Food Aid Lecture

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Food Aid After 50 Years Recasting its Role
Dan Maxwell CARE International Tufts
University October 17 2005
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Intro Basic Trends in Food Aid
Three Types of Food Aid
 
Program Subsidized deliveries of food to a
central government that subsequently sells the
food and uses the proceeds for whatever purpose
(not necessarily food assistance). Program food
aid provides budgetary and balance of payments
relief for recipient governments. Project
Provides support to field-based projects in areas
of chronic need through deliveries of food
(usually free) to a government or NGO that either
uses it directly (e.g., FFW, MCH, school feeding)
or monetizes it, using the proceeds for project
activities. Emergency/Humanitarian Deliveries of
free food to UN (WFP) /Govt. / NGOs responding to
crisis due to natural disaster or conflict.
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The geography of food aid flows has changed over
time, although US remains dominant.
Intro Basic Trends in Food Aid
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Food aid accounts for little in the way of
overall annual flows of food
Intro Basic Trends in Food Aid
and the share is declining, especially relative
to commercial trade.
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Intro Current Snapshot Food Aid
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Intro Current Snapshot Food Aid
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Why is Food Aid a Global Issue Now?

• Governance Food Aid Convention
• Expired and is presently on short-term extensions
• Major gaps in food aid governance mechanisms
• US Politics Upcoming US Legislation
• Proposal to convert 300M to local/regional
  purchase
• New Farm Bill (06-07?)
• New Maritime Security Program Bill
• Global Politics WTO negotiations
• European agricultural subsidies are the big issue
• Europeans and M/LIDCs view US food aid as an
  export subsidy
• European Proposals on Untying Food Aid
• US Proposal for local purchase
• Views on monetization
• Global Politics GMO disputes
• India, Zambia, Zimbabwe

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Why is Food Aid an Issue in the
Humanitarian/Development Context?

• In context of MDG 1, food aid can protect acutely
  hungry people it can also do harm
• In the long term, markets must work for the
  poorignoring the long-term market effects of
  food aid is often justified because of short term
  protection of poor people
• Much of the problem with food aid is with U.S.
  food aid
• European and Canadian food aid has been reformed
  somewhat morenow the issue is European
  agricultural subsidies Europe views US food aid
  as a subsidy
• Efficiency and Effectiveness (Tying Costs,
  Cargo Preference, time requirements)
• Reliance on monetization
• Speed and Flexibility are the issues in
  humanitarian response
• Appropriateness of the resource is the issue in
  development
• Time lags in emergency response
• Questioning of non-emergency distribution
• Use of monetization for cash requirements
• One way or the other, food aid will be reformed
  or changed We can lead it or we can be led
• In time of shrinking budgets, fear that reform
  can lead to either advocating for entrenching a
  dysfunctional system or lead to its collapse
• Fear that extreme reforms could harm poor people
  in food deficit countries
• There is a disappointing dearth of leadership on
  food aid reform, especially among US NGOs

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Food Aid Efficiency and EffectivenessA
donor-driven resource

• Donor-driven food aid is based on a few key
  myths
• Myth Food aid effectively supports donor country
  farmers (0.05 of US food economy,
  bagging/processing requirements, etc.)
• Myth Food aid builds long-term commercial export
  markets (free sample analogy wrong)
• Myth Cargo preference laws effectively support
  the U.S. maritime industry (50 decline/decade)
• Myth Food aid is wholly additional (Engels law,
  MPC of food only 0.3-0.8)
• Policies founded on these myths divert resources
  from food aids poverty/hunger reduction
  objective.

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Food Aid Efficiency Issues

• i) Small number of food vendors
• (11 procurement premium)
• ii) Very small number of shippers
• (78 cargo preference premium)
• iii) Efficiency of US Procurement
• 1.00 food costs 2.13

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Food Aid Efficiency Issues

• iv) Resource Transfer Efficiency (OECD Study,
  2005)
• Tied (in-kind) food aid from donor markets
  is 30-50 more expensive alternative import
  sources
• v) Possibility for local/regional
• purchase
• Myth local shortfall regional
• short fall
• Some momentum for this
• option
• Canadas new policy
• US debates
• Not just an issue of RTE or cost.
• Also an issue of speed/flexibility
• of response in emergencies
• (i.e. efficiency and effectiveness)

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Food Aid Effectiveness
Decision-Tree for Food Aid Utilization

• Food Aid has been proven effective for
• Fulfilling right to foodprotecting human life
  and nutritional status in acute emergencies
• Protecting assets during shocks
• Facilitating growth in assets
• Complementary element of HIV/AIDS
• treatment
• Recommendation Food aid should be focused on
  these activities.
• Question Can other resources be made available
  for food aids other roles?

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Food Aid Management and Impact  

• 1. Targeting (Who/Where?)
• - Leakage to non-targeted individuals,
  households, regions (errors of inclusion)
  undermines developmental impact
•  - Missing intended recipients (errors of
  exclusion) undermines humanitarian impact
• 2. Targeting (When?)
• 3. Consequences of targeting errors
• Exclusion High malnutrition/mortality
• Inclusion Low additional consumption of food
• intl. trade/domestic sales displacement
• producer/labor supply disincentives
• added costs
• Estimated range 30-80 average additional
  consumptiongreater inclusion error lowers age

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Food Aid Management and Impact

• 4. Incentive effects
• Disincentives
• Food price effects
• Sales/trade
• Production
• Positive Incentives
• Factor prices/availability (e.g., seed,
  fertilizer, assets)
• Risk effects
• - Health and ability to work/labor supply

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Food Aid Management and Impact  

• 5. Monetization
• Generates cash resources for NGOs, much like
  program food aid did for governments. These
  programs are important. But
• Differentiate between the monetization-supported
  programming and the problems associated with the
  resource
• Monetization-supported programs do have important
  impacts on food insecurity
• However
• Cost efficiency transoceanic shipping cargo
  preference
• NGO staff time and skills
• Timing difficulties and
• Cost of capital for programming
• And in most cases, the food itself is not
  targeted
• Additionality of consumption minimized
• Disincentive effects maximized

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Food Aid Management and Impact 

• Monetization A few additional points
• There are controls on US food aid monetization
  (Bellmon Analyses).
• Controls are imperfect (checks and balances
  issue)
• But controls are adequate to prevent gross abuse
  (the Somalia price crash of 2000 would not take
  place with Title II monetization).
• Monetization represents a tiny proportion of
  total trade in food.
• Monetization is often the one of the few
  resources for food security programming.
• WTO has some jurisdiction, but should not resolve
  trade disputes by cutting resources for poverty
  reduction and humanitarian response
• Monetization should be adapted onlyfor
  appropriate uses, and reliance on monetization
  purely for cash should be phased out, linked to a
  commitment to make alternative resources
  available.
• Alternative of resource conversion, not simply
  abolishing practice. But this will take timea
  transitional strategy and time frame is required
  for the conversion

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Food Aid Governance

• Existing Governance Mechanisms
• Food Aid Convention (1999).
• Has expired and is on temporary extension.
• Is a donors-only club (no representative of
  recipient governments or agencies)
• Tonnage minima frequently ignored, no
  enforcement mechanism
• No dispute resolution mechanism
• CSSD (FAO)
• Based on out of date principles
• lt 5 of food aid flows reported under required
  notification mechanism
• Codes of Conduct
• Sphere and EuronAid NGO Code of Conduct on Food
  Aid and Food Security
• Completely self-enforcing no accountability
  mechanism, limited donor support
• No codes of conduct for donors or recipient
  governments
• WTO
• Food aid is on the table of Doha
  Roundespecially trade-related elements
• Food aid in grant form only
• All food aid to be untied
• Multi-lateral distribution agencies only
• Big question on definition of bona fide food aid

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Food Aid Governance

• Issue is about principles, not about
  institutions
• Accountability
• Current system lacks monitoring and reporting
  mechanismsCSSD routinely ignored, has no legal
  status, and no dispute resolution mechanism)
• No one holds operational agencies accountable for
  best practice, or even agree on what it is.
• Inclusiveness
• FAC is a donors club, CSSD has 41 membersboth
  donors and recipients, but far from complete
  coverage
• Commitment
• Donor commitments in terms of both tonnage and
  value. Neither exist under current status quo
• Definition of bona fide food aid
• Codes of Conduct
• Based on IHL Food aid based on vulnerability
  and impartiality
• Appropriate analysis
• Appropriate utilization and management
• Clear obligations of all parties
• Donors
• Recipient country governments
• Operational agencies

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Specific Recommendations (from book)

• Policy Issues
• 1) Negotiate a new Food Aid governance mechanism
  (based on principles above)
• 2) Restore global development assistance flows
• 3) Negotiate reductions in outdated forms of food
  aid in exchange for reductions in EU export
  subsidies that harm both US and developing
  country farmers
• 4) Push for quicker and more flexible emergency
  response
• local purchases/triangular transactions, at
  least in early stages
• reduce/phase out domestic processing/cargo
  preference constraints on food aid programming
• 5) Expand cash budgets for addressing underlying
  causes of food insecurity, reducing pressure for
  monetization. Must build a constituency for
  greater cash resources for development
  programming
• 6)Within current budgets, adapt the resource to
  fit the application.
• Management Issues
• 7) Improve the targeting of food aid

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Thank you for your time, attention and comments!