RESTRICTED

Reference: Our letter No. 3 of January 4, 1960.†

UNRWA — CANADIAN CONTRIBUTION OF FLOUR

The results of the ad hoc pledging conference reported to you in our letter under reference, as they concern UNRWA, raise once again for the Agency the problem of finding sufficient funds to meet its approved budget.

2. The only source from which the Agency can foresee an increased contribution is Germany. However, on the basis of German increases to other extra-budgetary funds, it is unlikely that the increase will be much more than about 20%. It is therefore the Agency’s expectation that about the same situation as last year will prevail, the German increase being offset by the slightly higher level of the 1960 budget. In these circumstances the Agency has made informal inquiries as to whether a possibility exists that the Canadian Government might approve a further gift of flour for 1960, of the same order as in 1958 and 1959.

3. In our view, a donation of about 20,000 tons of flour to the Agency should be given very serious consideration. The General Assembly has reaffirmed its responsibility for the Palestine refugees and has continued UNRWA in being to discharge this responsibility. The Arabs supported a resolution which contained provisions for improvement of the Agency’s legal position as well as for revision of the relief rolls. The Agency has thus the blessing of the host governments for a more orderly life in the next few years. However, no express provisions were made for an improvement of the Agency’s financial position.

4. Without some substantial increase in contributions, the Agency will inevitably find itself in serious financial difficulties which will lead to curtailment of the rehabilitation projects which have been included, on a slightly increased scale, in the 1960 budget. It would be a pity if these projects were to be curtailed, since they offer to at least a small number of the refugees almost the only opportunity of becoming independent of relief. The Government of Jordan has opened itself to no little criticism from other Arab governments for its realistic approach to the rehabilitation program for the refugee. If funds are not forthcoming, this helpful attitude will be wasted.

5. Another consideration is that World Refugee Year will continue until June 1960. Canada has made substantial contributions to the Year already,¹⁰⁵ but it would be difficult for us to explain if less were done this year than last year for the Palestine Refugees. We are aware that before the official start of World Refugee Year, last year’s gift of flour was linked to the Year. However, in general, the High Commissioner for Refugees has benefited greatly from the Year, while there has been markedly less inclination to make an effort for the Palestine refugees.

6. In addition to raising the specific question of a Canadian contribution to the Palestine refugees for 1960, we should also like to put forward for your consideration the suggestion that this and future Canadian contributions to UNRWA might best be made up entirely of flour, at a level higher than the 1959 contributions of cash and flour combined. As you know, the basic ration distributed by the Agency consists of wheat flour, of which the Agency requires about 100,000 tons annually. The sum that we have in mind for the Canadian contribution is $3 million worth of flour, or about 40,000 tons, 40% of UNRWA’s annual requirements.

7. In 1959 the Canadian Parliament voted an expenditure of $25 million for disposal of surplus wheat or flour; $13.5 million went via the Colombo plan, $1.5 million to Palestine refugees and $10 million was voted for wheat to be given to a NATO food bank. In spite of the partial loss of some 100 million bushels of wheat of the 1959 crop through early and heavy falls of snow, it is not unlikely, on the basis of the figures we have seen here, that there will again be wheat available, for the disposal of which Parliament might be willing to grant funds.

8. It is suggested that such a Canadian contribution in kind should be at a level higher than our previous contributions of cash and flour combined not only to meet the Agency’s requirement for an increase in contributions in order to carry out its responsibilities, but also in order to counterbalance certain difficulties which a contribution wholly in kind would otherwise create for UNRWA. Under the present arrangements, UNRWA has agreed to purchase 50% of its flour requirements in the United States. The rest is brought mainly in Europe, on a purely commercial basis, at a cost about 30% below the North American price. To the latter must be added the shipping costs, which the Agency has to bear. Without any cash contribution at all, and the contribution being maintained at the 1959 level of flour and cash combined, we have calculated that there would be a net loss of assets to the Agency. Thus a conversion of the Canadian contribution entirely into kind must entail an increase in the level of the contribution.

9. The practical advantages of a contribution in kind, of flour, would be:

(a) The sum voted by Parliament for this purpose would be spent entirely in Canada

(b) The contribution would assist in reducing the wheat surplus, with its storage costs, special payments, etc., in a very good cause;

(c) A higher contribution by Canada would be matched, in cash, by the USA on a 70/30 matching formula;

(d) More cash would become available for the rehabilitation schemes;

(e) The flour required by UNRWA is of a relatively low grade, No. 5, a grade less salable than the better quality flours.

10. Against these must be weighed the fact that, in absolute terms, Canada would be making a higher contribution and would be very high on the list of contributors, i.e. the highest per capita contributor and the third highest in absolute terms. The United States contributes $23 million, the United Kingdom $5.4 million.

11. It may not be possible or desirable to consider this proposal for the 1960 contribution, but since the Agency will now be in existence at least 3 more years, you may wish to consider it for 1961 and after. We would, however, recommend that the question of a gift of flour of the order of the two previous gifts be given serious and sympathetic consideration for 1960.¹⁰⁶

C.S.A. RITCHIE

¹⁰⁵ Voir volume 26, chapitre premier, partie 1(a) (ix)./See Volume 26, Chapter I, Part 1(a) (ix).

¹⁰⁶ Note marginale :/Marginal note:
Jan. 20. Discussed this by phone with ME Division and Econ II. Econ II will raise question with T&C and keep us informed. G.L. M[orris].
Une subvention pour de la farine, d'une valeur de 1,5 million de dollars, a été approuvée par le Cabinet le 28 avril 1960. Une subvention additionnelle de 1 million de dollars a été approuvée le 30 juin 1960.
A grant of flour worth $1.5 million was approved by Cabinet on April 28, 1960. An additional grant worth $1 million was approved on June 30, 1960.