U.S. Foreign Policy and Global Natural Resources

In the newly published RFF book U.S. Interests and Global Natural Resources, my coauthors deal in some detail with U.S. national interests concerning energy, minerals, and food. In their examinations, they necessarily raise questions of foreign policy inasmuch as they are inherent in the problems at hand. Indeed, one of the major themes of the volume is that U.S. resources cannot be considered as purely domestic. The markets in which they are traded are global and, at least since the turbulent 1970s, foreign policy issues are inseparable from the demand and supply of the major natural resources.

Still, the other analyses are primarily resource-based. My task is to turn the issue around and to look at it not from the resource side of the intersection of the two sets of policies, but from the foreign policy side. In so doing I address three broad questions: What roles have global natural resources—in particular energy, nonfuel minerals, and food—played in the making of U.S. foreign policy? Are their roles likely to change in the near future? Should they? For the purposes of this article, I limit my discussion mostly to food.

Foreign policy history

Let us begin with a capsule historical tour, and remind ourselves that before World War I the United States had little in the way of an active foreign policy in general, and no economic foreign policy as such. The nation and its government were passive and took the world as given. Americans accepted British financial and commercial dominance as more or less immutable fact. During the period up to World War I, the United States was a capital importer, both in the narrow sense of being a net capital importer on the balance-of-payments account, and in the broader sense of being an even larger capital importer through immigration.

Even in situations in which U.S. actions had large impacts on the international economy—for example, when the country became the major international wheat exporter, displacing other suppliers—Americans hardly were conscious of the changes and their international impacts, and certainly took no policy actions concerning them.

For much of the time between the two world wars, U.S. foreign economic policy (and foreign policy in general) was dominated by international financial and related trade issues that were consequences of World War I. The nation shifted from a debtor to a creditor position, and questions arising from postwar debts and reparation formed the central focus of foreign policy.

Then came the 1929 Crash and its consequences. The U.S. dollar was devalued, both financial and commercial policy were dominated totally by domestic considerations, and U.S. international economic policies intensified the problems of the world economy rather than helping to resolve them.

The interwar period saw the beginning of the growth of U.S. business interests abroad. They were then primarily investments in the extraction of natural resources: oil in the Caribbean and Venezuela, and a little later in the Middle East; and minerals in the other Latin American countries, and to a small extent in Africa. In the late 1920s and early 1930s the concept of strategic materials became implanted in the national consciousness and, just prior to World War II, thinking about strategic materials played an important role in the U.S. attitude toward Japan. Americans saw Japanese expansion into Southeast Asia as a threat to supplies of natural rubber, on which the United States then was nearly totally dependent, as well as to tin supplies. These perceived threats certainly had an impact on the timing of the war's outbreak, although the ultimate choice was Japan's.

During the war, interest in strategic materials took on substantial importance, principally through U.S. and Allied strategic bombing campaigns and programs of preclusive purchases of ferroalloys in neutral countries aimed at restricting German access. The bombing campaigns were moderately successful, at least with respect to oil, although their success came from the damage Allied air forces inflicted on refining capacity and synthetic oil plants, rather than from a direct impact on raw material supplies. The preclusive purchasing effort resulted in profits to Spanish and Turkish suppliers, and even a fall in Spanish agricultural supplies, as farmers left their farms to comb the hills for ferroalloy ores that the United States was buying at ridiculously high prices. It is not recorded that these purchases had any discernible impact on the German war effort.

After the war, the idea that some materials were strategic because of their potential significance for military production continued to concern policymakers. It certainly played a role in the origins of President Truman's Materials Policy Commission, known after its chairman, William S. Paley, as the Paley Commission. Of course, the perspective of the commission was far broader than supplies for military purposes. Rather, it framed its inquiries in terms of economic growth, and the relation of the future availability, accessibility, and price of materials to the possibilities for continuing long-term economic growth.

Wartime experiences with raw material supply problems—both the direct consequences of the early Japanese advances in the Pacific and the ideas that lay behind the efforts to restrict German supplies—played a central role in the postwar U.S. decision to initiate and maintain stockpiles of strategic materials. But while the reasons for initiating the program stemmed from these experiences, the management of the stockpile as time went on responded increasingly to other pressures. Some of these arose from the concerns of U.S. domestic producers, and others from the anticipated impacts of stockpile transactions on allies and friendly nations abroad.

The Soviet Union and security

No matter how one reckons it, the immediate postwar period ended in 1947 at the latest. From that time on, U.S. foreign policy has been dominated by security concerns, whether the time marker is taken as the Berlin blockade or as the preceding breakdown of U.S.—Soviet discussions about the German economy, when it was clear that the Soviets were interested in occupying East Germany and not in discussing the German economy as a whole.

Americans first thought of their differences with the Soviet Union in global terms—as a struggle against communism. A little later, the struggle was with the Sino-Soviet bloc. Of course, the bloc never was as monolithic as it was perceived to be, and sometime in the mid-1960s America discovered that it had dissolved. For the past twenty years or so, the United States has focused more directly on the Soviet Union and less on world communism, though the Reagan administration has revived anticommunism as a major theme. Whatever their guise, these struggles and the security concerns they give rise to have been the central and dominant features of U.S. foreign policy. They have overshadowed almost all other foreign policy considerations, and they have been the touchstone of most—though not all—foreign policy decisions.

As the leader of an alliance locked in more or less worldwide struggle, the United States maintained a continuous strand of foreign economic policy that had as its highest priority the return to and then the maintenance of a liberal international economic order. An international economy was sought in which trade and worldwide movement of capital were as free as possible, and in which firms received national treatment in other countries.

The remarkable continuity of this broad policy over the nearly forty years since the end of the war has had two foundations. The first was the security commitment. Successive U.S. administrations believed that the way to promote the strength of what was called the Free World was to argue for, and pay for, a liberal economic policy. And America did bear the costs of leadership. The second and related foundation reflected U.S. economic interests. The United States maintained the monetary standard, as Britain had in the century before. And U.S. foreign investments were growing, first in mineral and energy production, and later in manufacturing. Though still concentrated in Canada and Latin America, they spread to Europe and then to the rest of the world. Thus, U.S. security and ideological commitments paralleled the economic interests of American business nationals.

Foreign policy and food resources

Food has played a continuous, if clearly secondary, role in U.S. foreign policy. With few exceptions, domestic interests and concerns have dominated international considerations in shaping U.S. food policy. The major themes of policy have been restricting imports and promoting exports, both obviously reflecting the interests of domestic producers and their continuing political strength. But U.S. agriculture increasingly is influenced by foreign markets and international events.

Exports and imports

U.S. farmers are highly efficient producers of the major food export crops—grains and soybeans. In the past decade and a half, U.S. exports of agricultural products have grown nearly seven times, and the net balance of U.S. agricultural trade more than twelve times. In a period of trade deficit, the contribution of agricultural exports to the trade balance has grown steadily, at least until 1981-82. This explains the obvious U.S. interest in a continuing commercial diplomacy directed at removing further barriers to imports of U.S. food products, especially in Western Europe and Japan.

On the import side, the United States itself has maintained a variety of barriers, the most important of which have concerned dairy products, meat, and sugar. The barriers to imports of dairy products and meat are in the form of health regulations, and thus ostensibly not a matter of foreign policy. But many barriers imposed on imports from the United States by other countries also appear in forms other than tariffs and import quotas, and U.S. officials hardly are ready to accept them at face value as reflecting only health or safety concerns and the like.

The sugar situation is more straightforward. For a long time the United States has subsidized domestic beet sugar production heavily, and restricted by quota imports of the cheaper cane sugar from semitropical producers. The allocation of the import quota among producers has been used regularly as an instrument of foreign policy, to reward friends, such as the Dominican Republic, and punish enemies, such as Castro's Cuba.

Surplus management

For a long period after World War II the major instrument of domestic agricultural policy was price support of the chief cereal crops, cotton, and tobacco, maintained by government purchase of (or loans against) that part of the crop that could not be sold at or above the support price. The result was an accumulation of grain and, to a lesser degree, raw cotton and tobacco in government stocks. This in turn led to a policy of using surplus crops as a large part of U.S. economic aid to developing countries, first under Public Law 480, and then under the slogan, "Food for Peace."

The domestic purpose of these programs has been clear, and they have enjoyed broad political support. But their consequences for the recipients have been a matter of some controversy. It generally is agreed that untied aid equivalent to the world market value of the food would have been more helpful to the food-short countries. Many further believe that food aid has acted as a disincentive to local agriculture in recipient countries, reinforced governments in policies that were inimical to agriculture, and thus delayed progress toward food self-sufficiency that they otherwise could have achieved.

U.S.—Soviet relations

The exceptions to the broad dominance of domestic agricultural interests in shaping food policy have centered on U.S. relations with the Soviet Union. In 1966-67—an early marker of the beginning of détente—the United States negotiated its first grain sale with the Soviets. The full blooming of détente led to the signing, in 1975, of the first five-year U.S.-Soviet agreement on grain sales. That agreement, of course, fell victim to the Soviet invasion of Afghanistan in 1979 and President Carter's decision to restrict, but not eliminate, grain exports to the USSR as a sanction. Two years later, in April 1981, President Reagan lifted the Carter partial embargo, belatedly fulfilling a campaign promise, despite the continuing occupation of Afghanistan and the fact that U.S.-Soviet relations in general had worsened. Lifting the embargo, however, was as far as the Reagan administration then wished to go: the United States offered no new long-term agreement, and Soviet short-term grain purchases from the United States were significantly lower than they had been before the partial embargo.

In December 1981 the Polish government's declaration of martial law in its effort to suppress the Solidarity trade union led to the suspension of U.S. government credit for Polish grain purchases, and the further American refusal to negotiate a new long-term agreement for Soviet grain purchases.

Finally, after two one-year extensions of the lapsed agreement, the Reagan administration and the Soviet Union, now under Yuri Andropov, in August 1983 concluded a new five-year pact. Its terms on the surface appear to be major improvements—from the American standpoint—over the initial agreement: both the minimum purchase level and the level allowable without consultation are 50 percent larger than before. But those levels, now 9 and 12 million metric tons, respectively, still are small relative to the amounts the United States wishes to sell and to what the Soviets actually have purchased in recent years.

Thus, the new agreement may be interpreted as an expression of Soviet caution: twice burned by embargoes, the Soviets probably do not believe they can rely fully on what must appear to them as a capricious, not to say arbitrary, United States. And they can afford to be wary, as Soviet agricultural production is picking up after four dismal years and especially as they have effectively diversified their sources of external supply, with Canada and Argentina playing prominent roles. Thus, U.S. food policy confronts a self-imposed dilemma. American agriculture increasingly is oriented to the export market, but important parts of that market from time to time are declared off limits for foreign policy reasons. For the future, whatever shape food policy takes almost certainly will be influenced heavily by international events only partially, if at all, under the control of U.S. policymakers.

What is past is prologue

So much for what has happened. What can we expect will happen in the near future? Any specific prediction almost certainly will be wrong, but the best forecast for global natural resources as a whole is that the situation of the recent past will continue: the whole politicoeconomic system has fairly high inertia.

Past patterns and relationships concerning food in particular may be expected to persist, with producers' interests remaining the leading element in U.S. foreign economic policy in this area. A turn toward renewed détente in U.S. relations with the Soviet Union is not unlikely, though certainly not inevitable. Indeed, the conclusion of the long-term grain agreement once again may prove an early sign of a change in the overall tenor of U.S.-Soviet relations.

There probably will be repeated episodes such as those of 1973-74 in which the run up of international food prices has a disproportionate impact on poor importers, and the question of emergency relief will arise again. The possibility of the United States using food as a foreign policy weapon again may come to the fore, and the slogan, "a bushel for a barrel," even may be revived. Jingoistic chest-thumping aside, this will remain an unrealistic notion. Although the United States currently accounts for a very large share of the world's exports in major grains, it simply does not control enough of the world's potential supply to make such a threat possible on its own. Nor do other major suppliers and potential suppliers share U.S. interests and views closely enough to make an effective "OGEC" likely.

Two premises for the future

What should the future be, if Americans could shape it as they wish? Or perhaps the question is better posed in terms of what can be done as a matter of U.S. national policy to help shape a better future.

Broadly and briefly, the answer in my view is to base U.S. policies on two premises: first, a continued commitment to an open world economy; and second, the recognition that energy, mineral, and food supplies are truly global resources. These premises lead directly to the conclusion that increases in global supply—wherever they occur—are in the long-run U.S. national interest, even though they may not be in the immediate interests of all or even particular U.S.-domiciled or U.S.-owned producers.

Some specific applications of the principle are clear. For example, it was inappropriate—not just politically unwise and futile—to try to hinder the Soviets in building the natural gas pipeline from Siberia to the western border of the bloc. Will it not increase the supply of energy to Western Europe? Similarly, U.S. administrations of both political parties have blown hot and cold on the question of making available, or denying, to the Soviet Union and other unfriendly countries U.S. oil-drilling and -explorative technologies. The U.S. Export Administration Act allows the president to restrict exports for reasons of national security and foreign policy. As Resources goes to press, the act is being debated in Congress preparatory to renewal. Whatever form renewal takes, one hopes that President Reagan and his successors use it sparingly and not as an all-purpose foreign policy bludgeon.

Two food policies could well serve long-run U.S. interests, although they might diverge from the shorter-run interests of American producers. The first is an increase in both the scale and effectiveness of international programs to increase food production in the Third World, especially the capacity of poorer countries to raise the outputs of their own farms. This would require more U.S. resources and leadership than such efforts have received in recent years. Second would be coordination of efforts to create and maintain an international food reserve to deal with the extra burdens that sharp short-run fluctuations in production and prices place on poor importing countries.

Finally, the most important immediate obstacle to maintaining a truly global view is the recent worldwide recession and the low growth rates and high unemployment in the industrial economies that threaten to continue through the next cyclical recovery. These circumstances stimulate protectionism, make it politically difficult for the United States and other nations to take a global view, and make it much more likely that recent behavior will serve as the model for future behavior. U.S. interests in natural resources are global interests, but it is difficult to see this essential truth when suffering from national myopia.