Linda M. Young and Philip C. Abbott Food Aid: Interests, Trade-offs and Options Presentation to Oxfam December 13, 2004

Options for Food Aid Today’s Agenda  Whose Interests Are You Concerned With? –Recipients –WFP –United States as a Donor –Other Agricultural Exporters Developed Countries Developing Countries –WTO  Then, I will discuss options to consider

Tradeoffs or Compliments: Food Aid, Food Self- Sufficiency and Other Developmental Goals Other Developmental Goals Food Production

Options for Food Aid How Prevalent Is the Disincentive Effect?  Lenz: no systematic evidence of disincentive effect  Barrett: spurious relationship without adequate controls  Phil: just mentioned that imports, not production likely to be affected in many cases

Options for Food Aid Recipients  Those who receive food aid/ benefits from –Victims of civil war and natural disaster –Chronically hungry Beneficiaries of food for work, feeding programs, –Beneficiaries of development projects  Concerns: –Enough, at the right time, appropriate form  Disincentive Effect  Conditionality

Options for Food Aid WFP  Enough supplies from donors  Unrestricted funds  Strategic plan: no monetization; cash for overhead  Emergencies variable: –Guess difficult to maintain staff in times of lower need

Options for Food Aid Donors  United States –Building coalitions to support food aid –Gives about 60% of WFP food aid  Other Agricultural Exporters –Concerned with surplus disposal aspect –EU: concerned with reforms they have made Want those to be reciprocated Possible trade-off in the negotiations What will it take to have them reduce export subsidies?

Total European Commission Food Aid, (grain equivalent)

Financial Allocations under Regulation 1292/96, (allocation by instrument – million Euro) Source: Commission of the European Communities “Communication from the Commission to the European Parliament and the Council: Evaluation and Future Orientation of Council Regulation (EC) No. 1292/96 on Food Aid Policy and Food Aid Management and Special Operations in Support of Food Security.” COM(2001) 473 final/2, December 9, Brussels, p. 19. (In the document, source is cited as “Evaluation of EC Food Aid, Food Security Policy, Food Aid Management and Programmes in Support of Food Security,” NRI and NEI Synthesis Report, November 2000.)

Options for Food Aid World Trade Organization  Concerned with success of Doha Round: Trade-offs  Focused on trade distortions: nothing more –July negotiating framework “Commercial displacement”  Even though wide-spread dissatisfaction with the Ministerial Decision on NFIDC  Little Developing Country voice in negotiations on food aid  Past concerns ignored or rejected (conditionality/market development) –Food financing –Food aid in schedules

Cereal Imports and Global Food Aid, 1990–2002 (food aid in grain equivalent)

Cereal Imports and Food Aid in Low- Income Countries, 1990–2002 (in grain equivalent)

Percent of Food Aid by Region,

Total Global Food Aid, (grain equivalent)

Options for Food Aid Market Development  US PL 480 Title I is contentious –Only donor food aid on loan terms –Ranging from 7 to 17 % in 1990s –12% of total donations in 2001 –Current size-2002 ½ mmts  Has an explicit market development objective –Move to export credits (although different than)  WTO: include language market development objectives not appropriate –Better outcome than deleting loans –NFIDC-more on grant terms or in accordance with FAO guidelines on concessional terms  Guess elimination a likely WTO accomplishment if round success

Options for Food Aid Exclusion of Government to Government Food Aid Data for year 2000

Options for Food Aid Exclusion of Government to Government Food Aid  Concern over developing country governments –Efforts to circumvent developing country governments –Well founded but; –Exclusion of governments problematic over the long run –Some multilaterals concerned with institution building, not circumvention

Options for Food Aid US Section 416B  Surplus Disposal – CCC stocks  But elimination or wording about surplus disposal could reduce US donations to the WFP –FY ,517,810 US to WFP from 416B –FY ,200 US to WFP from 416b –Data from reports on hand

Global Programme Food Aid, (grain equivalent)

Global Project Food Aid, (grain equivalent)

U.S. Project Food Aid, (grain equivalent)

Total U.S. Food Aid, (grain equivalent)

Options for Food Aid Options to Discipline Monetized Food Aid  Both program and project –Very different in nature  Program food aid –One option is to discipline size –Look at handout: indicated monetized food aid by size (all donors) –Relatively few extremely large donations –Many small donations Less likely to disrupt markets –Could discipline in terms of recipient income With appropriate language in terms of exceptions –i.e.: countries in former Yugoslavia

Food Aid to Low-Income Countries and Total Food Aid,

Options for Food Aid Project Food Aid  Some project food aid monetized  Administered by USAID  Some, a part of more broadly based development projects –Examples include  Given lack of evidence on disincentive, motivation to eliminate?

Options for Food Aid Only Multilateral Food Aid?  True, benefits of coordination –And WFP good reputation for efficiency  But, likely not a good solution –EU-gives food aid three ways –Likely to strike hard at donor motivation –Unclear what institutional monopoly would mean

Options for Food Aid Oxfam Should Consider Dreaming Bigger  What food aid really needs is a new institution  WTO: not the right mandate –Work at FAO recently an example –July modality framework the cause  Consultative Committee on Surplus Disposal –Again: wrong framework and ineffective Little food aid notified Concerned again over commercial impacts  Food Aid Convention –Not the right balance of membership –Waiting for the WTO rules before renewal

Options for Food Aid Oxfam Has International Voice  Design a new institution  Balance of recipient and donor concerns  Separate from the WFP –Worried about offending donors  Could be consultative to the WTO –Other organizations are – like Codex –Could discuss operational disciplines more effectively  This would be a much greater contribution than simply eliminating monetized/program food aid  Wide spread recognition of need for creative thought on this point

Options for Food Aid Another Strategy: Work on ODA  Less resistance to reducing food aid if official development assistance (ODA) is increasing rather than decreasing  ODA is the most fungible and effective source of aid in most cases –Even in food deficit situations used for triangular transactions  U.S. ODA has decreased over the years –Food aid as percent of ODA- 2-6 percent, variable US DAC % of GNI

Global Emergency Food Aid, (grain equivalent)

Food Aid by Region, (grain equivalent)

Options for Food Aid 1999 Food Aid Convention  Objective “to contribute to world food security and to improve the ability of the international community to respond to emergency food situations and other food needs of developing countries.”  Members: Argentina, Australia, Canada, EC (and members), Japan, Norway, Switzerland and the US  Terms: –All food aid to Least Developed Countries in grants –Grant to be 80% of a members contributions –Not tied to exports –Urged to use triangular transactions