Food aid more harm than good

Thursday, 13 September, 2007

Food aid to developing countries could actually worsen rural poverty and distort global trade, according to a report by the Rural Industries Research and Development Corporation (RIRDC).

"In many cases food aid can compete with domestic agricultural production and imports, inhibiting internal markets," said (RIRDC) chairperson Mary Boydell.

Boydell was launching the RIRDC report Food Aid and Agricultural Trade Reform, which examines the economic impact that food aid can have on market conditions in recipient countries and on world trade.

"Genuine emergency food aid prevents loss of life in emergency situations and the research suggests that this type of aid needs to be clearly distinguished from trade-distorting disposal of surpluses by developed economies," Boydell said.

In many developing countries the rural sector is characterised by small-scale farmers who produce food for their own consumption and sell small quantities to generate cash income. Non-targeted food aid affects the local markets for their produce, and can worsen rural poverty.

Food aid also has international trade-distorting effects, reducing demand for commercial imports into food-deficit countries.

The objective of the research was to examine concerns about the use of food aid as a form of export assistance, by reviewing global developments in food aid since the UR Agreement on Agriculture was implemented in 1995.

"Emergency relief and short-term assistance to prevent loss of life are reasonable responses to crisis situations, but if non-emergency food aid acts as a substitute for commercial trade in food on domestic and global markets, this can obstruct economic development," said Boydell.

The report recommends a World Trade Organization agreement should establish a set of principles to identify when food aid is required in an emergency situation. Careful consideration should be given to the forms of aid provided in non-emergency situations to prevent distortions of the market.

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