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return to Farmers Independent Weekly
November 10, 2005
Does Food Aid Benefit its Intended Recipients?
Ryan Cardwell, Department Of Agribusiness and Agricultural Economics
There is continuing research in development economics about whether
food aid does more harm than good. Food supply shocks can create
urgent shortages of food, and these circumstances must often be met
with food aid. How this aid arrives, and in what amount, can affect
the recipient region's prospects for recovery, so the short answer to
the titular question is "sometimes".
Large-scale, publicly funded food aid programmes began in 1954 with the
passing of Public Law 480 in the United States. PL 480 was first and
foremost a means by which the U.S. could dispose of agricultural
surpluses that grew out of income support programmes. Relieving food
shortages in developing countries was an appealing side-benefit to the
primary political goal of surplus disposal. The U.S. remains by far
the largest food aid donor, but other countries (notably the European
Union and Canada) have followed suit and donate large amounts of food
every year. Canada donated approximately 145 000 tonnes of food to the
World Food Programme in 2003 (FAO).
Because food aid was initially motivated by donor-country political
factors, the effect of aid on recipient countries was not a primary
focus of public policy. Theodore Schultz, a Nobel laureate in
economics, was the first to formally analyse the possible effects of
food aid on recipient countries. Schultz theorised that food aid, if
delivered in too large an amount, can suppress food prices in the
recipient country, thereby decreasing production incentives for local
producers. These producers may see the prices of their crops fall as a
result of food aid, and subsequently produce less food in the next
harvest period. Such a sequence of events could lead to the recipient
country's continued reliance on food aid.
Economists have spent several years trying to quantify the effects of
food aid on recipient-country agriculture by estimating statistical
relationships between aid shipments and food prices, and between food
prices and local production. There exists a broad consensus that aid
shipments affect recipient-country agriculture, but the debate about
the size of this effect continues. Despite the uncertainty surrounding
the size of potential disincentive effects, the formal recognition of
possible negative effects of food aid is important and relevant for two
reasons.
First, it illustrates that the primary goal of aid policy is shifting
from donor-country surplus disposal to the improvement of welfare in
recipient countries. Food aid programs are increasingly being designed
with the intention of generating the best outcome in afflicted regions.
Second, current World Trade Organisation negotiations are struggling
with regulating surplus disposal of agricultural products. Some member
countries are pushing for tighter restrictions on surplus disposal,
because they view food aid as a means by which countries can unload
surplus products, thereby pushing down world food prices. As a result,
any agreement that comes from the current round of trade negotiations
may include disciplines on surplus disposal. This may impact the manner
in which donor countries dispose of surplus agricultural production
which in turn could affect food aid donations.
The landscape of food aid deliveries is changing, however, and will
force economists to rethink the effects of food aid. The vast majority
of food aid until the mid-1990s was comprised of programme and project
food aid. Programme and project aid is food that is sold by a donor
country to a recipient country at a concessional price. The recipient
country then either resells the food in its local market or distributes
it freely. Over the past several years, however, emergency food aid
has become the primary source of aid, accounting for almost 70% of aid
shipments in 2003 (FAO). Emergency food aid is delivered in times of
supply shocks, wars and refugee crises and is most often handled
multilaterally through the World Food Programme. Most previous studies
of food aid's effects have been related to program aid, which has been
shown to be dependent on donor-country political motives. Emergency
food aid has not been subject to the same empirical analysis and its
effects on recipient countries are uncertain.
The lessons that have been learned from programme aid can, however, be
applied to emergency aid. Emergency aid that arrives in too much
quantity, or that arrives too late, can depress local prices and reduce
producer incentives to sustain or increase food production. What began
as a one time event (war, drought, etc.) that precipitated a need for
emergency aid could trigger a sequence of events that creates a
dependence on foreign food aid. As long as the policy goal of food aid
is to benefit the recipient instead of to dispose of surplus
commodities, then there is hope that maple-leaf emblazoned bags of
grain will do more good than harm.
Ryan Cardwell's
research focuses on economic development and international trade
policy. Some of Ryan's recent work has investigated the provision of
emergency food aid and developing country adoption of
genetically-modified crop technology.
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