The first of the United Nations Millennium Development Goals is to eradicate extreme poverty and hunger. Specifically, this goal aims to halve the proportion of people who suffer from hunger. Yet, today 963 million people are hungry. To help fill the apparent void, the international community worked together establishing a forum for participation in food security dilemmas, as well as institutionalized mechanisms in which wealthier countries can assist starving populations around the world. Food aid is one way in which wealthier countries assist poorer nations. The United States is the largest donor of food aid, thus this analysis will focus primarily on U.S. food aid implications. However, Canada and the European Union have their own food programs as well. Food aid encompasses many vying interests and is seen to provoke competing economic thoughts. Though development micro economic concepts encapsulate issues of food aid and food security, this analysis emphasizes the trade related effects of food aid distribution and policy. This analysis recommends food aid remain coupled with trade policy, and that the World Trade Organization (WTO) is the international body that will allow for fairer agricultural practices concerning food aid.
[...] 2003, Canada provided 70 percent of its food aid as project aid flowing through the WFP, and Canadian NGOs percent went as emergency aid, and none as program food aid.”[lxxv] However, Canada's food aid policy is basically as restrictive as the U.S. since 90 percent of the budget must be spent on the purchase and shipment of Canadian commodities.[lxxvi] The European Union has been critical of the U.S. in this matter; they have phased out the practice of monetization in the 1990s. [...]
[...] Food aid transactions must be notified in a timely matter to the FAO and WTO[xcvii] Oxfam also provides recommendations for changes to the Agreement on Agriculture like the elimination of surplus disposal instruments such as export subsidies and subsidized export credits; implement the Marrakesh Decision on Net Food Importing Countries; curb subsidized production on domestic food surpluses; and, increase funding for development assistance to target deeper causes of hunger and food insecurity.[xcviii] Food aid is not a matter easily decoupled from trade, nor should it be. [...]
[...] Maxwell, “PL480 Food Aid: We Can Do Better,” Choices: The Magazine of Food, Farm, and Resource Issues, (Fall 2004): 55. [xcv] “Facts of the Farm Policy Facts, (2009), http://www.farmpolicyfacts.org/all_facts.cfm (accessed April 24, 2009). [xcvi] “Food Aid or Hidden Dumping?: Separating Wheat from Chaff,” Oxfam International, Briefing Paper No (March 2005): 30. [xcvii] Ibid, 30-31. [xcviii] Ibid, 31-32. References Abdulai, Awudu, and Christopher B. Barrett, and Peter Hazell, “Food Aid for Market Development in Sub-Saharan Africa, IFPRI, DSGD Discussion Paper No (April 2004): Adams, Lesley and Paul Harvey, “Learning from Cash Responses to the Tsunami.” Issue Paper Humanitarian Policy Group, (September 2006): Barrett, Christopher and Daniel G. [...]
[...] Furthermore, food aid can exacerbate and prolong the shortages by distorting allocation of resources away from production of food and can distort domestic consumption patterns, leading to long term dependency.[liv] Agricultural Subsidies and Trade The microeconomic discussion is important in trade analysis because the two spheres of economic thought are intertwined. Each economic paradigm has actors and interests specific to their needs, and will lobby accordingly. However, lobby interests of U.S. farmers influence the U.S. decisions at the WTO, as well as influencing actions at the local country level, where their food is distributed. [...]
[...] al explain, “food aid transfers tend to decrease the demand for substitute commodities, such as maize and rice in the case of wheat food aid, and to increase demand for complements, such as meat and vegetables in the case of vegetable oil food aid.”[xlviii] However, to the extent that consumers substitute more than they purchase in complementary goods depends on the size of the income and substitution effects, which determine “net-cross price effects.”[xlix] Food aid affects on product prices are a serious concern especially in fragmented markets and if food aid is ineffectively targeted. [...]
using our reader.