Global Development: Views from the Center
September 17, 2008
What Happened to Japan's Rice Pledge?
Posted by Tom Slayton at 04:35 PM
Earlier this year, with the food crisis in the daily headlines, the world's leaders made promises -- first in Rome at an FAO gathering in June and then at the G-8 summit in Japan the following month -- to make a concerted effort to provide relief for the world's poor. Among the pledges was that of Prime Minister Fukuda that Japan was prepared "to release in the near future over 300,000 tons." With the government holding 1.3 million tons of imported rice, my colleagues and I wrote that "it is time for Japan to quit stalling and show some real leadership by releasing its unwanted rice stocks."
Sadly, this is still true. Month after month has passed without Tokyo acting on its promise. Discussions with the Philippines over 200,000 tons have gone nowhere because Tokyo has insisted on a price that is now well above the world market -- all the while selling increased quantities of its rice at lower prices to the local animal feed industry.
Japan would be wrong to think that the world has entirely forgotten. As the Washington Post pointed out in an editorial on Tuesday, Release the Rice (III), world prices have declined one-third from their April high of $1100 per ton, but the current price of about $735 is still too high for the world's poor. Worse, the price is now once again on an upward trajectory: notwithstanding the decline of the last several months, world prices are more than double those prevailing one year ago and are up substantially over the mid-August low of $675.
July 09, 2008
Scrap the G8
Posted by Lawrence MacDonald at 04:15 PM
Once again the G8 has come up tragically short on climate change and a host of urgent problems affecting poor people in developing countries. The good news is that they are at least discussing the right topics. The first Hokkaido G8 document, on the World Economy spills lots of ink on relations between rich and developing economies, including for example, reaffirmation of support for the Extractive Industries Transparency Initiative. The next three policy papers -- Environment and Climate Change, Development and Africa, and Global Food Security -- all address topics that are at the heart of rich world-developing world ties (and, not coincidently, major areas of focus for CGD research and policy work). The bad news is that the G8, representing as it does the interests of the richest societies on the planet, is the wrong forum addressing global problems that touch on well-being of billions of people in the developing world. The lack of legitimacy is evident in the resulting mealy mouthed policy documents.
Nowhere are the shortcomings more obvious than in the climate change document. Headlines blared that the G8 heads of state agreed to a 50 percent reduction in greenhouse gases by 2050 (See, for example, the solid Washington Post story). Never mind that this would be too little, too late to avert catastrophic climate change, including collapse of developing country agricultural productivity (see Global Warming and Agriculture: Impact Estimates by Country). The target is worse than meaningless, since the more than 2,000 word document fails to set a baseline for the promised reductions. (Because emissions are rising fast, the baseline is critical in determining the size of the cuts.)
The paper on Development and Africa included much discussion of the Millennium Development Goals and aid amounts but precious little on what the rich might do to improve aid effectiveness. An extensive sub-section on global health featured a promise to ensure "that disease-specific and health systems approaches are mutually reinforcing and contribute to achieving all of the health MDGs." (Yawn) The health systems rhetoric rehashes an already stale debate. What's needed now is not more rhetoric but better follow-through on promises that private donors and multilateral organizations have already made. The big vertical programs that are set up and funded by the G8 -- the Global Fund and PEPFAR prominent among them -- would be a good place to start.
The food security paper managed to say all the right things about investments in research, opening markets, and seeing the Doha Round of global trade talks through to a successful conclusion. It was of course silent on the travesty of Japan continuing to hold 1.5 million tons in unwanted surplus rice -- and feeding some of it to pigs and chickens -- at a time when the global rice price has doubled since January and children in Asia and Africa go to bed hungry as a result.
Trouble is, the G8 loves to opine on problems that are caused in large part by rich world policies and actions -- but where the resulting costs are mostly paid by poor people in developing countries. Moreover, the world is becoming more complex. On climate and many other issues, the policies and actions of the large emerging market economies are increasingly also a part of the problem. Unless these countries -- emerging giants such as Brazil, China, India, and South Africa -- are also at the table, the discussions and the resulting decisions will be little more then gestures of noblesse oblige.
Perhaps ironically, the foundations for a more suitable grouping of nations to tackle climate change and other shared problems could emerge from the so-called Major Economies meeting that President Bush initiated last year. The grouping perpetuates some late-20th Century post-colonial anomalies -- notably France, Germany, Italy, and Britain enjoy separate representation, rather than the EU speaking with a single voice -- but the group also includes China, Brazil, India, Indonesia, Mexico and South Africa. The 16 major economies in the group account for 80 percent of world greenhouse gas emissions. Not incidentally, they also account for the lion's share of the world's economic activity and population.
Among the people who have thought seriously about alternatives to the current international institutional framework is Kemal Dervis, a former CGD non-resident fellow and now the chief administrator of the UNDP. Kemal's CGD book, A Better Globalization: Legitimacy, Governance, and Reform, sets out interesting ideas for alternative approaches to international decision making, including bodies with "double majorities" -- for example, a simple majority of the countries and a majority as weighted by population and/or economic might. It's time for a vigorous debate on what would be better than the G8.
The first step, however, might be for the NGOs, think tanks and others who work to shape G8 declarations (a game that we at CGD have sometimes played) to step back and admit that the current G8 arrangements are worse than broken and that the results stink. Evidently the G8 itself is ill-equipped to even begin to consider the question of improving global governance. While most of the documents produced for this Summit run to thousands of words, the Group's declaration on International Institutions clocks in at a mere 85.
June 25, 2008
Let them Eat: Tokyo Favors Subsidized Rice for Cattle Over World's Poor?
Posted by Tom Slayton at 04:23 PM
A few weeks ago, our CGD Note, Unwanted Rice in Japan Can Solve the Rice Crisis -- If Washington and Tokyo Act, created quite a stir. Policy makers and the public could not believe that Japan was feeding rice to animals at a time when millions of poor people were going hungry because food prices were unaffordable. Sadly, Tokyo's Ministry of Agriculture still does not get it. Today's press quotes the head of the ministry's livestock department as saying that Japan plans to increase its subsidized sales of rice to its livestock sector by 50% to more than 600,0000 tons. At a time when millions of people are facing starvation, Japan is choosing to turn its rice stocks into cattle feed.
There is still time to act, especially in the run up to the Japan-hosted G8 Summit next month. The Japanese government must act now -- to donate stocks directly to the World Food Programme, release it for sale on world markets and commit its 2008 mandatory purchases for direct shipment to the WFP.
June 20, 2008
Japan Should Release Surplus Rice ahead of G8
Posted by Tom Slayton at 05:22 PM
This posting is joint with Peter Timmer and Vijaya Ramachandran
Over the past few weeks, rice consumers in Africa and other developing countries have watched anxiously as world prices have fallen steadily, at least in part due to our insistence that Japan and other countries have stocks that can be released on world markets . It is now clear that the speculative bubble has burst -- the "dynamic" in the market is bearish despite set-backs on individual policy fronts. The pressures on rice prices continue to be downward despite everything governments are doing to keep prices up.
But progress is far from adequate. For the millions of people, in Africa and elsewhere, who are facing hunger and starvation due to high food prices, time is running out. Early warning systems indicate that the Horn of Africa is sliding into yet another famine. Africa, in the best of times, does not enjoy much food security, relying on imports for up to 50 percent of urban consumption. About 9 million metric tons of rice are imported into the continent each year. The current situation with regard to food prices is nothing short of catastrophic.
On July 7-9, Japan will host the G8 Summit, in the beautiful city of Hokkaido-Toyako. Japan must show leadership while on center stage -- it must act now, by releasing its 1.5 million metric tons of unwanted rice stocks -- either to the World Food Programme or to international markets, thereby setting an example for other governments to swiftly mitigate the immediate impacts of the food crisis.
The Japanese government is likely aware that there is much to be done. Rice policy changes in Thailand and Vietnam – combined with inactivity in Japan and India -- have frustrated prices from moving to more affordable levels.
Bangkok Caves To Farmers' Demands. The Thai government, confronted by farmers disappointed that paddy prices were declining from record levels and threatening a blockade of roads leading into Bangkok, capitulated to their demands and more than doubled the price support of rice. Thai wholesale prices have see-sawed since the announcement, but are up 10-12% from the price on the day before the government's announcement. Thai export prices, though, have steadied at $780 (for 100% B rice) as overseas buyers remained on the sidelines waiting for more affordable values.
Hanoi Says It Wants More Sales, But At a Price. While Vietnam this week ended its export ban and increased its export target by as much as 1 million tons, it imposed a minimum export price of $800 -- which is $50/ton above the local costs. Exports at this level presumably will also be subject to an export tax of $30/ton. With Thai rice being $70 cheaper at $760, buyers were decidedly unimpressed and the acceleration in sales expected by Hanoi is unlikely to occur.
New Delhi Continues to Stall. Meanwhile, India continues its "starve thy neighbor" policy. Despite mounting government-held food grain stocks as a result of a record harvest and an excellent monsoon with rainfall 45% above normal, India is yet to increase the supply of grains on international markets.
Earlier hints that it might provide exceptions to its export ban for strategic neighbors or African clients have proven to be false. Instead, Indian Commerce Secretary Pillai offered a weak promise that New Delhi would reconsider its ban in October or November once the condition of the wet season crop was assured.
Japan Can Still Show Leadership. On Monday June 16, former UN Secretary-General Kofi Annan released the report of the Africa Progress Panel in London, and warned that millions of Africans are facing starvation because of sustained high food prices. Mr Annan called on Japan and the other members of the G8 to immediately review their policies on food stockpiles and to increase the food available for purchase on international markets. This message was picked up by scores of media outlets in Europe, Japan, the United States, the Middle East and by dozens of newspapers, TV and radio stations and websites in Africa. On June 20, the leaders of the Catholic Church in the G8 countries submitted a letter to their heads of state citing the message of the Africa Progress Panel and emphasizing the importance of "alleviating the abject poverty which ruins the lives of millions of people living in the southern hemisphere."
But Japan is yet to act. While the U.S. gave the green light to Japan in mid-May to re-export the more than 1.5 million tons of unwanted imported rice in its warehouses, Tokyo's response has been timid. Not only has Japan failed to strike a single deal -- holding out for very high prices in the 200,000 tons of rice it is discussing with the Philippines, but Prime Minister Fukuda has also failed to show any leadership whatsoever at the FAO meeting on the food crisis in early June, when he announced that Japan was only prepared "to release in the near future over 300,000 tons." It is time for Japan to quit stalling and show some real leadership by releasing its unwanted rice stocks.
June 05, 2008
The Food and Biofuels Debate in Rome
Posted by Kimberly Ann Elliott at 01:18 PM
It was supposed to be an emergency conference on food shortages, climate change and energy…. but when the microphone was turned on for the powerful politicians who had flown in from all over the world, they spoke mostly about economic issues in their own countries and political priorities.
The conference was preparing to issue its concluding statement on Thursday, and delegates said the wording of the section on biofuels was a point of contention. The United States said only 2 to 3 percent of the global increase in food prices was attributable to competition from biofuels. But other countries put the figure far higher.
New York Times, June 5, 2008
The assertion by American officials that biofuels have contributed only 2-3 percent to the rise in food prices is consistent with estimates of the impact on food prices in the United States, where most foods are processed and the value of the crop in the final retail product is a tiny fraction. In poor countries, where minimally-processed staple grains make up a much larger share of calories consumed, the impact of recent food prices is much larger.
Nor is it true, as asserted by congressional defenders of ethanol subsidies, that corn-based ethanol cannot have a large effect on food prices because it uses feed corn, which people do not eat. That is true, but people do eat poultry, eggs, and dairy products from animals fed on corn; increased production of corn also means reduced production of other crops, thus raising their prices, and high corn prices lead people to substitute other food products, again putting upward pressure on other crop prices. Mark Rosegrant of the International Food Policy Research Institute estimates that increased biofuel production contributed 30 percent of the rise in grain prices through 2007. [Resegrant's congressional testimony] (The acceleration of price increases in 2008 is likely due primarily to other factors.)
Moreover, as shown in the chart, the level of biofuels mandated by Congress in last year's energy security act that can be derived from corn would rise sharply and would require roughly 40 percent of total US corn production. It is simply folly to believe that would not have an impact on food prices. Far from defending US subsidies for corn-based ethanol, President Bush should order the Environmental Protection Agency to suspend the biofuels mandate, as requested by some states and by Senator John McCain (R-AZ) and 23 other Senate Republicans in a letter to the EPA last month.
May 30, 2008
New GAO Report is Food for Thought -- And Action
Posted by Rachel Nugent at 05:23 PM
A new GAO Report on international food security (International Food Security: Insufficient Efforts by Host Governments and Donors Threaten Progress to Halve Hunger in Sub-Saharan Africa by 2015) gets it almost completely right when it points to the feeble, self-defeating, and confused U.S. policies on world hunger. The report diplomatically states:
The efforts of host governments and donors, including the United States, to achieve the goal of halving hunger in sub-Saharan Africa by 2015 have thus far been insufficient.
The GAO is far too kind. U.S. and other donor hunger policies have been disastrous, as demonstrated by the current food price crisis. The sub-title of the GAO's Report says progress to cut hunger is threatened by these donor mistakes. In fact, as the GAO itself points out, there is NO progress in reducing world hunger! When I worked for the U.N. Food and Agriculture Organization 10 years ago, the number of hungry people in the world was estimated at 842 million. Today it is the same, or slightly more, and the number in Africa has risen.
The GAO lists specific problems with U.S. and other donor's policies on international food security. They are:
- Donor assistance to agriculture has not been well coordinated; and in the U.S. in particular, the approach is fragmented across agencies.
- Measuring and monitoring hunger in the world have been poorly done.
- U.S. policy has emphasized short-term emergencies and provided limited resources for agricultural development.
In short, food security and agriculture development have been low priorities of donor governments, despite long-standing pledges to the contrary. This GAO Report (remarkably well-timed, which has not always been a hallmark of the GAO in the past) provides solid evidence that donors must share the blame for the current food crisis due to ineffective and insufficient donor support for agriculture and food security.
The drivers on both the demand and supply sides that have pushed basic commodity prices to new peaks are hardly new, and shouldn't be surprising. On the demand side, gradual but long-term increases in income and population have stimulated demand for animal-based products (meat and dairy) which in turn stimulates demand for feed grains. These pull factors have been augmented by the diversion of some grains into bio-fuel production. On the supply side, except for the recent sharp increases in oil prices, the factors tightening supply have been underway for years: weather-related drops in production, declining inventories, land and water resource constraints and lack of productivity growth in agriculture due to lack of capital investments. The point is that most of these factors were predictable, and many were preventable. Amartya Sen is still right that famine in modern times is attributable to poor policies.
The GAO report shines a welcome spotlight on the role of donors -- and the U.S. in particular -- in the current food crisis. It points toward specific remedies that are needed to ameliorate a hunger emergency that could possibly have been prevented with better policies and better investments by development agencies. Let's hope someone is paying attention.
May 28, 2008
Rice Prices Tumble But Remain Out of Reach for Many of the Poor
Posted by Tom Slayton at 06:57 PM
This is a joint posting with Peter Timmer
Rice prices have continued to tumble this week amid reports that Cambodia is moving to ease export restrictions and other exporters may follow suit. This came after Japan's announcement that it would proceed with sales to the Philippines of 250,000 tons of rice (200,000 tons of imports and 50,000 tons of Japanese rice), and a U.S. Trade Representative (USTR) statement that: "the United States was supportive of Japan's initiative." (Readers who are following this story will recall that the U.S. has the ability to block the re-export of U.S. rice that Japan was compelled to buy but never offered on the domestic market).
Since we released our CGD Note, Unwanted Rice in Japan Can Solve the Rice Crisis -- If Washington and Tokyo Act, wholesale prices have fallen $157. Thai export prices have fallen below $850 per ton, roughly 25 percent less than the peak price of more than $1,100 at the end of April. But even at $850 per ton, rice still is nearly three times as expensive as it was one year ago. For the poor in Asia and Africa, some of whom spent nearly half of their income on rice before prices started to climb, a three-fold increase means malnutrition and even slow starvation.
A Washington Post story on Saturday by Emily Wax vividly described what high rice prices mean for some poor people in Bangladesh.
In some parts of the north, where harvests have been low, Bangladeshis are suffering from what is called monga, a near faminelike condition whereby villagers often skip meals and eat only tiny amounts of food. The country's food and disaster management minister, A.M.M. Shawkat Ali, said rising global food prices have created a "hidden hunger" among poor Bangladeshis.
Which raises an important question: Japan had about 1.5 million tons of surplus imported rice at the end of last year. Tokyo has announced plans to sell 250,000 tons. What's going on with the other 1.25 million tons? Japan is reported to be entertaining proposals for some of it, but appears to be hesitating to make the full quantity available on the world market. While Tokyo should be commended for releasing some of its unwanted stocks to help alleviate this year's dizzy prices, clearly there is more that it can do ahead next week's high-level meetings of the U.N.'s Food and Agricultural Organization in Rome.
Public pressure for a more sensible international rice market continues to build. On Tuesday a Washington Post editorial Release the Rice II endorsed our suggestion that Japan also donate to the World Food Program (WFP) this year's planned purchases of 680,000 tons of foreign rice, so that it can be shipped directly to aid recipients, avoiding the cost of trans-shipping via Japan. This could bring Japan's contribution to solving this year's world rice crisis to 2.2 million tons.
India Started the Problem, It Needs to Help Solve It. Friday's USTR press guidance also said that
...the United States took this opportunity to urge that the two countries coordinate their diplomatic efforts to persuade other food exporting countries to lift their recent food export restrictions…
India, which set off the current rice crisis, is a prime candidate for this diplomatic initiative. Unusually large wheat imports in 2006-2007 following weather-related damage to the wheat crop set off a firestorm of criticism, from farm interests and the political opposition. With a view towards upcoming state elections in November, the ruling coalition decided to pursue a "starve thy neighbor policy" -- curtailing wheat imports and boosting staple stock by banning exports of non-Basmati rice. This triggered rice export bans and hoarding elsewhere in Asia.
Now, however, India is facing record rice and wheat crops, which are expected to shatter last year's record food production by 10 million tons! The Indian government has also rebuilt its food grain stocks to very comfortable levels.
The time has come for Delhi to reverse course and once again allow buyers in Bangladesh, Sri Lanka, and the Middle East to buy India's excess stocks. The food ministry is supportive of a proposal to resume exports to "strategic neighbors" and the government reportedly is considering a proposal to allow 1.3 million tons to selective African markets. The trade ministry, however, apparently is opposed, while the agriculture ministry appears to be neutral. With India sitting on food grain stocks that exceed its targets, Delhi should do its bit to help alleviate the crushing world rice prices which are hammering the global poor.
Good News From Bangkok. Until recently, the newly-elected Thai government has alternated between using its 2 million tons of rice stocks for subsidized sales to its citizenry or holding on to it until its main crop harvest begins in November. Last week, though, the Thai government made statements suggesting that it might export some of its government-owned stocks under government-to-government (G-to-G) contracts with Malaysia and the Philippines. The idea of using the stocks for G-to-G contracts received backing Friday by the Thai Rice Millers' Association. The release of these stocks would allow Thailand, the world's largest exporter, to exceed its export target of 8.75 million tons and exceed last year's near-record sailings. This could help to further reduce prices to a level closer to what poor people can actually afford to pay.
May 21, 2008
Kudos to President Bush for Vetoing the Farm Bill
Posted by Kimberly Ann Elliott at 03:29 PM
Congress should help the President bury this farm bill, pass supplemental funding for hunger and nutrition programs here and abroad, and then start over next year on reform legislation that recognizes the vast changes in global agricultural markets.
May 15, 2008
Rice Prices Fall After Congressional Hearings But Crisis Not Over Yet
Posted by Peter Timmer at 06:12 PM
This post is joint with Tom Slayton, a rice trade expert and former editor of The Rice Trader
It has been a busy week in the rice markets following CGD's release on Monday of our note about how to puncture a speculative price bubble that threatens millions of people with malnutrition and worse (see Unwanted Rice in Japan Can Solve the Rice Crisis--If Washington and Tokyo Act ). On Wednesday our proposal was discussed at hearings on the world food crisis in both the House and Senate.
Arvind Subramanian, a joint senior fellow at CGD and the Peterson Institute, kicked off his testimony before the House Financial Services Committee by reminding the congressmen that "there are only seven meals between civilization and anarchy." He then recommended the sale of the Japanese rice stocks as the first of several policy responses to bring down soaring prices.
A representative of one of the two U.S. rice industry trade associations – the U.S. Rice Producers’ Association – was there to hear Rep. Barney Frank's first question after the testimony: what is needed for the U.S. to signal Japan that it is okay to export imported U.S. rice? Told that the Office of the U.S. Trade Representative (USTR) has authority to make the decision, Rep. Frank said: "All right, we're going to check that, but I'm inclined to be supportive of that. And I've talked to our staff members. We'll look at that.” The Rice Producers’ Association representative later told reporters that they, too, were in favor of Japan being able to export its stocks.
Meanwhile at the Senate Foreign Relations Committee hearing, Sen. Robert Menendez asked the two government witnesses, Henrietta Fore, director of U.S. foreign assistance and administrator of the U.S. Agency for International Development (USAID); and Ed Lazear, chairman of the President’s Council of Economic Advisors, a pointed question about our proposal:
According to the research of the Center for Global Development, the release of rice stocks being held by Japan and China can bring prices down now, possibly cutting them in half by the end of June. But this can only happen if our government lifts its objections to the re-export of rice previously imported from the United States. I see the specter of rice that could be used to help the world's hungry be used for feed and livestock in Japan... versus being used to feed human beings. And so what's our view of that?
The answers weren’t very satisfactory but the mere mention of Japan exporting its stocks led some speculators to dump their contracts in Chicago yesterday and today. Futures contracts for July rice ended limit down, or 75 cents lower yesterday and fell by a $1.05 to $20.44/100 lbs as the limit was expanded to $1.15. Also, Thai wholesale prices, which had been rising, fell today by $16 to $841-843 per ton.
Towards the end of the Wednesday, an unnamed USTR official was quoted as saying that the U.S. had no problem with Japan exporting its rice, but there was some ambiguity as there was also a call for the U.S. and Japan to "coordinate" their food aid efforts over the coming weeks. The ambiguity—and the lack of an official announcement that the sales would proceed--made some rice trade-watchers suspect that this thing may not be over yet.
One thing is clear: sudden and unexpected exposure to the limelight is prodding the bureaucracy in both Japan and Washington into action, and is already taking some of the speculative steam out of the market -- both of which are good news for poor people who depend on rice to survive.
Democrats and the Farm Bill: So much for Changing How Washington Operates
Posted by Kimberly Ann Elliott at 04:13 PM
"Asked how she could justify paying so much money to wealthy farmers when food prices are rising and Democrats are calling for change in Washington, [House Speaker Nancy] Pelosi listed the bill's nutrition and conservation spending.
"I justify it by saying this is the best farm bill I've ever voted on." - San Francisco Chronicle, May 15, 2008, p. 1.
In fact, the article on the front page of Speaker Pelosi's hometown newspaper highlights the many reasons that the farm bill passed by the House of Representatives is not a "very big step in the right direction," as Pelosi also claimed. Senator Richard Lugar (R-IN) agreed that the farm bill "contains many worthwhile polices, including valuable investments in conservation and nutrition programs," but he came down on the other side and was one of only 15 senators voting against the bill today. More than 300 House members voted in favor of the bill yesterday, enough to easily override President Bush's expected—and well-deserved—veto. Reform champions Ron Kind (D-WI), Earl Blumenauer (D-WA) and 13 other brave souls in the majority also deserve kudos for bucking their leadership on this issue.
The absurdities in the farm bill are put in stark relief by reporter Caroyn Lochhead in the San Francisco Chronicle article cited above:
"A farm couple will be allowed to earn up to $2.5 million a year before government payments are cut off under new rules that lawmakers called a major reform. An urban couple applying for food stamps is cut off at $17,808 in income and may own only one car."
Yet, this is the best farm bill that Pelosi has ever voted on because, under previous bills, there was no cap at all on the amount of income that a person could earn by farming and still collect subsidies, and individuals could earn as much as $2.4 million in non-farm income and still get a subsidy check from the American taxpayer—that's you and me. Under this year's bill, all subsidies are cut off when non-farm income exceeds $500,000 but, contrary to the Chronicle article, only direct payments, which are paid out no matter how high prices go, are cut off for those earning more than $750,000 from farming. And in each case, a spouse can earn just as much and the household will still be eligible for taxpayer largesse, thus adding up to $2.5 million.
Worse, in order to ensure that farmers selling at the highest prices in decades aren't squeezed too hard, the farm bill cuts funding that had been allocated to provide school lunches for poor kids in developing countries. Even in the midst of a global food crisis, the farm bill also maintains a system for delivering US food aid that means that tens of millions of dollars go to American shipping companies rather than to feeding hungry people. The farm bill also continues policies that have already been found to violate US obligations under international trade rules and, according to the Chronicle, it would allow farmers to collect subsidies for crops grown on newly plowed grasslands, which contributes to global warming.
Relative to past farm bills, maybe you could call this reform. But is it really the best that Congress can do?
May 01, 2008
President Bush Can and Should Do More to Address the Food Crisis: Let Japan Sell Its Rice Reserves
Posted by Peter Timmer at 06:26 PM
This posting is joint with Vijaya Ramachandran
Today, President Bush called on Congress to provide another $770 million in food aid, in addition to the $200 million already allocated through the Department of Agriculture,in order "to keep our existing food aid programs robust."
There is no doubt that these additional funds are much needed to purchase and distribute food to those who are suffering greatly from the current spike in food prices. But the U.S. can and should do more. Specifically, the U.S. must allow Japan to sell, at full cost on Japanese books, the 1.5 million metric tons of rice that it has in storage. About 600,000 tons is Thai and Vietnamese long-grain rice (high quality) and the rest is US medium grain (good rice). All of the rice is in Japanese warehouses because of an agreement with the World Trade Organization, and the U.S. as "cognizant observer" of the rice agreement, would need to approve the sale of both the US and the Thai/Vietnamese rice. Japan currently cannot release this rice to the World Food Program (or to the world market) without permission from the U.S., and the Bush administration is yet to move on this.
If Japan is able to release this stockpile of rice, world rice prices would likely come down to $600 per ton within a week. The speculative bubble will be pricked, and hoarding will stop. Exporters will start selling again, and we will likely return to what will be "normal" rice prices going forward-about $600 per ton. This is of course much higher than two years ago, but a far cry from the $1200-1500 per ton we are likely to see if the Philippines and other countries continue to buy aggressively in world markets.
We commend President Bush for his efforts to increase funding for emergency food aid but remind him that much more can and should be done to address the current dire situation.
April 28, 2008
How NOT to Fix the Global Food Crisis -- France Says Poor Countries Should Provide EU-Style Farm Subsidies, while U.S. Farm Bill Puts Vested Interests First
Posted by Kimberly Ann Elliott at 04:16 PM
And now for a really bad idea: according to the Financial Times Michel Barnier, France's farm minister, told a food crisis summit in Berne that Africa and Latin America should adopt their own versions of Europe's Common Agricultural Policy -- massive trade-distorting subsidies -- as a response to rising demand for food.
In fact, as those who have been tracking the crisis know, and as Anthony Faiola is explaining in a five-part series on the global food crisis in the Washington Post, restrictions on agricultural trade are part of the current problem. Instead of export resrictions and subsidies, Nancy Birdsall and Arvind Subramanian argued in an op-ed published in the Asian and European editions of the Wall Street Journal last week, the solution is to...
...promote trade and efficiency while also boosting agricultural production and reducing the vulnerability of the poorest around the world.
Unfortunately, U.S. agricultural policies, like those in Europe, continue to cater to special interests in ways that make the problem worse. Despite record high food prices, the 2008 U.S. Farm Bill, expected to pass Congress soon, would maintain a system that transfers billions of dollars annually to the largest farm operations. Roughly 70 percent of subsidy payments go to just 10 percent of the largest recipients and one version of the farm bill would allow farmers with incomes as high as $1 million to continue receiving subsidies. And this is touted as a "reform" measure because it lowers the income cap from the current $2.4 million (see the Environmental Working Group's Farm Subsidy Database).
If that were not enough, despite the current global food crisis, the farm bill retains an additional subsidy to U.S. shipowners, as well as farmers, by requiring that U.S. food aid be purchased in the United States, packaged here, and much of it shipped to where it is needed on U.S.-owned ships. That means that roughly half of the already-inadequate U.S. food aid budget goes for distribution and transportation, rather than to feed hungry people in poor countries.
Ensuring that food supplies are adequate and that poor people around the world can meet their basic nutrition needs is a critical problem that governments and international organizations around the world clearly need to address -- in both the long-term as well immediately. Replicating the distorting U.S. and European policies that transfer billions in taxpayer and consumer dollars to a handful of farmers in hopes that a little bit will trickle down to hungry people is not the way to go.
April 24, 2008
The Economist got it wrong!! on safety nets and food prices
Posted by Nora Lustig at 09:59 AM
You probably saw that this week's Economist devoted his leader to soaring food prices. They made two mistakes:
1. In the editorial they say that it is better to distribute cash rather than food to protect local growers. At a time in which one of the problems is hoarding, cash may push prices even further. There cannot be a blanket recommendation of this kind.
2. In the lead article they have a box on safety nets and mention Mexico's PROCAMPO program as an example of conditional cash transfers that could be applied elsewhere. First, PROCAMPO is NOT a conditional cash transfer program. The transfer program is called PROGRESA/OPORTUNIDADES (see Millions Saved, Case 9). Second, and more importantly, PROCAMPO is a program that subsidizes those who have land (it is similar to US farm subsidies), the overwhelming majority are net sellers of agricultural goods, so it would do no good at all to have such a program if what you want to do is help net buyers. On the other hand, the Mexican government could use PROGRESA/OPORTUNIDADES to transfer a higher amount of money to the beneficiaries so they can cope with the increases in food prices. The same could be done with similar programs elsewhere.
April 21, 2008
Trade Policy for a New Deal on Hunger
Posted by Nancy Birdsall at 03:05 PM
This is a joint post with Arvind Subramanian
In a Q&A published today, CGD non-resident fellow Peter Timmer estimates that soaring global food prices and panicky starve-thy-neighbor rice export restrictions in Asia could lead to 10 million or more premature deaths in the region if the current high prices are passed along to poor rice consumers.
This is the latest piece of worrying evidence that rising food prices may signal the onset of a new kind of Malthusian era, in which elevated food prices are a long-term reality driven by three key changes: rapid demand for more and more energy-intensive food in fast-growing Asia, the competition that new biofuels are posing for land; and the effect of climate-change-induced drought on global agricultural supplies.
If that is the case, the world ought to focus on boosting the long-term global supply of food -- including via food-friendly trade policy. A new deal on hunger requires that trade help rather than aggravate food shortages around the world.
What are the key trade policies that are aggravating the current food crisis? The problem now is not subsidies by rich countries that for years kept food production high and suppressed global food prices, hurting small farmers in the developing world. Rather, it is biofuel mandates in Europe and subsidies in the U.S. that are encouraging farmers to supply the biofuel market, raising food prices. Corn-based ethanol production in the U.S. has increased fourfold since 2000 and now takes up about 20 percent of total corn production.
Meanwhile in the developing world, such countries as Ukraine, Argentina, Russia, Egypt, Saudi Arabia, India, Philippines, Indonesia, and South Korea have slashed import duties and reduced other restrictions on food imports and imposed or tightened restrictions on exports of foodstuffs. Each country is trying to keep domestic supplies high on the justifiable grounds of food security. Taken together, however, the aggregate effect is reduced global supply -- and the potential for reduced long term supply -- if governments pay farmers below global prices in producing countries. Meanwhile, the restrictions are driving world prices even higher for food importing countries -- by at least 10 percent and possibly much more according to new estimates -- as the non-poor in exporting countries benefit while the poor in importing countries literally go hungry.1 Without a collective agreement to undo these restrictions, the world's poor, already at terrible risk, will be even worse off.
The contours of trade policies friendly to a New Deal on hunger are clear. Industrial countries should eliminate any practices that reduce global food supply, including all forms of subsidies to biofuels that compete with food production. Developing country food producers should eschew export restrictions. And importing countries can also contribute. To reassure developing country exporters about future access should prices become volatile or even decline, they could agree now to lock in their recent liberalization -- a plus for all agricultural exporters.
We also propose that in a New Deal on Hunger, major developing country producers set aside for now their reasonable objections to traditional rich country agricultural protection -- the bone of contention in the Doha trade round -- at least in the case of food staples (if not cotton and cocoa). Rich countries would ideally reduce this protection on their own (as their taxpayers might well like in the case of domestic production subsidies). But for a hunger deal now their long-perverse agricultural protection is not a central issue -- and leaving it aside has the political virtue of greasing the wheels of a global deal on hunger.
Finally, to address the concerns of the poorest food-importing countries that have been worst hit by food shortages requires immediate action. In addition to traditional emergency food aid, all food exporting countries -- the U.S., Brazil and other big beneficiaries of the current price hikes -- could commit a small proportion of their exports as food aid (or far better contribute the cash equivalent), with this proportion increasing in line with any increase in world prices.
No one should assume these trade measures alone will address the fundamental problem -- that chronic hunger is the result of poverty not just limited food supplies. But trade should help not hinder.
The Doha round of multilateral trade negotiations, even if successful, will not address these policies. The initiative for a New Deal on Hunger must come from elsewhere. As former chief U.S. trade negotiator and current international development czar, Mr. Zoellick is ideally suited to the task. He should secure agreement that trade and development ministers will meet within a month to agree on the trade principles of a new hunger deal, aiming for a full-fledged agreement before the end of the year. Indeed his leadership on this issue, especially in eliminating U.S. protection of corn-based ethanol, would complete his transition from representing U.S. trade interests to the development needs of the world’s poor.
Now is surely the moment to make the needs of the world's poor more central to trade policy. That would be breakthrough never yet achieved by trade negotiators alone.
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1Based on "Export Restrictions and World Prices" by Ivanic, Martin, Mattoo, and Subramanian (forthcoming).
April 11, 2008
The Global Food Crisis: Time for Action, Not Panic
Posted by Kimberly Ann Elliott at 11:55 AM
The New York Times yesterday (and Paul Krugman earlier in the week) called on rich countries to "step up to the plate" in confronting the food crisis in developing countries -- in the short run by increasing their donations of food aid. and in the medium run by getting rid of economically inefficient, inequitable, and environmentally unsound subsidies for biofuels, especially corn-based ethanol.
While the sources of current crisis are many -- adverse weather in key producing areas, rising farm costs due to higher oil and fertilizer prices, speculation in financial markets, rising demand, especially for meat, in China, the diversion of crops from food to fuel, and low stocks -- not all of them are amenable to policy changes, at least in the near term.
Rising demand for food in China, India, and other rapidly growing developing countries is the result of reducing poverty and that, of course, is a good thing! Over the longer run, a big part of the answer is for donors and developing country governments to invest more in improving agricultural productivity, as recommended by World Bank President Zoellick in his speech at the Center last week. In terms of what can be done now, this post focuses on the food aid problem and the need to reform US policy. A future post will examine policies to promote biofuels in the United States and Europe.
Food prices are notoriously volatile but the chart shows the magnitude of the present problem, with prices for key grains surging over the past two years to levels not seen in a decade or more and with more recent increases that are off the charts. The human costs of rising prices can be seen in food riots and rising hunger and poverty around the world.
Farmers are responding by increasing their plantings of grains and a US recession should dampen price increases a bit over the next year or so, but immediate and generous action by donors is desperately needed. The World Food Program's call in February for $500 million in increased food aid funds has already been eclipsed by the accelerating price increases. The World Bank study released just this morning also summarizes other safety net and food delivery programs that governments are adopting and that it is supporting in various ways. Strikingly, however, neither the US Department for Agriculture nor the US Agency for International Development had anything on their homepages this morning about the food crisis or plans to increase US assistance.
Beyond the need for an immediate response, the crisis also underscores the need to reform the way the United States delivers food aid. US policy did not create the food crisis but it is making it harder to address. Food aid budgets everywhere are being stretched thin by the escalation in food prices. But US policy compounds the problem by requiring that food aid must be purchased and packaged in the United States and shipped mainly on US-flagged ships. Thus, a good chunk of the US food aid budget gets diverted to higher distribution and transportation costs, which are also going up as a result of oil price hikes and rising freight costs.
Moreover, if the US Congress does not change the farm bill currently being debated, it could make things far worse. Although the House and Senate versions are slightly different, both require that a certain portion of the food aid budget be reserved for longer-term development projects, meaning that less would be available to respond to emergencies. This provision was always problematic but in the current environment, it could be disastrous.
April 03, 2008
Bob Zoellick is Leading the World Bank in the Right Direction. Will Bank Staff and Shareholders Follow?
Posted by Nancy Birdsall at 05:53 PM
World Bank president Bob Zoellick announced several striking new initiatives in his speech yesterday at a CGD event that drew a standing room-only audience of nearly 200 development specialists. Among his proposals: a "New Deal for Global Food Policy" to reduce hunger and social unrest throughout the developing world, as poor people attempt to cope with recent dramatic increases in food prices.
Not surprisingly, economic reporting today focused instead on Fed Chairman Ben Bernanke's use yesterday of the word "recession" and on Congress's confused efforts to deal with the U.S. housing mess. Among the few exceptions: David Ignatius drew on Bob's speech in his Washington Post column today on The Perils of the Price of Rice, which does a nice job of highlighting unexamined links between economic troubles here in the U.S. and the food shortages and other problems in the wider world.
Most of the media, as usual, seems to suffer from a case of double myopia (nearsightedness in time and in space) in which the immediate problem in the U.S. financial market (as legitimate as it is, for the 2 million or so households facing foreclosure risks) eclipses the crisis out there in the "rest of the world," which is urgent and could be long-term, of rising food and energy prices for poor people in poor countries -- who number about 2 billion.
Good to see Mr. Zoellick using the World Bank platform as a bully pulpit to fight for attention to the world's poor. And clever of him to link current shifts in global prices and risks to poor people's needs. I had the pleasure of hosting him and serving as moderator during the follow up discussion. From where I sat, our audience of development experts seemed pleased indeed with his proposals.
Like many who were there, I welcome his focus not on more World Bank lending (hardly a word on that, except for his promise to increase agriculture lending to Africa) but on the World Bank's role in making markets for new products (he wants 1 percent of sovereign wealth fund assets -- that's about $30 billion -- for a World Bank-engineered investment fund for Africa), and on providing a venue for global collective action on climate change.
Let's hope he can bring along quickly his 10,000 colleagues at the Bank (on climate change, progress is painfully slow) who still mostly "do" lending instead of realizing the institution's potential as a global development cooperative. He will also need to convince his Board and the bank's member countries, especially the U.S., who hesitate, against their own long-term interests (myopia again), to get on with the business of reforming the bank's governance to give developing countries and the emerging market giants a much greater voice in running the bank.
April 02, 2008
Robert Zoellick Outlines World Bank Response to Global Economic Situation
Posted by Lawrence MacDonald at 05:15 PM
Robert Zoellick outlined new approaches that the World Bank will take to help solve global problems today in a major speech delivered at an event organized by the Center for Global Development.
Zoellick's detailed and wide-ranging speech included a proposal for what he called a "one-percent solution" -- for sovereign wealth funds to invest one percent of their holdings in equity in sub-Saharan Africa as a way of tapping long-term global liquidity to boost investment opportunities and development. Other issues he discussed included high global food prices and the prospect of shortages; the need for a global trade deal, and efforts to address the so-called "resource curse," the many problems that face countries that are rich in oil and other high-value commodities.
The speech was well-received by a standing room-only crowd of nearly 200 people including development policy experts, policymakers, researchers and representatives of international NGOs.
The full text of the speech, video, a press release and other materials are available on the World Bank website.
October 03, 2007
More Reasons That Congress Should Reform US Food Aid
Posted by Kimberly Ann Elliott at 04:39 PM
This year's decline in food aid [due to high food prices] follows a period when the sharply escalating costs of shipping American-grown food aid to Africa and Asia already reduced the tonnage supplied. The United States Government Accountability Office reported this year that the number of people being fed by American food aid had declined to 70 million in 2006 from 105 million in 2002, mainly because of rising transportation and logistical costs.U.S spending on food aid doesn’t go as far as it used to. The ethanol and Chinese economic booms have caused commodity prices to soar; meanwhile; U.S. policy remains stubbornly rooted in the 1950s. Food aid began, in part, as a means of disposing of the surpluses the government accumulated when it was forced to buy up surplus crops to support farm prices. Though the government now pays billions of dollars in direct subsidies to farmers, instead, Congress still insists that the food aid budget be used to buy U.S. crops, which must be delivered to needy countries on U.S.-flagged ships. With prices for many agricultural commodities booming, the arguments for reforming U.S. food aid programs to ensure that limited dollars stretch as far as possible are stronger than ever. The Bush administration proposed putting $300 million from the food aid budget into a pilot program to buy food locally or regionally, so that more money goes to actually feeding hungry people. Some NGOs that benefited from receiving US food aid by reselling it to raise funds for development projects, have joined the chorus for reform.
Yet the House-passed bill contains no provision allowing for local purchases and it is not yet clear what the Senate will do on this issue. With commodity prices so high, farmers receive little or no benefit from the small amount of food bought by the government for food aid programs. But the third leg of the iron triangle against reform is not budging so far. Emmy Simmons, who has worked with the Partnership to Cut Hunger and Poverty in Africa on a project to reform food aid put it succinctly in the New York Times, article quoted above:
"[T]he shipping guys are hanging tough.... They're defending that little chunk of revenue. They aren't super concerned whether you feed less people."
Apparently, neither do the key players in the U.S. Congress and that's a shame.
August 20, 2007
The Economics and Politics of CARE's Decision to Pass Up Millions in U.S. Food Aid
Posted by Steve Radelet at 04:17 PM
I join my colleague Rachel Nugent in offering Three Cheers for CARE Decision to Forego U.S. Food Aid!
U.S. food aid has a long and complicated history. Most people think of food aid as "doing good"—feeding the starving—and it is often used for this purpose. However, large amounts of food aid are sold to finance development projects, often administered by the U.S. or by NGOs. And, in the process, food aid can actually do harm.
Understanding the complexities of the issue is hugely important in general and, specifically, now. Congress is mid-way through debating a new five-year Farm Bill: the House passed a Farm Bill in July that did not address calls for reform in food aid to “do best” and the Senate will take up the bill this fall. For those interested in understanding the underlying issues on food aid, read on:
There are two critical issues—where it is bought and where it is sold. The U.S. government purchases food in the U.S. for food aid abroad and is required to ship it on U.S. carriers. This is obviously popular with farm states and with shipping lines, but it makes U.S. food aid much more expensive than if purchased in developing countries or shipped cost-effectively, adding as much as 30% to the cost. It can also lead to months-long delivery delays, which, during a humanitarian crisis, is ineffective. Two years ago, then USAID Administrator Andrew Natsios brought the issue of the purchase site to the forefront when he pushed for a policy that would allow USAID to allocate 25% of the food aid budget to buy food in developing countries. His proposal caused a political firestorm and ultimately was scrapped.
The second issue (and the focus of the NYT article) was the impact of the sale of food aid in developing countries. As the article points out, some see food sales as helping developing countries and others see it as hurting them. From an economic perspective, the answer depends to a significant degree on the extent to which food is imported into the local economy.
One situation is a country where very little food is imported and prices are determined by local supply and demand, where an increase in food aid in effect shifts out the supply of food and lowers its price (Figure 1). This can be good for consumers, particularly in a food shortage crisis—a point not emphasized in the NYT article—but it can undermine the income of local farmers. It is this situation that led to CARE's decision to phase out its receipt of food aid.
The second situation is a country that produces relatively little food (Figure 2). Here the vast majority of food is imported and the local price is determined by the price of imports. In this situation, food aid simply displaces imports and does not have a significant effect on either consumption or local farm production. In effect, it saves the country's foreign exchange since it doesn't have to pay for the imported food. In this situation, an NGO that receives U.S. food aid can sell it to a local trader and the money can be used to fund local development initiatives with little effect on food markets.
So, when can food aid make sense? First is when there is a humanitarian crisis and food is urgently needed to save lives. In this situation, it would be better if the U.S. had the flexibility to buy locally so its aid money could go further to save lives. For a nation that prides itself as a moral leader, it is ironic that this may not be politically feasible. The second situation is when sales of food aid displaces imports and does not adversely affect farmer income. This is an inefficient way to finance local development projects and it provides misleading data on the financial value of foreign aid. But, under these circumstances food aid doesn't damage local production and once again, inefficiency may be the price we pay to maintain political support within the U.S. Let's hope that the combination of the Natsios proposal last year and CARE's decision this year can spark a re-thinking of U.S. food aid so that it can better serve the purposes of saving lives and financing development.
August 17, 2007
Three Cheers for CARE Decision to Forego U.S. Food Aid
Posted by Rachel Nugent at 04:56 PM
Huge kudos to CARE for taking a bold and reasoned stand on how best to deliver food aid to developing countries. Kudos as well to the New York Times for yesterday's front page coverage of the CARE decision—how remarkable to see food aid so prominently featured in the NYT!—and its other recent coverage (subscription required) of how U.S. policy affects poor African farmers. As the NYT reported:
CARE's decision is focused on the practice of selling tons of often heavily subsidized American farm products in African countries that in some cases, it says, compete with the crops of struggling local farmers. The charity says it will phase out its use of the practice by 2009...
"If someone wants to help you, they shouldn't do it by destroying the very thing that they're trying to promote," said George Odo, a CARE official who grew disillusioned with the practice while supervising the sale of American wheat and vegetable oil in Nairobi, Kenya's capital."
The timing of CARE's controversial decision and the NYT articles are not coincidental. Congress is mid-way through debating a new five-year Farm Bill. The one passed five years ago was an embarrassment. It continued and even increased large subsidy payments to a small number of mega-farms, as was well documented by the Environmental Working Group, a non-profit organization that let the cat out of the opaque bag of subsidy payments. In the process, lawmakers paid little mind to U.S. obligations under existing trade accords or to the discouraging effect on poor country farmers of cheap food surpluses created by U.S. subsidies (for more on rich country agricultural policies and their impacts on poor countries, see Kim Elliott's fine CGD working paper Agricultural Protection in Rich Countries: How Did We Get Here?
Ignoring pleas for reform from many corners, the House passed a farm bill in July that did little to improve matters. The Senate will take up its own version of the farm bill sometime in the fall, and almost inevitably, a conference committee between both houses of Congress will meet to work out differences. That means there is still time for the reform coalition to prevail in efforts to reduce payments to large U.S. farm producers, provide support to increase fresh fruit and vegetable consumption, and reform food aid (see Bread for the World's Seeds of Change campaign), which takes us back to CARE.
CARE's decision puts the emphasis first and foremost on how best to help African development, not on revenue generation, and not on getting rid of surplus farm products. That's as it should be for a charitable organization, and that's as it should be for U.S. foreign assistance policy. How best to help is admittedly a complex matter, as the New York Times article explains, but just doing good is not the same as doing what's best.
For those interested in learning more, CGD will be sponsoring a forum on September 10 on "A Healthy Farm Policy in a Globalized World." Speakers will include farm bill reform advocates from the non-profit sector, from Congress, and from research organizations, including CGD. Details to come on the CGD Website, or sign up for CGD event invitations from the E-mail Updates Page box on our homepage.
September 11, 2006
A Second Meeting with Norman Borlaug: The Man Who Fed the World
Posted by Lawrence MacDonald at 01:52 PM
Last week CGD hosted a talk by 1970 Nobel laureate Norman Borlaug on The Prospects for Bringing a Green Revolution to Africa. The event was sparked by the publication of a fine new biography, The Man Who Fed the World: Nobel Peace Prize Laureate Norman Borlaug and His Battle to End World Hunger (Amazon ) by Leon Hesser, former head of agriculture for USAID.
I first met Dr. Borlaug when I was a sophomore in high school. Immediately after the Nobel Peace Prize was announced, my father, then the director of public affairs at Cal Poly San Luis Obispo, a California state agricultural college, sent Dr. Borlaug a telegram inviting him to speak at the college. Dr. Borlaug accepted. He later told my father that the telegram was the first invitation to arrive. Had he known how many other prestigious invitations would follow, he said, he never would have accepted.
That summer my father took me and my brothers along with him to Mexico where he interviewed Dr. Borlaug and filmed him at work in the fields at CIMMYT, the International Center for the Improvement of Corn and Wheat. I remember standing in the fields while Dr. Borlaug explained the basics of the Green Revolution—no doubt my brothers and I were convenient props for my father’s documentary.
That trip to Mexico was my first encounter with developing country poverty, and with the idea that research funded by the rich world could make a huge difference in the lives of poor people. It was the beginning of my interest in development. So in a very real sense, without Dr. Borlaug it is unlikely that I would be working at CGD today.
But then I am hardly unique in having had Dr. Borlaug change my life for the better. There are perhaps a billion people on the planet who would not be where they are today were it not for the Green Revolution.
I told this story to Dr. Borlaug last week when he came to CGD. He is 93 years old and has given thousands of talks about the Green Revolution. So I did not expect that he would remember his talk at Cal Poly San Luis Obispo or our visit with him in Mexico. I was wrong. He remembered details about the talk that I had not heard from my father and asked that I send along his greetings to my dad.
Done!
July 24, 2006
China Now World's Third Largest Food Donor
Posted by Peter Timmer at 04:02 PM
The World Food Program (WFP) has just released its annual Food Aid Monitor with data for 2005 on where food aid comes from and where it goes. At the top, there are no surprises: The U.S. is by far the largest donor, providing 4.0 million of the 8.2 million tons of total food aid. Sub-Saharan Africa is the largest recipient, taking all of that and more, for total food aid delivered of 4.6 million tons. Some people might be surprised that fast-growing Asia also received 2.4 million tons of food aid, but in fact there are more hungry people in Asia than in Africa. Rapid growth offers promise for Asia, but South Asia in particular starts from a very low base with massive poverty.
The big surprise, appropriately flagged in the WFP press release, is that China has emerged as the third largest food aid donor, providing 0.6 million tons. We cannot tell from the WFP report where this food aid went, but I’ll bet that China's food aid is being used in the same strategic way that China uses the rest of its foreign assistance--to win friends and access to natural resources. For a fine summary from an African perspective, see Beijing Woos Africa's Contemptibles, by Alec Wescott, an intern at the South African Institute of International Affairs, published last week in South Africa’s BusinessDay.
Over the past decade China has emerged as a serious player in the foreign assistance game. But it is not part of the OECD Development Assistance Committee (DAC), does not report its foreign assistance budget or country flows to the outside world, and seems at times to be at loggerheads with coordinated efforts by the DAC donors to bring better governance, improved human rights and less corruption to countries receiving foreign assistance (It is hard to "harmonize" foreign assistance when a key player is not at the table and is perhaps not even interested in the rules of the game.)
China's foreign assistance program needs study. Even before any evaluation can take place, the simple facts need to be put on the table. Alec Wescott’s account is a good start. Volunteers?
January 25, 2006
Bush tries again to reform food aid
Posted by Owen Barder at 02:44 PM
The Bush administration is reviving a plan to buy some of the food it uses for overseas aid from foreign rather than domestic farmers, and is courting the support of charities that helped sink the idea last year.We have discussed food aid before on this blog, and reported the prediction that food aid reform would be included in the 2007 budget. It is astonishing that the charities should have put their own institutional interests in maintaining the status quo ahead of the interests of recipients of food aid. The Bloomberg report, they are coming under pressure to rethink:
Some of the charity groups ... say they are ready to listen now, partly because outside pressures, such as the WTO talks and funding cuts, are already pushing changes to the system.My own view is that we should keep up the pressure on the NGOs and charities to stop hiding behind agricultural interests and to come out in support of a sensible reform program.
December 13, 2005
Food Aid in Perspective
Posted by Peter Timmer at 11:38 AM
Reuters is reporting from Hong Kong that a food aid fight between the U.S. and the Europeans has darkened the mood as trade talks get underway in Hong Kong.
Tension between the United States and the 25-nation European Union burst into the open as the meeting got under way, with European Trade Commissioner Peter Mandelson calling for "radical reform" to the U.S. system of food aid for developing nations.Washington sends aid donations in the form of domestic corn, wheat and other commodities, but Brussels says cash is quicker and less likely to affect the delicate balance of local trade.
"Food aid for poor countries and emergency relief can be a tool to advance development and for humanitarian relief," Mandelson told a news conference. "But the U.S. programme is designed to give support to U.S. agricultural producers."
This is so sad. The Americans have allowed the Europeans to take the offensive over what is ultimately an insignificant part of the development business. I am in favor of food aid in the right circumstances, but let’s keep things in perspective. Food aid shipments from the United States are less than one tenth of one percent of the value of US food sales.
Globally, food aid is less than five percent of ODA and less than two percent of commercial trade internationally in food. Because ODA is itself a small part of international financial flows and an even smaller component of the total inputs needed to reduce poverty--most of which come from poor countries themselves--it is virtually impossible for food aid to be a significant component in the development process in any but the most extreme of cases. So it would be a great tragedy if the “Development Round” of trade negotiations is scuttled over this spat with the Europeans on food aid, because trade liberalization really will matter for economic growth and poverty reduction.
December 09, 2005
Natsios Vows to Pursue Food Aid Reform
Posted by Lawrence MacDonald at 04:05 PM
Andrew Natsios vowed Friday to continue to push for reform of U.S. food aid after his departure as the head of USAID next month. In a keynote address to some 200 relief and development specialists at a CGD event (Can Food Aid Be a More Effective Development Tool?), he described reform of U.S. food aid as a "moral issue" that could save thousands of lives every year. "If people think this issue is going away they are wrong," he said.
Natsios’s proposal to make $300 million worth of U.S. food aid (about 25% of the budget) available as cash that could be used to buy food in developing countries met a firestorm of opposition (see Politics of Food Aid ). He said on Friday that influential senators initially told him they would support such a change, which would make U.S. aid more flexible and efficient, but that they backed down under pressure from groups that support the status quo, including NGOs.
The requirement that U.S. food aid be grown in the U.S. and shipped in U.S. vessels means it often arrives too late to be helpful, he said. And sometimes it works against development. In Afghanistan, he said, U.S. food shipments undercut the market for locally grown wheat on the eve of a bumper harvest that resulted from new seeds introduced with U.S. assistance. Wheat rotted in the fields and the next year farmers turned to opium poppies instead, he said.
Agricultural lobbies, the U.S. shipping industry, and some humanitarian NGOs have opposed reform. Other NGOs, including Oxfam, have supported it.
Natsios announced last week that he was retiring from USAID to become a professor of diplomacy and an advisor on international development at Georgetown University.
On Friday he said it was important for relief and development workers to have access to both cash for local food purchases and to food aid in kind, so that they could use the most appropriate tool depending upon the circumstances.
The agriculture bill that eventually passed included a line scolding the administration for suggesting reform: “The conferees further admonish the Executive Branch to refrain from proposals which place at risk a carefully balanced coalition of interests which have served the interests of international food assistance programs well for more than fifty years,” it said (hat tip to Gawain Kripke at Oxfam’s Make Trade Fair Campaign)
Natsios vowed Friday that the proposed reform nonetheless would be included in the 2007 budget. Stay tuned!