THE RELATIONSHIP BETWEEN .P. L. 480 TITLE I IMPORT-S AND DOMESTIC AGRICULTURAL PRODUCT ION IN SIX RECEIVING NATIONS Thesis for file Degree of Ph. D. MICHIGAN STATE UNIVERSITY Wayne Nan Schufier 396$ THESIS This is to certify that the thesis entitled THE RELATIONSHIP BETWEEN P. L. 480 TITLE I DIPORTS AND DOMESTIC AGRICULTURAL PRODUCTION IN SIX RECEIVING NATIONS presented by Wayne Alan Schutjer has been accepted towards fulfillment of the requirements for _£h..D_.__degree inAéninnleal Economics , . ‘f 1“'/.l :-'..'-I"""P~(,L 7"/ -'/‘. r {< Major professor Date May 22, 1964 0-169 LIBRARY Michigan State University THE RELATIONSHIP BETWEEN P. L. 480 TITLE I IMPORTS AND DOMESTIC AGRICULTURAL PRODUCTION IN SIX RECEIVING NATIONS By Wayne Alan Schutjer A THESIS Submitted to Michigan State University in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY Department of Agricultural Economics 1964 ABSTRACT THE RELATIONSHIP BETWEEN P. L. 480 TITLE I IMPORTS AND DOMESTIC AGRICULTURAL PRODUCTION IN SIX RECEIVING NATIONS by Wayne Alan Schutjer Since 1955 the United States has exported over nine billion dollars worth of agricultural commodities under Title I of P. L. 480. It isi argued by some that these sales for local currency have an adverse effect on the domestic agriculture of the receiving nation. The overall objec- tive of this thesis was to study the relationship between the Title I program, including both the commodity and local currency aspects, and domestic agricultural production in the receiving nations. Six nations were selected for study: Colombia, India, Israel, Japan, Pakistan and Turkey. The data used in analyzing the individual nation's experiences were Obtained from secondary sources including studies conducted under both U.S.D.A. and U.N. auspices dealing with the effects of Title I imports on the economy of the receiving nations. Supplemental data were obtained from other U.N. and 0.8. Government sources as well as from agencies within the receiving nations. The procedure adopted con- sists of a theoretical analysis, an intensive analysis of the experiences of the six receiving nations, and a comparative analysis of the individual ‘nation experience. IThe analysis of the Colombian experience suggests that Title I ‘wheat imports have contributed to a reduced rate of growth in Colombian *wheat productionjand that a vigorous domestic cotton expansion program Wayne Schutjer over-shadowed any effect of Title I imports of cotton and vegetable oils upon domestic production and prices. In India imports of two Title I commodities, wheat and cotton, were found to have had no discernable effect upon domestic production. The effect of Title I imports of wheat and feed grains on domestic production in Israel was greatly influenced by the government's food grain expansion program which resulted in expanded wheat acreage at the expense of feed grains. Imports of cotton and vegetable oils appear to have had no effect upon domestic production. But cotton imports did contribute to the expansion of Israel's textile industry. The analysis of Title I wheat, feed grain, and tobacco imports by Japan suggest that Title I imports were absorbed with no detrimental effects upon domestic agricultural production. The Title I program did, however, result in a decline in commercial imports of tobacco and contrib- ute to the government's feed grain price stabilization program. Imports of wheat by Pakistan made a contribution to the government's wheat distri- bution program. Cotton and cottonseed oil imports were used to stimulate the textile and vanaspati industries at the expense of domestic cotton producers. The analysis of the Turkish domestic price and production record of the three Title I commodities, wheat, feed grains, and vegetable oils, leads to the conclusion that there were no adverse effects upon domestic production stemming from the Title I program in that nation. A comparison of the experiences of the six nations with the Title I program leads to three rather general conclusions. (1) Title I imports have been absorbed by the receiving nations with very little detrimental effect upon agricultural production. (2) The most important variable in explaining differential impacts of Title I imports upon domestic agricultural prices and production is the public policy of the receiving Wayne Schutjer nation. (3) The additional resources flowing into the receiving nations under Title I have permitted additional flexibility in the public policy of the receiving nations. In Colombia the local currency derived from the Title I program made a possitive contribution to agricultural invest- ment. This was not the case in all of the other nations, and in Turkey it appears that the Title I program has resulted in less emphasis being placed upon agricultural development. ACKNOWLEDGEMENTS Credit for assistance in the completion of this thesis is due many persons. It is impossible to list all the people who contributed but I would like to express my gratitude to a few. Sincere appreciation is extended to Professor Lawrence W. Witt, major professor, for his encouragement and patience during both the writing of this thesis and the entire Ph.D. program. The comments and suggestions given by Dr. L. V. Manderscheid are also gratefully acknowledged. I am indebted to the Department of Agricultural Economics for financial and other assistance during my graduate study at Michigan State University. A final note of gratitude is due my wife who not only typed the preliminary drafts of this thesis, but also exhibited much confidence and patience throughout all my graduate training. ii TABLE OF CONTENTS LIST OF TABLES vi LIST OF FIGURES x LIST OF APPENDIX TABLES xi Chapter Page I 0 INTRODUCTION 0 O O C O O O O O O O O O O O O O O O O O O O O O 1 POL. 480 O O O O O O O O O O O O O O O O O O O O O O O O O O O 4 Objectives 0 O O O O O O O O O O O O O O O O O O O O O O O O O 10 Procedure I I O O O O O O C O O O O O O O O O O O O O O O O C 11 II. THEORETICAL CONSIDERATIONS . . . . . . . . . . . . . . . . . . 13 Demand and supply elasticities . . . . . . . . . . . . . . . . 15 Surplus imports and related goods . . . . . . . . . . . . . . l9 Non-price variables . . . . . . . . . . . . . . . . . . . . . 22 Long-run effects of Title I imports on domestic agricultural production . . . . . . . . . . . . . 23 III C COUNTRY ANALYSIS 0 O O O O O O O O O 0 O O O O O O O O O O O O 27 calombia O O O O O O O O O O O O O O O 0 O O O O O O O O O O O 29 The Title I program in Colombia . . . . . . . . . . . . . . 29 The economic enVironment in COlombia o o o o o o o o o o o 32 Agricultural production and prices in Colombia................ Wheat and related products . . . . . . . . Cotton and related commodities . . . . . . The long-run effects of Title I imports on O O O O O O O O 38 domestic agricultural production in Colombia . . . . . . 50 IndiaOOOOOOOOOOOOOOOOOOOOOOOO0.0.55 The Title I program in India . . . . . . . . . . . . . . . 55 The economic environment in India . . . . . . . . . . . . . 58 The agricultural price and production record inIndia........................61 Wheat and related products . . . . . . . . . . . . . . . . 61 Cotton and related products . . . . . . . . . . . . . . . . 67 The long-run effects of Title I imports . . . . . . . . . . 69 Israel...0..000.00.000.0000000000073 TheTitleIprograminIsrael........o......73 The economic environment in Israel . . . . . . . . . . . . 76 The agricultural price and production record of Israel . . . . . . . . . . . . . . . . . . . . . . . . 80 Feed grains and related commodities . . . . . . . . . . . . 81 Wheat and related products . . . . . . . . . . . . . . . . 85 Cotton and related products . . . . . . . . . . . . . . . . 85 Long-run effects of Title I imports on agricultural production in Israel . . . . . . . . . . . . 88 iii TABLE OF CONTENTS (continued) Chapter IV. V. Japan....................... The Title I program in Japan . . . . . . . . . . The economic environment in Japan . . . . . . . The agricultural price and production record in Jap an o o o o o o o o o o o o o o 0 Wheat, barley and related products . . . TObaC CO e o o o o o o o o o o o o o o 0 Corn and related products . Long-run effects of Title I imports on agricultural production in Japan . . Pakistan . . . . . . . . . . . . . . . . The Title I program in Pakistan . . . The economic environment in Pakistan . The agricultural price and production record in Pakistan The Title I program in Turkey Wheat and related products . . . . . . . . . . . Cotton and related products . vegetabICOilsooooooooooooooooo Long-run effects of Title I imports on domestic agricultural production in Pakistan . . . . . Turkey . . . . . . . . . . . . . . . . . . . . . . The economic environment in Turkey . . . . . . . The agricultural price and production record inmrkeyoooooooooooooooooo Wheat, feed grains and related products . . . . Vegetable oils and related products . . . . . . Long-run effects of Title I imports on domestic agricultural production in Turkey . . . . . . A COMPARISON OF THE Wheat 0 o o o o 0 Feed grains . . . COtton o o o o 0 Vegetable oils . Title I imports, domestic EXPERIENCES producer incomes . . . . . . Public policy and Title I SUMMARY AND CONCLUSIONS . . . . Colombia India 0 o o o o o I area 1 o o o o 0 Japan 0 o o o o o Pakis tan 0 o o 0 Turkey 0 o o o 0 Results of six nation POI-icy implications 0 o o o o o 0 iv o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o 'o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o 0 comparison 0 o o o o o o o o o o o o o o o o 0 OF THE SIX NATIONS O O O O O O O O O O O O O O O O O O O 0 production and importSOOOOOOOOO O O O O O O O O O O O O Page 94 94 97 99 99 103 104 105 109 109 112 114 116 120 123 124 130 130 133 135 138 144 147 152 152 155 156 158 159 159 161 161 162 163 164 165 166 167 168 TABLE OF CONTENTS (continued) Chapter Page BIBLIW O O O O O O O O O O O O O O O O O O O O O O O O O O O O 1 7 O APPENDH TABLES O O O O O O O O O O O O O O O O O O O O O 0 O O O O 174 LIST OF TABLES Table 1.0 1.1 1.2 1.3 3.0 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 Utilization of Farm Commodities, Selected Periods, 1925-1958 United States Agricultural Exports 1930-1962 0.8. Agricultural Exports: Commercial and Special Programs, by Fiscal Years 1953-1961 The Composition of the P.L. 480 Program: 1955-1963 The Commodity Composition of the Title I Program in Five Receiving Nations Total Shipments of Title I Commodities to Colombia: 1955-1960 Title I Imports in Relation to Domestic Production and Total Supply in Colombia 1955-1960 Colombia's Population, National Income and Per Capita Real Income: 1950-1959 Changes in Domestic Production of Selected Agricultural Commodities in Colombia 1950/54- 1955/59 Changes in the Farm Price of Selected Agricultural Commodities in Colombia 1950/54-1955/59 Hectares of Rice, Beans, and Corn in Important Colombian Cotton Producing Departments Colombian Production of Fats and Edible Oils From Domestic Products Allocations and Loans of Section 104(3) Pesos as of March 31, 1961: Colombia Total Shipments of Title I Commodities to India 1956-1960 3.10 Title I Shipments to India in Volume: 1955-1960 vi Page 28 30 31 33 36 37 45 47 54 56 57 Table 3.11 3.12 3.13 3.14 3.15 3.16 3.17 3.18 3.19 3.20 3.21 3.22 3.23 3.24 3.25 3.26 Title I Imports in Relation to Domestic Production in India 1956-1960 Population, National Income and Per Capita Income in India: 1950-1960 Wholesale Price Indexes in India: 1950-1960 Domestic Production of Selected Agricultural Commodities, India, 1950-56 and 1956-60 Prices of Selected Agricultural Commodities, India, 1950-56 and 1956-60 The Production, Price, and Area Planted to Wheat and Its Principal Competitors in India: 1950- 55 and 1955-60 Exports of Cotton and Cotton Cloth by India 1951-52 and 1959-60 Allocation of Local Currency Arising Out of the Title I Program in India as of June 30, 1961 Disbursements of Local Currency by Use in India as of December 1961 The Distribution of Public Investment Under India's First and Second Five Year Plans Total Title I Shipments to Israel 1955-1960 Title I Imports in Relation to Domestic Production and Total Supply in Israel: 1955-1960 Per Capita Food Consumption in Israel at Constant Prices: 1952, 1955, 1960 Agricultural Subsidy Payments to Israel Producers: Fiscal Years 1958-1961 Changes in the Domestic Production of Agricultural Commodities in Israel: 1950/54-1955/60 Indexes of Producer Prices of Agricultural Com- modities and the General Wholesale Price, Israel: 1951-60 vii Page 58 59 60 62 63 65 68 69 70 71 74 75 77 78 81 82 Table 3.27 3.28 3.29 3.30 3.31 3.32 3.33 3.34 3.35 3.36 3.37 3.38 3.39 3.40 3.41 3.42 Area Devoted to Sugar Beets, Cotton, and Corn in Israel: 1956-1959 Domestic Production of Principal Oil Seeds in Israel: 1951-60 Sales Agreements Under Title I with Israel and I.L. Funds Generated for Various Uses: 1955-1960 Investments of Title I Funds and Expenditure of the State Development Budget: Israel 1955-1960 Total Shipments of Title I Commodities to Japan 1955-1957 Shipments of Title I Commodities to Japan by Year: 1955-1957 Title I Imports in Relation to Domestic Production and Total Supply in Japan Population and National Income in Japan: 1950-1957 Changes in the Domestic Price and Production of Selected Title I Commodities in Japan Changes in the Domestic Price and Production of Selected Non-Title I Agricultural Commodities in Japan 1950-54 - 1955-57 Hectares Sown to Wheat, Barley, Naked Barley, and Rapeseed in Japan: 1950-1957 Uses of Local Currency Made Available to Japan as of 1957 The Composition of the Title I Program in Pakistan 1955-1960 Title I Imports in Relation to Domestic Production and Total Supply of Title I Commodities in Pakistan 1955-1960 Population and National Income in Constant Prices, Pakistan 1950-1960 The Consumer Price Index in Pakistan 1952-1960 viii Page 86 88 90 91 94 95 96 98 100 101 103 107 109 111 113 113 Table Page 3.43 Changes in Domestic Production of Selected Agricultural Commodities in Pakistan: 1950/54-1955/60 114 3.44 Changes in the Price of Selected Agricultural Commodities in Pakistan: 1950/54-1955/60 115 3.45 Domestic Price and Production Changes for Wheat and Its Principal Production Substitutes: Pakistan 117 3.46 Acreage Devoted to Six Principal Commodities in West Pakistan 119 3.47 Exports of Cotton by Pakistan 1954-1961 121 3.48 Exports and Imports of Cotton and Cotton Textiles: Pakistan 1950-54 and 1955-60 122 3.49 Allocation of P.L. 480 Title I Funds Accruing from Seven Agreements with Pakistan Between 1955-1961 125 3.50 Breakdown of Loans and Grants of Title I Generated Rupees, by Purpose 1955-1960 127 3.51 Total Shipments of Title I Commodities to Turkey 1955-1960 131 3.52 Title I Imports in Relation to Domestic Production and Total Supply: Turkey 1955-1960 132 3.53 Population, National Income, and Per Capita National Income in Turkey: 1950-1960 133 3.54 Changes in the Average Domestic Production of Selected Agricultural Commodities in Turkey 1950/54-1955/60 136 3.55 Percentage Price Changes for Selected Field Crops in Turkey: 1950/54-1955/60 137 3.56 Support Prices of Cereals in Turkey: 1952-1962 139 3.57 Selected Price Indexes in Turkey: 1950-1962 140 3.58 Retail Price Index, Ankara, 1950-1962 143 3.59 Average Production and Farm Prices of Selected Oil Seeds, in Turkey 1950/54-1955/60 145 3.60 Income Accruing to the Importing Agencies of Title I Products: 1955-1962 149 ix Figures LIST OF FIGURES The Effect of Title I Imports on the Domestic Price and Supply of the Imported Good The Effect of a Change in Price Upon Sales and Consumption of a Subsistance Product The Effect of Surplus Imports on the Domestic Price and Production of Production Related Commodities The Effect of Surplus Imports on the Domestic Price and Demand of Consumption Related Commodities Page 14 17 20 21 Table 10 11 12 13 14 15 16 17 LIST OF APPENDIX TABLES Shipments to Colombia Under Title I, P.L. 480, 1955-1960: Quantity Title I Imports of Colombia by Years and Commodity: 1955-1960 Production of Selected Agricultural Commodities in Colombia 1950-1960 Prices of Selected Agricultural Commodities at Farm Levels in Colombia 1950-1959 Title I Shipments to India: Value 1956-1960 Domestic Production of Selected Agricultural Commodities: India 1950-1960 Domestic Prices of Selected Agricultural Commodities: India 1950-1960 Volume of P.L. 480 Title I Shipments to Israel by Year: 1955-1960 The Value of P.L. 480, Title I Shipments to .Israel: 1955-1960 Domestic Production of Non-Title I Commodities In Israel 1950-1960 The Domestic Production of Title I Commodities In Israel 1950-1960 Domestic Production of Title I Commodities in Japan 1950-1960 Domestic Production of Non-Title I Commodities in Japan 1950-1960 Prices of Title I Commodities in Japan 1950-1960 Prices of Non-Title I Commodities in Japan 1950-1960 Imports of Title I Type Commodities by Japan 1955-1960 Shipments of Title I Commodities to Pakistan 1955-1960: Quantity xi Page 174 175 176 177 178 179 180 181 182 183 184 185 186 187 188 189 190 LIST OF APPENDIX TABLES (continued) Table 18 19 20 21 22 23 24 25 26 27 28 29 30 31 Shipments of Title I Commodities to Pakistan 1955-1960: Value Domestic Production of Non-Title I Commodities in Pakistan 1950-1960 Domestic Production of Title I Commodities in Pakistan 1950-1960 Prices of P.L. 480 Title I Commodities in Pakistan 1950-1960 Prices of Selected Non-Title I Commodities in Pakistan 1950-1960 Commercial Imports of Title I Commodities by Pakistan 1955-1960 Cotton and Cotton Products: Pakistan, Value of Exports, Imports, and Net Exchange Balance, 1950-1960 Shipments of Title I Commodities to Turkey 1955-1960: Quantity Shipments of Title I Commodities to Turkey 1955-1960: Value Domestic Productions of Title I Commodities in Turkey 1950-1960 Production of Non-P.L. 480 Title I Commodities in Turkey 1950-1960 Production of Oil Seeds in Turkey 1950-1960 Farm Prices of Oil Seeds in Turkey 1950-1960 Commercial Imports of Title I Commodities by Turkey 1955-1960 xii Page 191 192 193 194 195 196 197 198 199 200 201 202 203 204 CHAPTER I INTRODUCTION The ability of United States agriculture to produce an over abundance of food and fiber is one of the principal problems facing the united States. Many possible explanations have been given for the over abundance; however, one simple fact emerges, United States agri- culture is producing more than is demanded at prevailing prices. To help remedy this situation, the United States sells agricultural pro- ducts to less developed nations on terms more favorable than those obtainable in normal commercial channels. It is argued by some that such sales benefit both the United States and the receiving nations whose agricultural sectors for various reasons are unable to fulfill local demand. However, serious questions have been raised, pointing to possible adverse effects on the domestic agriculture of the receiving nations resulting from these shipments. The export market is an important outlet for United States agri- cultural products. See Table 1.0. During the period 1955-58 exports accounted for nearly 12 percent of the total utilization of far-.com- modities. For several crops the percentage is even higher; in 1959 more than 25 percent of the domestic production of barley, cotton, rice, rye, tobacco, wheat, tallow, hops, fats and oils, and oil seeds were exported.1 IMenzie, Witt, Eicher, and’Rillman, Policy for United States ‘éggicultural Export Surplus Disposal, Technical Bulletin 150, The uni- versity of Arizona, College of Agriculture, Agricultural Experiment Station, Tucson, Arizona, p. 58. Table 1.0 - Utilization* of Fanm Commodities, Selected Periods, 1925-1958 (percent of total utilization) Industrial Domestic Feed for & Other Non- Total Period Food Werk StOCk Food Uses Exports Utilization 1925-29 68.4 9.6 10.7 11.3 100 1935-39 74.7 6.4 12.2 6.7 100 1945-49 75.3 3.0 12.8 8.9 100 1955-58 76.4 .8 10.5 11.8 100 *Utilization excludes feed for livestock production and seed. Source: Data taken from: Witt, Lawrence, Potentials of New'Harkets for Agricultural Products, prepared for the Committee for Economic Development, July, 1961, Table I, p. 7. Agricultural exports exceeded five billion dollars in 1962 or about one fourth of the total value of United States exports. See Table 1.1. This relative position of agricultural exports in total exports has been maintained since 1930 even though total exports increased more than 18 billion dollars.2 The ability of agricultural exports to keep pace with non-agricultural exports in the last two decades is in large part due to government programs. A.variety of postwar programs facilitated agricultural exports after 1945. Data for the past decade are Shown in Table 1.2 which gives a breakdown of U. S. agricultural exports on the basis of the type of transaction involved. The three types of transactions include; (1) commercial exports, that is exports 2Agricultural exports as a percent of total exports declined during the war years, 1940-44, but increased again in the post-war period. O . . . p o s o A Q I l O . , . s . . . . a , . I . s Iv - 0 O I . . o a . o . . . . C v . . I C s . ' ~ . Table 1.1 - united States Agricultural Exports 1930-1962 Ag as a Calendar Agricultural Total Percent Year Exports Exports of Total (million dollars) (Million dollars) (Percent) Average 1930-34 ‘ 322 ' 2,296 ‘ 36 Average 1935-39 747 2,828 26 Average 1940-44 1,307 8,792 15 Average 1945-59 3,280 11,744 28 Average 1950-54 3,249 14,138 23 Average 1955-59 3,937 18,020 22 1960 4,832 20,299 24 1961 5,024 20,629 24 1962 5,031 21,359 24 Source: Economic Research Service, 0. S. Department of Agriculture, U. S. Foreigp_égricu1tural Trade by Commodities Calgndgg Year 1952, June 1963, Tab1e2, p. 2. for dollars at U. 8. domestic prices, (2) commercial exports with government assistance, that is, exports for dollars at prices less than U. S. domestic prices, and (3) exports under special programs including P.L. 480 and Section 402-0f the Mutual Security Act.3 It can be readily seen that since 1953 between one-half and two- thirds of total U. S. agricultural exports have been in some way government assisted. These figures indicate that governmental action 3&0 9.3.5." P183218, Et. A1,, pp. 35-36. Table 1.2 - U. 8. Agricultural Exports: Special Programs, by Fiscal Years 1953-61. 4 Commercial and (in billions of dollars) Commercial Exports Year Ending No Special June 30 Assistance Gov't Assisted Programs Thtal 1953 1.8 .6 .4 2.8 1954 1.9 .4 .6 2.9 1955 1.9 .4 .8 3.1 1956 1.6 .5 1.4 3.5 1957 1.7 1.1 1.9 4.7 1958 1.6 1.2 1.2 4.0 1959 1.6 .8 1.3 3.7 1960 1.9 1.3 1.3 4.5 1961 2.0 1.4 1.5 4.9 Source: Menzie, Witt, Eicher and Hillman, Policy for united States in the export sphere has been an effective means of increasing foreign Agricultural Export Supplus Disposal, The university of Arizona, College of Agriculture, Agricultural Experiment Station, Tucson, Arizona, Table IV-Z, p. 36. shipments of agricultural products. PaL, 480 The major government program operating in the export market for U. S. agricultural products is authorized by the Agricultural Trade Development and Assistance Act of 1945. This law, more commonly known as P.L. 480,consists of four titles which outline the procedures to be used in meeting the objectives of the law. The stated objectives of P.L. 480 are to: (1) increase the consumptiOn of United States agricultural commodities in foreign nations, (2) improve the foreign relations of the United States, (3) expand international trade among the United States and friendly nations, (4) facilitate the convertability of currency, (5) promote the economic stability of American agriculture and the national welfare, (6) further the foreign policy_of the United States, (7) stimulate and faCilitate the expansion of foreign trade in United States agricultural commodities, and (8) use the foreign cur- rencies which accrue under P.L. 480 to (a) encOurage economic develop- ment, (b) purchase strategic materials, (c) pay U. S. obligations abroad, (d) promote the collective strength and (e) foster in other ways the fOreign policy of the United States.4 Title I authorizes the Executive to negotiate and carry out agree- ments with friendly nations to provide for the sale of surplus agricul- tural commodities for foreign currencies. This title also outlines the uses to which the foreign currencies may be put.5 In making such 4Public Law 480 - 83d Congress, Chapter 469 - 2d Session 8.2475 prepared for distribution by the Foreign Agricultural Service U.S.D.A., p. 1. 5Foreign currencies may be used for (a) market development, (b) the purchase of strategic materials, (c) procurement of military supplies for the common defense, (d) financing the purchase of goods or services fer other friendly nations, (e) promoting balanced economic development and trade among nations (f) pay United States obligations abroad, (g) loans to promote multilateral trade and economic development, (b) financ- ing the translation, publication, and distribution of books and period- icals, including Government publications, abroad, (3) provide assistance to activities and projects associated with the United States Information and Educational Exchange Act, (k) to collect, translate, abstract, and disseminate scientific and technological information and to conduct research and support scientific activities overseas, (1) acquisition of sites and buildings and grounds abroad, for U. 8. government use, and for construction, repair, alteration, and finishing of these buildings and facilities, (m) participation in cultural exchange, trade, agricul- tural and horticultural fairs, (n) the evaluation, indexing, etc. and acquisition of foreign books and periodicals, (o) assisting U. S. spon- sored colleges or institutions abroad, (p) supporting workahips in .American studies, (q) emergency assistance other than requirements for agreements the President is required to (1) safeguard world prices and not unduly disrupt normal patterns of commercial trade with friendly nations, (2) take steps tovassure that private trade channels are used as much as possible, (3) give special consideration to deve10ping and expanding market demand abroad with emphasis on underdeveloped and new market areas, (4) prevent re-exporting of the goods by the recipient country unless otherwise specified, (5) afford any friendly nation the maximum opportunity to purchase surplus agricultural commodities from the U. S. in view of the policy of the Act, and (6) to obtain exchange rates which are not less favorable than may be obtained from the United States disbursing officers in the respective countries.6 Title II authorizes the use of surplus commodities for emergency situations in friendly nations, or by friendly people regardless of the attitude of their governments. As of May 1960, this title also authorizes the transfer of surplus foods on a grant basis in order to promote economic development. The programs are implemented largely through the payment of wages in kind.7 Title III authorizes the barter and exchange of surplus come modities for strategic materials and other goods not produced in the United States. Secondly, this title provides for grants of surplus food for use by the needy within the United States in school-lunch surplus food, (r) preparation, distribution and exhibition of audio- visual information and educational materials abroad, and (s) for the sale for dollars to American Tourists. Ibid., p. 4-8. 51bid., p. 2. 71bid., p. 9. The original amendment of 1960 authorized such grants only until June 1961, however, in July 1961, this limitation ‘was repealed. programs, public hospitals, and non-profit summer camps for children. Finally it authorizes donations to approved international agencies for use in the assistance of needy persons outside of the United States.8 Title IV authorizes the Executive to make agreements with friendly nations for the delivery of surplus commodities for periods up to ten years. The payment for the commodities must be in dollars and include interest but the payments can be made to come due up to twenty years after the shipments have been completed.9 Since the inception of P.L. 480 in 1954, nearly 14 billion dollars of U. S. farm commodities have been committed for export under its pro- visions.1° A.summary of the amounts committed by Title as well as the annual proportion committed under each Title are given in Table 1.3. Title I has been the most important title in terms of value exported. Title I exports in 1955 were $354.6 million, representing 45.2 percent of the total for that year. This percentage increased to almost 74 percent in 1960 but has declined to about 68 percent during the first half of 1963. Title II, disaster and relief assistance has more than doubled since 1955 in dollar volume but has remained rela- tively stable in terms of percent of total P.L. 480 committments. Title 111 foreign donations have increased slightly in dollar amount but decreased from about 25 percent to 10 percent in terms of the total P.L. 480 program. The same is true of the barter section of 81bid., p. 10-14. 9Ibid., p. 14. 10United States Government, Seventeenth Semi-annual Report on .Activities carried on Under_gublic Law 480, Appendix.Tab1e I,‘March 4, 1963. Hoops H.u l are nonhumpnwoo on are w.fi. one wnomuesu wouulwcmu Hanan H 1‘ ammwo HH 1. Anna» HHH Hanna H4 Hanan mowoe mom Hoosw uwmsmnon_ powwow woeowmo nonuooow m onron >mmhmn. uosonnosm moaned when: EH52; manned." 355.com wannabe 35.5.03 monsoon 353.25 wonoonn 2:588 wonnson 32.5.85 em on on on on on on on on on on Amman weapons Honor uoHHsum Honew ueHHsnm Honey bowusnm Honey weave a Honey coupons Home nun.o no.» Hoo.m _Ho.o .eoo.» ~u.~ eon.o em.o o o ,onh.» nwum ou~.u pm.w HcH.o a.» wc~.u -.o ~om.b ~H.~ o o ~uuu.» Home Home.» ua.m pup.» w.» Maw.» Hu.o boo.u N~.o o o Hm~0.a Home uno.m ac.» How.m o.~ -~.m Nn.m oo.m m.» o o anoo.u Howe mu>.u mo.u uu.m m.» noo.m Ho.~ ~u~.u wo.u o o Hume.» $8 :83 :5 3% Po E3 on So; on o o 58.» Homw Huou.w uu.o Nun.» Hw.u mom.» a.» Heu.c a.o o c ~uwu.o Hum» ~uo~.o ow.w ~u~.o Ho.u nup.u w.u Hom.u m.m mu.c ~.u nuce.» Hun ream Hmaw mmm.m ou.a nae.» Hm.o ~ub.o wo.u ~o.m ~.u u~.o o.o wu~m.m Henna coom.u ab.o Hume.» e.u wows.» Hu.e Huuu.~ pw.u How.o .m wuoue.m Uzuwwnoom om mowpoum bnwonmaawu. Hoops #. 29 agricultural sector, it is necessary to supplement them.with data from other sources. These sources include F.A.O. and other united Nations agencies, as well as government agencies in the receiving nations theme selves. The fact does remain, however, that the availability of these studies permits insights into the effects of Title I imports which could otherwise only be gained through study within the receiving nations themselves. ..Colombia The Title Ihpgggram.in_Colombia. Between 1955 and 1960 over 300 thousand metric tons of united States surplus commodities valued at more than 48 million dollars were imported under Title I by Colombia. Data concerning the commodities imported and their relative importance in terms of the total Title I program in Colombia are presented in Table 3.1. Title I imports of wheat and flour were the largest in terms of both quantity and value, accounting for 85 percent of total quantity and 41.2 percent of total value. Vegetable oil imports included 8.98 thousand metric tons of cottonseed oil and 22.18 thousand metric tons of soybean oil. Together these importsof vegetable oils represented 9.4 percent of the total quantity and 31.7 percent of the total value imported under the Title I program. Cotton imports of 16.89 thousand metric tons valued at 11.9 million dollars represented 5.1 percent and 24.5 percent of total quantity and value, respectively. Imports of tobacco, non-fat dry milk and anhydrous milk fat were relatively unimportant in terms of the total Title I program. Two groups of related products, wheat and flour and vegetable oils, were received by Colombia in each of the years included in the period 30 Table 3.1 - Total Shipments of Title I . Commodities to Colombia: 1955-60. —7 Ffv Quantity Value 1000's Percent 1000's Percent Metric of 0.8. of Commodity Tons Total dollars Total Wheat ' 233.08 70.9 15,947 32.7 Flour 46.50 14.1 4,150 8.5 Cotton 16.89 5.1 11,930 24.5 Tobacco .50 .2 938 1.9 Anhydrous‘Hilk Fat .09 --* 116 .2 Nonfat Dry um .65 .2 163 .3 Cotton Seed 011 8.98 2.7 9,460 19.4 Soybean Oil __2_2_,_1_§ 6.7 __§_,_0_Q§ __1_g_._§_ TbtaI 328.87 100.0 48.709 100.0 *Less than .1 percent 8ource: Derived from.Appendix Tables 1 and 2. 1955 to 1960. Cotton imports under Title I were received by Colombia in each year of the period 1955-1958. Imports of other commodities under Title I were received sporadically; tobacco and nonvfat dry milk in 1958 on. 1960 and anhydrous milk fat in 1958. Title I imports of wheat and flour represented 31.7 percent of domestic wheat production in Colombia during the years 1955 to 1960. See Table 3.2. During the same period, Title I vegetable oil imports were equal to 31.1 percent of domestic production, and imports of cotton and tobacco represented 6.4 and 0.2 percent of domestic production, respec- tively. A clearer indication of importance of Title I imports to Colombia 31 HmoHo w.» u Hwnwm H Hanonna Mb onwnHoo no cosmunpo wuomsonwou one HonoH memme Hm ooHosrnms kuuuwcmo . annwo H mm HunHa H on monounwo s monsoon on Hwnwo H cosmonuo a weapon" on wnomcnnwoo m mosnunhn mnoQCnnwoo nosaomnnw Hsmounm wnomeonfioo cosmonwa wuoacnnnoo Hanonnmss m Hanonnu AHOOOHw Banana nooav Ammnomonv choc.u_xonufin-nooav Amounosnv crown wou.usse woo.o aw.» Hoawm.o Hm.» 928 38. , no?» a.» so: on someone .u woe.» .~ ~am.ossss .N 3835. on: 2.» #8.»; 2L 8?»? S.» smuomcnnwou mom men» we won «mono oounounonawnm no HHnHo H Manonn «some. ssnosamnowmw Mancunu. assmwocn nanonnmm canon awnwo H can no=mmoomwx Hmvwo H swan. B. c.. use swoowon. w. at. «Humane on meoHno rm: mac wuomnmam no ooHosoHs» Humane». anHHHHbuooHoarflm. Donovan. Hem». an. an. Hebuwoa. 32 and the effect they can be expected to have upon domestic prices and pro- duction is provided by the comparison of Title I imports and domestic production plus commercial imports. When imports under Title I are com- pared to this figure, the proportion supplied by these imports falls to 18.4 percent in the case of wheat, 19.2 percent for vegetable oils and 5.5 percent for cotton. The percentage in the case of tobacco remains essentially the same, as imports other than those under Title I were negligible. 0n the basis of the data presented with regard to the continuous- ness of imports and the proportion of domestic production and domestic production plus imports, the surplus imports of wheat, cotton, and vegetable oils can be expected to have the more significant impact on domestic production and prices. Imports of tobacco and milk products were relatively small and occurred in only two years. Therefore, the emphasis is placed on the price and production records of wheat, cotton, vegetable oils and their closely related products in the analysis sections which follows. The economic environment in Colombia. Basic data regarding population and income in Colombia are presented in Table 3.3. Colombia's population grew from 11.3 million in 1950 to 13.8 million in 1959, an average annual increase of over 2.3 percent. National income at constant prices in- creased from 15.1 billion pesos in 1950 to 21.3 billion pesos in 1959.1 Per capita real income grew from 1,356 pesos in 1950 to 1,555 pesos in 1The Colombian Peso was valued at about 3.50 to the dollar until 1954, in 1955 the value fell to 4.16 pesos per dollar. Between 1956 and 1960 the value fluctuated between 6.22 and 8.36 pesos per dollar. 33 Table 3.3 - Colombia's Population, National Income and Per Capita Real Income: 1950-59. National* Income , Per-Capita Population (Millionsv Real Income Percent Year (1000's) of Pesos) (Pesos) Change 1950 11,334 15,110 1,356 A --- 1951 11,589 15,113 1,319 ~2.7 1952 11,847 16,090 1,365 3.5 1953 12,111 17,515 1,444 5.8 1954 12,381 19,407 1,555 7.7 1955 12,657 19,511 1,520 -2.3 1956 12,939 20,062 1,519 0 1957 13,227 20,479 1,508 -0.8 1958 13,522 20,477 1,466 -2.9 1959 13,824 21,251 1,479 0.9 *In constant 1958 prices. Source: Goering, T. J., United States Aggicultural Surplus Dispgsal in Colombia, Ph.D. thesis, Michigan State University, 1961, p. 35. 1954, but decreased to 1,479 pesos in 1959 as population growth exceeded the increase in national income after 1954. During the period 1950 to 1960 Colombia experienced substantial increases in its general price level. An estimate of the general whole- sale price index reported by the Banco de la Republics shows a 119 per- 2 cent increase between 1950 and 1960. This increase was led by raw 2Witt, L. w., and Wheeler, R. 0., Effects of Public Law 480 programs inLColombia: 1955-62, Medellin, Colombia, October 1962, p. 34. Two otherfiEstimates of the wholesale price index are available one higher and one slightly lower. 34 material prices.which increased faster than finished goods prices.3 Another important aspect of the economic environment of a nation is the public policy towards agriculture. In Colombia, the agricultural policies of the past 30 years have been directed toward two particular objectives: (1) increased production of basic foodstuffs and agricultural materials in an attempt to attain self-sufficiency; and (2) the production of agricultural commodities in addition to bananas and coffee in quantities large enough to permit exports.“ In seeking to attain these objectives the Colombian Government has adopted a series of domestic production stimulants and stringent import restrictions. Among the production stimulants adopted are government supported prices, research and exten- sion activities, special facilities for agricultural credit and attempted reforms of the land ownership pattern.5 Various institutions have been established to carry out the general aims of Colombia's agricultural policy. These institutions include the various organizations responsible for establishing price supports and the dissemination of technical information to producers. An important aspect of these agencies is that they are in most cases commodity ori- entated, for example, under this system.cotton and other oil seed prices are supported by the Institute _d_e Pomento Alogodonero, Tobacco prices by the Instituto‘gg Pomento Tabscalero and barley prices by Procebada.6 3United Nations, Statistica1_gearbook: 1962, p. 474. l‘Goering, T. 1., Colombianégricultural Price and Trade Policies, universidad Nacional de Colombia, Palmirs, Colombia, 1961, p. 7. 51bid., r. s. 6’Goering, T. J., Colombian Aggicultural Price and Trade Policies, Universidad Nacional,de Colombia, Palmica, Colombia, 1961, p. 10. . 35 A.major departure from the commodity agency price support system is found with respect to the basic foodstuffs; corn, beans, potatoes, rice, and wheat. Mfinimum.producer prices for these commodities are established by the Institute Nacionsllgg Abastecimientos (INA). The INA though a surplus purchase and storage program attempts to maintain prices at a » previously determined level. However, a basic weakness of INA is a serious shortage of storage facilities which means that prices fall sharply when existing storage is filled to capacity.7 A major fault of the overall price support system in Colombia is the frequent distortion of price relationships among commodities. Price levels tend to be established on the basis of generally unreliable cost of production data and on the basis of the relative political strength of the supporting agencies.8 An indication of the importance of political strength in setting of price supports is provided by the fact that the support prices of commodities supported by INA have not increased as fast as the general price level while those supported by commodity agencies backed by processor groups have done so.9 éggicultural Production and Prices in Colombig. Data regarding changes in the average price and production of the major agricultural commodities in Colombia between the five years preceeding Title I imports and the first five years of the program are presented below. The changes in production given in Table 3.4 show that cotton and its joint product cotton seed 7Op. Cit., Goering, Colombian Agricultural Price and Trade Policies, pp. 10-11. 8Op. Cit., Gearing, Colombian45gricultural Price and Trade Policies, 9. 9e 9Apossible exception is barley after 1960. 36 Table 3.4 - Changes in Domestic Production of Selected Agricultural Commodities in Colombia l950/54-l955/59. Percent Average Average Change in Production Production Average Commodity 1950f54 1955-59 Production Barley 62.3 74.8 20.1 Corn 826.8 761.6 -7.9 Paddy Rice 290.0 392.2 35.2 Potatoes 554.0 627.0 13.2 cotton Seed 29.0 36.0 124.1 Sesame Seed 7.4 14.1 90.5 Capra 4.2 2.0 -52.4 Beans 46.6 62.2 33.5 Sugar Cane 1927.4 2424.1 25.8 Yuca 849.6 698.8 -l7.7 Wheat 132.2 137.2 3.8 Cotton 40.6 84.5 108.1 Tobacco 22.4 35.9 60.3 Coffee 462.6 516.3 11.6 Coco Beans 10.1 11.6 14.8 Brown Sugar 359.3 533.3 48.4 Source: Appendix Table 3 experienced the greatest increases in production, 108 and 124 percent respectively. Average increases of 20 percent or more were also experi- enced by barley, rice, sesame, beans, sugarcane, tobacco, and crude brown sugar. The production of three crops decreased between the two periods, copra - 52.4 percent, yuca - 17.7 percent, and corn - 7.9 percent. . . . . . - .. . . I O O I I O a O O Q I n q . O s O s O . g l . I t '- . ' . e . ' ' e m , , 1 s Q . 4 ‘ o O I O 7 ' I | ,1 a , , I ‘ ’ e . ' . , _ J ' s . , 1 . ' . ‘ ' . « 1‘ 9 ' v 37 Price changes between the period 1950-54 and 1955-59 are presented in Table 3.5. The largest price increases were for sugar cane, 100 percent, Table 3.5 - Changes in the Farm Price of Selected Agricultural Commodities in Colombia 1950/54-1955/59. (Pesos per Metric Ton) Percent Average Average Change in Price Price Average Commodity 1950-54 1950-59 Price Barley 369 503 36.3 Corn 249 383 53.0 Paddy Rice 406 551 35.7 Potatoes 286 309 8.1 Sesame Seed 588 1098 86.7 Ceprs 713 1216 70.1 Beans 1052 1342 27.6 Sugar Cane 10 20 100.0 ‘Yuca 124 211 68.5 Cotton 895 1247 38.2 Tobacco 1281 1674 30.7 Wheat 640 680 21.9 Coffee 2067 3159 53.2 Cece Beans 2400 3780 57.5 Brown Sugar 224 367 63.8 Source: Appendix Table 4 sesame 86.7 percent, copra 70.1 percent, yuca 68.5 percent, and crude brown sugar 63.8 percent. There were no price declinesas could be expected in view of the inflation experienced by Colombia between 1950 and 1960. 38 Wheat and related products. Domestic production of wheat in Colombia increased 3.8 percent between the periods 1950-54 and 1955-59. 'During this same period, the price of wheat at the farm level increased 21.9 percent. The demand for wheat increased between 1950 and 1960 as a result of increasing population and per capita income. Per capita con- sumption of wheat increased from 16.7 kilogramm in 1951-54 to 18.9 kilograms in 1955-60; Title I wheat played an important role in the in- crease as domestic wheat provided for consumption of 16.7 kilograms in 1951-54 but only for 15.1 kilograms in 1955-60.10 On the production side wheat must compete for land with barley, potatoes, dairy enterprises, and some varieties of corn. Domestic pro- duction of barley increased 20.1 percent between the periods 1950-54 and 1955-59 while domestic production of potatoes increased 13.2 percent and corn production decreased 7.9 percent. The price increases at the farm level were 36.3 percent for barley, 53.0 percent for corn and 8.1 percent for potatoes. The‘SQEEgg of Bogota, a rich agricultural area in the Department of Cundinamarca, is an important wheat growing area of Colombia. In this area, potatoes, barley, corn, wheat and dairy enterprises compete for land, even though potatoes and wheat are frequently grown in rotation. A recent study of the‘ggbgggll indicated that areas planted to barley were expanding and that some of this was at the expense of the dairy 10Witt, L. W., and Wheeler, R. 6., Effects of Public Law 480 Proggams in Colombia: 1955-62,‘Medellin-Celombia, October, 1962 p. 90. 11Departamente de Investigacienes, Caja Agraria, as reported in 31 Tflegpe, march 16, 1961. Cited by Gearing, T. J., Wheat Production in Colombia, Universidad Nacional de Colombia, Palmirs, Colombia, 1962, Pp. 12-13. 39 industry. The study concluded that the number of dairy herds had decreased about 30 percent since 1955. The expansion of barley acreage in Cundinamarca is also evidenced by INA data which suggest that hectares planted to wheat declined from 67,600 in 1955 to 23,300 in 1959.12 The increase in barley acreage is partly the result of higher prices and the introduction of new varieties. But in addition, the competitive position of barley, as opposed to wheat, has been improved with the adoption of a double crop- ping system for barley by mechanized cereal producers in the'ggbggg.13 Although, the evidence does indicate that barley production has expanded at the expense of wheat and dairy in the Department of Cundinamarca, the national acreage statistics indicate that this is not a nation wide phenomena. Total wheat acreage declined somewhat, about 6 percent between 1950-54 and 1955-59; however, barley acreage for the nation as a whole remained relatively stable or declined slightly.14 The INA and Procebada, in addition to announcing support prices, have disseminated new varieties of wheat and barley which explain the increases in the production of these crops in spite of acreage declines. Wheat yields have increased at least 75 percent in areas where the new rust resistant "Henkenan 50" wheat has been introduced and as much as 526 percent under conditions of severe rust.15 However, by 1961 only about 120p. Cit., Goering, Wheat Production in Colombia, p. 13. 13This practice is not suitable for wheat which requires a longer growing season. Adams, D. W., Adjustment Possibilities on Colombian Farms under Alternative Levels eggPublic Law 480 Imports, Unpublished Ph.D. Dissertation,‘uichigan State University, 1964, p. 62. 1"Op. Cit., Witt and Wheeler, pp. 57 and 62. 15Op. Cit., Witt-Wheeler, p. 59. 40 one-fourth of wheat lands were planted to the new variety. Barley yields have shown considerable increases in response to the new "Funza” variety. Yields per hectare almost doubled between 1955 when less than .02 percent of the barley area was planted with improved seeds and 1961 when 95 percent of barley lands utilized the new seed.16 There is some evidence to sup- port the hypothesis that although barley has been competing successfully with wheat in some areas, in others, corn has been substituted for wheat on lands suitable for the production of both crops. The acreage devoted to corn production in Colombia has declined from 831 thousand hectares in 1955 to 726 thousand hectares in 1959. However, the decrease was slight in the department of Cundinamarca and increased in Beyaca, another department where major competition between wheat and corn for land occurs.17 The reason for the decline in total acreage of corn is probably competi- tion between corn and cotton in other areas.18 Corn utilization in Colombia is divided approximately as follows; 50 percent direct human consumption, 25-30 percent processed foods, and 20-25 percent animal consumption either directly or as part of mixed feed concentrates.19 The share of total corn production being utilized for direct human consumption has been declining at the expense of the other uses.20 The demand for animal products in Colombia has been increasing, 16Op. Cit., Witt-Wheeler, p. 62. 17Guillermo, G. 3., La Produccion de Haiz En Colombig, Universidad Nacional de Colombia,‘Mede11in, 1961, p. 16. 18This is discussed fully in a latter section dealing with cotton. 19Adams, 0. w., Et. Al.,Public Law 480 in.Colombia: Iggacts of Title I Programs at Alternative Levels, Hedellin, Colombia, November, 1963 , ppo 129-132 o 2°Ibid., pp. 129-132. 41 and as a result milk and beef prices at retail increased 63 percent and 65 percent respectively between 1954 and 1960.21 Thus increases in the derived demand for corn as a feed grain probably accounts for some shift in wheat lands to corn. Beth barley and corn have enjoyed greater increases in their support prices in recent years than has wheat. Between 1955 and 1959 the increases in their respective support prices were; wheat 50 percent, barley 78 percent and corn 57 percent.22 However, the support price of barley is more meaningful than that of wheat and corn because INA, which supports the price of wheat and corn, has been unable to maintain announced prices while Precebada, which supports barley prices, has. It appears that Title I imports of wheat by Colombia have affected adversely the domestic production of wheat. The demand for wheat increased considerably between 1950 and 1961 as a result of rising population, income and per capita consumption.23 Title I imports were made avail- able to help meet the increased demand, with the result that retail prices of wheat did not increase as much as the general price level.24 In addi- tion, the availability of Title I wheat imports probably helped to hold down the farm.price of wheat by reducing the pressure for increasing sup- port prices.25 21Op. Cit., Witt - Wheeler, p. 81. During the same period the retail price of all food increased 60 percent. 22Op. Cit., Witt-Wheeler, p. 46. 23Per Capita consumption increased more than 15 percent between 1951 and 1960. Op. Cit., Witt-Wheeler, p. 90. 24Op. Cit., Witt-Wheeler, p. 81. 251bid., Witt-Wheeler, p. 81. 42 Wheat production has maintained itself or increased slightly as higher yielding varieties helped to offset a decline in planted area. However, the evidence indicates that in various departments land formerly devoted to wheat production shifted into the production of barley and corn. In addition, a recent study by Adams reports that data from preliminary surveys indicates that the utilization of fertilizer and sprays for potatoes, and the availability of better quality dairy cattle and concen- trates have improved the competitive position of these enterprises vis- a~vis wheat.26 Cotton and related commodities. Domestic production of cotton in Colombia increased 108 percent between the periods 1950-54 and 1955-59 while its price increased 38.2 percent. The substantial increase in cotton produc- tien is in large part due to expanded acreages and increased yields resulting from favorable government policies and the efforts of the Instituto de Pemente Algodonero. The principal government programs dealing 'with cotton include import protection, minimum producer prices, and obli- gatory absorption of domestic fiber by the Colombian textile industry.27 Although the government agricultural policy in Colombia.has tra- ditionslly supported the idea of self-sufficiency in agricultural produc- tion, a change in the exchange rate in 1957 provided an additional stimu- lus to government and industry interest in promoting domestic cotton production.28 unt11 1957 the exchange rate for cotton maintained by the 290p. Cit., Adana, D. W., Ph.D. Thesis, pp. 62-64. 27Goering, r. 1., Cotton Production in Colombia, Uhiversidad Nacional de Colombia, Palmirs, 1962, p. 4. 28Porter, H. G., The Cotton Industry in Colombia, Cotton Division, Foreign Agricultural Service, U.S.D.A., April, 1961, p. 6. 43 Colombian government somewhat over-valued the peso, making the peso cost of imported cotton substantially cheaper than the domestic cotton price. ‘With the establishment of a free exchange market in mid-1957, the value of the peso in terms of dollars decreased to about one-half its former value. The effect was to raise the price of imported cotton substantially in terms of pesos, which developed a strong interest on the part of the cotton mill industry in expanding domestic cotton production.29 Changes in cotton support prices reflect the new government interest in expanding domestic production. In the latter part of 1956, the support price for cotton was raised 23 percent and between 1956 and 1960, it was increased another 56 percent.30 This increased support price for cotton in conjunction with in- creased credit availability and ginning facilities as well as an effec- tive research and extension program brought about the rapid increase in Colombian cotton production.31 An indication of the success of the cotton expansion program is provided by the fact that up until 1959 Colombia was a net importer of cotton while in both 1960 and 1961, Colombia exported over 20 thousand metric tons of cotton.32 A major effect of the cotton expansion program was a shift in land use in the major cotton producing areas. The total acreage devoted to cotton production increased from 38.8 thousand hectares in 1950 to 151.2 thousand hectares in 1960, an increase of more than 380 percent.33 The 290?. Cit., Goering, Cotton Production in Colombia, pp. 4-5. 30013. Cit.,‘Witt-Wheeler, p. 46. 310p. Cit., Geering, Colombian Agricultural Pgice and Trade Policies 1:. 14. 32Op. Cit., Goering, Cotton Production 19 Colombia, p. 8. 330p. Cit., Getting, cotton Production in Colombia, p. 12. . 3 , 1 . . 1 0 W 1‘ 1' 1 t 1 1 . 1 1 . . A . I 9 . . . o . 1 . . oo . I m . , . , . V ' I l 1 . l ,1 I 1 ‘ 1 ' I. . . ‘ . C v , I . 4 . r; V > ‘ ~I ' . . J , 1 o | v m . o . Q . 1 . o I ' o o . ‘ ‘ ‘o ‘. I‘ 1 1 1 ~ - ‘6 l t . . 1 1 1 1 ' . . ‘ J J . I ' U o . . ,,. . 1 . . . o , 1 1 . o ’ , . . . . . 1‘ ’ ‘ 1 ._ . .1 . a... . ' u ‘14 . , U ‘1 1'; I ' . 1 ' 1 . 1 f I ‘ . .1 ' . '1 . . l ' . . , O I 1 1 1 1 . 1 1 .. .1. . I. m i I. O o. o ’ O D .. . ' o. o 44 most rapid increases in cotton acreage occurred in the Interior Zone where cotton competes for land with beans, corn and rice. Less rapid increases occurred in the Atlantic Zone where cotton must compete with corn, rice, and extensive livestock enterprises. Table 3.6 provides data regarding the hectares devoted to rice, beans and corn in four important cotton producing Departments of Colombia. The Departments of Magdalena and Cordoba are in the Atlantic Zone while Valle and Telima lie in the Interior Zone. The figures suggest that in the Departments of Cordoba and Magdalena the areas planted to corn have diminished slightly, if any. Hectares de- 'voted to rice production in.Magdalena have increased from 6,250 in 1955 to 30,000 in 1960 and then decreased to 13,000 in 1961. These data sug- gest that cotton expansion in the Atlantic Zone has been at the expense of livestock operations. To the extent that land formerly devoted to grass has been shifted to cotton, it could explain some of the increase in rice and corn acreage in this area. Two crops of cotton annually are prohibited by the government as part of their disease and insect control program. When new lands are brought into cotton production they do not remain idle following cotton harvest, rather they are utilized in other crop production, frequently rice, corn or beans.34 In the Interior Zone, the acreage devoted to the production of beans and corn decreased substantially during the period 1955 to 1959. The bean acreage in Valle fell from 27.4 thousand hectares in 1955 to 4.6 thousand in 1959. Corn area in Valle fell from 48.0 thousand hectares to 36.0 thousand hectares in 1959 while during the same period it fell 34Op. Cit., Gearing, Cotton Production in Colombia, p. 13. 45 HmeHo w.m a woonouoo on ”was. women. one noun Hm Hseeunwon noHoamHou cannon mueaconom monounaosnm Awe Hooo.m zoonomoav fiMoo momma comm summon . moment Home nnnnso «and nonnosmooo acumen momma»: nouns wows wombcnu Home Honmw zonnno Hone 52 rt: 9:: II»... 9%.. Illa. lit. :38 83% 53 ~33 ”Lem III you» II...» It. 5.3.. 8.8» $3 92$ ”.25 II...» ”Ea Ill. III 5.8”. Hobo» Home PSN 95... £5 :3 5» It»... P3... 81.3 Sum ubuu fog moo room so lit. SL8 ”fume Home $8» foam :25 {on woo lit. :38 $33 $3 $5.. 98o PE. room So lit. 5.8a 3.2... 5% aka 9mg mom «to mom lit... :38 8.3.. Home 5.3» SL3 to: 8° 5° II...» 5.8» 3&5 eooo Ho.uoo m.oeo ~.ooo emu too Noe. Hw.~oo ee.oo~ *mquooaoa Ho opp onawBonwoos marooow. nowoaoso“ done one owns. o>anNNMlmonnHou u. Hoav mononw. bunny Ha. woo». 48 tion of oil from cottonseed, sesame and African Palm have increased sub- stantially. Production of soybean oil and lard have increased slightly while production of oil from copra has decreased. Oil seed production with the exception of soybeans is the responsi- bility of the Instituto'gg Fomento Algodonero (IPA) the same agency responsible for cotton production. Soybean production is the responsibil- ity of the Instituto Nacional‘dg Abastecimientos (INA). Cottonseed is Colombia's most important domestic oil crop, accounting for more than 37 percent of all the fats and edible oils produced with domestic raw materials in 1960. The increase in importance of cottonseed as one of the nation's principal sources of both vegetable oil and all fats and oils reflects the rapid expansion of Colombia's cotton industry under the stimulus of favorable price supports and technical and marketing assistance. While cottonseed provides Colombia with the majority of its edible oil produced from domestic crops, imports of copra are the main source of vegetable oil. Imports of copra were more than 30 thousand metric tons in 1960. It is expected that imports of copra will decrease in coming years as a result of increasing domestic supplies of oil seeds and a government decree, that requires successive reductions in copra imports of 10 percent per year, initiated to stimulate self-sufficiency programs.38 The San Andres Islands are an important copra producing area in Colombia. However, due to the increase in construction as a result of the expanding tourist business in this area, copra production has been de- creasing and it is expected that by 1965 copra production in these Islands 38Op. Cit., Embassy Report, p. 3. a: 49 will be negligible.39 In an attempt to stem the decrease in total copra production, more than 52 percent between 1950-54 and 1955-59, the IPA is attempting to encourage plantings in other areas, particularly on Colombia's Pacific Coast.40 Domestic production of sesame has increased rapidly, more than 86 percent between 1950-54 and 1955-59. The greatest increase in production took place after 1956 probably due to the 62 percent increase in its price between 1956 and 1957. In the Interior Zone, sesame is grown as a rota- tion crop with cotton and the increase in cotton acreage in this area may also explain some of the increase in Colombia's production of sesame. Soybean production in Colombia is limited to a small area in the Valle del Cauca where all the production is sold to one shortening factory.41 Soybean production has increased slightly but not regularly nor signifi- cantly in terms of the total oil seed production of Colombia. This lag- ging production record is probably a function of a lack of technical advancement as well as the monopsonistic nature of its market.42 The effects of P.L. 480 Title I imports on the domestic production of oil seed crops in Colombia was probably negligible. The system of price supports and other production inducing programs adopted by the IRA and the Colombian Government offset any possible effects on producer prices and, hence, any production affects. It should be noted, however, that as a result of rising demand the retail price of vegetable oils increased sharply, over +16 percent, between 1954 and 1960; an increase which may 39Ibid., p. 3. 4°1bid., p. 3. 41Ibid., p. 3. 421bid., p. 3-4. 50 even have been greater in the absence of Title I imports.43 The long-run effects of Title I imports on domestic agricultural produc- tion in Colombia. The Title I program does not appear to have brought about any decreases in income at the producer level. This is especially true in the case of cotton and vegetable oil imports whose effects were offset by policies adopted by the Colombian Government. Some wheat lands were shifted into the production of other agricultural products including barley, corn, potatoes, and dairy. In each case, the loss of its competi- tive position by wheat is only partially a function of lagging wheat prices and in each case a ready substitute was available.44 However, wheat prices would have risen faster in the absence of the Title I program so there is reason to believe that producer incomes also would have increased more rapidly had Title I imports not been made available; to this extent the program had a negative effect on producers income.45 There is also the possibility that lower wheat prices had a nega- tive effect upon the income of producers who were not able to transfer their resources into the production of one of wheat's substitutes. This is especially true in the case of barley where a large part of the gain in its competitive position, vis-a-vis wheat, came about as a result of the introduction of double cropping made possible by mechanization. Thus, 430p. Cit., Goering, Ph.D. Thesis, 9. 115-117. 44In the case of barley and wheat Goering and Witt have shown that gross receipts from the two crops have increased steadily and faster than the general price level; however, the proportion derived from barley has increased. Op. Cit., Goering-Witt, p. 21. l‘SIt should be noted that the Colombia Government might have adopted other procedures to procure wheat supplies externally had Title I wheat not been made available. In that event the price of wheat would not have increased any more rapidly_than it did. 51 those farmers whose operations were not sufficiently mechanized to take advantage of this procedure no doubt lost income as the price of wheat lagged behind that of barley. The effects of Title I imports on investment were probably more significant at the governmental level where over 230 million pesos have been made available from Title I stimulated local currency balances. Title I imports have made local currency available for investment in Colombian agriculture from three sources: (1) import taxes levied on P.L. 480 products; (2) revenues realized by INA in its Purchase and resale Operations for imported products; and (3) local currency loans made available by the United States under section 104 (g) of P.L. 480. It would be a mistake to assign all investment which occurred with local currency from the above sources to the P.L. 480 program. However, there is reason to believe that the situation in Colombia during the period 1955-1960 warrants assigning at least part of the increased invest- ment in agriculture to P.L. 480: (1) it is doubtful that imports of agricultural products would have been as large in the absence of the Title I program; (2) there is an abundance of labor in Colombia; and (3) the Colombian Government has generally exercised a moderately conserva- tive fiscal policy.46 Tax revenues on P.L. 480 imports totaled an estimated 36 million pesos between 1955 and 1960 while during the same period a tax levied on flour milled domestically from P.L. 480 wheat yielded an additional 20 million pesos.“7 During the six-year period the import taxes on P.L. 480 “Op. Cit., Goering, Witt, p. 23. 47Goering, T. J., united States Agricultural Surplus Disposal In Colombia, Ph.D. Thesis, Michigan State University, 1961, pp. 90-91. 52 products provided almost 75 percent of the central governments agricultural 'budget.48 These revenues are transferred to a special fund in the Ministry of Agriculture and then allocated to the various commodity agencies responsible for the develOpment of domestic production of various agri- cultural commodities.49 The second major source of local currency funds arising from Title I imports were those which accrued to INA as a result of the spread between its import and selling price. INA.which is responsible for Title I imports of wheat, oils and flour realized a profit of over 78 million pesos from Title I imports during the period 1955-1960.50 Although some of the funds received by INA were transferred to Caja Agraria (Colombia's largest development bank) those that were retained by INA represented about 50 percent of total INA expenditures in the period 1957-1960.51 The funds retained by INA have been utilized to offset losses in its domestic price support operations and in building additional storage facilities to enhance its ability to maintain announced prices. The funds transferred from INA to the Caja Agraria were for use in three programs carried on by the bank: (1) colonization and land parcellization, (2) drainage and water control, and (3) general agricultural improvement.52 The third source of local currency for investment arising out of 48Ibid., pp. 90-91, “91bid., pp. 90-91. 5°lbid., p. 93. 51Ibid., p. 93. Total INA expenditure figures are not available for 1955 and 1956. 521bid., p. 93. 53 the P.L. 480 program in Colombia are loans made under Section 104 (g) of Title I. This section of Public Law 480 provides for local currency loans to promote multilateral trade and economic development. This is the largest use of Title I pesos in Colombia as the equivalent of 70.89 mil- lion dollars, about 58 percent of total pesos involved, have been desig- nated for this category.53 In Table 3.8 data regarding the allocations and loans of Section 104 (g) pesos as of'Harch 31, 1961, are presented. It can be seen that about 50 percent of the total pesos allocated or 107.5 million pesos have actually been loaned. The table also shows that the overwhelming majority of the loans and pesos have gone to agricultural projects. The fact that these loans have emphasized agricultural development has no doubt offset any adverse effects on agricultural investment which may have resulted from depressed farm prices. The emphasis on agricultural development is also encouraging in view of the rapidly growing population in Colombia and the fact that there is already considerable pressure on the exchange earnings of Colombia. If agricultural output can be expanded, it can forestall additional food imports and may also increase the nation's exchange earnings by permitting larger exports of agricultural products.54 The effect of industrial loans made with Title I local currency on the exchange position of Colombia was probably neutral at first but favorable in the long-run.55 This is because the short-run savings in 53Op. Cit., Goering-Witt, p. 23. 5“Over 75 percent of the nations exports are composed of agricultural products with coffee accounting for 70 percent alone. 5501). Cit., Adams, et. al., p. 359-350. 54 Table 3.8 - Allocations and Loans of Section 104(g) Pesos as of March 31, 1961: Colombia (thousands of Pesos) Pesos Pesos Loaned by allocated Caja_ Project Agreement I Cacao production 292 196 Access roads to agricultural areas 4,900 4,900 Livestock imporvement 1,700 1,700 Water well drilling 224 224 Agricultural lime pits and kilns 430 430 Fertilizer production 12,000 12,000 Irrigation 850 850 Small industry 2,154 1,967 Total: Agreement I 22,549 22,266 Project Agreement II Cauca Valley Corporation 33,590 32,700 Coal production 6,000 3,560 Fertilizer production 24,000 24,000 Lumber production 1,000 1,000 African palm production 4,075 2,289 Fondo STACA 4,335 0 Total: Agreement II 73,000 63,549 Project Agreement III Irrigation and drainage (Atlantico) 5,652 3,500 Chemical fertilizer 10,000 7,551 Cement production 2,348 2,348 Reforestation 2,000 1,200 Total: Agreement III 20,000 14,599 Project Agreement IV Fertilizer production 20,000 0 Reforestation 6,000 0 Irrigation and drainage 6,000 0 Irrigation and drainage (Atlantico) 14,348 0 Storage facilities (INA)- 28,000 0 Livestock production (STACA) 12,000 0 Cement production 9,652 7,152 Access roads to agricultural area 5,000 .___JQ Total: Agreement IV 101,000 7,152 Grand total: Agreements I, II, III, and IV 216,549 107,566 Source: Goering, T. J. and Witt, L., United States Agricultural Surpluses in Colombia: A.Review of Public Law 480, Tech. Bul. 289, Agri- 'Eultural Experiment Station,‘Michigan State university, East Lansing, Michigan, 1963, p. 25. 55 foreign exchange which is made possible by imports for pesos is likely to be offset to a large extent by an outflow of foreign exchange for invest- ment items, as well as by the substitution by the 0.8. Government of the available pesos for dollars in its local expenditures. After some lag, substantial savings of foreign exchange will result from import substitu- tion stemming from the peso development loans. Thus the impact of both the industrial loans and those channelled into Colombian agriculture will be the enhancement of the nations exchange position and economic development in the long-run. INDIA The Title I Program in India. Between 1956 and 1960 India received more than 13 million metric tons of United States agricultural products valued at nearly one billion dollars under Title I. See Table 3.9. Wheat was by far the most important counodity received, accounting for over 90 percent of total volume and 78 percent of total value. Cotton was the second most important commodity representing 12.1 percent of the total value and 1.4 percent of total volume. Corn, grain sorghums, rice, tobacco and non-fat dry milk were also imported under the Title I program. Wheat and cotton were received under Title I in each year of the period 1956-1960. Feed grain imports were concentrated in the latter years, and tobacco was received between 1957 and 1960. See Table 3.10. In addition to the continuousness of importation another indication of the importance of a particular surplus product on the economy of the receiving nation is provided by a comparison of the magnitude of the imports and that of domestic production. This comparison has been made in Table 3.11. Title I imports of wheat represent over 26 percent of 56 Table 3.9 - Total Shipments of Title I Commodities to India 1956-1960 Percent Percent 1000's 0.8. of 1000's of Commodity Dollars* Total ‘Metric tons Total Wheat 741101 ’ 78.1 12220 91.2 Corn 14070 1.5 276 2.1 Grain Sorghum 5801 .6 140 1.0 Rice 63819 6.7 537 4.0 Cotton 114793 12.1 197 1.4 Tobacco 6388 .7 3 .0** Non-fat dry milk 3409 .4 21 .2 Total 949381 . 100.0 13394 100.0 *Market Value. **Less than .1 percent. source: Appendix Table 5 and Text Table 3.10. domestic production during the period 1956-60. But cotton imports under Title I were equal to 4.8 percent of domestic production for the same peri- od. The other Title I imports, with the exception of corn, represented less than .5 percent of the domestic production of their respective crops. The importance of Title I imports of wheat and cotton does not diminish significantly when these imports are compared with domestic production plus non-Title I imports. In the case of wheat, the propor- tion diminishes to 24.8 percent while imports of cotton represent 4.3 percent of the total supply of cotton in India during the period 1956- 60. Total wheat imports supply about 25 percent of the total supply of wheat in India but more than 80 percent of these imports are made up of Title I wheat. 0n the other hand, Title I imports of cotton represent 57 Table 3.10 - Title I Shipments to India in Volume: 1955-1960 (1000's Metric Tons) 1956 1957 1958 1959 1960 Total Wheat 345.5 2522.6 2206.4 2797.4 4348.0 12,219.9 Corn 0 0 58.5 116.8 100.4 275.7 Grain Sorghums 0 0 86.6 10.8 42.3 139.7 Rice 40.7 156.2 0 0 339.9 536.8 Cotton 8.4 27.1 5.4 18.4 137.4 196.7 Tobacco 0 .5 1.4 .9 .3 3.1 Non-fat dry milk 0 4.9 6.8 8.9 0 20.6 Source: F.A.S., U.S.D.A., Title I, Public Law 480: Total Shipments by 6dMonth Periods, January 1955 through June 1959, by County and Commodity, S.D.S.-7-61, May 24, 1961. F.A.S., U.S.D.A., Title I, Public Law 480: Total Amounts programmed 29d Shipped_through December 31, 1962, and Shipments by 6-month Periods, from July 1,.1959, through December 31, 1962, by Countgy and Commodity, S.D.S.-6-63, March 15, 1963. only about one third of total cotton imports but total imports of cotton by India are small.56 In the analysis sections which follow, the effects of Title I imports of wheat and cotton are given the major emphasis. In view of the evidence presented with regard to continuousness of importation and rela- tive size, it is highly unlikely that imports of other commodities under Title I resulted in any discernable effects upon domestic production in India. ' 56The data on cotton and wheat imports used to make these calcu- lations are from: Richards, 8. 1., Trends in Indies Agricultural Trade, Foreign Agricultural Economic Report No. 15, E.R.S., U.S. Department of Agriculture, February 1964, pp. 25 and 29. 58 Table 3.11 - Title I Imports in Relation to Domestic Production in India 1956-60 (in 1000's Metric ton) Title I Domestic Percentage Imports Production of Total Wheat 12,220 46,400 26.3 Corn 276 17,653 1.6 Grain Sorghums 140 41,767 .3 Rice 537 225,746 .2 Cotton 197 4,133 4.8 Tobacco 3 1,392 .2 Non-fat Dry Milk 21 * * *Not Available Source: Text Table 3.10 and Appendix Table 6 The economic environment in India. During the period 1950-1960 the popu- 1ation of India increased from 358.3 million to 431.7 million, an increase of about 2 percent a year. See Table 3.12. Over the same period national income increased from 102.4 billion rupees to 145.0 billion rupees an increase of about 41 percent. The percentage increase in per capita income over the period.was 16 percent.57 The price level in India increased during the period 1950-1960. The largest increase in the general price level occurred after 1955 and appears to have been pushed upward primarily by increases in prices of agricultural products. See Table 3.13. The national agricultural policy of India is an important aspect of the economic environment facing agricultural producers. However, since 57One 0.8. dollar equals about 4.80 Indian Rupees. 59 Table 3.12 - Population, National Income and Per Capita Income in India: 1950-1960 (Constant 1960-61 Prices) National Per Capita Population Income _Income 1000's (Billion Rupees) (Rupees)__ 1950 358293 102.4 286.4 1951 362488 105.2 289.2 1952 368639 109.3 295.4 1953 375131 115.9 307.6 1954 381973 118.8 309.4 1955 389198 121.3 309.9 1956 396815 127.1 318.5 1957 404858 125.9 309.1 1958 41334 135.1 324.9 1959 422278 136.8 322.1 1960 431690 145.0 331.1 Source: N.C.A.E.R., Logg Term Projections of Demand and Supply of Selected éggicultural Commodities 1960-61 to 1975-76. Commercial Printing Press, Bombay, April 1962, p. 33. United Nations, Demogiaphic Yearbook 1962, Rome 1963, pp. 136-137. 1951, India's agricultural policy has been geared to national plans for economic development. The basic goals of India's third Five Year Plan are to increase national income over 5 percent a year, to expand basic industries, to use as fully as possible all manpower resources, to estab- lish greater equality of opportunity for all people, and to expand agri- cultural output 30 percent.58 58Government of India, Third Five Year Plan, pp. 48, 55. 60 Hmowo u.Hu : geopomawo manna Mombasa up Home." Homelwwoc Awouwlwwuw I annoy. Human Home Hemp new» Houu Home Hmmu Home you» Hmum Home Homo H. moon >Hnwowo Hom.u H»N.p cw.» won.» mm.m m~.o c~.m Ho~.w Ho~.w nwu.m HHN.° nonnmwm o~.o woceo om.c Hoo.c mm.c qoeo mm.o $9.6 em.o Hosea wou.o n. Hmmcmnuwsw wea_zbnonwmwa www.w _.Huu.u pew.» Hc~.u Ham.» on.» yew.e ku.u HHH.u spa.» ~w~.o was connom ou.o Heb.o Hom.o oo.o Hom.o o~.o Hau.o Hpu.c Hou.o Howeo Huu.c u. xbocmmnncnoa om.w ~Hm.u Heu.m mm.» Hoo.m HcH.H Hc~.o pom.» Ho~.o pom.» HHm.m N. o >H H COB—gal Hausa Hoe.» Hnm.n mo.o Hoo.m Hoo.u mo.m mm.w Hom.m How.» HHN.u www.e mocnnou ooeonmmo monsoon on ooaaoarmue HouuuHmmo coaomnHo wnoaconHoo HmuuaHoao HonaH msmeN - Anosuv Anoouv Amonnoonv Anoomv Aoouonmnv swoon H~ueHum aHeuuo NH» uunebee we.» when . Hemoo bum bum Ho.on Ha.o manned Hemau HemHu HHu momum no.9 mane Grooms Nam HeuHu me u.c~u no.6 moon H.m- meemm no Hueumc Hu.m moHeHo oHHass u.ouu Hm whomuu Hm.H Home manma-- HmueHuo Homeooo Ham www.coo u~.u cannon Henmu uewbo Nb Ho.b~m Hn.u Hovmooo Ho» H.mmH m N.qoa u.m aamHHozo manna aaoHo BHHx. mucosa. one unwed woman son HooHcaoa“ manna anoHo BHHK Hsoonnoa ome H: Home» unseen zone Heoonnoa oon Ho Hommu one unwed noose eons non masonnwomHHw ouoacnoa. asaoan «coon I noan HBooNnm oHsm moammnwo odomsonwoo eHn: so assume Ho unoowm. ssauoanmnwo ouoasonwoo newsman Hmanao oHH seaweed mnoa HHnHo H Haoounu «no monsoonnmo emu omHocHonma on new means on man noonoon. monsoon nHoon. m.. momwwuem mom bmmommaoon on new moomoauo mmmoon on are c.m. mceHHo has bmo HHnHo H wnomnma Ha HansoH. amok 0m HmnmoH. HoHnmeweo Con.. HomH. oo. Haw. Ham. Hoe. woe. uno. ”mm. are an. >oooomwx nmeHo m. 76 point out the importance of imports in the total supply of food and fiber in Israel. In the analysis section which follows major attention is given to the domestic production and price records of wheat, feed grains, cotton, and vegetable oils along with closely related products. Imports of dairy products under Title I were also important in terms of domestic production, total supplies, and continuousness of importation. However, the price and production record of dairy products is influenced by the availability of feed grains, thus dairy products are considered in conjunction with Title I imports of feed grains. The economic engironment in Israel. During the period 1950 to 1960 the economy of Israel grew rapidly. The value of gross national product in constant prices increased 174 percent at an annual growth rate of 10.6 percent a year. During the same period population increased 67 percent with an annual growth rate of 5.2 percent, much of it frommigration.73 Under the stimulus of rising population and incomes the demand for food increased rapidly between 1950 and 1960. As may be seen from Table 3.23 between 1952 and 1960 per capita consumption of food and beverage increased by almost 38 percent, primarily as a result of rising income. The most rapid increases in consumption were of livestock pro- ducts, as per capita consumption of meat and meat products increased al- most 300 percent while per capita consumption of milk and eggs increased almost 55 percent. Per capita consumption of fresh fruit increased 120 percent while per capita consumption of tea, coffee and cocoa increased 73Ginor, F., Analysis and Assessment of the Economic Effect of the 0.8. Public Law 480 Title I Program in Israel, Bank of Israel, Tel-Aviv, Oct., 1961, p. 10. t s \ I 2 s u I v \ I e I e . l )u._ g . » . s ‘ l \ ~ 4 . ' . . ex 1‘ _‘ s a . ca . ‘ I . -‘ l u (t u I , g' - I -e Table 3.23 - Per Capita Food Consumption in Israel at Constant Prices: 1952, 1955, 1960 (Indexes: 1952 - 100) Commodity 1952 1955 1960 A. Consumption of Food & Beverages 100.0 109.4 137.8 Food Consumption 100.0 109.1 138.1 Cereals & Cereal products 100.0 100.2 94.0 Meat & Meat products 100.0 191.9 398.7 Fish 100.0 91.3 96.4 Milk &'Milk products 100.0 134.5 154.9 Eggs 100.0 116.7 154.7 Edible oils 100.0 102.7 112.4 Fresh fruit 100.0 115.7 220.5 Fresh vegetables 100.0 101.3 89.0 Processed fruits & vegetables 100.0 85.2 103.3 Sugar & Sugar products 100.0 124.9 134.3 Tea, Coffee, Cocoa 100.0 178.3 195.7 Bevegggngonsumption 100.0 113.7 133.0 Soft drinks 100.0 145.3 148.4 Alcoholic drinks 100.0 98.5 124.8 B. Tobacco Consumption 100.0 92.2 89.8 Source: Ginor F., Analysis and Assessment of the Economic Effect of the 0.8. Title I Program in Israel, Bank of Isreal, Tel-Aviv, October 1961, p. 423. 77, 96 percent. 0n the other hand, per capita consumption of cereal products, fish and fresh vegetables declined. A second important aspect of the economic environment of Israel which influences agricultural output and prices significantly is the agri- cultural policy of the nation. The goal of Israel's agricultural policy as expressed in the Seven Year Plan in 1953 was a level of output by 1960 that would make Israel self-sufficient in all foodstuff production and allow a surplus for export.74 However, by 1956 this plan was dropped.75 In recent years other goals or objectives of Israel's agricultural policy have been declared at various times by responsible leaders, to include: A. Maximum income of farmers. B. Maximum production of calories. C. Maximum earnings of foreign currency. D. Maximum value-output per acre. E. 'Maximum value-output per input of water. F. Maximum number of persons employed on a given unit of land.76 The above goals or objectives are not only inconsistent but do not provide economically solid guide lines for policy. A review of the various policies adopted by the government seems to indicate that the working objectives of Israel's agricultural policy are to increase production of of commodities for export and at the same time reduce the need for certain agricultural import items.77 74Rubner, A., The Econggy of Israel, Frederick, A. Praeger, New York, 1960, p. 110. 75lbid., p. 110. 761bid., p. 111 77This interpretation is supported by: Op. Cit., Agricultural Handbook 132, p. 213. 78 In attempting to meet the objectives of its agricultural policy the Israel government has adopted a system of price supports, subsidies, and strong trade barriers. Table 3.24 presents data regarding direct agri- cultural subsidies to agricultural producers. It should be noted, however, Table 3.24 - Agricultural Subsidy Payments to Israel Producers: Fiscal years 1958-1961 (IL millions) 1958-59 1959-60 1960-61 1961-62 Eggs 11.9 19.4 15.2 17.9 Cows & ewes milk 16.2 12.5 10.5 20.1 Beef & Poultry meat 0.8 3.3 1.1 6.2 Vegetables 7.7 5.1 3.2 4.8 Cotton 4.8 6.8 8.7 10.0 Other Products 0.2 1.1 1.7 2.1 Subsidies to new settlement 2.6 2.9 2.8 2.6 Total output subsidies 44.2 51.1 47.2 63.7 Drought Compensation 6.2 23.2 4.5 8.0 Fertilizers & water _3.7 3.4 5.4 6.8 Total imput subsidies 9.9 26.6 9.9 14.8 Grand total 54.1 77.7 57.1 78.5 Source: Bank of Israel, Annual Report 1962, Jerusalem, May, 1963, p. 204. that these direct payments do not fully reflect the extent of Government subsidies to agriculture. For example, the Bank of Israel estimates that 14 million IL should be added to the 14.8 million IL of imput subsidies in 1961-62 to take account of the amount by which production costs were prevented from rising as a result of the postponement of price increases 79 in imported imputs.78 In addition to direct Government supports the Israel farmer has the support of various government sanctioned farm organizations. It is not essential that these be enumerated; however, it should be noted that various farm organizations have marketing, research and credit functions.79 The marketing functions of the various farm organizations are performed in various ways to influence the returns to producers of agri- cultural commodities. This may be through cooperative marketing or through fixing of a minimum price and buying all surpluses which result at the fixed price. For example, the Vegetable Production and‘Marketing Board fixes a minimum price for vegetables and buys quantities left on the market at stated minimum prices and disposes of them partly for canning, partly for distribution among the needy, and partly by destruction.80 This price support operation is financed by a levy which is paid by the producers on every ton of vegetables'marketed and by an annual Government contribution which amounts to about one third of the cost.81 In addition to the various price support activities of the farm organizations, guaranteed prices to producers also result from the activities of an Export Company established to encourage agricultural exports. The company contracts with farmers producing products expecially 78Bank of Israel, Annual Report 1962, Jerusalem, May 1963, p. 204. 79Holm, H.‘M., The Agricultural Economy of israel, FAS, U.S.D.A., June, 1960, pp. 17-18. 80Government of Israel, Ministry of Agriculture, Bank of Israel, . The Economy and Agriculture of Israel, A report prepared for the Mediter- ranean Development Project of the U.N., F.A.0., Jerusalem, June, 1959, p. 35. 81Ibid., p. 35. 80 for export, specifying either a fixed price or a minimum price plus the difference between it and the selling price.82 As is the case with most nations, the national policies of Israel's Government influencing agricultural prices and production are extremely complex. In later sections, policies that influence important Title I commodities and related goods will be considered in more detail. The agricultural price andgproduction record of Israel. The value of Israel's agricultural output grew rapidly between 1950 and 1960. In 1950 the value of total agricultural output in current prices was I.L. 45.8 million, and in 1954 the comparable figure was I.L. 258.0 million and in 1960 I.L. 673.8 million.83 Table 3.25 gives the average production of most agricultural commodities produced in Israel for two periods, 1950-54 and 1955-60, as well as the percentage change between the two periods. The greatest increases in production were experienced in sugar beets, peanuts, cotton, and livestock products. On the other hand, the average domestic production of barley and tobacco declined between the two periods. Indexes of producer prices as well as the general wholesale price index are presented in Table 3.26. It should be noted when viewing these price indexes that they may not reflect the actual price received because of the system of subsidy payments used by the government of Israel to encourage production and maintain farm incomes. The greatest price in- creases were in cattle and sheep prices; however, most of the prices in- creased as much or more than the general wholesale price index. 82Ibid., p. 39. 83Op. Cit., Ginor, p. 238. The general wholesale price index increased from 100 in 1951 to 295 in 1954 and to 378 in 1960. Table 3.25 - Changes in the Domestic Production of Agricultural Commodities in Israel: 81 1950/54-1955/60. Average Average la— Production Production Percent Commodity_, 1950-54 1955-60 Changg_ . 1000 metric tons 1000 metric tons Barley 62.5 57.6 -8 Corn 11.6 23 99 Grain Sorghum 20.5* 26 27 Feed Grains 82.2 106.6 30 Wheat 27.2 61.6 126 Milk** 138 261.8 90 Tobacco 2.3*** 1.9 _-17 Rice 0 ,,- .7**** Beef 1.4 6.5 , 364 Cotton .12*** 5.4 4400 Butter. . .6 , 1.6 166 Hard Cheese .5 1.3 160 Sugar beets 21 114 443 Potatoes 51 89 75 Onions 17***** 23 35 , Tomatoes 70*?*?** 110 57 Grapes 20 ...... 44 120 Lemons 11 17 55 Olives 11 12 9 Groundnuts 6 16 167 Dry Peas 0 l.6******* Chick Peas 13 1.3 ..... 30 *Includes only 1951-54 **Milk in metric tons. ***Average of 1953 and 1954. ****Includes only 1957-60. *****Average 1952-53-54. *#****1954 only. *******1960 not included. source; Computed from data presented in Appendix Tables 10 and 11. Peed grains and related commodities. The most important Title I imports in terms of value, quantity, and percent of total supplies were feed grains. Between 1951 and 1960 the producer price index of feed grains increased from 100 to 412 while the wholesale price index increased to 378. However, following the initiation of the Title I program, in 1955, 82 Hmcpo w.~m I Hammxom on waoncnon wnwooo om >mnwocwnsnmw ooaaoannnnn one are noaoan trowoumwo manna. Haemowu Houwnmce chmw I Heaven L 93833 , SE 5% $3 52. Sum 53 58 5% $2.. $8 mmm. So EH Bo NB 8o Sm use new at was 9.2:» So so Now 3a «.3 a; as... 83 3» 3m «32. So so {a 8» So a: 28 So So 25 353. :5 Ga 8... 8... So So Sm 8:. 8m ”8 5? So 3m ”so NS ~$ 2: u; or. NS NS .393» as: It... So as ~2 8H 8» t.» 8c us» a: 58 H8 3» So so N3 8» Now now III... I... 2:333... . H8 3» 3m us So to sum £5 5m to ca. 333 So 3.... H8 “E as us use Iii» lit... II use 988 So Sm NF as to woo s5 Se to, S» 5:33 250535 Be so So So as , on» 3m 8» wow 8m nwnwoou 0» Hana. crown. one due woman one an arm nonmnw Houmw use one >nannaaonn on "so moonoann unmonn on «so c.m. wceHMn rm: emo awnwommwwnmmmme we Haneow. wear on Hancow. eo~u>a»<. onn. Heap. we. awe. new. new. bum. emu. one pm». are mononmw arowoaawo wanna Hanna mnoa” assume 2onwouu. mnonnnnwomw «can coo: pcow. wean. v. ewe. 83 feed grain prices remained virtually stable. Domestic feed grain produc- tion increased 30 percent from an annual average of 82.2 thousand metric tons in the period 1950-54 to an annual average of 106.6 thousand metric tons in the period 1955-60. The principal feed grains produced by Israel are barley, corn, and grain sorghum. Domestic production of corn increased 99 percent between 1950-54 and 1955-60 while domestic production of grain sorghum increased 27 percent and barley production decreased 8 percent. In Israel barley and sorghum are produced on non-irrigated land and thus do not compete with corn which is produced primarily on irrigated land. The area devoted to corn production has declined slightly but the expanded use of fertilizers and new seed account for most of the rapid increase in production.84 The area devoted to grain sorghum production has remained relatively stable while the area devoted to barley produc- tion has declined rapidly from 227 thousand acres in 1953 to 142 thousand acres in 1959.85 The reason for the decline in barley acreage has been a substitu- tion of wheat for barley on lands suited for the production of both crops. The shift of dry lands from barley to wheat is no doubt partly due to the government policy initiated in 1955 to expand both bread grain pro- duction and marketing. This policy includes a provision which allows farmers to trade one ton of wheat for about 1 - 1/3 ton of barley or corn.86 The availability of feed grains to the government after 1955 84Op. Cit., Holm, p. 30. 851bid., p. 30. 86Ibid., p. 28. 84 under Title I of P.L. 480 contributed to the feasability of this policy and thus indirectly to the decline in barley acreage.‘ During the period 1950 to 1960 livestock production in Israel expanded greatly as the value of domestic production of animal products, including milk, eggs, meat, and pond fish, increased from 116.8 million I.L. in 1950 to 344.8 million I.L. in 1960 or nearly 200 percent.87 Livestock production has also increased relative to other agricultural output. In 1954, livestock production was 38.5 percent of total agricul- tural output and in 1960 it was 50 percent. The rapid increase in livestock production was stimulated by Title I imports of feed grains in two ways. First the availability of Title I feed grains held feed grain prices in check after 1954 (see Table 3.25). This stability of feed grain prices in the face of rising producer prices of animal products made livestock production more profitable. Secondly, the importation of feed grains created optimistic expectations as to the continuity of feed grains supplies and the stability of feed grain prices. This created expectations of continued profitability of the new enter- prises.88 The increase in feed grain supplies and the resulting expansion of the livestock industry offset any adverse effects on domestic produc- tion that Title I imports of meat and dairy products might have had. Title I imports represented 40 percent of total supplies of butter, 36 percent of non-fat dry milk supplies, and 14 percent of beef supplies. See Table 3.22. However, average production of these products increased 87Op. Cit., Ginor, p. 241 - In terms of 1958-59 prices. 881bid., p. 40. 85 fron the period 1950-54 to the period 1955-60. The increase was over 350 percent for beef, 166 percent for butter, 160 percent for hard cheese, and 90 percent for milk. Wheat and related products. Wheat production in Israel increased from an annual average of 27 thousand metric tons in the period 1950-54 to an annual average of 62 thousand metric tons in the period 1955-60 an increase of 126 percent. Most of the increase was due to increases in acreage sown to wheat at the expense of lands formerly devoted to the production of barley. After the initiation of the government policy to expand wheat production in 1955 the area devoted to wheat production increased from 77 thousand acres in 1954 to 117 thousand in 1955 and to 154 thousand in 1959.89 Barley acreage decreased from 227 thousand acres in 1953 to 171 thousand acres in 1959.90 The effects of the government policy to expand wheat production no doubt prevented Title I imports of wheat from having any adverse effects upon domestic wheat production. However, it appears that Title I imports and increasing domestic production have to some extent displaced other imports. The average annual imports of wheat in the period 1950-54 were 233 thousand metric tons while imports excluding Title I shipments were on the average only 184 thousand metric tons for the period 1955-60.91 Cotton and related_products. Domestic cotton production showed the greatest increase of any Title I commodity. Cotton production on a commercial basis in Israel began in 1953. For the period 1953-54 average production was 89Op. Cit., Holm, p. 28. 901bid., p. 28. 91Op. Cit., Ginor, p. 180. 86 only 120 metric tons while during the period 1955-60 average annual pro- duction was more than 5,000 metric tons. Cotton is grown on irrigated land suitable for the production of sugar beets, vegetables, and corn. Domestic production of sugar beets has expanded rapidly, increasing from an average annual production of 21 thousand metric tons in the period 1950-54 to 114 thousand metric tons in the period 1955-60, an increase of more than 400 percent. Domestic pro- duction of corn also increased. The acreage devoted to the production of the three crops is presented in Table 3.27. The area devoted to the Table 3.27 - Area Devoted to Sugar Beets, Cotton, and Corn in Israel: 1956-1959. (1000 Acres) Crop 1956 1957 1958 1959 Sugar Beets 2 3 6 7 Cotton 14 12 l4 l7 Corn 23* 24 15 9 *1955 Source: Helm, H. M., The Agricultural Economy of;;srael, U.S.D.A. F.A.S. M981, Washington, June, 1960, pp. 30 and 32. production of corn has decreased since 1956, while that of both sugar beets and cotton has increased. Cotton production and processing are under the supervision of the Cotton Production and Marketing Board, which coordinates cotton growing and marketing in Israel. The Board represents both growers and buyers; fixes the prices of cotton and cottonseed; maintains grading and storage facilities; provides crop insurance; and cooperates with the Ministry of 87 Agriculture in cotton pest control.92 In addition to the activities of the Cotton Production and Marketing Board, cotton producers have received the benefits of direct government subsidies which reached 10 million I.L. in 1961-62. See Table 3.24. The effect of Title I imports of cotton on domestic production was no doubt offset by the vigorous cotton expansion program and the govern- ment subsidy system. However, Ginor reports that the availability of Title I cotton enabled Israel to expand its cotton spinning industry earlier than would have been the case in the absence of the program.93 A joint product of cotton, cottonseed oil, was also imported under Title I. The source of raw material for refined vegetable oils in Israel is both domestic oil and oils imported under Title I. For this reason, in order to assess the effects of Title I on domestic oil production, it is necessary to consider production of the oil seeds themselves. Domestic production of principal oilseeds in Israel has increased rapidly from less than a thousand metric tons in 1951 to more than 23 thousand metric tons in 1960. See Table 3.28. The greatest increase has been in cottonseed production, since it grew from virtually no pro- duction in 1951 into by far the most important source of vegetable oil in Israel. This great increase in cottonseed production is of course correlated with the expansion in cotton production. Although Title I imports of vegetable oils have been relatively large, there appear to have been no adverse effects on domestic produc- tion of oilseeds. But greatly increased demand stemming from rising 920?. Cite, Balm, Po 3].. 930p. Cit., Ginor, p. 231. 88 Table 3.28 - Domestic Production of Principal Oil Seeds in Israel: 1951-60 CMetric Tons) Sun- Saf- Cotton flower flower Sesame Year Seed Seed Seed Seed Total 1951 0 468 150 108 726 1952 0 870 1,000 150 2,020 1953 30 870 500 380 1,780 1954 500 1,620 500 700 3,320 1955 4,000 500 1,100 420 7,020 1956 5,250 950 1,450 1,450 9,100 1957 6,700 2,750 1,050 1,520 12,020 1958 8,100 1,500 700 950 11,250 1959 12,250 2,400 555 970 16,120 1960 19,000 2,650 450 1,130 23,230 Source: Ginor, F., Analysis and Assessment of the Economic Effect of the 0.8. Public Law 480 Title_;_Program in Israe , Bank of Israel, Tel-Aviv, Oct., 1961, p. 222. incomes and population in conjunction with the government's cotton sub- sidies have done much to prevent any such adverse effects.94 .ngg_run effects of Titleégrimpggts on agricultural production in Israel. The effects of Title I imports on income and, hence on investment at the individual producer level in Israel were mixed. The producers of feed grains probably lost income due to the stabilizing influence of feed grain imports on domestic feed grain prices. This loss was not as great as it wou1d_have been in the absence of the government's policy of food 94The daily consumption of fats per capita rose from 68.2 grams in 1952 to 85.7 grams in 1959. 89 grain expansion and the ease of shifting barley lands into wheat production. The loss in income was also less for those individual producers who made the transition to wheat production more rapidly than others. Title I imports probably had their greatest impact on incomes of livestock producers. As a result of the relatively stable feed grain prices after 1955, and rising livestock product prices livestock produc- tion became more profitable, thereby stimulating production and increasing producer incomes. Ginor estimates that additional income accruing from the share of the increase in livestock production which can be attributed to Title I amounted to I.L. 85-95 million during 1955-60 or I.L. 14-16 million annually.95 She also estimates that investment in the livestock industry during the same period would have been about I.L. 71 million less in the absence of the Title I program.96 It should also be noted that this additional investment in the livestock industry was not government sponsored and that loan funds from the Development Budget were not made available for this use. Hence, funds for the additional investment in livestock enterprises were raised by farmers themselves either from savings or other non-government sources. The importation of other commodities under Title I probably had negligible effects on domestic production. This was due in part to their small size and in part to governmental policies adopted by Israel to prevent any adverse effects. As a result it would be difficult to say that incomes of producers were either enhanced or injured and thus that 95Op. Cit., Ginor, p. 274, In constant 1958-59 prices. The Israel pound had a value of .357 I.L. to the dollar in 1952, by 1954 the value had fallen to 1.80 I.L. per dollar and has remained at this level. 95Ibid., p. 275. 90 there were any indirect effects on private investment from these imports. The Title I program in Israel had a local currency value of 303.8 million I.L. Of this total I.L. 48.5 million were designated for U.S. uses, I.L. 199.4 million for loans under Section 104(g), I.L. 46.5 for loans under the Cooley amendment and I.L. 7.6 million for grants under Section 104(e). See Table 3.29. ‘Table 3.29 - Sales Agreements Under Title I with Israel and I.L. Funds Generated for Various Uses: 1955-1960. U.S. Dollars I.L. Funds Source and Uses (1000's) ,(lOOO's) Sales Agreements 168,549 303,388 U.S. uses* 26,966 48,538 Loans to Israel” 110,783 199,410 Grants to Israel*** 4,200 7,560 Cooley loans- 25,827 46,489 Total**** 167,776 301,997 *After the transfer of $11.11 million or I.L. 20 million to Sec. 104(g). **For use under subsection 104(g). ***For use under subsection 104(e). ****Difference between total and sales agreements is a freight differential. Source: Ginor, F., Analysis and Assessment of the Economic Effect of the U.S. Public Law 480 Title:; Program inigsrael, Bank of Israel, Tel-Aviv, Oct. 1961, p. 7., . Of the I.L. 245.8 million made available for use under subsection 104(g) and the Cooley Amendment, I.L. 180.2 million were released for approved projects. The funds for approved projects were channelled to the economy through the State Development Budget.97 During the six 97Loans under the Cooley Amendment were originally extended by the Export Import Bank of Washington through their Israel agent, the Industrial Development Bank of Israel. These projects were later incorporated into the Development Budget. 91 year period 1955-60, Title I funds constituted about 9 percent of the investment expenditure of the State Development Budget. See Table 3.30. Table 3.30 - Investments of Title I Funds and Expenditure of the State Develop- ment Budget: Israel 1955-1960. Investments of Share of the state Title I Title I Branch Development Budget fi_Investments Investments (I.L. Millions)* (I.L.Millionefi" (percent) Agriculture & Irrigation 687.0 54.3 7.9 Electric Power 140.2 22.5 16.0 Industry & Mining 405.0 76.9 19.0 Transport 265.5 14.6 5.5 Oil 46.1 0 0 Housing 360.3 5.6 1.5 Municipalities 46.7 4.7 10.1 Miscellaneous 105.0 1.6 1.5 Total 2,055.8 180.2 8.8 *Current prices Source: Ginor, F., Analysis and Assessment of theigconomicegffect of the U.S. Public Law 480 Title I Program in Israel, Bank of Israel, Tel-Aviv, Oct., 1961, p. 16. . . Over 50 percent of these funds were channelled into investment in industry and electric power generation. About 30 percent were utilized for invest- ments in agriculture and irrigation; however these constituted a rela- tively small share (7-9 percent) of the government's total loan program in the agricultural sector. The actual loans made with Title I funds do not represent additional investment as much as investment for which United States approval was 92 easily elicited. On the other hand, the importation of commodities did allow investment to be made which resulted in the creation of over 5,000 new jobs a year on the average between 1955 and 1960 and at the same time hold the price level relatively stable.98 The index of wholesales prices increased only 22 percent during the period 1955-1960 while between 1951 and 1955 it increased over 200 percent. Another factor which must be considered in crediting investment from Title I local currency balances to the Title I program is the fact that less than 16 percent of the local currency was designated for U.S. uses.99 If the United States had elected to claim more resources the Government of Israel would either have had to decrease its investment program or subject the nation to greater inflationary pressures. Another aspect of the affect of the Title I program on investment patterns in Israel is that loans which can be identified as being made with Title I funds had a small import component.100 However, Ginor, states that in the absence of the Title I program, the total development budget would have had a smaller import component, since the Title I program made more foreign exchange available for non-food imports. Thus, the investment patterns of Israel was influenced in the direction of invest- ments with higher foreign exchange requirements. 98Op. Cit., Ginor, p. 67. 99Following the initiation of the Title I program an extensive translation program was initiated in Israel utilizing local currency, suggesting that even 16 percent of the Title I local currency provided larger than normal U.S. needs for Israel's currency. 100Op. Cit., Ginor, p. 49. 93 The Title I program has made a contribution to the achievement of Israel's basic agricultural policy. This policy of concentrating pro- ductive efforts in high value products such as fruits, vegetables, milk, eggs, and poultry is designed to enhance the nations exchange position by producing products expensive to import, which are at the same time, good exchange earners. For example only 15 to 20 percent of the wheat required and 30 percent of other grains are grown in Israel, but nearly all dairy products and about 80 percent of the fats and oils, and red meat needed are produced domestically.101 The variation in the foreign exchange components of various types of investments suggests that the success of this policy line could have a significant impact upon the direction of future investment both agri- cultural and non-agricultural. In addition, if Israel's agricultural trade accounts could be balanced, it would provide a less vulnerable position to a nation whose Balance of Payments, in 1962, included 85.3 million dollars of net foreign investment.102 101Op. Cit., Agriculturgl Handbook No. 132, p. 212. 1020p. Cit., Bank of Israel, p. 49. 94 JAPAN The Title I program in Japan. Between 1955 and 1957 Japan received more than 1.25 million metric tons of U.S. agricultural products valued at more than 135 million dollars under Title I of P.L. 480. In effect these were the "tapering off" programs following G.A.R.0.I.A. (army civilian supply) and E.C.A. which had supplied food during most of the years fol- lowing the occupation of Japan. However, the post 1957 growth in Japanese exports was not fully anticipated at the time, so that the end of the program was not then recognized. As may be seen from Table 3.31, wheat Table 3.31 - Total Shipments of Title I Commodities to Japan 1955-1957 1000's Percent Percent Metric of 1000's of Commodity tons Totgiv Dollggs Apgptpl Wheat 843.08 66.1 47,826 35.4 Barley 156.42 12.3 7,967 5.9 Corn 99.30 7.8 5,411 4.0 Rice 97.16 7.6 13,750 10.2 Cotton 75.49 5.9 52,471 38.9 Tobacco 4.44 .4 7,639 5.7 Total 1,275.89 100.0 135,044 100.0 Source: United States Dept. of Agriculture, F.A.S., TitleAI, Public Law 480; Total Shipments by 6-month Peripds,_Jgnuary 1955 through June 1959, by Country and Commodity, Washington, SDS-7-61, May 1961. represented 66.1 percent of the volume and 35.4 percent of the total value imported. Barley was the second most important import representing 12.3 percent of the total volume and 5.9 percent of total value. Corn, rice, cotton and tobacco were also imported under the Title I program. 95 Wheat, barley and cotton were imported under Title I for three con- secutive years beginning in 1955 while corn and tobacco were imported in 1956 and 1957. Rice was imported under the Title I program only in 1955. See Table 3.32. Table 3.32 - Shipments of Title I Commodities to Japan by Year: 1955-1957 (in 1000's metric tons) 1955 1956 1957 Total Wheat 372.48 348.88 121.72 843.08 Barley 56.84 80.86 18.72 156.42 Corn .00 50.89 48.41 99.30 Rice 97.16 .00 .00 97.16 Cotton 44.63 28.82 2.04 75.49 Tobacco 3.01 1.43 .00 4.44 Source: United States Dept. of Agriculture, F.A.S., TitleTI, Public Law 480: Total Shipments by 6-month Periods,_January 1955 thrgggh June 1959 p17Country and Commodit , Washington, SDS-7-61, May 1961. In addition to the continuousness of importation another indica- tion of the importance of a particular surplus product on the economy of the receiving nation is provided by compsring the magnitude of the imports 'with domestic production and total supply. These comparisons have been made in Table 3.33. Title I wheat imports were 20.2 percent of domestic production while imports of barley, rice and tobacco were only 2.3 percent, .7 per- cent, and 1.5 percent of domestic production respectively. When viewed as a proportion of domestic production, corn imports, representing 55.2 percent of domestic production, were the most important. But because of HmeHo u.uu n HHnHo H Hamosnm Mu onmnHos no coaoenwo wnoaconwoo one HonoH memeHw a: Queens Awe Hooo.m Bonnwn nosey HMnHo H HamoNnm HHnHo H Haoonnm 96 HHnHo H coaounuo on m cannon" om muoecnnnon mm m monooan om oosaoewnw Hamonnm wnoecnnwcs monomnwo wnoasonwon obelmmeonnm muonsOnwon w Hmwonnm swoon mpw.om eHuu no.» Howuo.o ~.q wmuHow Hu¢.e~ ooom ~.u gnaw.» H.» cons ow.uo Hmc mm.» Hose.“ o.u ”woo ou.Hm HemHm .u Hmomb.b .m Hoemooo b.bh wow H.m wHo.~ H.» nonnonfi* um.bo Hu0u.m b.» *wnonconwos one Haeonnm non «we mean woman on HHnHo H Haeonnm. ssooammnwo mnomconwon om oonnos smmHHmweHo. monsoon men HmvHo u.uH. >evmsmwx HmeHom Hw one Ho. 97 large commercial imports of corn by Japan, Title I imports represented less than 10 percent of total annual supply, which includes imports and domestic production. Title I imports represented only 7.7 percent and 4.4 percent of Japan's total annual supply of wheat and cotton respectively. In the analysis sections which follow major attention is given to the domestic price and production records of wheat, barley, corn, tobacco and their closely related products. Rice was imported under Title I in only one year, 1955, and represented less than 1 percent of total supplies in that year. Cotton is not produced domestically and, therefore, is not considered. The economic environment in Japan. During the period 1950-1957 the popu- lation in Japan increased from 82.9 million to 90.7 million, an increase of 9.4 percent or about 1.3 percent a year. See Table 3.34. Over the same period national income increased from 3,381.5 billion yen to 8,153.1 billion yen, an average annual increase of 13.6 percent. Per capita national income grew from 40.7 thousand yen to 89.8 thousand yen, an increase of 120.3 percent or about 12.1 percent a year.103 The price level in Japan has been relatively stable. For example, the general wholesale price index increased only eight percent between 1951 and 1957 which represents only slightly more than a one percent in- crease per year.104 During the same period the wholesale price index of farm products increased 33 percent; however, it remained virtually constant after 1954.105 103The exchange rate for yen is 360.8 yen per dollar. 10"United Nations, Statistical Yearbook: 1959, p. 449. 1°51bid., p. 449. 98 Table 3.34 - Population and National Income in Japan: 1950-1957 Population National Income Per Capita Nat'l Income Percent (in bil- Percent (in thou- Percent Year 1000's Change lion yen) Change sand yen) Changg_ 1950 82,900 3,381.5 40.7 1951 84,200 1.6 4,347.5 28.6 51.6 26.8 1952 85,500 1.5 4,959.0 14.1 58.0 12.4 1953 86,700 1.4 5,647.0 13.9 65.1 12.2 1954 88,000 1.5 5,984.4 6.0 68.0 4.5 1955 89,000 1.1 6,551.1 9.5 78.6 8.2 1956 89,950 1.1 7,310.6 11.6 81.2 10.3 1957 90,730 .9 8,153.1 11.5 89.8 10.6 Source: Population data from: United Nations, Demoggaphic Yearbook: 1962, pp. 136-137. National income data from: United Nations, Statistical Yearbook: 1959, p. 447. The national agricultural policy of Japan is an important part of the economic environment facing agricultural producers. The broad objective of Japan's economic policy is the achievement of a continued increase in the total and per capita production and consumption of goods and services, with maximum opportunity for full employment.106 Agricultural policies emphasize the government's desire to make the economic condition of Japanese farmers closer to that of industrial workers.107 In order to increase farm incomes, the government supports the prices of many agricultural commodities including those food grains and 1°50p. Cit., Agriculture Handbook No. 132, p. 225. 1°71bid., p. 225. 99 oil bearing crops.108 In addition to its price support activities, the Japanese Government has adopted other policies to encourage greater pro- duction. For example, land improvement projects receive financial assis- tance from the government and subsidies are granted to assist farmers in the procurement of production supplies.109 The ggricultural price and pgoduction recordgip_Japan. The changes in the average annual production and prices of commodities imported under the Title I program between the period 1950-54 and the average of the years the commodity was imported are presented in Table 3.35. The same infor- mation for selected non-Title I commodities is presented in Table 3.36. There appears to be little relationship between the changes in prices and the changes in production for either Title I or non-Title I commodities. Wheat experienced the only decrease in domestic production of all the Title I commodities yet its price increased more than that of the other Title I commodities with the exception of rice. On the other hand, tobacco production increased almost twice as fast as did that of any other commodity imported under Title I, while its price increased less than that of wheat. Wheat,gbarley and related products. The domestic price and production record of wheat and barley are considered together as they are substitutes in production. Wheat and barley are grown in southern Japan as a winter crop on paddy land and in the north as an upland crop. 'In both these areas, in addition to each other, they must compete for land with rapeseed. In its competition with barley for growing area, wheat is somewhat at a 108Brown, L.R., The Japanese Agricultural Economy, Economic Research Service, U.S.D.A., June, 1961, p. 26. 109F.A.0., United Nations, National Grain Policies, Rome, 1959, p. 85. Hoops w.um a Grumman we "so coaoanwo means one mnoeconwos om mmHonnoe HwnHo H oosaoawnwom Ha amoeba >vuonmwx HmeHom HN one He. HmeHo u.wm a newsman H: new cosmonuo wanna use wnomsnnwoa om moHoonoa zoouHHnHo H >mnnncHnsnoH coaaomwnwom Hm humor» Hmmcuue n Hummumw. 101 >HH onwnmm one was won Ho mm. cannon «on cross onwoo we mweeoanx HmoHom He. no one mm. 112 In the analysis sections which follow, primary emphasis is given to the effects of wheat, cotton and vegetable oil imports. Imports of rice and tobacco were so small in comparison to domestic production and total supply that no discernable effects upon domestic price and production can be expected. The economic environment in Pakistan. Between 1950 and 1960 the national income of Pakistan in constant prices increased about 23 percent, from 18,324 million rupees to 22,606 million rupees.127 During the same period the population of Pakistan increased from 75 million to over 92 million or about 23 percent. As a result of similar growth patterns of both population and national income per-capita national income remained virtually constant. See Table 3.41. Estimates of the wholesale price index are not available for Pakistan but estimates of the consumer price index are. The consumer price index of all commodities increased from 100 in 1953 to 113 in 1960 while the consumer food price index increased from 100 in 1953 to 123 in 1960, as may be seen from Table 3.42. The general consumer price index has actually been relatively stable whereas the consumer price index of food increased 13 percent in 1957 and 8 percent in 1960. The agricultural policy of Pakistan, another important aspect of the economic environment, is aimed primarily at self sufficiency in food grain production and maintenance of the present export level of the nation‘s chief foreign exchange earners.l28 The details of the specific policies in- 127 The exchange rate for the Pakistan Rupee was about 3.33 per dollar until 1955, since then the rate has been about 4.00 rupees per dollar. 128 Lerner, 8., Agricultural Polic in Pakistan, E.R.S.-Foreign-16, U.S. Department of Agriculture, October 1961, p. 1 113 Table 3.41. Population and Nat Pakistan 1950-1960 ional Income in Constant Prices, NatiBnal Per-capita income Population Nat‘l Income Year (million Rupee) (1000's) (Rupees) 1950 18324 75040 244 1951 ...2 76602 ...2 1952 ...2 78232 ...2 1953 19450 79896 243 1954 19850 81595 243 1955 19556 83331 235 1956 20854 85103 245 1957 21087 86913 243 1958 21040 88762 237 1959 21693 90650 239 1960 22606 92578 244 l. Constant 1949-52 prices. 2. Not Available Source: United Nations, Statistical Yearbook: 1961, Rome, p. 486 United Nations, Demographic Yearbook: 1963, Rome, pp. 136-137. Table 3.42. The Consumer Price Index in Pakistan 1952-1960 (1953= 100) Index 1952 1953 1954 1955 1956 1957 1958 1959 1960 General 90 100 98 94 97 106 110 106 113 Food 93 100 98 95 100 113 117 113 123 Source: United Nations, Statistical Yearbook, 1961, Rome, p. 484. 114 fluencing domestic production of commodities which are imported under Title I are presented in the analysis sections that follow. The agriculturalprice andgproduction record in Pakistan. A comparison of the average production between the two periods 1950-54 and 1955-60 for the principal agricultural commodities produced in Pakistan are presentd in Table 3.43. Changes in domestic prices for several of the same commodities are presented in Table 3.44. Most commodities ex- perienced increases in both domestic production and prices. The greatest increases in domestic production occurred in sugar cane, meat, and tobacco production. The price of sugar cane increased considerably less than that of most other agricultural commodities while the largest average price increases were experienced by chickpeas and jute. In general their appears to be little relationship between the changes in price and the changes in production. Table 3.43. Changes in Domestic Production of Selected Agricultural Commodities in Pakistan: 1950/54 - 1955/60. (in 1000's of Metric Tons) Average Average Production Production Percent Commodity, 1950-54 1955-60 Change Barley 146 144 -l.4 Corn 401 456 13.7 Wheat 3472 3616 4.2 Millet 6 Sorghum 576 566 -2.3 Chick peas 601 679 13.0 Rice 12693 13349 5.2 Sugar cane 10496 14284 36.1 Table 3.43 (continued) Average Average Production Production Percent Commodity» 1950-54 1955-60 Change Jute 899 1037 15.4 Cotton 281 300 6.8 Tobacco 77 95 23.4 . 1 Milk 5295 6296 18.9 2 Meat 238 314 31.9 1. Includes whole cow, goat and buffalo milk. 2. Beef, veal, mutton and lamb. Source: Appendix Tables 19 and 20. Table 3.44. ChangesIn the Price of Selected Agricultural Commodities in Pakistan: 1950/54 - 1955/60 (Rupees per 82.28 1h.) Average Average Price Price Percent Commodity 1950-54 1955-60 Change Wheat 11.0 13.1 19.1 Chickpeas ....3 13.8 43.81 Rice 21.0 24.9 18.6 Sugar cane 18.4 20.2 9.8 2 2 Jute 154.4 226.0 46.4 Sorghum ....3 12.6 21.21 1. Percent change is the average of 1955-60 compared to 1955. 2. Rupees per 400 1b. 3. Not available Source; Appendix Tables 21 and 22. 116 Wheat and related products. Wheat is the basic food grain in West Pakistan, and in addition to home consumption, wheat is used in the pay- ment of wages and for barter in the villages. As a result of the special place of wheat in the economy of Pakistan most farmers are compelled to raise wheat. Direct price supports for cereal products do not exist in Pakistan. However, indirect supports are available for wheat in West Pakistan and rice in East Pakistan in the form of fixed procurement prices that the government will pay for these grains.129 These procurement prices include both floor and ceiling prices that are fixed after the main grain crops have been gathered with little or no weight given to either the cost of production or to a concept of parity.130 The government is also responsible for supplying wheat to deficit areas including Bast Pakistan and urban centers in both East and West Pakistan.131 To assure an equitable dis- tribution of wheat the government restricts the supply of wheat in possession of private parties and prohibits the movement of wheat from or into surplus . . . 132 areas except by off1c1al permit. In order to implement their policy of distributing wheat the govern- ment of Pakistan has adopted a wheat procurement system. Three main methods of procurement are used; (1) compulsary levy, (2) selective procurement, and (3) voluntary procurement.133 Under the compulsary levy, producers in 129F.A.0., United Nations, National Grain Policies,_Rome, 1959, p. 89. 130Ibid., p. 89. The ceiling price is the important one due to the shortage of cereals in Pakistan. 131Ibid., p. 90 l32lbid., pp. 90-91. 133F.A.0., United Nations, National Grain Policies 1960 Supplement, Rome, 1960, p. 93. 117 surplus areas are required to sell to the government at the announced procurement price any production that the government determines to be above their own requirements. Under the system of selective procurement cultivators are required to declare their surplus stocks which, if needed, are then purchased by the government at the procurement price. Under the voluntary procurement system a farmer sells his crop voluntarily to the government at the procurement price. Nearly all the wheat produced in Pakistan is produced in West Pakistan where it competes principally with cotton, chickpeas, sugar cane, rice, and other grains. The price of wheat increased about 19 percent on the average between 1950-54 and 1955-60. See Table 3.45. This increase was about the same as the increase in the price of rice, the other principal food grain and considerably less than the 40 percent increase in the price of chickpeas. On the other.hand, the prices of two other competitors, cotton and sugar cane, increased less than the price of wheat. Table 3.45. Domestic Price and Production Changes for Wheat and Its Principal Production Substitutes: Pakistan Wheat Coffon Chickpeas Sugarcane Rice Productionl 1950-54 3472 281 601 10496 12693 1955-60 3616 300 679 14284 13349 Change (Percent) 4.2 6.8 13.0 36.1 5.2 Price2 3 1950-54 11.0 94.1 ... 18.4 21.0 1955-60 13.1 92.6 13.8 20.2 24.9 Change (Percent) 19.1 -l.6 43.8 9.8 18.6 1. 1000's metric tons. 2. Rupees per 82.28 lb except cotton, per 728 lb. 3. Not available Source: Appendix Tables 19, 20, 21, and 22. 118 The average wheat production of Pakistan was 4.2 percent greater in the period 1955-60 than in 1950-54. See Table 3.45. This increase was less than that of any of the other major crops produced in West Pakistan including cotton whose price decreased 1.6 percent between the two periods. In view of the rapid growth in Pakistan's population, 23 percent between 1950 and 1960, and the relatively small increase in wheat production, wheat prices no doubt would have increased more in the absence of the government's wheat policy. This conclusion is supported by the fact that in 1960 when the government dropped all controls on wheat shipments and procurement, the price of wheat jumped about 25 percent.lau There appears to have been no shifting of land either into or out of wheat production. See Table 3.46. Wheat was grown on 43 percent of the West Pakistan area devoted to principal crop production in the period 1950-54 and on about 44 percent in the period 1955-59. Cotton acreage in- creased slightly in spite of the fall in the price of cotton while sugar cane, whose price increased only about 10 percent, had the greatest in- crease in acreage. P.L. 480, Title I imports have made a significant contribution to the government's wheat distribution program in urban areas. During the first 3 years of the program, P.L. 480 Agreements accounted for about 50 percent of the total percapita supplies available for distribution. However, perhaps more important is that Title I imports have enabled the government to dis- tribute increased amounts of wheat without increasing procurements. Wheat 34 . . . 1 Within one month of the new policy, short supplies and Speculation forced the government to again adopt controls over wheat. Op. Cit., Lerner, p. 2. 119 HmUHo w.:m. >ouommo cmooomv Awmdomnnv HZHHHHoo om >oummv Amouomonv Ammooomdv zooms Ho.~e ew.o Hp.me _ ew.e Hm.w oonfloo m.Hm Hm.» w.:: Hw.o m.» aseoxonon ~.mo _ Ho.m 8.0m Hp.m no.0 mammuombo .mH w.m .mo w.: :q.m ween ~.we e.m m.mm Ho.o Hw.p canoe mumHsm . m.0H MH.o :.mw Hm.» Im.m aoan ww.mm Hoo.o mm.mo Hoo.o H. Hede Hm new noan moummmo mo<04¢m «0 Hanan me ouoom Ha some wmxwmdmo mum doom nod HDOcho moose w aHHHHon momma om mucHnm. .m.. :nHmH. c.m. umemunaonn om >muHocHdcuo. moenoavou. Hmmw. e. z. . 120 procurements have remained virtually constant when the average of the pre- P.L. 480 period is compared with average procurement of wheat since the inception of the Title I program.135 Since the free market price is above the government procurement price this has probably been a plus to wheat farmers incomes especially if, as the Pakistan Report suggests, the govern- ment would have controlled any rise in food prices in the face of a shortage.136 Cotton and related products. As may be seen from Table 3.44 the domestic production of cotton increased by about 6 percent between the period 1950- 54 and 1955-60, in Spite of the fact that its average price was less in the second period than in the earlier period. The acreage devoted to cotton production increased by about 290 thousand acres in West Pakistan between the periods 1950-54 and 1955-59. See Table 3.46. In general there appear to have been no shifts in production from cotton to either commodities also imported under Title I or to those not imported under Title I. The fall in the price of cotton is due to a variety of reasons in- cluding a strong desire on the part of the government to develop a domestic textile industry. Much of the legislation dealing with cotton over the past decade has provided for favorable treatment of the textile industry by maintaining low cotton prices to allow a wider profit margin for the mills.137 In addition the internal price of cotton was probably depressed somewhat by a 135 . . . . . . . . ECAPB/FAO Agriculture Division, A Note on the Utilization of 952$? cultural Surpluses for Economic Development in Pakistan, United Nations, 136Ibid., p. 47. However, it is possible that the government would have raised farm prices in an attempt to stimulate production and subsidized the consumer price. Under such a program farm incomes may have been greater depending upon the extent of the price increase. 137Minyard, J.O., Cotton in Pakistan, F.A.S. M-lSl, U.S. Department of Agriculture, September 1963, p. 18. 121 decline in the export price of Pakistan cotton.138 The fall in the export price of Pakistan cotton was in reSponse to a shift in the world demand for cotton. This shift came about partially as a result of the termination of the Korean War which had greatly stimulated demand in the early 50's, and partly in response to the United States subsidized exports and surplus diSposal transactions in cotton. Not only has the price of Pakistan’s cotton in foreign markets de- clined but so have total exports of cotton. As may be seen from Table 3.47, total exports of cotton have declined from an average of 830 thousand bales Table 3.47. Exports of Cotton by Pakistan 1954-1961 (1000 bales) Year Desi Uplandl Total Average: 1950-54 82 748 830 Annual: 1954 96 589 685 1955 173 518 691 1956 117 395 512 1957 129 304 433 1958 153 242 375 1959 137 249 386 1960 83 113 206 1961 125 218 343 1. Total - Desi exports. Source: Computed from data presented in: Minyard, J., Cotton in Pakistan, F.A.S. M-lSl, U.S. Department of Agriculture, September, 1963, p. 210 ' 38 ECAFB/FAO Agriculture Division, A Note on theUtilization of Agricultural Surpluses for Economic Development in Pakistan, United Nations, Bangkok, 1961, p. 50. 122 in the period 1950-54 to less than 350 thousand bales in 1961. Exports of Desi (shortstaple cotton) have declined somewhat but the major decline has occurred in the exports of upland (longstaple cotton) which competes directly with much cotton shipped from the U.S.139 The BCAFE/FAO RePort states, "...United States subsidized exports, as well as surplus disposal transactions on a world-wide scale relating to cotton, have apparently affected the foreign demand for and the prices of cotton produced in other exporting countries including Pakistan." Although exports of cotton did decline almost 60 percent between the periods 1950-54 and 1955-60 this was offset to a large extent by two factors. See Table 3.48. First, exports of cotton textiles increased considerably between the two periods, from less than 1 million rupees to more than 70 million rupees. Secondly, imports of cotton textiles by Pakistan decreased from an average value of 264 million rupees in the period 1950-54 to an average Table 3.48. Exports and Imports of Cotton and Cotton Textiles: Pakistan 1950-54 and 1955-60 (Million Rupees) Wet Cotton Exports Imports Exchange Year Cotton Textiles Total Cotton Textiles Total Balance Ave. 1950-54 664 -1. 665 3 264 267 398 Ave. 1955-60 278 74 352 12 25 37 315 1. Less than 1 million Rupees. Source: Appendix Table 13. 139 . . The United States cotton exports are made up primarily of Upland cotton with a staple length of between 1 and 1-1/8 inches. 140 Ibid., p. so 123 of 25 million rupees in the period 1955-60. As a result, although earning from cotton exports fell about 60 percent, the net exchange balance of Pakistan for cotton fell only 20 percent.“1 Vegetable oils. Between 1957 and 1960 about 2 thousand tons of edible vegetable oils were received by Pakistan under the Title I prOgram. The shipments were composed of about one half cottonseed oil, which is the principal vegetable oil produced in Pakistan, and one half soybean oil, of which there is virtually no domestic production in Pakistan. As could be anticipated in view of the production record of cotton in Pakistan, domestic production of cotton seed was virtually stable between 1952 and 1950.1”2 However, the price of cottonseed and that of cottonseed . . . . . . . 143 011 has fallen steadily Since 1958, following Title I imports in 1957. The decrease in the prices of both cottonseed and cottonseed oil were the result of a government program to stabilize domestic prices of vegetable oils by importing cottonseed and soybean oils under Title I. No doubt in the absence of the Title I program, the domestic price of cottonseed oil would have been higher, especially in view of the stable production and rising demand. Falling cottonseed oil prices did have a favorable influence upon the vanaspati industry in Pakistan which consumes almost the entire quantity of domestically produced and imported cottonseed oil. Vanaspati or vegetable lqut should be noted that the per capita consumption of cotton has also grown from 3 lbs. per capita in 1950 to 5 lbs. per capita in 1960. Ibid., Pp. 30-310 42 See Appendix Table 14. luaWanamaker, G.E., and MacDonald, D.L., The Market for Fats, Oils, and Oilmeal in Pakistan, PAS M-l22, U.S. Department of Agriculture, August 1961, p. 21. 124 ghee is a hydrogenated cottonseed oil product which is the principal source of fat in the diet of the people of West Pakistan. The price of vanaspati is controlled by the government at the factory, wholesale, and retail levels. In addition the government maintains a 12 percent sales tax and 1,5 cent a pound excise tax.luu In addition to creating favorable raw materials prices Title I imports have stimulated the vegetable ghee industry by creating favorable expectations as to the continued supply of the raw 145 material. As evidence of this expansion, the vegetable ghee industry was expected to double between 1961 and 1962 and again between 1962 and 46 1963.1 Egggjrun effects of Title I imports on domestic agriculturalgproduction in Pakistan. The effect of Title I imports on the income and hence on the investment patterns of domestic producers in Pakistan was probably mixed. Imports of vegetable oils under Title I contributed to a decline in the price of both cottonseed and cottonseed oil which had a negative effect on the income of cotton producers. Cotton lint prices fell between the periods 1950-54 and 1955-60 but primarily due to high prices in the early fifties and a conscious effort on the part of the government to develop a textile industry. The effect of wheat imports under Title I on the income of domestic wheat producers depends upon what one is willing to assume would have been the government‘s wheat policy in the absence of the program. If the government would have been successful in maintaining its wheat control price without 144 Ibid., p. 22. luSIbid., pp. 21-22. 1”6Ibid., p. 19. 125 Title I imports then the fact that producers were able to sell more wheat on the open market probably increased incomes. On the other hand, if wheat prices would have risen faster in the absence of the program, the effect of Title I imports on the income of wheat producers was probably downward. At the governmental level the U.S. Title I program has resulted in some loss of foreign exchange earnings by Pakistan through cotton exports. This loss was probably not as great as had been feared as it was offset to a large extent by increases in cotton textile exports and decreases in textile imports. Investment of local currency balances in agriculture which may be con- sidered additional were probably small. As of 1961, the Title I program in Pakistan had a total Rupee value of 5.1 billion. The uses to which these funds have been designated are shown in Table 3.49. Table 3.49. Allocation of P.L. 480 Title I Funds Accruing from Seven Agreements with Pakistan Between 1955-1961. Crores of Rupees 1 Percent Total Rupee Value 506.9 100.0 Common Defense 37.8 7.5 Economic Grants 202.2 39.9 Cooley Loans 24.6 4.9 Development Loans 131.4 25.9 Indus Basin 62.7 12.4 U.S. Uses 48.3 9.5 l. A crore equals 10 million Source: Beringer, C., P.L. 480 and Economic Development (A Case Study of West Pakistan), The Institute of Development Economics, Karachi, February 1963, p. 14. 126 Over 60 percent of the local currency has been allocated to the categories of economic grants, economic development loans, and the Indus jBasin project. U. S. uses including Cooley Loans account for about 15 19ercent and 7.5 percent has been allocated for common defense. The fact that rupee counterpart funds are committed to various uses jLn the agreements does not mean that they have been actually utilized. As an matter of fact less than 60 percent of P.L. 480 generated funds have As a result there was a aactually been withdrawn from the accounts. azubstantial lag in the use of local currency in Pakistan. When the actual (disposits are compared with withdrawals of local currency through 1960 it <2a1n.be seen that the sale of P.L. 480 commodities in Pakistan resulted in a net contraction of the money supply,1“8 Not only were less than 60 percent of the funds withdrawn but those (leesignated for development purposes have been utilized within the framework This stems from the procedure of the over-all development plan of Pakistan. This adopted by the United States and Pakistan for selecting uses of funds. Procedure involves the preparing of an annual development program by the Government of Pakistan within the framework of its long term program. The government then submits to A.I.D.lug certain projects whose local currency component it proposes be financed either partly or wholly out of counterpart funds,150 A breakdown of the purposes for which grants and loans of local h 147 , Beringer, C., P.L. 480 and.Economic Development (A Case Study of EEEE§1t Pakistan), The Institute of Development Economics, Karachij'Pebruary, 1963, p. 15. 148 . Ibid., p. 16. Since 1960 withdrawals have equalled depOSits. 1“United States Agency for International Development. 150This discussion of the procedure of selecting uses is from the Beringer Report, pp. 15-16. 127 currency have been made is presented in Table 3.50. A brief review of the nature of the projects which have been supported suggests that projects that will contribute to the development of infra- structure have been emphasized. These types of investments usually have a Table 3.50. Breakdown of Loans and Grants of Title I Generated Rupees, By Purpose 1955-1960. Loans Crores of Rupeesl Small Industries Corporation 1.00 Karachi Water Supply 4.00 Provincial Econ. Development 8.70 Rehabilitation of Pak Railways 7.96 Pak. Industrial Finance Corp. 3.00 Karachi Resettlement Program 0.75 Sub Total Loans 25.41 Grants University of Dacca 0.02 University of Panjab 0.36 General Public Health Service 0.37 Karachi Water Supply 4.34 Karnafuli Multi-purpose Project 3.67 Aviation Facilities 0.11 W. Pak, Power Development 3.01 Basic Medical Scientific Institute 0.01 Sub Total Grants 11.89 Total Grants and Loans 37.30 l. Crore equals 10 million. Source: Beringer, C. P.L. 480 and Economic Development (A Case Study of West Pakistan), The Institute of Development Economics, Karachi, February 1963, p. 74. 128 long gestation period and often the benefits stemming from them cannot be measured in dollar terms. However, they are the type of investment which may prove to contribue significantly to the economic growth of the nation. The shifting of investment patterns toward infrastructure is an important aspect of the effect of the Title I program on the development of Pakistan. However, the fact that as of June 30, 1962 less than 50 percent of the value of the agreements had been collected by the U.S., and of this only 75 percent had been distributed, points up another important aspect of the effect of Title I imports upon the economy of Pakistan.151 This aspect of the Title I program is that the disbursement of counterpart funds would have offset the counter inflationary impact of the commodity inflow and have forced the government to curtail its operating or development expenditures. The agricultural sector of Pakistan accounts for one-half of the nation's national income and two-thirds of its exports. However, the agri- cultural sector has been unable to meet the rising demand for food stemming from Pakistan's rapidly growing population. Not only has food production ‘ failed to expand sufficiently to meet the additional demand from domestic sources but neither have exports of agricultural products expanded enough to permit the purchase of the needed food supply abroad. As a result, the availability of food grains under Title I has contributed greatly to fore- stalling internal consumer pressures for a reappraisal of national food policies. It is difficult to judge what policies the government of Pakistan would have invoked in the absence of the Title I program. However, some 151Op. Cit., 17th Semi Annual Report, p. 73. 129 combination of increased resources devoted to food production or special provision by the United States to permit the procurement of foods ex- ternally on a commercial or non-commercial basis seems most likely.152 152 , . . . Witt, L.W., and Eicher, C., The Effects of United States Agri- cultural Surplus Disposal Programs on ReCipient Countries, Research Bulletin 2, Agricultural Experiment Station, Department of Agricultural Economics, Michigan State University, 1964, p. 36. 130 Turkey The Title I program in Turk_y. During the period 1955-1960 Turkey received over 2.5 million metric tons of 0.8. Title I agricultural products valued at more than $230 million. Table 3.51 gives the commodity composition. of the program in Turkey through 1960 in terms of quantity and value. Wheat was the most important Title I import in terms of both quantity and value, accounting for more than 75 percent of the total quantity and over 52 percent of the total value. Feed grain imports, con- sisting of barley, corn, and oats, represented 352 thousand metric tons or 13.7 percent of total quantity. Feed grain imports under Title I were valued at over $19 million or 8.3 percent of the total value. Fats and oils imports including cottonseed oil, soybean oil, and tallow represented 8.9 percent of the total quantity and 34.2 percent of the total value imported under the program. Dairy products, rice, beef and poultry were also imported under Title I but were relatively unim- portant in terms of both total quantity and value. Wheat was imported under Title I in each year of the period 1955- 1960. Feed grain imports occurred in each year of the period 1955-1960 except in 1958 and 1960, while edible oils came in each year except 1955 and 1960. Rice imports were limited to 1956, 1958 and 1960 while dairy products were imported under Title I only in 1957, beef in 1956 and 1957, and poultry in 1958. The relationship between Title I imports, domestic supply and total supply is shown in Table 3.52. Vegetable oils were the most important in terms of domestic production as they were on the average about 25 percent of domestic production. Rice imports under Title I were 4.2 percent 131 Table 3.51 Total Shipments of Title I Commodities to Turkey 1955-1960. 1000's Percent 1000's Percent of Commodity metric tons of Total dollars ‘ total Wheat 1939.64 75.8 120235 52.2 Barley 183.81 7.2 9683 4.2 Corn 118.56 4.6 6396 2.8 Oats 49.92 1.9 3034 1.3 Rice 25.49 1.0 3453 1.5 Butter .41 l 399 .2 Cheese 2.26 .l 1300 .6 Anhydrous milk fat .15 l 200 ‘.1 Non-fat dry milk 1.09 l 300 .1 Cottonseed oil 117.00 4.6 45459 19.8 Soybean oil 89.96 3.5 28667 12.5 Tallow 20.43 .8 4397 1.9 Beef 6.62 .3 4397 1.9 Poultry 3.10 .1 2247 1.0 Total 2558.44 100.0 230167 100.0 1 Source: Less than .1 percent Appendix Tables 25 and 26. ...... 132 amUHm w.mm. HHde H HapOddm H5 wmpmdwos do uoammdwo wdoacodwos mum HOHmH mcpwwwu Hcdxmw memupmmo mwwpo H Hapoudm H HHde H HawOHdm eHnHm H coammdwo mm m pedomsd om HoamH mm m vouoman om ooasoawnw Hawoudm wuooconwou coammdwo wdoacoflwos mcpvww aome mcwwww “Hooo.m amadwo nosmv Apouomsdv \NHooo amndwo dosmw, Awmsoonnv 23mmd cho :qwow :.H :mwo: :.o wmdpmw Hm: mopwm .o mommm .m omdm mo meow H.o mus: H.m 0065 Ham mama m.m meow w.» moon memwsm wmw mmmmo H.» mmcmm H.» wwom mm mmo :.M mo: $.H xnmu. w.. >bmHmem mud >mmmmmamsd om firm moososHo mmmmodm wcvwwo rm: :mo awawa H wuomflma escrow. >sxmdm. acuxmw. gave Hmmw. HmVHm xxH<. mm. N9 mum w H. Iwm cared mmnm mdoa >pnmumwxi Hmcwom 133 of domestic production during the period 1955-60 while wheat and feed grains represented 4.1 and 1.2 percent of domestic production respectively. The percentages Title I imports were of domestic production plus commercial imports for the period 1950-1960 do not differ significantly from those obtained by comparing Title I imports with domestic production. The reason for the similarity of the percentages is that commercial imports of Title I type products were relatively small, even for vegetable oils. In the analysis sections which follow major attention is given to the affect of Title I Imports of wheat, feed grains, and vegetable oils on domestic production in Turkey. The economic environment in Turk_y. Basic Data regarding changes in population and national income in Turkey for the period 1950-1960 are presented in Table 3.53. Population increased by about 33 percent between Table 3.53 Population, National Income, and Per-Capita National Income in Turkey: 1950-1960l Constant 1961 prices. Population National Income Per Capital Nat'l Income Year (in 10003) (Million lira) Lira Percent Change 1950 20947 24744 1181 1951 21634 28469 1316 11 1952 22219 30898 1391 6 1953 22818 34383 1507 8 1954 23433 31212 1332 -12 1955 24065 33516 1393 5 1956 24771 35789 1445 4 1957 25498 38045 1492 3 1958 26247 39661 1511 2 1959 27017 41343 1530 1 1960 27829 42835 1539 1 1 Source: Population data from: United Nations, Demographic Yearbook, 1961, The Data on National Income from: Prime Ministry of the Republic of Turkey, State Planning Organization, Tables of Five-Year Development Plan of Turkey, (Deaft Outline), Ankara, Sept. 1962, p. 3 134 1950 and 1960 while national income increased from 24.7 billion Turkish Lira in 1950 to 42.8 billion Lira in 1960, an increase of 73 percent.152 During the same period per-capita national income increased from 1,181 lira to 1,539 lira, an increase of about 30 percent at an annual growth rate of less than 3 percent. The agricultural policy of Turkey is also an important aspect of the economic environment affecting agricultural production and prices. The principal objective of Turkey's agricultural policy is to expand the national income and raise the standard of living by increasing agricultural production.153 The government has striven toward increased production and productivity by adopting a system of price supports and by improving pro- duction methods. Included in improved production techniques are more advanced cropping techniques, increased mechanization, more extensive irrigation and the wide use of fertilizers, insecticides, high-quality seeds and breeding stock.15” In Turkey the ministry of agriculture is responsible for crOp and animal production. However, in reality a series of semi-official agencies and unions of farmers cooperatives administered price supports for their members. In addition, the Agricultural Bank administers farm credit and the National Office for Agricultural Equipment handles much of the dis- 152 , , The Turkish Lira exchanged for dollars at the rate of 2.80 lira per dollar before 1957. In 1958 the rate was 4.90 lira per dollar and since 1959 the principle export rate of exchange is 9.00 lira per dollar. 153United Nations, F.A.O. National Grain Policies. Rome, 1959: p. 93. 154 Ibid., p. 93. -..! . 135 . 155 tribution of machinery and other farm supplies. Toprak Makrulleri Ofisi (TMO) administers the support price on cereals, does almost all buying of grain for distribution to urban centers, does all grain exporting and importing (including P.L. 480 imports of 156 cereals), controls grain storage, and also purchases all opium produced. _E_t 128214;}: Kurumu (EBK) has responsibility for meat and fish production and has handled almost all tallow, oilseed, beef, poultry and dairy product imports under Title I. The Ministry of Monopoly administers the support price for tobacco and handles the marketing of tea and coffee. Sugar beet production is under the Sponsorship of the State Sugar Beet Company which supports sugar beet prices. There are four semiofficial unions of farmers cooperatives which administer support prices and handle the marketing for their members. The commodities they deal with include cotton, figs, raisins, and olives. In the analysis sections which follow greater attention will be given to the specific agencies responsible for domestic production of the principle Title I commodities. The agricultural price and production record in Turkey. Data regarding changes in the average production of selected agricultural products in Turkey between the periods 1950-54 and 1955-60 are presented in Table 3.54. 55 . . 1 West, Q.M., Agricultural Development in Turkey, Foreign Agri- culture Report No. 106, F.A.S., U.S.D.A., January 1958, p. 25. 156 . . . This discussion and that which follows concerning the adminis- tration of Agricultural policy in Turkey is taken primarily from, Op. Cit., West pp. 24-28 and Op. Cit., Aktan, pp. 4—6, Part II. 136 'Table 3.54. Changes in the Average Domestic Production of Selected Agricultural Commodities in Turkey 1950/54-1955/60 (in thousands of metric tons) Average ’Average Production Production Percent 1950-1954 1955-1960 ' “"1 Change Wheat 5838 7866 34.7 jBarley 2767 3356 21.3 Oats 362 450 24.3 Corn 797 909 14.1 Rice 143 164 14.7 Soybeans 3 5.3 76.6 Milk 3188 3874 21.5 Beef 46 75 63.0 Rye 583 677 16.1 Millet 86 69 -19.8 Sugar beets 1124 2653 136.0 Potatoes 831 1298 56.2 Onions 235 392 66.8 Dry beans 102 141 38.2 Dry peas 1 1.5 50.0 Dry broad beans 38 us ' 13,u Chick peas 83 89 7.2 Lentils 62 74 19.4 Groundnuts 10 19 90.0 Cotton 145 168 15.9 Vegetable oils 119 142 18.9 Source: Appendix Tables 27 and 28. 137 The greatest increases in production were experienced by sugar beets, vegetables, peanuts, and soybeans. Domestic production of millet recorded the only decrease between the periods. The price data presented in Table 3.55 is not as complete as the production data; however, it does indicate that the rapid increase in sugar beet and potato production was primarily in response to rapid price increases. Another factor influencing the domestic production of sugar beets Table 3.55 Percentage Price Changes for Selected Field Crops in Turkey: 1950/54-1955/601 Commodity Percent Change Wheat 51.9 Rice 91.8 Barley 81.1 Oats 76.3 Corn 85.2 Sugar beets 187.8 Potatoes 217.4 Prices to farmers . Source: Calculated from data presented in: Aktan Resat, Anal sis and Assessment of the Economic Effects Public Law 480 Tiile I Program, Turkey, Ankara, Turkey, June, 1963, Tables XXXIV and XXXV. 138 and potatoes is irrigation. In 1955 these two crops had the highest percentage of total crOp irrigated of any crops in Turkey and with the 157 rapid rise in their prices, the percentage has no doubt increased. Wheatheed grains and related products. The principal cereals produced in Turkey, wheat, barley, oats, and corn, were all imported under Title I. The importance of cereal production in Turkey is shown by the fact that about 90 percent of the cultivated land is devoted to grain production, Of this area, 59 percent is in wheat and either current crop or fallow. 21 percent in barley with the remainder devoted to oats, corn, rye, and 158 To support cereal prices, the Turkish Government each June fixes TgMOOO millet. support prices for wheat, rye, barley, oats, corn, and rice. stands ready to buy at the established prices, all quantities offered Deliveries are optional, as a private cereals market functions by farmers. in Turkey, and there is no obligation for the growers to supply any part of their crop to T.M.O. In addition to stablizing the cereals market by buying cereals offered to it and releasing stocks whenever prices rise above a certain T.M.O. will level, T.M.O. also performs market organization functions. deliver wheat to a flour mill in one population center or flour to a hospital or army unit in another, in this way playing a major role in the distribution of wheat and flour from surplus to deficit areas. Support-.prices of five cereals for the period 1952-1960 are pre- ented in Table 3.56. It can be seen that the ratio of announced wheat The data presented will not allow a com- 157Op. Cit., West, p. 12. rison over time as it is limited to the year 1955. 158 Cit., West, p. 28. Op. 139 Table 3.56. Support Prices of Cereals in Turkey: 1952-1962l (Kurush per Kg)2 Wheat Rye ~ Barley Oats Corn 1952 30 21 19 19 20 1953 30 21 19 19 20 199+ 30 25 22 22 22 1955 30 25 22 22 24 1956 35 25 26 25 24 1957 45 32 32 31 30 1958 45 32 31 31 30 1959 45 32 31 31 38 1950 55 42 39 39 38 1961 53 3 3 3 47 1962 73 3 3 3 55 1. Top prices for best quality cereals including premiums. 2. One Kurush equals about .1 cent. Source: United Nations, F.A.O. National Grain Policies, Rome, 1959, p. 93. United Nations, F.A.O. National Grain Policies Supplement 2, Rome, 1960, p. 95. Aktan Resat, Analysis and Assessment of the Economic Effects Public Law 480 Title I Program Turkey, Ankara Turkey, June, 1963, Table 26. prices to feed grain prices has been declining. 140 In 1952 the announced price of feed grains was about two-thirds of the announced price of wheat while in 1960 announced prices of feed grains were about four-fifths of the announced wheat price. As could be expected, the same trend has occurred in the ratio of farm prices of wheat to farm prices of feed grains. See Table 3.57. Table 3.57. Selected Price Indexes in Turkey: 1950-1962 (Average 1950-54 = 100) 2 veW— 2 1 1 l 1 All raw . General Year Wheat Barley Corn Oats Cereals Materials Index 1950 96.3 88.2 93.1 87.3 97.3 87.2 88.9 1951 94.9 86.8 91.2 91.5 95.2 110.3 99.8 1952 98.0 93.6 94.9 96.8 93.3 100.1 99.2 1953 101.7 105.9 103.7 103.7 99.1 94.0 100.1 1954 108.8 125.0 117.8 120.6 115.1 108.3 112.0 1955 112.5 129.4 123.5 126.5 123.0 128.9 127.6 1956 119.7 146.6 140.1 143.9 160.0 143.2 148.2 1957 151.2 183.3 193.5 174.1 185.6 200.3 174.4 1958 152.2 177.5 193.1 175.7 172.5 217.7 208.3 1959 175.3 211.8 217.9 205.8 206.1 268.8 256.4 1960 200.3 237.7 242.9 231.7 222.6 308.0 260.0 196.1 246.1 263.3 278.3 238.1 263.9 273.4 261.3 1962 279.3 289.2 313.4 277.2 276.5 277.6 268.6 '__ L. prices received by farmers ’. wholesale price indexes Aktan, Resat, Analysis and Assessment of _Ehe Economic Effects Public Law 480 Title I Program Turkey, Ankara, Turkey, June 1963, Table XXXIV and XXXVI. ource 3 141 The increases in the indexes of feed grain and wheat prices did not keep pace with either the. general wholesale price index or the index of wholesale price index or the index of wholesale vegetable raw materials prices until 1962. The reversal of the trend in 1960 is the result of large increases in the support prices of cereals in 1960. For example, the support price of wheat increased from 45 kurush per kilogram in 1959 to 73 kurush per kilogram in 1962 in three annual jumps. To the extent that the availability of cereals on less than commercial terms contributed to price policy decisions, the lagging cereal prices of the period 1955-1960 can be attributed to Title I imports. In view of the fact that these imports were the equivalent of 12 to 15 percent of marketed domestic production, this conclusion seems warrented.l59 The domestic production of all cereals imported under Title I increased between the periods 1950-54 and 1955-60. See Table 3.56. The greatest increase was in wheat production, 34.7 percent, while barley production increased 21.3 percent, and domestic production of oats and corn increased 24.3 percent and 14.1 percent, respectively. Domestic production of rye, which is not imported under Title I, increased 16.1 percent while that of another non-Title I cereal, millet, decreased 19.8 percent. The principal non-cereal substitutes in production for wheat and feed grains in Turkey are pulses. The domestic production increases for the 159A highly tentative statistical analysis reported in the Turkey report suggests that the annual increase in nominal wheat prices would have been twice as great in the absence of P.L. 480 or other wheat imports of a similar magnitude, other things remaining the same. Op. Cit., Aktan, p, 19-19, Part II. 142 principal pulses between the periods 1950-54 and 1955-60 were; dry beans 38.2 percent, dry peas 50.0 percent, broad beans 18.4 percent, There appear to have chick peas 7.2 percent, and lentils 19.4 percent. been no shifts in production from feed grains or wheat to pulses. The fact that wheat prices lagged behind feed grain prices while there appears to have been no shift from the production of wheat to either feed grains or pulses is probably due to the role of wheat in the Turkish economy. Wheat is the traditional food crop of the turkish farmer and only a small percentage has in the past moved in commercial channels. The authors of the Turkey Report estimate that in 1950 about 20 percent of the wheat crop was sold and by 1960 this had only increased to 40 percent. Thus the increase in production of wheat in spite of the declining food-feed grain price ratio, is probably due to a lack of price responsiveness on the part of wheat producers. It could be expected that lagging feed grain prices would stimulate livestock production provided that lovestock prices kept pace with or exceeded the general price rise of the nation. The wholesale or producer price index was not available for livestock products, which prevents a direct comparison; however, the retail price index is available for both meats and other products.]'61 See Table 3.58. 160 . . . Op. Cit., Aktan, Tables 37 and 38, The authors did not estimate the marketed share for other crops, and even the estimate for wheat must be considered quite tentative. 16 . The authors of the Turkey Report feel that consumer prices generally show the same trends as farm prices and that changes in marketing margins, processing, and wages in transportation and distribution have not induced Op. Cit., Resat Aktan, Part II, p. 16. modifications in the patterns. 143 Table 3.58. Retail Price Index, Ankara, 1950-1962 (1950-54 = 100) General All Index Food Cereals Meats Dairy Products 1950 94.4 95.4 103.0 84.4 95.3 1951 93.4 92.3 99.0 86.6 83.5 1952 97.5 99.6 99.0 101.1 101.7 1953 102.6 103.7 99.0 111.1 107.1 1954 11.9 108.9 100.0 118.9 112.4 1955 125.2 118.3 101.9 127.7 127.4 1956 139.6 131.7 114.9 142.2 126.3 1957 157.1 153.5 147.5 133.3 132.8 1958 181.7 175.3 157.4 204.4 146.7 1959 222.8 227.8 185.1 245.6 223.8 1960 239.2 244.8 214.9 258.9 248.4 1961 242.3 248.9 222.8 261.1 245.2 1962 251.3 267.2 281.8 289.2 246.3 Source: Aktan, R., Analysis and Assessment of the Economic Effects Public Law 480 Title I Program Turkey, Ankara, Turkey, June 1963, Table XLV. The price patterns of livestock products and feed grains indicate that the. profitability of livestock enterprise increased rapidly until 1960. After 1960 rising feed grain prices stemming from increased support prices reversed this trend. The production of meat in Turkey increased from an annual average of 103 thousand tons in 1950-54 to an annual average 144 of 150 thousand tone in the period 1955-60, a 45 percent increase. Domestic production of beef and veal increased from an annual average of 46 thousand tons to 75 thousand tons during the same two periods, an increase of over 60 percent. The extent to which the increase in livestock production can be attributed to lower feed grain prices stemming from Title I imports is However, no doubt feed grain imports under Title I difficult to discern. In were partially responsible for the increase in livestock production. addition, imports of products other than cereals under the Title I Program have also contributed to the growth in Turkey's livestock industry. E.B.K. (Meat and Fish Corporation) is responsible for Title I imports of non-cereals. As a result of a difference in buying and selling prices of these imports E.B.K. has realized a substantial profit, which has en- hanced its ability to invest in the construction of modern meat slaughter and distribution facilities.162 Vegetable oils and relatediroducts. The other significant group of Title I imports, in addition to food and feed grains, were fats and oils. As was noted earlier the average domestic production of vegetable oils in- creased about 19 percent between the periods 1960-1954 and 1955-60. However, the data on domestic production includes cottonseed, sunflower, sesame, poppy seed and olive oils while Title I imports were limited to cottonseed and soybean oils. Under these circumstances the comparisons are not very meaningful because some of the oils are substitutes in production, others substitutes in comsumption, and others not related. Another method of getting an indication of the effects of Title I imports on the domestic production of fats and oils in Turkey is to look 162 . Op. Cit., Aktan, Part II, pp. 4-5. at'fluadata on the sources of vegetable oils, and oil seeds. Table 3.59 gives the average domestic production and farm prices of three principal oil seed crops for the periods 1950-54 and 1955-60 as well as the percentage change between the two periods. is the source of cotton seed oil which is the only vegetable oil both domestically produced and imported under Title I. 145 163 Cottonseed the other two oil seeds, sesame and sunflower seed, are both field crops and edible and thus are related to cottonseed oil on both the production and consumption side. Table 3.59. Average Production and Farm Prices of Selected Oil Seeds, in Turkey 1950/54-1955/60 Average Average Percent 1950—54 1955-60 Change Productionl Cottonseed 270.4 298.1 10.2 Sesame seed 34.9 46.6 33.5 Sunflower seed 101.3 116.4 14.9 Farm Prices2 Cottonseed 27.9 55.2 97.8 Sesame seed 84.7 169.2 99.8 Sunflower seed 36.0 82.1 128.1 1 in.1000's metric tons. 2 in Kurush per kilogram. Source: Appendix tables 29 and 30. 163 . . . . . . Domestic production of fats is not discussed primarily because of a lack of data but also because the production of fats is highly related to meat production which is considered under the feed grain section. 146 mmmstic production of all three oil seed increased between the Cottonseed production increased by 10.2 percent, sesame two periods. seed production 33.5 percent, while sunflower seed production increased The increases in prices of the three oil seed crops were 14.9 percent. 97.8 percent for cottonseed, 99.8 percent for sesame seed and 128.1 per- cent for sunflower seed. The price increases for cottonseed and sesame seed were about the same as the percentage increase in the wholesale price index between The price increase for sunflower seed surpassed the in- the two periods. crease:h1the wholesale price index and also the increase in the whole- sale price index of vegetable raw materials. It is difficult to assess the effect of Title I imports of cotton- seed oil, the only vegetable oil both imported under Title I and domestically produced, on domestic production of cottonseed. The reason being that cottonseed, a jointly produced product of cotton lint, is greatly in- fluenced by the price and production of cotton. For example, in 1957-58 the price of cotton, which is supported by two unions of cotton cooperatives, As a result of the price increase, domestic was increased 25 percent. production of cotton increased greatly as did domestic cottonseed pro- With the increased supply of cottonseed the price of cottonseed duction. increased only 1 Kurush per kilogram as compared to increases of. over 10 7 Kurush the proceeding year and at least 5 Kurush in the three years pre- However, in 1959 when cotton production and hence cotton- ceeding that. seed production fell off somewhat the price of cottonseed increased over .10 Kurush per kilogram. lESL‘Op. Cit., West, p. 26. 147 No doubt one reason for relatively small increase in cottonseed production was the relative stability of its price as compared to that of other oilseeds and the wholesale price index. However, some weight must be given to the fact that cotton production was greatly stimulated in the early 1950's by the demand created by the Korean War. In addition, the cotton unions that support the price of cotton in Turkey are hesitant to increase its price. The reason is that the price of cotton in Turkey is above the world price, and although price increases may be passed on in the case of domestically utilized cotton, the cotton unions must absorb any loss incurred on exported cotton.165 Long run effects of Title I imports on domestic agricultural pgoduction in Turkey. The effect of Title I imports on agricultural producers in- comes in Turkey was mixed. The price and production record of oil seeds suggests that the effect of Title I imports of vegetable oils on the income and thus on the investment patterns of oil seed producers was negligible. On the other hand, during the early years of the Title I, program cereal prices failed to keep pace with those of other agricultural products and with the general level of inflation. It is difficult to pin point exactly the effect of lagging prices on the income of cereal producers. However, if real prices of wheat had increased as much in the period 1955-61 as the Turkey Report suggest they did in the period 1948-54, the income received by wheat producers would have been at least 9 or 10 percent greater.166 65 166 , . . This assumes that total production and production costs were the same in both periods. 148 Feed grain prices did not lag behind noneagricultural and other agricultural prices as much as did those of wheat, but no doubt the income of feed grain producers would likewise have been greater in the absence of the program. Lagging feed grain prices did, however, contribute to an increase in the profitability and size of the livestock industry, and in this way to increased income in this section of the Turkish agricultural economy. At the national hvel there are two ways in which Title I imports have affected agricultural production in Turkey. The first of these is through investments made with local currency arising out of the Title I program which the United States either granted or loaned to Turkey for investment in agriculture. The second is the utilization of profits accruing to the importing agencies as a result of a difference between the import and domestic prices of Title I commodities. The effect of loans and grants of Turkish currency made by the United States for direct investment in agriculture has been relatively minor. Out of a total 2,292 million lira arising out of the Title I program less than 4 percent has been allocated either directly or in- directly for investment in agriculture. Two semi-official Turkish agencies are responsible for handling all P.L. 480 imports, the Toprak Maksulleri 9_f_i_ei_._ and £1; Yew Kurumco. The TMO has responsibility for the importation of cereal products while E.B.K. handled almost all of the tallow and oilseed imports as well as the small quantities of beef, poultry, and dairy products imported.167 AS a a result of a Spread between buying and selling prices or Title I imports 167 . Op. Cit., Aktan, Part II, p. 4. 1.B.K. during the period 1955-1962. and T.M.O. realized a combined income of 461,511 thousand lira See Table 3 . 60. Of this total, 268,285 thousand lira accrued to T.M.O. while E.B.K. realized 196,225 thousand lira. Table 3.60. Income Accruing to the Importing Agencies of Title 1 Products: 1955-1962 (in 1000's of Lira) Year Costs Returns Difference 1955 85,448 116,233 30,785 1956 32,354 50,651 18,298 1957 295,415 388,654 93,238 1958 267,228 361,935 94,707 1959 328,585 446,151 117,566 1960 275,309 259,099 -16,210 1961 604,475 623,304 18,829 1962 805,872 913,170 107,298 Total 2,694,685 3,159,196 464,511 Source: Aktan, R., Analysis and Assessment of the Economic Effects Public Law 480‘Title i Program TuEEey, Ankara, Turkey, June, 1963, Table XVII A lack of data prevents an analysis of the use of this income accruing from the Title I program to E.B.K. and T.M.O. In general T.M.O. is a price support and marketing agency while E.B.K. tends to work more in the areas of . . 168 cold storage, proceSSing and marketing. 16 8 Op. Cit., Aktan, Part II, p. 5. The efforts of E.B.K. have provided 150 Turkey with modern meat Slaughter and distribution facilities. The extent to which Turkey's processing capacity for livestock products is expanding" is shown by the recent construction of four modern meat processing plants, four milk pasteurizing plants and two milk processing plants.169 Because of the nature of the various functions performed by the two agencies it would be difficult to determine the extent to which investment in agriculture has been stimulated by their operations. However, prices of cereals certainly would have fallen more in the absence of T.M.O. and the investment orientation of E.B.K. both suggest a positive contribution to Turkish agricultural investment arising out of the Title I program from this source. Turkey has suffered from continued inflationary pressures. These pressures arise primarily from increases in develOpment expenditures in conjunction with the low income elasticity of the nation's tax structure.170 The Title I program by making goods available no doubt contributed to the success of this increased investment budget in several ways. In the first place, more goods were available in the economy to help reduce inflationary pressures and relieve food shortages. In addition, the fact that Title I counterpart funds were not deposited to become available for expenditures until about 1958 helped reduce the competition for goods.171 169Op. Cit., West, p. 22. This was in 1958 and thus these particular investments are probably not attributable to Title I funds, however, it does point to the investment orientation of E.B.K. 70 1 Op. Cit., Aktan, Part II, p. 12. 171 . No deposits were made until 1957 and no expenditures until 1958, Op. Cit., Aktan, Part II, p. 8. 151 The United States chose to retain 46 percent of the local currency balances arising out of the Title I program for its own uses. This re— sulted in some competition for resources as well as a loss in foreign exchange for Turkey. It is this loss of exchange and the failure of the Title I program to channel significant additional amounts of investment expenditure into the agricultural sector which will have the long run impact upon the development of Turkish agriculture and of the nation . 172 . . . itself. Many of Turkey's agricultural commodities, cotton, tobacco, fruits, nuts, etc., are in high demand in many European nations. A recent agreement between the Government of Turkey and the E.E.C. will lead to 173 With this guaranteed eventual full membership for Turkey in the E.E.C. market, it would seem that perhaps a heavier commitment to agricultural development would be a promising line for Turkish investment expenditures. 172 Less than 4 percent of the local currency balances arising out of the Title I program can be attributed to agricultural investments. 173 This is to be accomplished in three stages; (1) Turkey will receive ;preferrential treatment during the period 1963-1968, (2) customs union to be introduced over a period of 12 years, and (3) full membership. Op. Cit., .Agricultural Handbook No. 132, pp. 196-197. CHAPTER IV A COMPARISON OF THE EXPERIENCES OF THE SIX NATIONS The purpose of this chapter is to compare the experiences of the six receiving nations, and to draw some conclusions on the basis of their combined experiences. Thus, the first part of this chapter compares the effect of Title I imports of wheat, cotton, feed grain and vegetable oils upon domestic production. The second part of the chapter considers dissimilarities in individual nations experiences as well as the reasons for the dissimilarities and some of their implications. :flheeg. In each of the six nations studied wheat was an important part of the Title I program. However, the effect of wheat imports upon domestic production varies considerably between nations. In Turkey imports of wheat under Title I contributed to a relative decline in domestic wheat prices as increased supplies relieved the pressure on the government to increase support prices more rapidly. However, in 1960 the support price was raised, the price of wheat started to recover and by 1962 the lag was completely overcome. The relative decline in wheat prices in the period 1955-60 does not appear to have reduced wheat production. A similar lack of price response is also evident in Pakistan. In this nation, the government allowed the price of wheat to increase as rapidly as those of its major competitors, and faster than the general price level, yet production remained virtually stable. This lagging production in conjunction with a rapid population growth resulted in an 152 153 unfilled demand for wheat that was met with Title I imports. Some observers have argued that had rising demand been allowed to push prices of wheat even higher, production would have been greater. However, the pattern of land use in Pakistan during the period 1950 to 1960 suggests that a lack of price responsiveness exists which would have prevented any substantial increases in wheat production. In India the price and production pattern of wheat compare favorably with that of other field crops. But the use of Title I imports to hold down wheat prices contributed to a loss in potential income at the pro- ducer level. It is difficult to say just how much the government of India would have permitted prices to rise in the absence of the Title I program. But a review of the measures adopted, in addition to selling Title I wheat through "Fair Price Stores", to prevent price rises in basic food grains suggests that any loss in income that can be attributed to Title I is negligible. In Japan, the average domestic production of wheat during the five ;years preceeding the initiation of the Title I program was greater than it was during the Title I period. However, there does not appear to be any direct relationship between Title I imports of wheat and the decrease in domestic production. The major reasons for the decline in wheat production ‘were rapidly rising yields in the case of one of its principal competitors and rapidly rising prices in the case of the other. Barley yields in- creased considerably more than wheat yields while the relationship between their prices remained about the same. In addition, wheat prices, which are set without regard to Title I imports, did not increase as rapidly as did those of rapeseed-another major user of wheat land. The shift of .acreage formerly devoted to wheat production to the production of barley and 154 rapeseed was reinforced by falling retail prices for rice, which is a preferred food of the Japanese people. In Colombia as in Japan, the area devoted to the production of wheat decreased; although, total production of wheat increased due to the adoption of a new variety. The land shifted out of wheat production has gone Primarily into barley and corn production, both of which substitute readily for wheat on Colombia's cooler lands. The price of wheat has not kept pace with the price of either corn or barley. The reason for the change in relative prices is partly Title I imports, and partly the nature of the institutional structures in Colombia. AS a result of Title I imports, retail prices of wheat were held in check, which has reduced the pressure on the government to stimulate local production through increasing the support price of wheat -- a price already well above world levels. On the other hand, the demand for livestock products has been increasing, which in turn has pushed the price of corn upward. Barley prices have also increased more rapidly than wheat prices, primarily as a result of pressure exerted by the agency which supports barley prices. Thus in Colombia Title I imports have contributed to a decrease in the acreage sown to wheat. In Israel the Situation was just the opposite in that the Title I program actually contributed to an increase in domestic wheat acreage and production. But the increase was due to Title I feed grain imports rather than to wheat imports. Following the initiation of the Title I program in Israel there was a shift of land out of barley production into wheat production and a consequent increase in wheat production. Imports of feed grains under Title I contributed to the Shift in land use in two ways. First, feed grain imports helped to hold domestic feed grain prices 155 down while wheat prices increased. Second, feed grain imports under Title I played a major role in the government's food grain expansion program which provided for the exchange of one ton of domestically produced wheat for one and one-third ton of feed grains. The resulting increase in wheat production in conjunction with Title I imports did, however, result in a decline in commercial wheat imports. Feed grains. Feed grains were an important part of the Title I program in three nations. These nations include Israel, Japan, and Turkey. In Israel the importation of feed grains under Title I adversely affected domestic feed grain production. The adverse effectwas brought about in two ways; (1) Title I imports of feed grains contribute to the stability of feed grain prices and (2) the availability of surplus feed grains contributed to the government's wheat expansion program. As a result of these two forces, the acreage devoted to the three principal feed grains in Israel declined substantially following the initiation of the Title I program. The lower grain prices in conjunction with rising consumer demand did lead to a rapid increase in the domestic livestock industry of Israel. Thus, although the incomes of feed grain producers were injured by the Title I program, the income and investment of livestock producers were . greatly expanded. There appear to have been no adverse effects upon domestic feed . grain production in Turkey in spite of the fact that feed grain prices lagged behind those of most other agricultural products and the general price level. One reason for this production record was the fact that the prices of wheat, the major production substitute of feed, increased even 156 less. Feed grain prices are the responsibility of a government agency in Turkey and with the supplies imported under Title I, there was less incentive to push them up. Lagging feed grain prices were injurious to the incomes of feed grain producers but in conjunction with rising retail livestock prices resulted in an expanded livestock industry. Title I imports of feed grains in Japan were limited to barley and corn. The domestic production of barley increased primarily because rising yields encouraged the planting of barley on lands formerly devoted to wheat production. Domestic corn production in Japan also increased. The increase coming in spite of the fact that the price of corn fell more than 20 percent after 1955, and the fact that the government launched an expansion program for a major competitor of corn, sugar beets. The fall in price was primarily a result of a government decision to sell imported coen at prices substantially below prevailing domestic prices. Title I imports made up between 10 and 15 percent of corn imports and thus con- tributed to the feasibility of the program. To this extent, Title I imports contributed to a decrease in the income of corn producers. There is, however, no indication that the lower corn prices resulted in an ex- panded livestock industry in Japan. Cotton. Imports ofcxmton under Title I of P.L. 480 were significant in four nations of the Six studied. These nations were Colombia, India, Israel and Pakistan. Domestic cotton production in Colombia expanded greatly between 1955 and 1960. The increase in production stemming from greatly expanded acreage being brought into cotton production in response to a vigorous cotton expansion program. This program, which included import protection, 157 higher support prices, and guaranteed markets, resulted in over a 380 percent increase in cotton acreage between 1950 and 1960. The success of the cotton expansion program far overshadows any effect that Title I imports of cotton had upon domestic cotton production in Colombia. In Israel, the government also followed a vigorous cotton expansion program in an attempt to stimulate production of a crop which has only been grown on a commercial basis in Israel since 1953. The expansion program included fixed prices, crop insurance, seed distribution and pest control measures. In addition, cotton producers received substantial government subsidies.1 The purpose of this vast expansion program was to provide domestic supplies to meet the ever growing needs of Israel's expanding textile industry. In the early years of the expansion program, Title I imports were used so as to allow a more complete utilization of facilities being built in anticipation of greater local supplies. In this way, the imports of cotton contributed to an early expansion of the textile industry yet caused no adverse effects upon domestic cotton pro- duction. In Pakistan the Title I program contributed to an expansion of the domestic cotton textile industry. This rapid expansion is evidenced by a larger per-capita consumption of cotton textiles, in spite of a rapidly _‘growing pOpulation, and an increase in textile exports and a decrease in imports. The relationship between this growth and the Title I program stems from the fact that the government allowed Title I imports to lower domestic prices of the industries raw material, cotton. 1About 10 million Israel Lira in 1961-62. 158 In India Title I imports of cotton appear to have had no effect upon domestic production. Cotton prices lagged somewhat compared with other farm products, primarily as a result of the high prices of the early 1950's. Title I imports do not appear to have stimulated either the domestic textile industry nor India's exports of textiles as was the case in Pakistan. Vegetable oils. Vegetable oils were important in the Title I program in Colombia, Israel, Pakistan and Turkey. Cottonseed and soybean oils were the major vegetable oils imported and in each case, except Colombia, cottonseed oil was the only vegetable oil both imported under Title I and domestically produced. In Colombia and Israel any effects of Title I vegetable oils upon domestic production were over-shadowed by the various cotton expansion programs pursued by the respective government. In Turkey Title I imports resulted in no discernable affects upon domestic production. However, the relationships between the various vegetable oils on both the production and consumption sides are very complex, which coupled with disease and pest problems permits any firm statements. In Pakistan, as may be expected in view of the production record of cotton, cotton-seed production was virtually stable. The fact that Title I imports of vegetable oils were used for the express purpose of lowering domestic prices of cottonseed and cottonseed oil no doubt contributed to this production record; however, the lagging price of cotton lint was probably a more important variable. The government of Pakistan chose to use Title I vegetable oil imports to hold down the domestic price of cottonseed oil in an attempt to stimulate the vanaspati 159 industry in Pakistan. AS was the case with the cotton textile industry, the vanaspati expansion program met with considerable success. Title I imports,_domestic_production and producer incomes. The effect of Title I imports upon the distribution of income in the receiving nations were greater than were the effects upon domesticiproduction. The shifts in income occurred at three levels, (1) from producer to consumer, (2) from producer to industrial owner, and (3) amongagricultural producers. In each of these instances the income of agricultural producers was injured, and in view of the importance of producer income in determining investment decisions at the farm level these affects could have a significant impact upon long run agricultural output in the receiving nations. But positive effects also accrue from the shifts in income, as lower raw material prices stimulate development of agriculturally based industries, and stable food grain prices contribute to stability not only of a political nature but also in the nations overall price level. Public poliey and Title I imports. The comparison of the experiences of the six receiving nations also points up the fact that the most important variable in explaining the differential impact of Title I imports upon domestic agricultural production is the public policy of the receiving nation. A second and related conclusion the comparison reveals is that Title I imports have contributed significantly to increased flexibility of public policy in the receiving nations. There are many examples of this increased flexibility, including the food grain and cotton textile programs in Israel, the wheat procurement and cotton textile programs in Pakistan, etc. The wisdom of each individual policy adOpted will not be questioned as this is beyond the scope of the study. However, it Should be noted that a decision to expand a domestic 160 industry on the basis of Title I imports, that are non-commercial, temporary supplies, at the expense of domestic producers appears to be quite short Sighted. In the case where Title I supplies are treated as temporary, the situation is quite different. .The use to which the government of Israel put Title I cotton imports in expanding its domestic textile industry is a good example of wise use of these additional re- sources. The cotton imports were used to allow an early expansion of the textile industry to a level that permitted substantial economies of scale; at the same time a vigorous cotton expansion program was initiated to insure future supplies from domestic sources. There are, however, situations in which it would pay a nation to expand an industry on the basis of cheap imported raw materials. This would occur when the nation has a comparative advantage in the manufacture of a commodity but not in the production of its raw material. These are the types of questions that should be considered by each of the receiving nations in advance of industry expansion and not in the future when it becomes ineligible for the Title I program. CHAPTER V SUMMARY AND CONSLUSIONS The overall objective of this study was to determine the relation- ship between Title I imports and agricultural production in the receiving nations. Six nations were selected for study, primarily because of the availability of data. The Six nations were Colombia, India, Israel, Japan, Pakistan, and Turkey. In the early parts of this chapter a brief summary of the con- clusions reached concerning the relationship between Title I imports and comestic production in each of the Six nations is presented. The second part of the chapter reviews the conclusions arrived at through the com- parisons made in the preceeding chapter and the last part points out some of the policy implications of the study. Colombia. In Colombia three different Title I commodities, wheat, cotton, and vegetable oils, were related to domestic production. The analysis suggests that Title I wheat imports have contributed to a reduced rate of growth in Colombian wheat production. This Stems from the fact that the availability of Title I wheat reduced pressures for the government to stimulate production by increasing domestic wheat prices that were already above the world price level. Cotton and vegetable oils were also imported but a vigorous cotton expansion program over-shadowed any effect of Title I imports upon domestic production and prices. At the aggregate level the availability of ready production sub- stitutes, barley, dairy, corn, potatoes, prevented any substantial reduction in farm incomes stemming from lagging wheat prices. But for those farmers 161 162 who were slow to make adjustments, either because of poor managerial ability or economic barriers, income was reduced. At the national level, the availability of labor and a relatively stable monetary policy suggest that Title I funds Spent upon investment have actually increased investment. The fact that much of this additional investment was channelled into ' I I agricultural investments should have a favorable long run effect upon agricultural production. yIn view of the increasing demand for food and z . foreign exchange in Colombia, the investment in agricultural will have a large pay-off for the nation as a whole.' £2212: In India two Title I commodities, wheat and cotton, were related to domestic production. The analysis suggests that imports of wheat and cotton had no discernable effect upon domestic production. In spite of the fact that wheat imports were the equivalent of over 25 percent of domestic production, the price level of wheat has not declined. In fact, the real price of wheat as compared with manufactured products Showed no downward trend over the past decade and even rose in recent years.1 COttOfl prices have lagged somewhat but probably due mostly to a slump in world demand following the end of the Korean conflict of the early 1950's. Even Should it be the case that the government of India would have allowed wheat and cotton prices to increase more rapidly in the absense of the Title I program, the price response coeffients for Indian farmers reported by the N.C.A.E.R. study suggest that output would not have increased greatly. 1 e . e o e e 0 Ezekiel, M., "Impact and implications of foreign surplus disposal on under-developed economies: the international perspective," J.F.E., 42, No. 5, 1960, p. 1068. 163 The effect of Title I imports on investment at the national level center primarily upon the role of these imports in the second Five Year Plan of India. The Title I program made at least two important contri- butions to this plan; (1) it helped to offset the inflationary pressure created by the second Plan and, (2) it compensated for the Plan's in- dustrial emphasis. As of 1961, only 13.7 percent of the local currency component of the Title I program had been disbursed, which meant that the Title I commodities were able to absorb a considerable amount of the ex- cess money created by the deficit spending of the Second Plan. The Title I program is playing even a greater role in India's Third Five Year Plan as the timing and long term (4 years) duration of the 1960 agreement permitted the Planning Commission to integrate these expected receipts into this Plan. Israel. The analysis of the effects of Israel's imports under Title I upon domestic price and production was limited to four commodities, wheat,feed grains, cotton, and vegetable oils. Imports of cotton and vegetable oils appear to have had no effect upon domestic production. However, cotton imports did contribute to the expansion of the domestic textile industry by providing raw materials when domestically produced cotton was not yet available in sufficient quantities. The effect of Title I imports of wheat and feed grains on domestic production in Israel was greatly influenced by the government's food grain expansion program. This program made use of Title I imports to promote domestic wheat production. As a result there was greatly expanded pro- duction of wheat in Israel following the initiation of the Title I program, while the area devoted to the production of the three major feed grains declined. 164 There was probably some loss in feed grain producer income as compared to what it would have been in the absence of the Title I program. However, this loss was not as great as it would have been had the govern- ment of Israel not embarked upon a food grain program. Title I imports in Israel had a substantial positive impact upon income of livestock producers, as livestock production expanded greatly. Ginor estimates that I.L. 14-16 million annually was added to livestock producers incomes and that Title I stimulated over I.L. 10 million additional annual investment in this sector. At the national level the Title I program had two distinct effects upon investment. First the inflow of commodities permitted additional investment which resulted in the creation of over 5,000 new jobs a year between 1955 and 1960 and at the same time held the price level relatively stable. Secondly, the Title I program resulted in a larger import component in the development expenditures of Israel. Although the investments which can be identified as being made with Title I funds had a small import component, the Title I program made more foreign exchange available for non- food imports. Thus the investment pattern of Israel was influenced in the direction of projects with higher foreign exchange requirements. £3232, Imports of wheat, feed grains, and tobacco were related to domestic production in Japan. The analysis leads to the conclusion that Title I imports were absorbed by Japan with no detrimental effects upon domestic agricultural production. The Title I program did, however, result in a decline in commercial imports of tobacco and contribute to the government's feed grain price stabilization program. 165 The structure of the Japanese economy in general and Specifically that of agriculture suggest that the investment projects supported with Title I funds are those that will contribute to the agriculture policy objectives of the nation. Japan is primarily an industrial nation with a land poor agricultural sector. Thus, the channelling of most of the Title I funds into industry and utilizing those ear marked for agriculture for intensification through irrigation will lead to increased agricultural incomes. Industrial expansion will permit the transfer of labor out of the agricultural sector and irrigation projects will increase the pro- ductivity of those workers remaining in agriculture. Pakistan. The analysis of the effects of imports under Title I upon domestic production in Pakistan was limited to three commodities, wheat, cotton, and vegetable oils. Imports of wheat appear to have had no adverse effects upon domestic production but did contribute to the government's wheat distribution program, while, cotton and cottonseed oil were used to stimulate the textile and vanaspati industries. The expansion of the textile industry and consequent increases in textile exports and decreases in textile imports contributed Significantly to offsetting a substantial decline in Pakistan's earnings from raw cotton exports. However, there was a net loss in exchange earning from cotton that is partially due to U. S. subsidized cotton exports either through Title I or other programs. The effect of Title I imports upon the income and investment of wheat and cotton producers was negative. The income of cotton producers was adversely effected by imports of both raw cotton and cottonseed oil as the government utilized these imports to stimulate the domestic textile 166 and vanaspati industries. At the national level, the Title I program appears to have resulted in a greater emphasis on investments in in- frastructure than would have been undertaken in the absence of the program. However, the fact that by 1962 only about one-third of the local currency arising out of the Title I program had been disbursed is a more important aspect of the effects of the program. The lack of increased agricultural production to meet rising demands for food, points up the importance of the commodity impact of the Title I program to both political and price Stability in Pakistan. Had more Title I funds been released, the added money in the economy would have created new pressures upon both the food supply and price level and in this way offset many of the benefits stemming from the Title I food imports. Turkey. In Turkey imports of three different commodities were studied, wheat, feed grains, and vegetable oils. The analysis of the price and production record of these commodities leads to the conclusion that there were no adverse effects upon domestic production, as compared to the pre P.L. 480, period, stemming from the Title I program. Title I imports did contribute to lagging wheat and feed grain prices as the added supplies reduced pressure for increased support prices. However, in 1960 the support prices were increased and by 1962 cereal prices had recovered their relative position. The lower cereal prices of the late 1950's did contribute to a shift in income from cereal producers to both consumers and livestock producers. On the other hand, the price and production records of oil seeds Suggests that the effects of Title I imports of vegetable oils on producer income were negligible. 167 Turkey has suffered from continued inflationary pressures stemming from high development expenditures and a relatively inelastic tax structure. The Title I program by making goods available reduced these pressures.2 There is some indication that Turkey has chosen to neglect its agricultural development, and that the availability of agricultural commodities under Title I have contributed to this decision.3 In view 0f Turkey's position relative to the European Common Market it would seem that a greater in- vestment in agriculture would contribute more to the long run development of the nation. Results of Six nation comperison. In Chapter IV the experiences of the Six receiving nations were compared. AS is evident from the results of the individual nation analysis presented above, the experiences of these Six nations with the Title I program to not lend themselves to easy generalization. But three rather general conclusions do appear warranted. (1) Title I imports have been absorbed by the receiving nations with very little detrimental effect upon agricultural production. The most notable exceptions being wheat in Colombia and barley in Israel. (2) The most important variable in explaining differential impacts of Title I imports upon domestic agricultural prices and production is the public policy of the receiving nation. 2In addition the Title I local currency was not a significant additional source of money bidding for goods, as no expenditures were made until 1958 and as of 1961 less than 50 percent of the local currency balances had been disbursed. 3Aktan, R., Final Report on the P.L. 480,;Title I program in Turkey, Draft Copy of Chapter V. In addition to Aktan'S conclusion on the basis of his analysis of the budgets of the various agencies in Turkey, it Should be noted that less than 4 percent of the local currency balances were designated for investment in agriculture. 168 (3) The additional resources flowing into the receiving nations under Title I have permitted additional flexibility in the public policy of the receiving nations. Policy implications. The availability of new resources on less than commercial terms on a basis which must be considered temporary puts a responsibility on the decision makers of the receiving nations to consider not only the Short run consequences of their actions but also the longer run effects. There are indications that this has not always been taken into account especially where Title I imports have been used to expand new industries or as in the case of Turkey where Title I imports have resulted in a neglect of investment in the agricultural sector. Policies to facilitate the inflow of commodities under Title I without detrimental effects upon domestic agricultural production are necessary. But there Should be a greater effort on the part of both the donor and recipient nations to consider not only the Short run effects of such policies but also the long run consequences. In several of the nations, Title I imports were utilized to restrain rising food prices as domestic agriculture failed to respond to the needs of a growing population and higher incomes. However, in most instances the anti-inflationary affect of the Title I program resulted not only from the inflow of commodities but also from the fact that there were lags between the collection and disbursement of local currencies. Had these monies entered the economy at the same time as the goods, only a cut back in the money supply through some other procedure would have eased in- flationary pressures. It should be recognized that local currency balances spent outside the nation's investment plan will call for a reduction of an 169 equal amount of Spending in order to just maintain the prevailing in- flationary pressures. The Title I program should not be viewed as an alternative to solving the problems responsible for a nations inflation any more than it Should be used to delay a solution to the food production problem. In the more traditional agricultural sectors of India, Turkey, and Pakistan, the stability of production patterns in the face of changing prices was an important element in.determining the effect of Title I imports upon domestic production. However, the importance of the public policy of the receiving nations on the effects of the Title I program, in conjunction with the relatively few cases of adverse effects, speaks well of the receiving nations. For although under such circum- stances they must accept the bulk of the responsibility for the adverse effects which did occur, they must also be given major credit for the fact that the majority of the Title I imports were absorbed by the re- ceiving nations with little or no harmful effects. BIBLIOGRAPHY Books Boulding, R., Economic Analysis, Third Edition, Harper and Brothers, New York, 1955. Choudhury, R., The Plans for Economic Development in India, Bookland Private Ltd., Calcutta, 1959. Leftwich, R., The Price System and Resource Allocation, Revised Edition, Holt, Rinehart, and Winston, New York, 1960. Marshall, A., Principles of Economics, Eighth Edition, Macmillan and Co. Limited, London, 1959. Rubner, A., The Economy of Israel, Frederick A. Praeger, New York, 1960. Articles and Periodicals Bank of Israel, Annual Report 1922’ Jerusalem, May, annually. Ezekiel, M., "Impact and Implications of Foreign Surplus Disposal on Under- v/ developed Economies: The International Perspective," J.F.E. Vol. XLII, No. 5, Dec. 1960, pp. 1063-1077. Government of India, Statistical Abstract of the Indian Union, New Series No. 9, New Delhi, annually. Government of Japan, Ministry of Agriculture and Forestry, Abstract of Statistics on Agriculture, Forestry, and Fisheries: Japan, annually. Myers, M., "Impact of P.L. 480 - Discussion," J,F.E. Vol. XLII, Dec. 1960, L/ pp 1077-1081. Raup, P.M., "The Contribution of Land Reforms to Agricultural Development: An Analytical Framework," Economic Develgpment and Cultural Cheege, vol. XII, No. 1, Oct. 1963, pp 1-21. Schultz, T.W., "Value of U. 8. Farm Surpluses to Underdeveloped Countries,"'/ J.F.E., Vol. XLII, Dec. 1960, pp. 1019-1030. Sen, S. R.,"Impact and Implication of Foreign Surplus Disposal on Under- developed Economies - The Indian Perspective," J.F.E., Vol. XLII, Dec. 1960, pp. 1031-1042. J United Nations, Demographic Yearbook, Rome, annually. United Nations, F.A.0., Production Yearbook, Rome, annually. United Nations, Statistical Yearbook, Rome, annually. 170 171 United Nations, F.A.0., Trade Yearbook, Rome, annually. Witt, L. W., "Discussion: Impact and Implication of Foreign Surplus Disposal on Underdeveloped Economies," J.F.E., Vol. XLII, Dec. 1960, pp. 1046-1051. . f/ U.S. Government Sourcee American Embassy, Colombia: Fats and Oils, 6A (CERP - Section D, IV, A, 6) Bogota, Colombia, April 16, 1962. Brown, L.R., The Japanese Agricultural Econoey, U.S. Department of Agriculture, Economic Research Service, June 1961. Holm, H. M., The_eg;icu1tural Econogy of Israel, U.S. Department of Agriculture, Foreign Agriculture Service, June 1960. Lerner, 8., éggicultural Policy in Pakistan, U.S. Department of Agriculture, Foreign Agriculture Service, Foreign -16, Octo. 1961. Minyard, J. D., Cotton In Pakistan, U.S. Department of Agriculture, Foreign Agriculture Service, M-151, Sept. 1963. Porter, H. G., The Cotton Industry in Colombie, Cotton Division, Foreign Agricultural Service, U.S.D.A.. APril 1961. Public Law 480 - 83d Congress, Chapter 469 - 2d Session S. 2475, prepared for distribution by the Foreign Agriculture Service, U.S.D.A. Richards, 8. 1., Trends in India's Agricultural Trade, Foreign Agricultural Economic Report No. 15, E.R.S., U.S. Department of Agriculture, February, 1964. U.S. Department of Agriculture, Economic Research Service, eggicultural Policies of Foreign Governments, Agriculture Handbook No. 132, Washington, March 1964. U.S. Department of Agriculture, Economic Research Service, U.S. Foreigg Agricultural Trade by Commodities Calendar Year 1962, June 1963. U.S. Department of Agriculture, Foreign Agriculture Service, Title 1, Public Leg 480: Total Amounts Programmed and Shipped through December 31, 1962, and Shipments by 6-month Periods,_from July 1, 1959, through December 31, 1962, by Country aed Commodigy, S.D.S. - 6-63, March 15, 1963. U.S. Department of Agriculture, Foreign Agriculture Service, Title I, Peblic Law 480: Total Shipments by 6-month Periods, January 1955 through June 1959, by Country and Commodity, S.D.S.-7-61, May 24, 1961. 172 United State Government, Sixteenth Semi-Annual Report on Activities Carried on Under Public Law 480,1962. United States Government, Seventeenth Semi-Annual Report on Activities Carried on Under Public Law 480, March 4, 1963. Wanamaker, G. R., and MacDonald, D. L., The Market for Fats, Oils, and Oil Meal in Pakistan, U. S. Department of Agriculture, Foreign Agriculture Service, M-122, August 1961. West, Q. M., Agricultural Development in Turkey, Foreign Agriculture Report No. 106, U.S. Department of Agriculture, Foreign Agriculture Service, January, 1958. Other Sources Adams, D. W.,‘hdjustment Possibilities on Colombian Farms Under Alternative Levels of Public Law 480 Imports," Ph. D. Thesis, Michigan State University, 1964. Adams, D. W., Et. A1., Public Law 480 in Colombia: Igpacts of Title I Programs at Alternative Levels, Medellin, Colombia, November 1963. Aktan, R., Analysis and Assessment of the Economic Effects Public Law 480 Title I Program Turkey, Ankara, Turkey, June 1963. Aktan, R., "Final Report on the P .L. 480, Title I Program in Turkey," draft copy of Chapter V, Ankara, 1964. . Beringer, C., P.L. 480 and Economic Development (A case study of West Pakistan), The Institute of Development Economics, Karachi, February 1963. Fisher, F. M., Food Supplus Digposalngrice Effects,yand the Costs of Agricultural Policies in Underdeveloped Countries: A Theoretical Analysis, Report 6307, Netherlands School of Econometrics, February, 1963. Ginor, F., Analysis and Assessment of the Economic Effect of the U.S. Public Law 480 Title IeProgram,in Israel, Bank of Israel, Tel-Aviv, Oct. 1961. Goering, T. J., Colombian Agricultural Peice and Trade Policies, Universidad Nacional de Colombia, Palmirs, Colombia, 1961. Goering, T. J., Cotton Production in Colombia, Universidad Nacional de Colombia, Palmirs, Colombia, 1962. Goering, T; J.,‘United States Agricultural Surplus Disposal in Colombia," Ph.D. Thesis, Michigan State university, 1961. . 173 Goering, T. J., Wheat Production In Colombia, Universidad Nacional de Colombia, Palmira, Colombia, 1962. Goering, T. J., and Witt, L.‘W., United States Agricultural Surpluses; in Colombia: A Review of Public Law 480, Michigan State University, Agricultural Experiment Station, Tech. Bul. 289, Department of Agricultural Economics, 1963. Government of India, Second Five Year Plea, Bombay, 1956. Government of India, Third Five Year Plan, Bombay, 1961. Government of Israel, Ministry of Agriculture and the Bank of Israel, The Econogy and egriculture of Israel, A report prepared for the Mediterranean Development Project of the U. N., F. A.O., Jerusalem, June 1959. Government of Turkey, State Planning Organization, Tables of Five Year Develepment Plan of Turkey, (draft outline), Ankara, Sept. 1962. Guillermo, G. E., La Produccion de Maiz En Colombia, Universidad Nacional de Colombia, Medellin, Colombia, 1961. Mason, E. D., Et. A1., The Problem of Excess Accumulation of U.S. Owned Local Currencies; Findings and Recommendations Submitted to the Undersecretary of Stateeby the Consultants oneInternational Finance and Economic Problems, Washington: U.S. Government Printing Office, 1960. Menzie, Witt, Eicker and Hillman, Policy for United States Agricultural Export Surplus Disposal, the University of Arizona, Technical Bulletin 150, Agricultural Experiment Station, Tucson, Arizona. National Council of Applied Economic Research, Logg_Term Projections of Demand for and Supply of Selected Agricultural Commodities 1960-61 to 1975-76, N.C.A. E. R., New Delhi, April 1962. United Nations, ECAFB/FAO, A.Note on the Utilization of Agricultural Surpluses for Economic Develepment in Pakistan, Bangkok, 1961. United Nations, F.A.0., A.Note on the Utilization of Agricultural Surpluses for Economic Development in Jepan, Bangkok, 1958. United Nations, F.A.0., National Grain Policies, 1959 and 1963, and; Su lement No. l, 1559; Supplement No. 2, 1960; Supplement No. 3, 15%;, and; Supplement No._fl, 1962, Rome. Witt, L. W., Potentials of New“Markets for Agricultural Products, prepared for the Committee for Economic Development, July 1961. Witt, L. W., and Wheeler, R. 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