Photo: ASSOCIATED PRESS
A woman in Zimbabwe stands alongside bags of food from the United States given to her family.

JENNIFER CLAPP; CENTRE FOR INTERNATIONAL GOVERNANCE INNOVATION

In a world where natural disasters and other emergencies now seem to occur on a regular basis, food aid is an important form of humanitarian assistance. It helps to feed those in dire situations and supplements food supplies in food deficit countries.

But it is important to remember that food aid is also very much a trade issue, and one that is highly political. Tied food aid -- that is aid tied to donations of food grown in donor countries -- has gained much attention in recent years because of its potential to distort trade.

The currently stalled trade talks at the World Trade Organization, which look set to be re-launched at Davos this week, provide an opportunity to address some of the longstanding critiques of in-kind food aid. But the main players, the United States and the European Union, have been at odds over the issue.

From its inception in the 1950s, food aid was conceived as a foreign policy tool with multiple objectives. By giving food in-kind, donors aimed to benefit both the donor and the recipient.

But it hasn't been that simple in practice. The impact of food aid over the past 50 years has been uneven. Extensive research has highlighted the persistent problems with in-kind food aid.

A key problem is that in-kind food aid can distort markets. It can take months for a food aid shipment to arrive where it is needed. There is a long list of cases where food aid arrived during the local harvest. When this happens it depresses prices in the recipient country, which hurts local producers. In-kind food aid can also displace commercial trade. When given a choice, some food aid recipients would purchase food within the local economy, or from a country other than the food aid donor country. Such transactions can get food to where it is needed more quickly, and minimizes trade distortions.

It is also very costly to deliver food aid in-kind compared with cash donations to support food purchases. Studies have shown that it costs on average 50 per cent more to deliver food aid in-kind than it would if cash were provided to purchase food locally. And in-kind food aid costs one-third more than if it were purchased from a third country. Cash has the potential to provide more food for those in need, and ultimately save more lives.

In-kind food aid also limits food choices for those facing food shortages. Food preferences might include a desire to consume non-genetically modified food.

Food aid shipments to southern Africa in 2002-03, for example, were rejected by some countries because they contained genetically modified maize. In recent months, an unapproved variety of genetically modified rice made its way into food aid shipped to West Africa, sparking concern.

The problems with relying solely on in-kind food aid have been highlighted by a number of studies by non-government organizations and intergovernmental bodies alike. Calls have been made for replacing or at least supplementing in-kind food aid with a cash-based system which would be less market distorting, less costly, and allow for countries to express food preferences.

The European Union, Australia, and Canada have responded to these critiques. They have moved over the past decade to reduce in-kind food aid and implement at least some cash-based food assistance as part of their food aid programs. Canada, for example, changed its policy in 2005 to allow up to 50 per cent of its food aid to be purchased in developing countries.

But the United States, by far the world's largest food aid donor, providing over 50 per cent of all food aid, has held onto its in-kind system. Although the Bush administration suggested last year that the U.S. should also move toward more cash-based food assistance, the U.S. Congress bowed to heavy pressure from the grain producers, processors and shippers, to "keep the food in food aid."

In the WTO trade talks, the EU has claimed that in-kind food aid is an unfair subsidy to U.S. producers, and that it distorts trade. In its view, in-kind food aid should be disciplined by WTO rules. In the negotiations, the EU has said it will only reduce its own agricultural subsidies if the U.S. makes major changes to its food aid system.

The strong position taken by the EU may well be part of its strategy to enhance its own bargaining position in the trade talks. But if its tactic is successful in getting the U.S. to change its food aid program to a more cash-based system which is in line with the other major donors, it would be a step in the right direction. The academic literature has pointed out the problems with in-kind food aid for years. The current WTO negotiations may be a unique opportunity to bring about a change in practice.

Jennifer Clapp is the chair in international governance at the Centre for International Governance Innovation in Waterloo, and is an associate professor in the environment and resource studies department at the University of Waterloo.

The opinions expressed in this article/multimedia are those of the author(s) and do not necessarily reflect the views of CIGI or its Board of Directors.