Loans and outright money grants to developing countries may have cut into U.S. agricultural exports, but the extent of the damage and whether such aid should continue is a point of contention among agricultural economists.
Some said sending foreign aid to developing countries helped them to become more self sufficient in food production. They said it even helped some to increase production to the point where the country now is a net exporter of agricultural products in direct competition with U.S. farm goods.Foreign aid to eliminate poverty often goes toward improvements in agriculture since that is where the bulk of a developing country's poorest people live, analysts said. Many countries also encouraged expanded food production to increase exports to generate currency to service their debts. Many times, farmers still live in poverty.
In the mid 1970s, population growth made it look like there would not be enough food to go around, said Sid Love, market analyst for the LBAs consulting group. As a result, the United States set about helping developing countries produce more of their own.
Jerry Gidel, research director for G.H. Miller and Co., a commodity brokerage firm in Chicago, pointed out that most of the aid was aimed at crops that did not compete on a large scale with U.S. crops. However, in some cases this backfired.
In 1974 the International Monetary Fund sent aid to Malaysia to improve its palm oil production, Mr. Love said. Malaysian palm oil production increased to 4.77 million tonnes in 1986 from about 1 million a year. Since palm oil competes with soybean oil, it would be safe to say that the aid has hurt U.S. soybean demand.
The 1977 and 1981 farm bills tied U.S. farm price supports to inflation, Mr. Love said. When the world went into a deflationary spiral in the early 1980s, U.S. prices were artificially supported at high levels, encouraging increased production in other countries.
Farmers cleared thousands of acres of jungle and irrigated desert regions to increase production. Many times, the crops competed with U.S. production. As U.S. prices became increasingly out of touch with world prices, expanded foreign production was encouraged.
On the other hand, aid projects aimed at making food production more stable in developing countries generate employment and income, which translates into increased buying power, said Duane Acker, director of food and agriculture for the U.S. Agency for International Development. "We operate on the premise that poor people don't buy much."
Agricultural development and trade authority James Houch agred, saying advances in agricultural productivity could be increasing imports of cereals and other agricultural products via the income effect of general economic development. "For these nations, investments in agricultural development and assistance programs are not detrimental to U.S. farm interests. They are generally beneficial."
Some countries are developing their agricultural output without U.S. help, resulting in increased per capita food production worldwide. For instance, China and the Soviet Union grow much more wheat than the United States.