Food Aid: EU urges US reform

Refering to a World Food Program advertisement in today's Financial Times, EU Trade Commissioner Peter Mandelson has this afternoon defended the EU's call for reform of the US Food Aid program.

Speaking to a press conference in Hong Kong, Peter Mandelson said: "I find it shocking that United Nations agencies should be financing an advertisement in the Financial Times that is designed to support the US' trade distorting policies on food aid.

Food aid for poor countries and for emergency relief can be a tool to advance development and for humanitarian relief.

However, the large structured US programme of 'in kind' food aid is designed in reality to give support to US agricultural producers. It distorts trade and depresses local production. Statistics show that this aid is directly related to the price shifts for the commodities concerned on the US market.

A radical reform of US food aid is an essential part of any agreement we may reach in this Round on eliminating export supports. We have moved to eliminate export subsidies. We expect comparable action on others' programmes, including in Canada, Australia and NZ."

Some factual information on the current US Food Aid system is annexed below.

For more information:
http://europa.eu.int/comm/trade/index_en.htm

Key facts on food aid
Export refunds

• Since 1992, Common Agricultural Policy reform has enabled the European Union to substantially scale down its export refunds (to less than 3 billion euros in 2005).
  
• The EU has pledged to phase out all export refunds as part of its offer in the
  
• It will not commit to end dates before other countries agree to parallel disciplines on their export support programmes.

• The EU does not question the granting of genuine food aid.
  
• The EU is firmly committed to achieving food security for all and to making sustained efforts to eradicate hunger.
  
• It is not the intention of any WTO Member to limit food aid for genuine needs in Developing Countries.
  
• But the EU does question the way some WTO members have used food aid donations as a commercial tool to dispose of surpluses and promote sales in foreign markets.
  
• Dumping of surpluses under the cover of food aid is an abuse of the concept.
  
• Dangers include: disturbance of local markets; undermining local agriculture; displacement of legitimate exporters; and circumvention of WTO rules on subsidized exports.
  
• The most cost-effective option with the least risk of market displacement is the donation of "untied" cash for free procurement (preferably in developing countries) of food aid commodities.
  
• "Untied cash" food aid and proper donor commitment provide the flexibility to address emergencies effectively.
  
• The EU does not accept the argument that such money is vulnerable to corruption.
  
• The US is working with reputable NGOs and UN Agencies such as the World Food Programme. The EU is confident this makes abuse unlikely.

• The US donated 2.6 billion dollars of food aid in 2003, all procured on the US market and provided with US logistics as "in-kind" food aid.
  
• With this kind of "tied" food aid, up to 60 percent of the budget stays in the donor country (agribusiness companies, logistics and shipping companies).
  
• Aid procured on the donor market can take months to ship to its destination.
  
• For the US, food aid acounts for up to 20 percent of wheat exports and more than 50 percent of skimmed milk powder exports.
  
• The US has proposed to exempt more than 85 % of global food aid from future WTO disciplines.
  
• The EU has kept its emergency food aid stable. The "Official Development Aid" provided by the EC and Member States is increasing.
  
• By 2010, the collective EU contribution will amount to 0.56 percent of ODA/GNI, equivalent to an additional annual volume of 20 billion euros. The EU has pledged to go to 0.7 percent ODA/GNI by 2015.
  
• In 2004, all developed countries gave cash to the World Food Programme, the only exception being the US, which spent almost two thirds of its WFP contribution on transport and logistics.

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