Food aid on the back burner as WTO talks collapse

As countries grapple with high food prices, attempts to draw attention to an inefficient food aid delivery system have been pushed to the back burner after the World Trade Organisation (WTO) talks collapsed last week.

Revised rules in the WTO negotiating text on agriculture had broadened the scope of "monetisation" - selling food aid to raise cash - to include buying agricultural inputs and using the money, where necessary, to fund transporting food aid.

"If the WTO permits the continuation of the monetisation of food aid resources for purposes not connected to the cost of food aid delivery, it will undermine the credibility of the Food Aid Convention [the international treaty on food aid] at a critical moment," said four leading food aid policy analysts in a letter to Crawford Falconer, chair of the WTO agriculture negotiations.

"As important as some of the other uses of monetisation proceeds may be (for example, purchase and supply of agricultural inputs), it would be far wiser to seek these resources in the form of cash assistance rather than jeopardise the system of international food aid as a whole," the analysts wrote.

As important as some of the other uses of monetisation proceeds may be (for example, purchase and supply of agricultural inputs), it would be far wiser to seek these resources in the form of cash assistance rather than jeopardise the system of international food aid as a whole

The analysts are Stuart Clark, of the Canadian Foodgrains Bank, a faith-based development agency; Sophia Murphy, senior policy advisor at the US-based Institute for Agriculture and Trade Policy (IATP), which advocates fair, sustainable food, farm and trade systems; Gawain Kripke, of Oxfam America; and Christopher Barrett, International Professor of Agriculture at Cornell University in the US.

Monetisation is primarily used by the US food aid programme, the IATP pointed out. Food aid to developing countries is sold by the recipient non-governmental organisations in the beneficiary countries to generate cash, often for non-food activities.

"The result is grotesquely inefficient: the cost of shipping food from the United States to a recipient country to be sold on the open market (thereby displacing commercial sales of both local and imported production) wastes half or more of the value of the aid. Monetised aid is not targeted at the households that need the food," they argued in their letter.

"Monetisation increases volatility in local markets and often causes abrupt, if temporary, price falls. These market conditions discourage local production, yet livelihoods, food security and rural development all depend on stimulating increased production in food aid recipient countries," the analysts maintained.

"During this food crisis, we should be improving rules to ensure much-needed food gets to as many people as possible - not allowing a highly inefficient and trade-distorting system to continue," said IATP's Sophia Murphy in a statement. "Nearly all other food aid donor countries agree: an untied, cash-based system would make the best use of scarce and expensive food aid resources."

Food aid at the WTO

Food aid is an agricultural trade issue because some donors seek to "tie" overseas food aid with support to their farmers. "These tying practices are
prima facie a form of export subsidy," according to Edward Clay, senior research associate at the Overseas Development Institute (ODI), a UK-based think-tank.

"There is some sympathy for proposals to avoid the use of food aid as a way of offloading surpluses and expanding market share," an article on the WTO's website commented.

For years, most discussion has been about "how best to ensure that the aid goes to those really in need, does not harm domestic production in countries receiving aid, does not distort trade (in particular jeopardise exports from competing suppliers), responds genuinely to demand, does not amount to the disposal of surpluses in subsidising countries, and does not allow countries to get around their export subsidy commitments," the article said.

All countries agree that food aid for humanitarian purposes is essential. "Most countries argue that aid should only be in the form of grants — i.e. not on credit - but some warn that this could be too rigid and prevent food aid from promptly reaching those who need it," the WTO noted.

"Many developing countries are calling for binding commitments from donor countries on the amounts they supply, with rising amounts of food at times of high prices; aid supplies in response to demand; technical and financial assistance to help countries develop domestic production instead of relying on food aid; and increased transparency through notifications to the WTO Agriculture Committee. Some developed countries also endorse some of these ideas."

The current round of WTO negotiations - also called the Doha Development Round, after Doha in Qatar, where the talks were launched in 2001 - collapsed last week in Geneva when the US, China and India failed to reach an agreement on how to open their markets.

"The US argued that opening markets was the best way to achieve food security and to promote livelihoods," the IATP said. "India and China, supported by the majority of developing country members, argued for a strong safeguard mechanism to protect food security and livelihoods in the event of major disruptions to agricultural markets."

Member states have vowed to keep talking.

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