An analysis of some aspects of Public Law 480
Wilder, Ronald Parker
Rimlinger, Gaston V.
Master of Arts
Public Law 480, the Trade Development and Assistance Act, was passed by the 83rd. Congress in July, 1954, for the purpose of utilizing surplus agricultural commodities to further the foreign policy of the United States. The Act provides that surplus agricultural commodities shall be sold for foreign currencies, with the proceeds of the sales used for trade development, economic development, the payment of U. S. obligations abroad, and other uses which promote U. S. foriegn policy. The majority of P. L. 480 exports are shipped under Title I, sales for foreign currencies. The rationale behind the use of surplus agricultural commodities to promote economic development in receiving countries is the following: The U. S. sells agricultural commodities to underdeveloped countries. It then grants or loans the majority of the local currency proceeds back to the country involved to be used in its development program. The additional investments undertaken as a result of the grants and loans create new income, part of which are spent on the agricultural products supplied by P. L. 480. Thus, P. L. 480 provides additional resources for the receiving countries, and enables them to undertake a greater amount of investment than would be possible in the absence of the food aid. Food aid through P. L. 480 can increase the rate of economic development in the receiving country by increasing the rate of capital formation and by increasing the efficiency of the use of capital. It increases the rate of capital formation by freeing foreign exchange, redistributing income, and by reducing inflationary inflationary pressures which tend to curtail capital formation. It increases the efficiency of the use of capital by furthering education and technical training. There are several problems which seem likely to accompany the use of food aid to promote economic development. The two most serious problems are first, that surplus food imports tend to decrease agricultural prices in the receiving country, and second, that the local currencies generated by P. L. 480 Title I transactions tend to be inflationary in the receiving country. The inflation problem is compounded by the lags which frequently occur between the shipment of the agricultural commodities and the transfer of the local currencies back to the receiving country. It is very likely that P. L. 480 will continue in the next decade, due to the continued existence of the U. S. farm surplus. Because of its apparent success in promoting economic development, and because of its negligible effect on the U. S. balance of payments, it will continue to be a popular form of economic assistance. To the extent that it has delayed the end of the government subsidy in agriculture, however, it is probably doing the U. S. a disservice.