food aid and its relationship to wto rules and the development agenda

8/8/2019 Food Aid and Its Relationship to WTO Rules and the Development Agenda

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Food AidAndits RelAtionship

to Wto RulesAndthe

development AgendA

Andreas Schneider

Brussels, Belgium


2/32

2006 The German Marshall Fund o the United States. All rights reserved.

No part o this publication may be reproduced or transmitted in any orm or by any means without permission

in writing rom the German Marshall Fund o the United States (GMF). Please direct inquiries to:

The German Marshall Fund o the United States

1744 R Street, NW

Washington, DC 20009

T 1 202 745 3950

F 1 202 265 1662

E [email protected]

This publication can be downloaded or ree at http://www.gmus.org/publications/index.cm. Limited print

copies are also available. To request a copy, send an e-mail to [email protected].

GMF Paper Series

The GMF Paper Series presents research on a variety o transatlantic topics by sta and ellows o the German

Marshall Fund o the United States. The views expressed here are those o the author and do not necessarily rep-

resent the view o GMF. Comments rom readers are welcome; reply to the mailing address above or by e-mail

to [email protected].

About GMF

The German Marshall Fund o the United States (GMF) is a non-partisan American public policy and grant-making institution dedicated to promoting greater cooperation and understanding between the United States

and Europe.

GMF does this by supporting individuals and institutions working on transatlantic issues, by convening leaders

to discuss the most pressing transatlantic themes, and by examining ways in which transatlantic cooperation can

address a variety o global policy challenges. In addition, GMF supports a number o initiatives to strengthen

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Founded in 1972 through a git rom Germany as a permanent memorial to Marshall Plan assistance, GMF

maintains a strong presence on both sides o the Atlantic. In addition to its headquarters in Washington, DC,

GMF has six ofces in Europe: Berlin, Bratislava, Paris, Brussels, Belgrade, and Ankara.


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FoodAidanditsRelationshiptoWTORulesandtheDevelopmentAgenda

ASc

B,BAGMFUS

CEPcyS(CEPS)


4/32

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cbcWbc,cccccw-cc,ccccbTjy,bbycyc

TwwcBy,ywcccyAccycccy,cccy,c?Oyc-cyc,ccccccx

Introduction

1

Eradicating global

hunger is a moral

obligation for the

richer countries

in the world, one

that has received

increasing attention

especially in light of

the fresh debates

in the World Trade

Organizations

Doha Round of

multilateral trade

negotiations.


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D,k,c,,cy,cc(IFI)bcyccw

yccwcyTywqwbycbcc,kccbjc

Donor governme

development

stakeholders, do

agencies, and, m

recently, econom

and internationa

financial instituti

(IFIs) have been

increasingly

concerned with t

role that food aid

plays in economi

development and

the world econom


6/32


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ycqcc-cywbcbycy

Tk,cccby-c(ODA),,ccc(WFP,2005)

2.1 Studyobjectives

TbjcybwWTO,bycww

I,wwcyyzwc,,,Wwxcyw,,,ww,xb,wcy

WTO

Tyycwbw,c,cwycwc-bccy(Tb2)Iyccy,cywcbcyby-bIc

Table 1: Total ODA and Food Aid (in Millions of U.S. Dollars)

1980 % 2004 %

TODA 15,991 75% 78,000 95%FA 3,997 25% 300 5%Sc:OECD

Background, Objectives, and Method

2

Although it had

a share of more

than 25 percent

of all development

assistance in

1980, food aid

accounted for only

about 5 percent

of total overseas

development aid

(ODA) in 2004.


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2.2 Methodofinvestigation

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c,cUS,ckIcwc,wc,wcyccjccbcywcccy-by-bTccccbjcbccBybjcykcccq,wccycIccwy

cwcbw

Twkkw,wwywwccyb

Table 2: Possible Scenarios of Food Aid and the WTO Relationship

Food Aid

Effectiveness

WTO Compliant

with RulesOutcome

Sc1 Y Y =SQRSc2 N Y =CDy

Sc3 Y N =CR

Sc4 N N =RcCSc:

Judgment about

what food

aid system is

best used for

any particular

development

provision is usua

not taken on

solely economic

grounds, but

based on politica

decisions that

largely ignore

economic issues

or concerns for

efficiency.


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Obywcc

: Tccc

Tcc TwODA T

Tbwcy

cycc Tcb

b Aykbwc

cbbc Mcccc(,

OECD)cbyAb(2005)cbcyk

Acqc,cwy

Fy,bybb,wkcbbcWTOxcycbwcyc

The original

ideal of donating

surplus food

stocks in addition

to mainstream

development

aid has, in many

cases, been

supplanted and

superseded.


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Hw,40y,c,cbcckOwOcyjcycccOECDcWcjc,cy,cxcc,y,wcy

bcyy,ccyc

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A30w-wcb-SAccyckcbc

cqwWccccc,ccScAccycc

Occbcky1950,wccccc

ccccTFAOPc

1990 1991 1992 1 993 1994 1995 1996 1997 1998 1999 2000 2001 2002

0

2

4

6

8

10

12

Emergency

Programme

Project

3History and Institutional

Arrangements of Food Aid

Figure 1: Volume of Food Aid Deliveries According to Type, 1990 2002

Sc:WFP,2005

With a large

reduction in

project and

program food aid

emergency food

aid, in response

to natural

disasters and

complex political

emergencies,

has emerged

as the primary

form of food aid,

which is usually

distributed to the

acutely hungry,

including refugee

and domestically

displaced person


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I,UScb56c,wbybcbTEUwc,w20c,wbyJ8c(F3)TbybcF4

Wcc,k,,55c

SDcCSbcSD(CSSD)1954TCSSDccc,kccxbcycccy,cccccWcb,ycbyyc

cbc

WywyUS,yjcxccTccWFP(WFP)1961,bcbbcccWFPwcy

TbwwFAC(FAC)1967wcxIGA(IGA)UFAC,x(q)Tc5,cb4319681980,b7619801986,b7519861995,b5319951999

3.1 Majortrendsinfoodaidflows

Tc,ccwTy

Trends will set

the platform

for the debate

about food aid

and will give rise

to the argument

about the relative

share of food aid

given by donor

countries.


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TODAbccby20y(F5)Icbcyccyccycccc(FAO,2005)Tbyc,wccywcyw-Twcc

jyF,bzwcFACScy,ccy50yc1950Ic,w

1990 1992 1994 1996 1998 2000 2002

0

2

4

6

8

10

12

14

16

18

20

MillionMetricTonnes

Year

Total global food aid

Monetized food aid

United States

56

EU

20

Japan

8

Rep Korea

2.75

Canada 2.75

Australia 2.75

China 2.75

Others 5

Figure 3: Global Food Aid by Donor, 2004

in Percentages

Source: OECD, 2005

Figure 2: Total Global Food Aid, 19902002 (Grain Equivalent)

Sc:IPC,2005

Food aid has los

its importance as

a development

policy tool in

the recipient

country and also

as an indirect

price support

mechanism in

donor countries.


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wkkwyyTwwkbcyxwybcwwcy

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

0

2

4

6

8

10

12

14

16

18

MillionMetricTonnes

Year

EU

USA

Other

Total

Ly,yy,ycb,cTwcjy

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002

0

2

4

6

8

10

12

%

Year

ODA

Share of food imports

Figure 4: Food Aid Deliveries by Main Donors from 1994 to 2003

Sc:IPC,2005

Figure 5: Share of Food Aid in ODA and in Food Import Bills of Developing Countries

Sc:WFP,2005


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11

4.1 Definitionsoffoodaidtype

P yycc,cywwTbwyb,bbc,yccycycc(FAO,2005)Twwy1950

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cwy,cccwycb

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c

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4.1.1 Threekindsoffoodaid

Ecjcc(Tb3)yAy

cywcy(ycc,)bwTy:

4Analysis of Food Aid Definitions,

Procurement, Effectiveness

In terms of ODA,

financial aid is

almost always th

preferred option,

since it is seen a

the most effectiv

and efficient way

of funding direct

distribution of fo


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Project food aid(cz),wcbccc

Program food aid,wccycck,cwcccbbjc

wb

4.1.2 Emergencyfoodaid

Ecyybc-ccBccy,cybjcyDcycc,cywbxqb

Hw,ccccEC,EUDRyxcccccybxb(EU,2004)Cxybc,cHw,qcbjc,cywbwycy

4.1.3 Projectfoodaid

Pjcbycy,NGO,byjcccyy--cccTccc,by,,cc,ccyccScjcwc

Table 3: Government-to-Government Food Aid, 2000

Emergency Project Program Total (% of total)

Metric tons, grain equivalent

A 49,500 49,500 (16)

C 10,000 51,577 61,577 (20)

EU 33,000 33,000 (10)

Fc 57,805 79,905 137,710 (45)

Iy 6,328 13,507 10,969 30,804 (10)

J 37,109 112,346 149,455 (48)

US 149,686 350,512 2,103,231 2,603,429 (850)

T 199,014 508,433 2,358,028 3,056,475

%FATy 65 165 770

Sc:IPC,2005

Because of

the urgency of

the needs it

responds to,

emergency food

aid is subject

to slightly

different rules.


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1

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Mzccccy/yFx,cbkNGOc,,ycHw,cccc,ybc-cwy

TbbwzcccccwcBcbbxcbyy,yyccccycOc,z

yTCwqzwbywcAybyCwzbc-cc(Ck,2001)Hw,ycqczckbcybcT,cx-ccwyq

ycc

4.1.4 Programfoodaid

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Tyz

ccwxbykcbDcyb,ccycTjy,czckI,byccyO,qybyckcc(IPC,2005)

Dckwy,bcbcI,ybwcc

Due to its

controversy and

debate surround

it, program food

has declined in t

last couple of ye

in importance

and volume.


16/32


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Wck,yccw,c

cyBcccwccckyz,wcyc,c,bccyc

4.2 Foodaidprocurement

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Ccqcyccyc,wccwcxccTb

bycybqybbjc(Hc,2001;FAO,2004;O,2004),wccccywbbcwcccy

4.2.1 Thesourceoffoodaid

Mcbqcc

cFcycybybcA,bcGbzcc15cbcc(WFP,2005)TwkDDAxccbccjc

Bcccy,cccTyw-cc,wcbwky,yccbyNGOMNGOy80cby,cw28ccy1990(F6)IbNGOccbyccTbyNGOw90,10c21c

Todays growing

need for rapid

response to

large-scale crises,

often in situations

where normal

government

channels have

been weakened or

destroyed, has led

many donors to

allocate increased

responsibility for

management

of food aid to

multilateral

institutions and

NGOs.


17/32


1

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Ty,cc

,c,ccDccyTycqcIc,ccy()cyTcbyccbcTcccOyb15ccwy,cbc-cwy(IATP,2005)

4.2.2 The(un)tyingoffoodaid

AccOECD,ycccbybw15c25cUyE(bb)c350600-q(OECD,2004)

Multilateral

51%

Bilateral

21%

NGOs

28%

Figure 6: Breakdown of 2003 Food Aid

Deliveries by Channel, in Percentages

Source: WFP, 2004

0%

10%

20%

30%

40%

50%

60%

70%

80%

1983-85 1986-88 1989-91 1992-94 1995-97 1998-00 2001-03

3 year average

Food Aid

ODA

Figure 7: Share of Total Bilateral ODA and Food Aid That Is Untied, 19822003

Sc:OECDDAC,2005

The last option fo

sourcing food aid

is through local

purchases. Only

about 15 percen

are sourced this

way, although thi

method is claime

to be the most

cost-effective wa

of providing

food aid.


18/32


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T,2002,42cECwcEk,32ccc,226cc3cCy,USc99cywkIc,USqbJcjyckI2002,78cJbwk

Hw,cbc,EC,J,

Mc,Nb,NwycyTUS

4.3 Thebenefitsoffurtheruntyingfoodaid

Tw-byTbc: Dccc Gcby Eccc R

Iccw

MkwkccwcwScyckcwcycccqbcb

Fx,byccbyccckc

cc,,,,cTcc30cc

Table 4: Food Aid Donors During the 19952001 Period

Donor 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01

(Thousand tons grain equivalent)

EC 2,488 1,948 1,756 2,573 2,297 1,528

EUB 757 849 865 1,016 910 820

US 3,037 2,273 2,787 6,403 7,247 4,697

RW 1,115 535 833 1,258 714 1,419

Total 7,397 5,605 6,241 11,250 11,168 8,464

Sc:WFP,2005

12002f2Fccycy3Fcxccycy

Sourcing food

aid in an

internationally

competitive

marketplace

would effectively

reduce the

overall costs of

acquisition and

better allocate

the available food

aid funds.


19/32


1

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I-1990,x,J300(US$35)MwTwJc3,000cAzc79(US$09)T221(US$26)wccOy26cwc

MwIc,MwbbbyzwAc,ycbc10,000zJcc,bxccc

Nyc,bcckccGcc

kwwbccccccc(Oet al,2004)

AccCy,wccwycycccM,ccy:1)ccyc,2)bccc,3)ccc

c(Ck,2001)Hw,cbxcckbyc-cc,bybc

TybyCk(2001)w,cCwcy,kcxcFccccy,cby,,ccc,qyIcczcckc,cccwcc

Dywbc,ycyywcxbycby 4HwWFPw,w,wwbckc(WFP,2005)

4.3.1 Currentobstaclestountyingfoodaid

Awcy,yBck,bc,kbwcybcjby

Tbyc,,cCbkcxyUST

byy,wywcbbccyA

4Aw,c,byUSJ

Not only is

untied food aid

more efficient,

but it also

leads to greater

opportunities for

local producers

to market and

sell their produce

in partnering

countries.


20/32


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IcybDcFAC,WFP,xWTO,cybyWFACwycccwcc,

bWTO,w,cyc,,bcyccbyccWTOHw,cWTOAAc(AA),5wcxcycbwbwc,ccTcDDAbyx

WTObwcywAAIwy,cbyb

TcbbbTcyUS,NGO,z,bby,wcbbccyS,by-ccEU,cbwNGOcyz,cy,wccccyTc(cU

SJ),bby,w,x,NGOzbykccyby

TUS,by,b,qbybkTbbyUS,cNFB,NFU,NFyFC,

cbUScyyIbcwUS,ccccTcybccWTO,bccbywUST,yw(cwc)

y

TccyNGOwccybxbycyyycTyy,byckccbycccccIybbccwTwzybcAbcb,WFPccbccjy

Some

governments,

notably the pro-

agricultural reform

countries of the

EU, combined

with almost all the

NGOs and charity

organizations, are

advocating for

further untying of

food aid, to allow

recipient countries

to procure food

locally.


21/32


1

USbkcTWFPcby,wcccBbkbcc,byUSIwWFPwkccc,wbbycUSTcbkcwcWFPTwby,bccby,wcw

b

TbcybccxcOywkycSc5,wwbwccHw,cbcwjby

4.3.2 Conceptsofachievingfurtheruntyingof

foodaid

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OcwccWTOTbwbqxb,xc,Tcbc-cc

yc,cywccDRB,cccyccbyccWTO

TEUcy,ybcEbbMEUbykyc,cyccTEC

ycc,FAR(EU,2004)RccyccEUycwGycE,wbbcwycy

IbcywyUcy,wybccyc

cBc,byccc,wcwbcIbcybjc,yz,cc-cwyTwjcw,ybccybc

Tjcc,ycwbwIccb,cc

Trends have

shown that the

use of project foo

aid is growing,

largely because

it is increasingly

possible to

procure it untied


22/32


4.4 Effectivenessoffoodaid

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bccwyccc

EcOECDy,wckyccc/cccww(OECD,2005)TOECDc--yccyccycwccccbbyOECD

cycbH,ybc-c

TOECDycccyccywccycccccyTc-c,,cccccc

Tycccb,yc-cwyjc,c,jczEcyOECDy

c-c,ccw-ckyw

TOECDycww(w,cbSc4243)y,cUScccy,,y,c-ccT,cccwUS

yccTccc-cw,ccTbc,wycyc()c-ccc

Hw,cb,OECDycwwcbcccxIc,ccyk

cccbycxwcycwcccy

4.4.1 Effectsoffoodaidonlocalproducers

DcbyFAO2001bywcw,bybcccc(Ox,2005)TkyIc,ckcccccccccHw,byk,cyxby

Emergency food

aid emerged in the

OECD study as the

least cost-effective

form of food aid,

due to the costs

associated with

providing urgent

responses in

life-threatening

situations and

lack of opportunity

to do forward

planning.


23/32


1

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MyccbccccFcbcccywwcyckc,w-c

kkxTkjc,wcwyb-AcybyAbet al(2005)kbckccccq,bccyccc,by,

TycbE;w,w

cccwkcc,ycTwcwcb-SAc,wcwcycccbyccy

TccycAcccbcckcy,wckc

4.4.2 Conclusionofanalyticalcomponents

Oycbc-c-(OECD)bbcbccccTc,y,byck,w,by

Tk,cccbywjczycPcc,c,,ccbbTkcc,wjcbycycb,wccTbycy,wcb

,ccccccFcyc,wcwbcyF,ywcccc

Hw,c,wjcbcywyccPccybw,ycT,ycwbwc

If appropriately

provided and

targeted, food

aid need not

inevitably lead

to disruption in

local markets no

as we shall see,

should it inevitab

distort trade.


24/32


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WTOy,c,bbc,,cTcWTObbcc,bccccFwccc,yccc,bwc

cUcy,wccbckbbzccwwz,wcccbTccGATTUyRbqyDDARcwccycG-20kcbzWccyc,,cb

TbbbccWTO

Tcc,cFACFAO,bcc,bybcccHc,kwwWTOHw,bcWTOck,yb,bycc,kcWTOcc,c,cb(IATP,2005)N,c

The Political Dimension of Food Aid

ccccc

IyzwwWTOcyTcbywWTO,w,,c,wbbcw,,cbc

Tccyby,byWTO,bwc,cFAC,WFP,NGOTUS,bby,qbybkUScTbbyUScbUScy

yPcwjby,cqy,USHw,ywUSFzywybck,cc,wwqyUSbc

5.1 Foodaidinmultilateraltrade

negotiations

FwAc10AAc(AA)wbUyRHw,

5

The inclusion of

food aid in the

WTO negotiations

means that the

debate over food

aid becomes even

more political, in

addition to being

an economic

concern.


25/32


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WTObTc,w,wccwWTO

TbbcxwDDAWTObkccbzby,USEU,cb,wc

wcTDDAkywTEUcwAAwbc-bHw,cckybcUS,wcc,wcwcbF,bc,wcWTOckwc

IbqcjkcEUb

bcc(GI),wccEUHw,cbbUS,bycxcHc,bc,cy,ccbw

Ibwc

cbcAcx,bcbbDDAWTOccbccAcccwywbbccyc,cycw

5.2 Policychangesneeded

Wycccbc,ywycccyTWTOcbOcy,UScxbykwkyww,y,wcAcxy

OcUScwbwGbFACc(GFAC)cxFAC(FAC)TFACwc

Outdistancing all

other nations in

food aid delivery,

the United States

could set an

example for othe

nations by makin

a few key reform

that would allow

its food aid to

help more people

in a more timely

fashion, at a lowe

cost to American

taxpayers.


26/32


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c,wGFACcbcbcbycxccyM,bykGFACxWTObyxSb2003BSccc-cybc

Awcccywb

cybcccMycyc(,USAIDUSDAUS)Accwy-ywcIc,cyybyIc,US60ccyEbcEcyccb,USc

cywCyNAcbcyybUS

I,cUSAIDyccccbOyb10cbcccwcwFcSbwqc

Oy,bcccbccc,ccTcxby,cccccbcckwzMzbb,xbcyNGOcbyFcyccyyccHw,qxbycjcScxbywqxUSc

IwbxccEUxbbUS/EU-cyFx

ccbcwcccybjcwccFbc

To increase the

flexibility of food

aid, the sale of

food in recipient

countries to

generate cash

resources for

other programs to

address the cause

of hunger should

be implemented

the practice known

as monetization.


27/32


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5.3 Operationalchangesneeded

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cTbcwTcyqwc,bwcc,wkcy,wwGcwycqycGFcy-cwc

Accyy-cc,cc,bNGOWFPyN,Twqyywwcy,wc

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cbybcbyckcwccc

Tbz,c,c,wcybkcIbwcccyccIb,w,

yw-ccwccccHw,wkjzjcbywyccc

There is one

major role for

which food aid

is ideally suited:

addressing acute

food insecurity

in humanitarian

emergencies tha

are underpinned

by both an

outright shortage

of food and a

failure of market

to respond to

demand stimuli.


28/32


Summary and Conclusions

6

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c,cccwyc-ccccccy

Sc43wyjc,c,wccybcckTbcwccy,bcwccTc-c,cbccywHw,wk

c-cyccy,wwcbqyccyckbccTbcyc

Icc,cccwwbTckcccxcb(bb)ccC-cycb,bycbb,ccyccb

If food aid is

granted in the

form of project

food aid for

monetization, and

completely untied

and targeted in an

efficient manner,

it can be an

effective way of

alleviating hunger

while having

minimal effects

on trade and

local production.


29/32


30/32


Ab, A, B, C, H, J 2005Dycc?Nwcb-SAc,cWorld Development

B,C2002FScyFAcP,GR(),Handbookof Agricultural Economics,A,E

B,C,Mxw,D2004PL480FA:WCDB,Choices,N3

Ck, C 2001 F A WTO AcTPcy,Canadian Foodgrains Bank,Nb2001,16

EU2004WkcC c, T H AI Nw Fc Pc,20072013,B

E U 2005 Ac ccy:IwwEU, Monitoring Agri-trade Policy,N02-

05,B

FAO2005FACxIDcMkDR,FOATPcyTccNWTOc,N8

Hc, L 2001 U A G F,Developments,Fby2001

IATP2005USFA:TGIR,cy I Ac TPcy,M

IPC 2005 B Jy FwkA:OAc,IF&AcTCc,IPCIBJ2005,W,DC

ODI2000RFA:TGN,ODIb,1Jy2000

OECD2004FA:IIEcDIMTIIT,OECD,P

OECD2005TDEcFAEcITy,OECD,P

O,K,VqzM,B,LC,A,Sc,A2005AISyFUyEA,EUx

Ox2005FAHD?OxBP71,Mc2005

WFP 2004 2003 F A Fw, y,The Food Aid MonitorMy2004

7References


31/32


32/32

O f f i c e s

Washington, DC

1744 R Street NW

Washington, DC 20009

T1 202 745 3950f1 202 265 [email protected]

Berlin

Oranienburger Str. 13/14

10178 Berlin, Germany

T49 30 28 88 13 0

f49 30 28 88 13 10

Bratislava

Transatlantic Center for Central and Eastern Europe

Strova 3

811 02 Bratislava, Slovak Republic

T421 2 5931 1522

f421 2 5931 1405

Paris

30 rue Galile

75116 Paris, France

T33 1 47 23 47 18

f33 1 47 23 48 16

Brussels

Transatlantic Center

Rsidence Palace

Rue de la Loi 155 Wetstraat

1040 Brussels, Belgium

T32 2 238 5270

f32 2 238 5299

BelgraDe

Balkan Trust for Democracy

Dobracina 44

11000 Belgrade, Serbia and Montenegro

T 381 11 30 36 454

f 381 11 32 88 022

ankara

Tunus Cad. No. 15/4

Kavaklidere 06680

Ankara, Turkey

T90 312 425 6677

f 90 312 425 3399

www.gmfus.org

food aid and its relationship to wto rules and the development agenda

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