Canada to provide cash, not commodities in switch of food aid policy

Canada is the latest major donor country to break the link between overseas food aid and supporting its own farmers.

The country says it will no longer insist on sending domestically grown food to the rising number of poor countries affected by escalating food and fuel prices, but will instead provide aid agencies with cash, giving them the flexibility to source cheaper food in the region or beneficiary country.

Canada's move to "untie" its food aid by removing restrictions on where the food can be purchased leaves the United States of America, the world largest donor of food, as the only developed country with tied food aid.

"With fuel cost increases eating into food aid budgets as much as food price rises are, untying emergency food aid is more important than ever, so as to conserve increasingly scarce funds and provide a quicker response," said Christopher Barrett, who teaches development economics at Cornell University, New York, and is the co-author of the book, Food Aid After Fifty Years: Recasting Its Role.

Canada also announced a donation of US$230 million to food aid programmes, joining the United Kingdom, the European Union and Japan, who have also pledged significant amounts to deal with the current crisis.

"Hopefully, the US Congress [which is considering President George Bush's proposed $770 million in new aid to feed the world's hungry] will follow Canada's lead," Barrett commented.

Almost all food aid donated by the USA is tied to domestic requirements for procurement, processing and shipping. According to Barrett, it costs more than two dollars of US taxpayers' money to deliver one dollar's worth of food procured as in-kind food aid.

The implication [of Canada's announcement] is that the priority should be the food security of hungry people in developing countries and providing support that helps to promote local producers and markets, and also seeks value for money when funds are at a premium

Feeding while building agriculture

Edward Clay, senior research associate at the Overseas Development Institute (ODI), a UK-based think-tank, noted: "The implication [of Canada's announcement] is that the priority should be the food security of hungry people in developing countries and providing support that helps to promote local producers and markets, and also seeks value for money when funds are at a premium."

He pointed out that Canada had been providing food aid since the 1950s, almost all of it sourced in Canada. In 2005, when the global community signed the Paris Declaration on Aid Effectiveness, in which rich countries committed themselves to removing restrictions on procuring aid and promoting the recipient country's agriculture and markets, Canada announced that it would untie half its food aid.

Already profiting

Barrett said the current high prices of food and fuel meant agri-businesses and shipping lines in the US were "enjoying record profits, so the defensibility of safeguarding their windfall gains from present US food aid policy is ebbing."

David Snider, a spokesman for the US Agency for International Development (USAID), said the Bush administration had put forward a proposal that 25 percent of food aid dispensed by the US government be in cash to buy food for recipient countries locally or regionally.

Neither Barrett nor Clay could see Bush's proposal getting the nod from Congress. Barrett said there were subtle signs of change in Congress, but thought the prospects were better for getting pro-local and regional purchases of food aid included in the next Farm Bill, a specific law governing food aid that is updated every five years.

New money

The additional new aid proposed by Bush, which includes US$395 million for emergency food aid, has come under internal criticism, the daily Washington Post newspaper reported.

The Democrats, who voiced dissent, have argued that the money - part of the 2009 budget year that begins in October 2008 - will be too late to help countries already struggling with the food price crisis. Bush's request for another $350 million for food aid as part of the 2008 supplemental budget for the war in Iraq has also been slammed by the opposition as too little.

Democrats Senator Robert Casey Jr and Majority Whip Richard J. Durbin, who have asked Bush for at least $550 million in emergency food aid immediately, were quoted in the Post as saying: "That is far too late for the urgency of this problem. If you're hungry and your government is collapsing, waiting until December 2008 or January 2009 for food to hit the ground is just too late."

High food prices have been triggered by a host of factors, including dwindling stocks and a continuing strong demand for cereals, partly on account of an increased demand for meat and milk in India and China, and biofuels. According to the World Bank, high food prices could push 100 million people into deeper poverty.

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