Imports of US wheat under PL-480
If there is any cause of worry in ensuring the availability of wheat/flour to the public, it is the flawed system of procurement, supply and distribution which needs to be urgently streamlined. Another cause of worry, so to say, is the growing interference by speculators, hoarders and profiteers in wheat trade that has to be tackled.
The proposal to import wheat under PL-480 is in addition to one tranche $500 million loan request to the World Bank for overcoming food and energy crisis the country is facing.
An envoy of the prime minister visited Washington early this month and delivered Asif Ali Zardari’s letter to Senator Tom Harkin, who chairs the US Senate Agriculture Committee about wheat assistance under PL-480. Federal agriculture minister Nazar Gondal had also made this request to US agriculture secretary Mr Shaeffer when he met the latter at the world food summit in Rome also in the first week of this month. Later, Pakistan made a formal request for PL-480 food assistance to the US authorities. In the past, Pakistan received a lot of assistance under this programme in different periods, more so in the 1960s. In 2001, when faced with famine-like conditions, Pakistan received a one-time assistance of $70 million under this programme. Over the years, the PL-480 which was originally used as a political instrument by the United States during the Cold War to wean away the poor countries from the Soviet Union is now less a concessional assistance and more a commercial activity.
Under this programme, the wheat has to be purchased in the United States and shipped to the recipient country by the latter itself. During 2004-2007 period, the US provided Pakistan commodity assistance under PL 480 worth $530 million.
In the second half of 1950s, Pakistan’s bulk of imports of food grains were financed under the concessional PL-480 assistance from the United States which proved counter-productive as this assistance discouraged the leadership to realise the need for developing domestic food grain production and, as such, agriculture sector remained neglected. In a way, from 1958 to 1965 Pakistan remained addicted to external aid.
The PL-480 programme came into existence on July 10, 1954 when President Dwight D. Eisenhower signed the Agricultural Trade Development Assistance Act known as Public Law 480. The purpose was to “lay the basis for a permanent expansion” of American exports of agricultural products “with lasting benefits to ourselves” as described by him.
Since that day, the lasting benefits he envisioned have been coming to his country. Global food aid programmes, the largest of which is PL480, have brought together governments, businesses, multilateral institutions such as the World Food Programme (WFP), and American NGOs in a partnership of their own, not without political ends.
President John F. Kennedy understood the importance of PL 480 to the US and renamed it “Food for Peace” by placing it in the newly created US Agency for International Development, saying “food is peace, and food is freedom”. The PL 480 food aid programme is comprised of three titles. Title II is the largest and is administered by the USAID.
During the second five-year Plan period (1960-65) the US provided 55 per cent of all aid received by Pakistan, covering 35 per cent of government’s development budget and 45 per cent of its import bill. Several factors had made this expansion possible. First factor was expenditure on Indus Basin works replacement, which amounted to $1.5 billion during the 1960s alone. It was financed either directly by foreign assistance or indirectly by counterpart funds generated by the sale of PL 480 commodity assistance.
Second factor was the availability of $800 million of non-project assistance during 1960-65, nearly 90 per cent from the US. A key element was the multi-year agreement in 1961 on an expanded PL 480 programme with the US, totalling $621.5 million for the remaining period of Second Plan; more than half the amount was for wheat imports and about 20 per cent was for vegetable oil imports.
The US aid came to a halt after the 1965 war with India. Though it resumed soon, it was much less than the previous size which, along with a rise in military expenditure, made it difficult for Pakistan to finance the imports. What was more obvious was the setback to agriculture; the large scale and assured food grain supplies, virtually on grant basis, had obscured agricultural incentives.
Off and on, Pakistan has been making request to the US for concessional commodity assistance under PL-480 programme. In February 1975, when Prime Minister Zulfikar Ali Bhutto visited Washington, he, in his meeting with President Ford, appreciated the substantial assistance given to Pakistan under the PL 480 programme during the past several years, and sought assistance. President Ford said his government was making available 300,000 tonnes of wheat under PL 480 Title I for immediate delivery, in addition to the 100,000 tonnes already provided during the year.
On October 16, 1969, Henry Kissinger recommended to the US president to give Pakistan one million tonne of wheat under PL 480 for fiscal year 1970 because it would be ‘politically significant’ in the backdrop of political unrest in the former East Pakistan. President Yahya Khan made a personal request emphasising the urgency of such deliveries to pre-empt turmoil.
The US stopped PL 480 assistance to Pakistan in 1991 because of its concerns with Pakistan’s nuclear research programme.
With the end of the cold war, the purpose and shape of PL-480 programme has changed. The US and South Korea are the only countries in the world which sell part of their “food aid.” The beneficiaries of the existing system are agribusiness firms, maritime companies, and a small but powerful group of NGOs. During the 1980s, Pakistan’s shipping industry badly suffered because all the aid which came to Pakistan in kind was, as a pre-condition, transported by the US ships. The cost of shipping was deducted from the economic aid Pakistan received.
The US approach towards food aid has become problematic for two reasons. One is its practice of monetising food aid — allowing the NGOs to sell food aid in recipient country markets to generate funds for their development projects. Another is its use of export credits to facilitate concessional sales of food aid to developing countries. These practices cause setback to commercial food sales.