As the world’s largest food aid provider, supplying about half of all food aid, the USA has a special responsibility not to misuse this humanitarian tool for commercial aims. And yet it is the most problematic actor among food aid players. At the WTO, the USA has emerged as the primary opponent of new food aid disciplines, defending the status quo and successfully maneuvering to remove language from the July 2004 WTO framework agreement prohibiting surplus disposal via food aid. Because the USA is the largest donor of food aid, this paper largely focuses on the US food aid program.
The USA is nearly the only country that sells ‘food aid’ to recipient countries; other donors give it in grant form. The USA is likewise the only donor country to make significant use of export credits in connection with food aid; this essentially means extending loans to countries to buy food aid. Reductions in export credits are squarely on the table at the WTO agriculture negotiations as they are considered export subsidies.
More than 850 million people suffer from chronic hunger. Reducing by half the proportion of people suffering from hunger by 2015 is a key target for the Millennium Development Goals (MDGs). The right to food is enshrined in numerous international instruments, including the Universal Declaration on Human Rights, the International Covenant on Economic, Social and Cultural Rights, and many others.4 However, the world’s farmers produce more than enough food to fulfill the minimum caloric needs of humanity. According to the Food and Agriculture Organization of the United Nations (FAO), in 2001 the total global food supply amounted to 2,800 calories and 76 grams of protein per person per day — plenty to nourish the world’s population and remove chronic hunger.
The US food aid system creates opportunities for a variety of private interests to skim off benefits in the procurement, packaging, transportation, and distribution of commodities. Many inefficiencies result from the US insistence on sending commodities for food aid. For example, the US government requests bids for sales of surplus agricultural commodities from a limited list of pre-qualified US-based agribusiness companies, and arranges the transportation of these commodities from the USA to recipient countries on US-flagged ships. The bidding process results in purchase and transportation expenses that are substantially higher than market costs.
US shipping companies are major beneficiaries of food aid programs: US law mandates that 75 per cent of all food aid transport be handled by shipping companies carrying the US flag. In 2002, $261 million - over one-third of total US food aid program costs - was allocated to US shipping companies. The share of international cargo, other than US food aid, carried by US-flagged ships has been declining and now accounts for less than 3 per cent of US import and export tonnage.
A select group of US cereals traders also benefits from these tidy arrangements for food aid. In March and April 2003, the ‘competitive’ acquisition process resulted in contracts for grain purchases in excess of $28m. This was shared among just four companies: Cargill, Louis Dreyfus, ADM/Farmland, and Kalama Export Company. According to the US Government Accountability Office, only 18 US companies were qualified to bid for food aid contracts even when volumes of food aid shipments were at their peak between 1991 and 1994.
The greatest concern around food aid is the possibility that it can undermine the livelihoods of poor farmers by creating disincentives for local food producers, by flooding markets and depressing prices. Substantial volumes of food aid provided over a long-term basis could discourage local production, result in increased poverty, and create long-term food insecurity due to increased dependence on food imports. Regenerating agricultural production and local markets is central to any strategy for longer-term recovery and development.8
At the local level, there are numerous cases where producers report falling prices and market displacement as a result of an influx of food aid commodities.9 For instance, in 2002 and 2003 food aid donors over-reacted to a projected 600,000-tonne food deficit in Malawi, and sent close to 600,000 tonnes of food in aid. However, commercial and informal importers brought in an additional 350,000–500,000 tonnes. Malawi was flooded and had very large carry-over stocks. Maize prices dropped from $250 per tonne to $100 per tonne in the course of a year. Local production of maize, cassava, and rice fell markedly, and estimated losses to the Malawian economy were approximately $15m
