US rejects plan to replace food aid with cash

The US yesterday firmly rejected a European Union proposal to convert its food aid for developing countries to cash payments, as members of Congress warned they would have difficulty supporting a Doha Round world trade agreement that did not preserve the current programme.

Under questioning from senators, Rob Portman, the US trade representative, said: "We are not going down that road.

"The kinds of radical changes the EU and others are talking about would not be just harmful to our farmers and ranchers, but also terribly damaging to the developing world," he told the Senate agriculture committee.

The food aid issue is one of several on which the EU and US are trying to make significant progress before a December meeting of trade ministers in Hong Kong.

The EU, Switzerland, Canada, Australia, New Zealand, Australia and Thailand are all urging the US to stop providing direct shipments of food to developing countries except in genuine emergencies. They argue that food aid displaces commercial sales, distorts agricultural markets in developing countries and is used primarily to dispose of surplus crops encouraged by high domestic subsidies.

Mr Portman said the US was willing to consider other ways of ensuring that food aid did not displace commercial sales.

The US is the world's largest provider of food aid, shipping about $2bn (€1.6bn, £1bn) of commodities a year through a 55-year-old programme called Food for Peace. The scheme is extremely popular with farmers, providing a ready outlet for crops that might not otherwise find a market.

The US also argues that such direct food aid is better for developing country recipients, as cash payments are more likely to be siphoned off by corrupt officials. The aid community has been divided, with some groups like Oxfam arguing in favour of cash payments, while the United Nations World Food Programme is strongly opposed. World Vision, the Christian charity group, told the committee yesterday: "It is critical that the US stands firm against restrictions that could cause harm."

The food aid issue is just one of several difficult issues facing the administration of President George W. Bush in trying to win support from powerful US farmers for a Doha Round deal. Saxby Chambliss, the Republican chairman of the committee, warned that "producers are more sceptical of the promises and predictions of future market access than in years past".

The US is hoping that reductions in tariffs abroad and the elimination of export subsidies will produce sufficient export growth to offset cuts to US domestic support programmes for farmers. With European domestic supports on the decline from a much higher level, US farmers are likely to be hurt more seriously by a Doha Round agreement that sharply restricts such subsidies.

But Mr Johanns warned that US subsidies to farmers were already facing serious legal challenges that could restrict their use. The US yesterday missed a World Trade Organisation deadline to end subsidies to its cotton farmers under a case brought by Brazil, which has threatened to retaliate if the US does not comply. Mr Johanns said the US could soon face similar challenges on its rice and corn subsidies. "I worry that the status quo is very high-risk for American farmers," he said."

21 September 2005

Trade Representative Building Support for U.S. Food Aid at WTO
Portman testifies against proposals to convert all food aid to cash

By Bruce Odessey
Washington File Staff Writer

Washington -- U.S. Trade Representative Rob Portman says he expects some developing countries and nongovernmental organizations (NGOs) will support continuation of U.S. food aid programs that have come under pressure in World Trade Organization (WTO) negotiations.

In September 21 testimony before the Senate Agriculture Committee, Portman said he believes the United States can assemble a coalition to offset demands from the European Union (EU), Switzerland, Australia and other food-exporting countries to convert all food aid into cash.

At issue are U.S. programs such as Food for Peace, which in part provides for the donation of U.S. agricultural commodities by the U.S. government to meet humanitarian food needs in foreign countries.

Portman argued that all-cash food aid, such as the EU now employs, often ends up filling the pockets of corrupt officials instead of the stomachs of hungry people.

"I think there's plenty of evidence of that," Portman said. "There is still a significant concern on our part of corruption and the need to get this food to people who need it quickly."

He asserted that U.S. donation of agricultural commodities does not displace commercial food sales and that now the world needs much in the way of emergency food supplies.

"The last thing we want to do is cut back on emergency food aid when we need it," he said.

Portman said he expects he can line up support from African and other developing countries, as well as from NGOs that support the U.S. food aid programs as they are.

Food aid is only one of the issues in the long-stalled WTO negotiations. Since their launch four years ago, by most accounts, the negotiations have made little progress except for a framework agreement on the difficult agriculture issues worked out in July 2004. (See related article.)

And since July 2004, Portman said, the negotiations have made little progress. Nevertheless, he expressed hope that the parties will move forward before a crucial WTO ministerial meeting in Hong Kong in December.

"I am hopeful that we can still come together -- not with a final product at Hong Kong; that will not happen, and we ought not to have those expectations -- but with the kind of formulas and the kind of modalities ... that enable us to make progress in 2006," he said.

Portman’s goal is to complete WTO negotiations by the end of 2006 to present a negotiated agreement to Congress in early 2007 for consideration before trade promotion authority (TPA, otherwise known as fast track), expires in July 2007.

Under TPA, Congress restricts itself to approving or rejecting a negotiated trade agreement, within strict time limits and without amendments.

The U.S. objectives in the agriculture negotiations are for better market access, especially lower tariffs in developing countries; elimination of export subsidies by a set deadline; and sharp reduction of domestic payments to farmers.

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