF THE YEAR. SINCE SUCH AN AGREEMENT CAN HAVE
IMPORTANT TRADE IMPLICATIONS AND SINCE THERE ARE OTHER

-34-

ASPECTS OF GRAINS THAT NEED TO BE CONSIDERED IN THE
INTERNATIONAL TRADE NEGOTIATIONS, DISCUSSIONS ON TRADE
CAN BE CONTINUED IN THE TOKYO ROUND ONCE THE OUTLINE
IS ESTABLISHED. BUT FOOD SECURITY IS TOO URGENT AND
TOO IMPORTANT TO AWAIT THE CONCLUSION OF THE FULL
TRADE NEGOTIATIONS, WHICH MAY TAKE SEVERAL MORE YEARS.

-35-

CONCLUSION

THE CHALLENGE TO THE INTERNATIONAL ECONOMIC STRUCTURE IS ONE OF THE MOST FUNDAMENTAL OF THE RANGE OF ISSUES NOW FACING ALL NATIONS OF THE WORLD.

IT HAS BECOME ONE OF THE CENTRAL CONCERNS OF OUR DIPLOMACY.

THE ISSUE IS NOT TECHNICAL, BUT VERY SIMPLE: IT GOES TO THE CORE OF THE PROBLEM OF INTERNATIONAL ORDER.

WHETHER THE MAJOR INDUSTRIAL NATIONS AND THE DEVELOPING NATIONS CAN RESOLVE THESE PROBLEMS COOPERATIVELY, OR WHETHER WE FACE AN ERA IN WHICH ECONOMIC PROBLEMS AND POLITICAL PROBLEMS ARE SOLVED BY TESTS OF STRENGTH.

WILL THE WORLD FACE UP TO THE IMPERATIVE OF ITS INTERDEPENDENCE? OR WILL IT BE ENGULFED IN CONTESTS OF NATIONS OR BLOCS?

THE ROLE WHICH THE UNITED STATES TAKES WILL BE CRUCIAL. WILL WE FULFILL OUR RESPONSIBILITY OF

-36-

LEADERSHIP? IF WE KNOW OUR OWN INTEREST, WE WILL.

FOR IT IS STILL THE UNITED STATES WHICH REPRESENTS
THE SINGLE GREATEST CONCENTRATION OF ECONOMIC WEALTH
AND POWER TO BE FOUND ON THE PLANET. OUR TECHNOLOGY,
OUR FOOD, RESOURCES, OUR MANAGERIAL GENIUS AND
FINANCIAL EXPERTISE, OUR EXPERIENCE OF LEADERSHIP
ARE UNMATCHED. WITHOUT US, THERE IS NO PROSPECT OF
SOLUTION. BUT WHAT IS ASKED OF US NOW IS NOT OUR
RESOURCES BUT OUR VISION AND WILL. AS EDWARD GIBBON
SAID, "THE WINDS AND WAVES ARE ALWAYS ON THE SIDE OF
THE ABLEST NAVIGATORS". BUT IF WE DO NOT USE OUR
ASSETS, WE RISK THEIR LOSS; WE MUST EMPLOY THEM IF WE
ARE TO SUSTAIN THE KIND OF GLOBAL ENVIRONMENT WHICH
ITSELF PERMITS THEM TO FLOURISH.

-32-

THUS THE OPPORTUNITIES OPEN TO US ARE IMMENSE,
IF WE HAVE THE COURAGE AND FAITH TO SEIZE THEM. WE
CAN ONLY FACE THEM AS A UNITED PEOPLE.

WHEN OTHER NATIONS LOOK TO US, THEY SEE ONE
NATION. WHEN THEY LOOK TO WASHINGTON THEY SEE ONE
GOVERNMENT. IT IS NO EXAGGERATION TO SAY THAT THE
WORLD'S GREATEST FEAR AT THIS MOMENT IS THE FEAR
OF AMERICAN DISUNITY, DISARRAY, AND PARALYSIS.

THE AMERICAN PEOPLE HAVE ALWAYS BELIEVED IN THE
HOPE OF MANKIND FOR A NEW WORLD OF COOPERATION RATHER
THAN FORCE, OF NEGOTIATION RATHER THAN CONFRONTATION,
AND THE FULFILLMENT OF THE ASPIRATIONS OF PEOPLES
FOR PROGRESS AND JUSTICE. SUCH A WORLD WILL NEVER
COME ABOUT WITHOUT OUR ACTIVE ENGAGEMENT, IN ITS QUEST.

-38-

THE PRESIDENT BELIEVES THE AMERICAN PEOPLE AND
THE CONGRESS WILL NOT BE DIVERTED FROM THESE IDEALS
BY TEMPORARY SETBACKS.

WE HAVE A STAKE IN THE WORLD'S SUCCESS. IT WILL
BE OUR OWN SUCCESS. IF WE RESPOND NOW TO THE CHALLENGE
WITH THE VISION AND GOOD SENSE AND DETERMINATION
THAT THE WORLD HAS COME TO EXPECT FROM AMERICA, OUR
CHILDREN WILL LOOK BACK UPON THIS PERIOD AS THE
BEGINNING, NOT THE END, OF AMERICA'S GREATEST TRIUMPHS.

DRAFT

May 3, 1975

FOOD: THE LONG-TERM FUTURE

Vietnam is now behind us -- as a major international issue and as a source of domestic division.

President Ford has asked Americans "to look ahead to the many goals we share and to work together on the great tasks that remain to be accomplished."

This is a welcome message.

For it is now time for America to face the agenda of the present and future. It is now time for us to take on, with a new confidence and united spirit, the great international issues of the modern world that are more fundamental to our future than the crisis from which we have just emerged. For the future consequences of Vietnam are yet to be determined. The world will be less influenced by what happened to America last month than by how American responds to its challenges *today*.

-2-

We live in a new world, no longer characterized by a Cold War
division of the planet into two blocs locked in military confrontation.

We live in a world of over 140 nations, of many other centers of power
and initiative, of many other dimensions of international concern besides
threats to military security. New fields of international concern come to the
fore -- food, energy, raw materials, law of the sea, protection of the
planet's ecology. These problems are global by their very nature.

They affect us all; they do not respect national boundaries; they can only
be solved by international collaboration. Our destinies are intertwined,
our well-being interdependent.

At this moment in our own history, regardless of our recent
setbacks, it is to America that the world looks once again for leadership.

For these are fields of endeavor in which America's ability is unique
to make a decisive contribution to global solutions. No other country

has the resources, the technology, the organizational skill -- and the

- 3 -

tradition of humane concern for our fellow men around the
world -- that America is in a position to offer.

It is for this reason that I am confident about
America's future and the world's future.

***

I have come before you today to outline the next steps
in our effort to address one of the basic challenges
before us: the long-term problem of food. We see our
duty as food producers to engage other nations in a
collective campaign to apply all our skill and technology
to eliminate food shortage permanently from the melancholy
list of scourges of mankind. There is no greater challenge
to mankind today. There is no better task to engage the
moral commitment of the American people and Congress to the
rest of the world in the era we are now entering.

- 4 -

Last November, stimulated by famine in many regions of the world and by the spectre of a ghastly global food shortage, the World Food Conference was convened in Rome. In a dramatic demonstration of international cooperation, a start was made toward establishing the new international institutions required by an unstable global food economy. And basic agreement was reached on the elements required for a long-term global food action plan.

But now the momentum which that Conference created is in grave danger of being lost. The spectre of immediate famine which haunted the world a year ago and produced the Conference has now receded.

The prospects for the coming harvest are good. But while the menace

- 5 -

of global famine is not present -- temporarily -- the world still endures
the chronic, pervasive and morally unacceptable burdens of massive
hunger and malnutrition.

-- The number of malnourished people in the world today is
greater than ever before in history.

-- The pressure of population growth continues to expand inexorably
at two percent a year. Despite a decade of effort, programs of population
control have only begun to have an impact on the problem. The world's
population is expected to double between now and the year 2000.

-- The dependency of the world's less productive regions will
continue to grow. Households, provinces, nations once self-sufficient
now rely on others for food to survive. Vast regions rich in productive
land, with the potential for food surpluses, are unable to produce enough
to keep up with growing populations, for want of new techniques and
fertilizers.

- 6 -

-- And in many areas where food supplies are sufficient, inadequate storage and impediments to distribution deprive many of an adequate diet. The quality of food remains deficient in many parts of the world.

The result is a continuing global agony of human suffering and political dependence, a continuing danger of famine emergencies, and a trend toward increasingly unmanageable food crisis.

The world cannot wait. Conferences and resolutions do not feed children. Governments must show they have the capacity for action.

The claims of pride, principle, or ideology fade when confronted by hunger. Joseph Conrad wrote: "No fear can stand up to hunger, no patience can wear it out, disgust simply does not exist where hunger is; and as to superstition, beliefs, and what you may call principles, they are less than chaff in a breeze."

-7-

The U.S. Strategy

Let me state the problem in concrete terms. In 1974,
the worldwide gap between the food needs of the developing
countries and what they produce themselves was 25 million
tons. By 1985, if present trends continue, the gap will
grow to 85 million tons.

To advance the work begun by the World Food Conference
to meet this problem requires urgent action in three
crucial areas:

-- For the short-term, until a sound global food
economy is established, *food aid* will continue to be
vital. The U.S. will urge expanded food aid as a
cooperative responsibility, not only of major food
producers, but of all financially capable nations.

- 8 -

-- A long-term solution will require world food
<u>production</u> to be increased to its full potential.

The U.S. will place primary emphasis on food
production in the developing countries, which have
both the greatest problems and the greatest
potential.

-- And to protect mankind from the cycle of feast and famine caused by crop failures, grain <u>reserves</u> are essential. The U.S. will work to help create an international system of nationally-held grain reserves.

Let me discuss each of these areas for action in turn.

FOOD AID

First, food aid.

The World Food Conference set a minimum annual food
aid target of ten million tons. The United States supports

- 9 -

that target. Until a more rational and productive world food
economy is in reach, food aid will continue to be needed to
meet emergency and disaster requirements, to help raise the
nutritional level of many millions throughout the world, and
to assist countries in their development efforts by reducing
the financial burden of food imports.

The nations which have the greatest need to import food
are often countries with low per capita income and limited
capacity to purchase food commercially. These countries
typically cannot afford to import the food their undernourished
populations need without giving up other imports essential
for general economic development -- such as machinery and
fertilizer needed to increase agricultural production. Even

- 10 -

if they borrow, the terms prevailing add an unacceptable
burden to already heavy debt-service obligations. Meeting
the food import needs of these poorer countries requires food
aid.

The United States now has an international commitment
to provide a minimum of 2 million tons of food aid a year.

Tonight, the President has asked me to announce that
we will double that commitment to at least four million
tons a year for the next three years, regardless of how
tight world supplies become or how high prices rise.
Moreover, during the next fiscal year the United States
expects to exceed this minimum level by two million tons.

- 11 -

If other traditional donor governments also double their minimum food aid commitments, some eight and one half million tons of the World Food Conference target will be assured. Canada has already made such a pledge.

We call upon the newly-rich nations, whether or not they are food exporters, to participate in this common commitment to the poorer nations of the international community. We are ready to join them and the traditional donors in realizing the World Food Conference pledge of ten million tons.

The poorer nations do not seek, and we do not encourage, permanent dependence on such assistance. The need for food aid will diminish as rebuilt world reserves give greater assurance to supply at reasonable prices, and as the developing

- 12 -

countries increase their export earnings and are able to rely
more on commercial markets to meet food needs. It is our
hope that the Multilateral Trade Negotiations, which have
now started and to which the U.S. Trade Act of 1974 enables
us to make a major contribution, will provide developing
countries with more foreign exchange through wider access
to the major industrialized nation market.

Whether food aid from the U.S. is 2 million tons or 4 million
tons or 6 million tons is an important moral and humanitarian
question. It may mean life or death in times of famine or
emergency. But it can never be decisive in solving the long
term problems of food and hunger. As Willa Cather said, "No
one can build his security upon the nobleness of another..."

But the need for food aid can never be substantially
reduced or eliminated until the poorer, developing countries
improve their own food production.

- 13 -

PRODUCTION

No long-term solution to the food problem is possible
without greatly increased world food production.

The reason is clear: there is a growing disparity between
the implacably increasing demand of the developing countries
for food and their lagging ability to produce it. Even to maintain the
current inadequate food consumption and nutrition levels,
world food production must double over the next quarter
century. It will be impossible to meet this need if present
world production patterns are maintained.

The United States, already the world's leading food-surplus
nation, has taken dramatic new action to expand its output
even more. We have returned 33 million formerly inactive

- 14 -

acres to farmers for planting. The U.S. now has 167 million
acres in grain production and last year produced 203 million
tons of grain.

But the U.S. and the handful of other food-exporting
nations alone simply will not be able to meet the world's needs.
Their ability to increase production is limited. The physical
constraints of land and water dictate this.

Even if the food exporting countries could regularly
produce such vast supplies, the staggering financing and dis-
tribution effort required would be impossible to sustain. To
finance such quantities would divert scarce resources from
the very development effort that offers a solution to the
problem. Moreover, prolonging and deepening the world's

- 15 -

dependence for food on a small group of countries is undesir-
able -- an economic burden to the producers, a political detri-
ment to the dependent. Perennial food aid may only weaken the
will of the recipients to take steps to reduce their dependence.

Today, developing countries cultivate 35 percent more
land than the developed countries, but produce 30 percent
less. With two-thirds of the world's people they produce
one-third of the world's food. Yet it is both paradoxical and
fortunate that many of these food-deficit nations possess the
greatest capacity -- in unused land and water -- for
increased production. In other words, the greatest effort
to increase world agricultural production must come from
the food-deficit nations themselves.

- 16 -

What is needed to increase production in these lands?

There are five critical elements: credit, education, water, seed, and fertilizer.

-- Fertilizer

Of these, fertilizer can be the lever to pull into place the other elements critical to success. If fertilizer consumption in the developing countries increased from the currently projected level of 29 million tons per year to 36 million tons by 1985, their need for imported food could be reduced by as much as 32 million tons. But to achieve this, a massive effort is needed to increase the supply of, and the demand for, fertilizer, in developing countries.

- 17 -

Fertilizer production is extremely complicated. It is a capital intensive industry, raw materials are not universally available, plants are difficult to operate, and the fertilizer industry is plagued by cycles which alternately bring surpluses and depressed prices followed by shortages and high prices.

Even if these problems are overcome, the effort to increase fertilizer supply will be fruitless unless concurrent efforts are undertaken to accelerate the demand for fertilizer in developing countries. This will require an effort to improve the other elements critical to improved food production. Let me briefly touch on these.

- 18 -

-- Agricultural credit must be improved; current credit programs need to be doubled to provide an average of $1 billion a year over the next 5 years. Without better credit facilities, farmers cannot buy new technology and the necessary seeds, fertilizers, and pesticides;

-- Farm Education Extension Services must be vastly expanded. Basic education is crucial to provide the literacy and skills essential to enable rural populations to participate in the development process;

-- High yielding seeds, which have spurred dramatic increases in crops, must become more widely available in developing countries. New institutions for seed multiplication and distribution are needed; and

- 19 -

-- Irrigation systems must be improved and expanded.

The green revolution technology depends above all on
water supply, particularly to expand multiple cropping.

In broad terms, the developing countries, and those
nations and international institutions which assist them,
must give renewed emphasis to agriculture in their plans
for economic development.

Many developing countries have neglected agricultural
production in favor of industrialization. Some countries, with
as much as 70 percent rural population, have invested less than
25 percent of their development budget in agriculture and rural
development.

- 20 -

Foreign aid from the developed countries also has neglected agriculture. Less than 15 percent of current official development assistance from all aid programs, bilateral and multilateral, are devoted to agricultural.

To help remedy this, the Administration has proposed that U.S. dollar aid for food production and nutrition be increased by $170 million to $476 million next year, which would account for nearly 55 percent of our total bilateral economic aid. And the World Bank has taken a momentous decision to double loans for rural development over the next five years with the aim of benefitting small farmers, tenant farmers and the rural landless.

- 21 -

But the magnitude of the task requires more. In addition
to desperately needed social reform, the developing countries
urgently require comprehensive financial and technical assistance
in order to improve agricultural productivity.

To meet these needs, the United States proposes to work
with, and through, two international groups:

- The International Fund for Agricultural Development,
  which we propose should operate under the World Bank; and

- The Consultative Group on Food Production and Investment.

Let me speak briefly on how the U.S. envisions the working
of these bodies.

- 22 -

The Fund should bring together all donors who are prepared to contribute additional resources, over some agreed base year, to agricultural development. For many countries, this may require the institution of new assistance programs. For others, like the United States, this will require a commitment to sustain current and future agricultural assistance efforts at levels in excess of those in the recent past. Within this framework, participating countries would act in concert to support specific development projects which they agree should receive priority attention.

To accomplish its task, the Fund should at the start have an annual lending power of at least $1 billion a year.

- 23 -

While other financial facilities currently emphasize
general development of infrastructure, the resources of the
Fund would be concentrated on the critical variables of food
production, for tremendous gains in productivity can be
achieved if seeds, water and in particular fertilizer, are
provided at the right place and the right time.

Specifically with regard to fertilizer, we propose that
the Fund *supplement* official and private efforts to:

- develop a long-term supply and consumption plan
  for fertilizer aimed at making 36 million tons
  available to developing countries by 1985;

- assure that all fertilizer production opportunities
  in developing countries are fully exploited through
  loans, and technical and managerial assistance.

- 24 -

-- develop on a regional basis additional capacity needed
to meet individual country shortfalls, creating or
working through regional sub-organizations to assist
the construction and operation of plants.

While the Fund should encourage long-term contracts
for fertilizer supply, it should avoid creating new distortions
in the market through subsidizing prices at the farm level.

Artificially cheap fertilizer will only encourage governments
to keep food prices artificially low, thereby basing development
on an economic situation unsustainable over time.

The overall global strategy for expanding world food
production and development will be managed by a new
international institution created at American initiative
by the World Food Conference. This is the Consultative
Group on Food Production and Investment. The Group, which
plans its first meeting in July,

- 25 -

should be the mechanism for cooperation among traditional
donor nations, new donors -- the oil exporting countries --
and the developing countries themselves. Such cooperation
should aim at a global food production plan which:

-- sets national standards of achievement for key
countries;

-- determines whether national agricultural development
plans are adequate to meet those standards, with special
regard to farm price incentives, income distribution
and credit availability; and

-- matches available financial resources -- domestic
and external -- with national development programs.

- 26 -

RESERVES

In parallel with efforts to increase world food production,
we must also take measures to buffer against crop failures,
floods and other disasters which affect the world food supply.
This requires grain reserves. Regrettably, the consensus
reached at Rome on the need for an international grain
reserve system has faded in recent weeks.

The famine and food shortage which the world has
experienced during the past few years is disturbingly
symptomatic of the increasingly critical situation the
world will face during the remainder of this century if
we do not take action. In 1972, for the first time in two
decades, world grain production decreased, primarily owing
to poor harvests caused by adverse global weather conditions.

- 27 -

As a result, cereal production declined by some thirty million tons, a precipitous deviation from the long-term production pattern the world had come to expect. In addition to weather, mismanagement, misallocation and increased world consumption caused food reserves to fall dangerously low. By 1974, speculative purchasing and hoarding had sent grain prices to unprecedented highs, making nutritional standards difficult to sustain even in food surplus areas. One food crisis in our time is enough. We must not await yet another cycle of famine and the death of millions to convince us of the need to plan for long-term food security.

- 28 -

To meet such disasters, the world has come to depend upon a few food-exporting countries, especially the U.S., to maintain the necessary grain reserves. But reserves no longer exist, even though our farmers have made an all-out effort to maximize production. In these circumstances, an international system of national grain reserves as agreed at the World Food Conference is indispensable.

An international grain reserve system must assure the availability of food to participating nations, developing and developed, in the event of crop failures; it must ease the financial burden in times of shortage. The current effort to establish a grain reserve system has evolved from the principles for international coordination of national reserve

- 29 -

policies developed in the United Nations Food and Agri-
culture Organization. At the World Food Conference,
the United States began an effort to establish a global
system of grain reserves large enough to offset major
shortfalls in world food grain production. Representa-
tives from eleven countries met in London in February
at the invitation of the United States to discuss the
elements of an effective international system of reserves.

Technical discussions have continued in the International
Wheat Council. These are useful and necessary preliminary
steps. But we must now turn from discussion to negotiation.

The United States is ready to enter negotiations promptly with
a comprehensive proposal, if other major grain importing and

- 30 -

exporting countries are prepared to join us in devising a
solution to the food security problem.

The United States proposes that all major grain pro-
ducing, consuming, and trading nations join in an agreement
to build and maintain national reserves of food grains.

Under such an agreement, a specific global reserve
target would be established in the range of 30-60 million
tons, depending upon the degree of assurance of supply
sought and the kinds of grains to be covered. Producers and
consumers, exporters and importers, would agree to share
the responsibilities and the costs of this system by holding
proportional amounts of the global reserve, with additional
stock for small importers to be held by major exporters.

- 31 -

The question of financing stocks for the poor developing
countries would also need to be addressed. Those major
importers and exporters which choose not to participate
could not expect to share in the benefits of an agreement
at the expense of those who do.

We are prepared to propose procedures for the manage-
ment of these reserves, for their accumulation, storage,
and release in times of need -- as well as for regular con-
sultations among members to assess trends in world grain
production and supply. Consultations would be held and
action taken whenever world food grain production fell
short or exceeded expectations by an agreed amount.

- 32 -

In years when world production falls dangerously below expectations, when shortages threaten and prices rise sharply, reserves would be released in accordance with agreed rules, and exporting members would give first priority to the needs of other members which have fulfilled their commitments under the agreement. Action to reduce non-food uses of grains might also be needed in times of severe shortages.

In years of persistent surplus production, when supplies are plentiful and low prices threaten to reduce future production, members would build up reserves in accordance with a regular schedule and isolated from the commercial market.

- 33 -

They might also limit the use of export subsidies and other
measures contributing to an excess of grain entering world
trade.

But an agreement on reserves will bring wider benefits.

The availability of reserves would help avoid the need for
export restraints imposed in the past to conserve supplies
when world production falls short. Release of reserves would
benefit consumers by moderating sharp price increases and
avoiding the psychology of scarcity recently in evidence.

It would be of special benefit to exporting countries,
especially the United States, whose domestic economy has
had to absorb a disproportionate share of the burden of
adjustment when supplies are short.

- 34 -

Conversely, in times of surplus, reserves will help avoid sharp declines in price -- thereby giving greater production incentive to farmers. Prospects for increased trade -- carried out without sharp fluctuations in volume -- will also be improved, and a more stable framework for carrying out trade created.

As the world's largest exporter of grains and the principal guarantor of the world's food security in the past, the United States has a special interest in a global food security system and feels a special responsibility for its development. We are, of course, prepared to hold an important part of an agreed level of world reserves. We

- 35 -

regard the mechanism by which such international stock
holding commitments are met as a matter for national determin-
ation by each participant in light of its laws and internal
policies.

If other potential participants join us in negotiating this
proposal, the outline of an international reserves agreement
can be completed before the end of the year.

The Need for Urgent and Sustained Action

Interdependence means more than mutual dependence. To us
it must symbolize the vast creative possibilities of a pluralistic world.
The future of the emerging economic order and political order is as
yet unformed. The fates of nations are now intertwined by objective
reality, not merely aspiration. Are the world's nations to consume
themselves in conflict, and undermine the structure of relations on
which the well-being of all depends? Or will the expansion of production,
trade, mutual assistance, and prosperity be pursued cooperatively, and
thereby successfully?

Food is a test. The United States, for its part, is determined to promote, in every way it can, cooperative efforts and cooperative solutions. President Ford instructed me to declare at Rome last November: "We regard our good fortune and strength in the field of food as a global trust. ... We are convinced that the collective response will have an important influence on the nature of the world that our children inherit." The United States will do its part.

The United States recognizes its special responsibility as the world's largest producer of food. That is why we set forth a comprehensive food plan at Rome; it is why we have removed domestic restrictions on food production in the United States; and it is why we are doubling our food aid commitment. It is the policy of the United States to make our response to this challenge a model for international collaboration on all the great issues of interdependence.

It has not been our policy to use food as a weapon, for a world of economic confrontation can serve no nation's interests. We expect nations that produce other vital commodities to be equally constructive and cooperative. By working together to meet our common needs and overcome our common problems, mankind can turn from fear toward hope.

- 37 -

The essence of the achievement of the World Food
Conference is that a cooperative, sustained effort to create
a new global food equilibrium must be undertaken now. We
no longer can afford to attack the problem of hunger on a
piecemeal, case-by-case basis which brings action in
times of crisis and complacency in times of well-being.

The task of translating proposals into practice is now
before us. It will require vision, dedication, and perseverance,
but it will bring benefits as well. America's farmers, the
world's major dependable source of food, will benefit from
steady global demand for their product; our country's international
influence will be enhanced by our role of leadership and our
security strengthened by the creation of a more stable and
equitable world order. Most of all, our ideals and principles
will be renewed by our commitment to this most fundamental
cause.

- 38 -

Ages ago, man achieved the miracle of agriculture to lift himself from an untamed and unpredictable world. Now we have a chance to create a second agricultural revolution, to break free from the cycle of plenty and privation which has weighed down mankind's progress throughout recorded history.

It was in this spirit that the effort of Americans to overcome our country's greatest agricultural disaster -- the dust bowl of the thirties -- was portrayed by John Steinbeck, who wrote that "man, unlike any other thing, organic or inorganic in the universe, grows beyond his

- 39 -

work, walks up the stairs of his concepts, emerges ahead
of his accomplishments."

This is the legacy which Americans share with all
mankind. It is the bedrock upon which our progress must
continue to be founded.