FOOD AID IN THE CONTEXT OF THE WTO NEGOTIATIONS ON AGRICULTURE

What is food aid?

International food aid is the provision of food commodities by one country to another, free of charge or under highly concessional terms, to assist the country in meeting its food needs.

As a form of assistance, food aid is of three general types:

§ relief food aid, which is targeted and freely distributed to victims of natural and man-made disasters;

§ project food aid, which is targeted to vulnerable groups to improve their nutritional status and to support specific developmental activities; and

§ programme food aid, which is provided directly to a recipient government or its agent for sales on local markets the proceeds of which are under the control of recipient government but with some form of agreement with the donor about their management and use.

There is sometimes confusion, however, as to what constitutes food aid. Largely, this stems from situations where food aid is provided not in fully grant terms but under varying degrees of concessionality thus overlapping with some commercial transactions that also have a concessional element.

Our concern here is to consider food aid in the context of the WTO Agreement on Agriculture (AoA). The paper examines the disciplines on food aid and on other forms of international not-fully commercial transactions and how the latter relate to food aid. Then the paper considers the implications for food aid of possible reforms in the context of the on-going WTO negotiations on agriculture.

Origins of food aid: surplus disposal in the 1950s

Food aid as a form of assistance to developing countries has its origins in the early 1950s when structural surpluses of cereal products appeared in the United States. Thus, originally, food aid was in-kind aid, i.e. food commodities procured in the donor country internal market or internationally and shipped to the recipient countries as such. Because of the strong links of food aid with surpluses in donor countries, there was a strong element of additionality in this type of assistance in the sense that it led to an increase in the total aid provided which would not have been possible in the absence of food surpluses.

A large part of food aid continued to be a surplus disposal operation throughout the 1980s and 1990s. However, gradually, as pressures of surplus disposal weakened and as food aid programmes of donor countries became much more responsive to the recipients’ needs, other forms of food aid transactions emerged since the 1980s. These included: triangular transactions whereby food is acquired from another developing country and shipped to the beneficiary country; and local purchases where the donor acquires the food commodities in the beneficiary country itself (normally to be used for humanitarian or development purposes).

Have we moved away from surplus disposal? And what are the implications if that is the case? To a large extent, food aid may no longer be considered a surplus disposal operation. Now, for several donors food aid is part of the overall development assistance budget and deciding how much food aid to provide is based on the needs for such assistance and considerations having to do with making effective use of food aid compared to other forms of assistance. The relevant question for these donors is whether a dollar spent on food aid is more effective than a dollar spent on other types of assistance. This also implies that an increase in the budget line for food aid would have a corresponding decrease in the budget line of another type of assistance. In other words, there is no additionality for these donors.

On the other hand, for the donors where some link between food aid and the availability of surpluses is still maintained, part of the food aid they provide is an additional development assistance resource. For these donors if food aid is reduced there is no guarantee that other development assistance would increase by the same amount. In other words, the cost of some continuing link with surplus disposal is perhaps compensated by the additionality element of the food aid provided.

How much is the additional element? As a first approximation, one could say that the minimum commitment under the Food Aid Convention ( FAC) does not have any relationship to surplus disposal, but food aid provided over and above that level may still be linked to a greater or lesser degree to availability of surpluses in the donor countries. However, as a result of the reform programme in agriculture, government stocks of surplus food have decreased considerably in donor countries and therefore it would be expected that the links to surplus disposal are now much weaker.

Institutional arrangements for food aid

The FAO Principles of Surplus Disposal. Together with the emergence of food supplies for surplus disposal in the early 1950s, intergovernmental consultations took place on the impact of food aid on commercial trade and on agricultural production in the recipient countries. This gave birth to the FAO Principles of Surplus Disposal and the Consultative Sub-Committee on Surplus Disposal (CSSD) in 19541.

The FAO Principles of Surplus Disposal represent a code of conduct recommended to governments in the provision of food aid. In the main, the Principles seek to assure that food and other agricultural commodities which are exported on concessional terms result in additional supplies for the recipient country and do not displace normal commercial imports; and similarly, that domestic production is not discouraged or otherwise adversely affected. While the Principles are not a binding instrument, they represent a commitment by signatory countries. They help governments to focus on their responsibilities as parties to transactions on concessional terms and to avoid potential difficulties and disagreements.

The interests of recipient countries are safeguarded by the principle which emphasizes the importance of increasing consumption rather than restricting supplies. The interests of exporting countries are protected by the undertaking that such disposals should be made without harmful interference with normal patterns of production and international trade, by assurances against resales or transshipment of commodities supplied on concessional terms, and by the introduction of the concept of "additional consumption".

“Additional consumption” is consumption which would not have taken place in the absence of the transaction on concessional terms. The mechanism assuring such additionality is the usual marketing requirement (UMR), a concept adopted by the FAO in 1970. It requires a commitment by the recipient country to maintain a normal level of commercial imports of the commodity concerned, in addition to the commodity supplied in the concessional transaction. With certain exceptions, and depending upon the type of food assistance provide, this provision has become an essential element of food assistance agreements.

The Consultative Sub-Committee on Surplus (CSSD), based in Washington D.C., monitors adherence to the Principles by reviewing commodity assistance transactions, normally prior to signature of the assistance agreement and shipment of the commodity. While in practice the CSSD tends to focus on the interests of exporting countries, attention is also given to the interests of recipient countries. The principles embrace the view that surplus commodities can be utilized for the promotion of economic development, for special welfare distribution and for emergency relief. In general, the CSSD provides a forum for examining any difficulty that may arise in light of the Principles. Forty-one members have subscribed to these Principles. The CSSD maintains a list of potential food aid transactions for which donors have notification obligations. The list of potential food aid transactions was last revised in 1997 to bring it into line with the AoA (see Annex I).

The World Food Programme. While originally it was mainly the US that provided food aid, gradually other donors entered in the process especially in the use of food aid in development assistance activities. This gave birth to the creation of the World Food Programme (WFP) in 1961 to broaden the resource base of food aid and to provide a vehicle for multilateral channeling of this assistance. The WFP has since then become the single largest multilateral food aid agency. The WFP is covered under a separate document.

The Food Aid Convention. The institutional basis of food aid was further strengthened with the signing of the first Food Aid Convention in 1967 within the context of the International Grains Arrangement (IGA). The FAC has been successively extended or renewed since then, and the current convention is scheduled to expire on 30th June 2002. Under the FAC, donors undertake the obligation to provide a minimum level of food aid expressed in tonnage terms (wheat equivalent). Under the current 1999 FAC the minimum "guaranteed annual tonnage" amounts to some 5 million tons (in wheat equivalent). Past FAC minimum commitments were: about 4.3 million from 1968 to 1980; about 7.6 million from 1980 to 1986; about 7.5 million tons from 1986 to 1995; and about 5.35 from 1995 to 1999.

Key provisions of the FAC 1999 are contained in Articles VII, VIII and IX on Eligible recipients, Needs, and Forms and Terms of Aid, respectively (see Annex II).

Food aid, export subsidies and export credits in the context of the WTO

Food aid, together with export subsidies and export credits are three ways that modify the normal terms on which agricultural trade takes place. The main relevant articles of the WTO Agreement on Agriculture (AoA) are Articles 9 and 102. Article 9 on Export Subsidy Commitments, includes a list of export subsidies that are subject to reduction commitments, the mechanics of the reduction commitment and exception for developing country members. Article 10 on Prevention of Circumvention of Export Subsidy Commitments (those covered in Article 9) includes the following provisions:

§ Exports subsidies not listed in Article 9 must not be used to circumvent reduction commitments (para 1) and that exports in excess of reduction commitments must not benefit from subsidies (para 3)

§ Members agree to develop and then comply with international disciplines on export credits (para 2)

§ Members that are donors of food aid undertake to ensure that food aid is provided in accordance with a number of provisions (para 4), namely:

Broadly speaking international agricultural transactions can be grouped into four categories (i) those on commercial terms (ii) those benefiting form export subsidies (iii) those benefiting from government subsidized export credits, and (iv) food aid. The latter three can be described as non-fully-commercial transactions (NFCTs), subject to the rules and disciplines set out in Articles 9 and 10 of the AoA3.

How do these three forms of NFCTs compare?

First, in terms of the budgetary transfers involved (cost to government budgets of the exporting countries), the most important among them is export subsidies, where the WTO ceiling under the Uruguay Round is now around US$14 billion (down from about $21 billion in the base period), although this amount is currently not being used to the full. Next in importance is food aid. The value of food aid, both cereal and non-cereal, is in the order of $2.5 billion. Finally, the subsidy element of export credits was estimated by OECD at about $300 million in 1998 (corresponding to a total value of transactions of some US$7.9 billion) (Annex Tables 1 and 2). Clearly these values may vary considerably from year to year both because of changes in the quantities involved as well as changes in world market prices. The most variable in terms of value are export subsidies and export credits which tend to rise when market prices are low and decline when market prices are high. The value of food aid, on the other hand, changes only marginally now days simply because for most donors their food aid commitment is expressed in monetary terms. The implication however is that volumes of food aid can vary considerably – higher when prices are low and lower when prices are high (Tables 3 and 4). This counter-cyclical nature of food aid runs against the needs of the recipient countries for this type of assistance.

A second comparison between NFCTs is in terms of the degree of concessionality they represent for the recipient countries (which is not the same as the budgetary cost to the exporting country). Here food aid comes clearly first with nearly the full value of food aid of some $2.5 billion representing grants. Unfortunately, it is difficult to say a priori much about the benefit to the importers of the other two types of transactions. Much depends on how these are implemented in practice. In the case of export subsidies (which account for the highest budgetary cost to the exporting countries, as mentioned above), for some important subsidizing exporters, most of the subsidy is captured by the producer/exporter in the exporting countries themselves, to make up the difference between the world market price and the domestic price. But in other cases, depending on how export subsidies are implemented, a part of the subsidy involved is transferred to the recipient country in the form of lower prices and/or better terms. For example, in the case of cereals, FAO made an attempt to estimate the portion transferred to the recipient countries during the late 1980s and early 1990s when export subsidization was at its peak. It was estimated that the total potential transfer to all recipient countries from the US EEP programme never exceeded $1 billion and averaged about $590 million per annum between 1985-95. No corresponding estimate has been made for export credits but in any case their value to the recipient countries cannot be greater than the subsidy element of these transactions, which as mentioned above, was estimated by OECD at some $300 million in 19984.

Finally, yet another comparison between the NFCTs can be made in terms of their production and trade-distorting effects. Two effects may be considered: market displacement and depressing market prices. Some have argued that the most trade distorting effect comes from export subsidies. However, others have argued that export credits also present a major problem, especially because they are not capped as in the case of export subsidies and are not yet subject to any transparent disciplines. Both of these forms of transactions can have a displacement effect on trade in the sense that the subsidizing countries would not have been able to export such volumes in the absence of government assistance. Thus, they can displace exports of non-subsidizing competitive exporters and they can depress market prices. They could also create disincentives to domestic production in the recipient countries if they result in import surges well above normal level of imports by these countries and are imported at prices at which domestic producers cannot compete.

In contrast to export subsidies and export credits, appropriately used food aid is the least distorting form of NFCTs, especially since a relatively high proportion of this assistance is used for emergencies (50 % and rising) which clearly does not distort production and trade, and for nutritional intervention projects (some 25%), which can hardly be considered trade distorting as such assistance usually represents additional consumption for people with little or no purchasing power. The rest of food aid (programme aid, which accounts for some 25% of the total) could potentially cause disincentives to domestic production and here is a case where vigilance from the consultative process at the CSSD is necessary to make sure that such food assistance is given in a way that does not adversely affect production and trade.

The future

In the years since the coming into force of the AoA several developments have taken place which have a bearing on the future of food aid:

§ First, discussions that have taken place in the WTO Committee on Agriculture on how provisions on export subsidies, export credits and food aid are being implemented in practice, in some cases have given rise to issues requiring clarification and interpretation. Several aspects of Articles 9 and 10 have created problems for some Members of the WTO and these problems have a bearing on how these provisions may be modified in the future.

§ Secondly, consultations are continuing at OECD on export credits and an eventual understanding on this subject may provide an input to the development of multilateral disciplines on the subject, as committed under Article 10 of the AoA.

§ Finally, and most importantly, negotiations are on going for some time in the context of Article 20 of the AoA. Disciplines on export competition are high in the agenda of negotiators and this has been given further impetus by the Doha Declaration.

These developments have implications on how these subjects will be dealt with in the future and how food aid may be affected. As discussed above, there are several ways in which export subsidies, export credits and food aid are connected and it may be expected that these links would figure in future negotiations5. In this context a number of possible issues that may arise could include:

1. Further export subsidy reduction commitments are likely to be an outcome of future negotiations as well as tightening up on export credits. Both of these are likely to exert pressures on more assistance to be provided in the form of food aid.

2. In view of the potentially overlapping nature of some forms of export subsidies and export credits with food aid, it is important that definitions and disciplines on food aid are modified accordingly to ensure that food aid does not circumvent agreed disciplines on export subsidies and export credits. In particular, changes in the disciplines governing export subsidies and export credits could have implications on the FAO Register of Transactions.

3. With tighter disciplines on export subsidies and export credits, food aid would not only become more important in quantity terms but possibly also subject to more variability, absorbing what was formerly channeled through export subsidies and export credits, when world market prices fluctuated. This implies that the counter-cyclical nature of food aid that we have seen in the past may be exacerbated in the future.

4. In order to deal with the potentially damaging effects of more variable food aid, mechanisms would be needed to safeguard not only a minimum level of food aid in years of high prices but also to enforce stringent disciplines ensuring strictly bona fide food aid in years of plentiful supplies and low prices.

5. One possibility to avoid the counter-cyclical nature of food aid could be to introduce a mechanism whereby excess food aid availabilities in years of plentiful supplies are carried forward, perhaps in conjunction with national food reserves of donor countries, and made available in subsequent years when food aid supplies are tighter.

6. Another issue is the role of food aid in the context of the Marrakesh Decision to assist LDCs and NFIDCs. The mechanisms that may emerge, including the proposal for the creation of a Revolving Fund as well as any special treatment of these countries may enjoy in the context of disciplines on export credits, would have implications for the role of food aid in the context of this Decision.

7. It is imperative that recipient countries have a better idea of the real value to them of different types of transactions and the possible risks that these may pose to domestic production. Such a comparison can only be made by the recipient countries themselves (as these effects depend largely on the detail of individual transactions) with the assistance of relevant international organizations and NGOs. Being better aware of the potential benefits and risks involved in different types of concessional transactions, recipient countries would be in a better position to influence the multilateral negotiations on the desirability of such transactions.

8. Overall, the new disciplines that may emerge as a result of the negotiations on agriculture should aim at striking a balance between the concerns of exporting countries related to market displacement effects, and those of the beneficiary countries related to the timing and terms of food assistance to better correspond to their needs and avoid the risk of harmful effects on the domestic market.

Annex I

Register of Transactions Notified to the FAO Consultative Subcommittee on Surplus Disposal (CSSD) 6

Annex II

Food Aid Convention, 1999 (Articles VII, VIII and IX)

ARTICLE VII: Eligible Recipients

(a) Food aid under this Convention may be provided to the developing countries and territories which are listed in Annex B, namely:

(i) least-developed countries;

(ii) low-income countries;

(iii) lower middle-income countries, and other countries included in the WTO list of Net Food-Importing Developing Countries at the time of negotiation of this Convention, when experiencing food emergencies or internationally recognised financial crises leading to food shortage emergencies, or when food aid operations are targeted on vulnerable groups.

(b) For purposes of paragraph (a) above, any changes made to the DAC list of Developing Countries and Territories in Annex B (a) to (c) shall also apply to the list of eligible recipients under this Convention.

(c) When allocating their food aid, members shall give priority to least-developed countries and low-income countries.

ARTICLE VIII: Needs

ARTICLE IX: Forms and Terms of Aid

(a) Food aid under this Convention may be supplied as:

i. grants of food or of cash to be used to purchase food for or by the recipient country;

ii. sales of food for the currency of the recipient country, which is not transferable and is not convertible into currency or goods and services for use by the donor members;

iii. sales of food on credit, with payment to be made in reasonable annual amounts over periods of 20 years or more and with interest at rates which are below commercial rates prevailing in world markets.

(b) With respect only to food aid counted against a member’s commitment, all food aid provided to least-developed countries shall be made in the form of grants.

(c) Food aid under this Convention provided in the form of grants shall represent not less than 80 per cent of a member’s contribution and, to the extent possible, members will seek progressively to exceed this percentage.

(d) Members shall undertake to conduct all food aid transactions under this Convention in such a way as to avoid harmful interference with normal patterns of production and international commercial trade.

(e) Members shall ensure that:

i. the provision of food aid is not tied directly or indirectly, formally or informally, explicitly or implicitly, to commercial exports of agricultural products or other goods and services to recipient countries;

ii. food aid transactions, including bilateral food aid which is monetised, are carried out in a manner consistent with the FAO "Principles of Surplus Disposal and Consultative obligations”.

Annex Table 1: Export credits and the value of exports

 

1995

1996

1997

1998

Total

Export credits

(million US$)

Australia

1106

2014

2130

1553

6803

Canada

570

697

1239

1108

3613

European Union

985

989

1151

1254

4379

Austria

10

9

11

11

40

Belgium

83

121

133

153

491

Finland

6

5

11

11

32

France

0

153

293

330

776

Germany

21

2

1

0

25

Greece

1

1

3

4

8

Netherlands

392

341

361

411

1506

Portugal

6

4

0

0

10

Spain

467

353

338

334

1491

Hungary

0

38

12

19

68

Korea Rep.

0

33

46

46

126

Norway

0

0

0

0

0

United States

2843

3188

2845

3929

12806

Total

5504

6959

7423

7910

27796

           

Total exports

(million US$)

Australia

10526

11325

12583

10501

44936

Canada

14866

16664

18153

17555

67237

European Union

57272

58348

59934

57028

23582

Hungary

2922

2768

2881

2788

11359

Korea Rep.

3198

3268

3179

2875

12519

Norway

3544

3875

3857

4086

15361

United States

60996

65531

61413

57395

245334

Total

153323

161778

161999

152228

629329

           

Share with credits

(percent)

Australia

10.5

17.8

16.9

14.8

15.1

Canada

3.8

4.2

6.8

6.3

5.4

European Union

1.7

1.7

1.9

2.2

1.9

Hungary

0.0

1.4

0.4

0.7

0.6

Korea Rep.

0.0

1.0

1.5

1.6

1.0

Norway

0.0

0.0

0.0

0.0

0.0

United States

4.7

4.9

4.6

6.8

5.2

Total

3.6

4.3

4.6

5.2

4.4

Note: Export credit data are from confidential survey by the Participants to the Export Credit Arrangement

at the OECD. Total export values are from Foreign Trade Statistics. Intra-European Union export credits and

trade are excluded for all EU members.

Source: OECD (2001) An Analysis of Officially Supported Export Credits in Agriculture, OECD, Paris

Annex Table 2: Estimates of subsidy element of export credits in 1998

 

Subsidy Element Estimates

 

Start 1998

End 1998

Average 1998

 

Amount

Rate

Amount

Rate

Amount

Rate

 

(mil US$)

(percent)

(mil US$)

(percent)

(mil US$)

(percent)

Australia

1.6

0.1

8.7

0.6

5.1

0.3

Austria

0.0

0.0

0.1

1.2

0.1

0.6

Belgium

0.2

0.1

1.5

1.0

0.9

0.6

Canada

8.3

0.7

19.0

1.7

13.6

1.2

Finland * †

0.1

0.3

0.2

0.9

0.2

0.6

France

8.2

2.5

16.7

5.1

12.4

3.8

Germany *

0.0

0.7

0.0

1.3

0.0

1.0

Greece *

0.0

-0.4

0.0

0.4

0.0

0.0

Korea Rep.

0.1

0.1

0.2

0.3

0.1

0.2

Netherlands

2.2

0.5

4.8

1.2

3.5

0.8

Norway †

0.0

2.8

0.0

4.7

0.0

3.8

Spain*

4.6

0.6

8.8

1.1

6.7

0.8

United States

119.2

4.9

324.9

8.3

258.0

6.6

Total

216.3

2.6

384.8

4.6

300.5

3.6

Note: * To prevent a likely upward bias, calculations of certain EU members include intra-EU export credits.

† Fee data missing. Thus, the estimates should be interpreted as a maximum, before subtracting the fees

Subsidy amounts and rates are calculated, as described in the report below. Calculations for Hungary are not possible

due to insufficient information.

Source: OECD (2001) An Analysis of Officially Supported Export Credits in Agriculture, OECD, Paris.

Annex Table 3: Shipments of food aid in cereals, July/June

Donors

1995/96

1996/97

1997/98

1998/99

1999/00

2000/01

(estimate)

 

(.... thousand tonnes, grain equivalent 1/....)

Australia

181

170

296

267

264

240

Canada

436

373

384

332

421

192

China

1

171

122

170

215

416

EC

2488

1948

1756

2573

2297

1528

of which:

            

European Community

1731

1099

890

1557

1387

707

National Action

757

849

865

1016

910

820

Austria

13

12

9

1

9

7

Belgium

25

46

31

58

23

24

Denmark

25

73

61

82

85

79

Finland

2

4

1

6

10

6

France

188

207

209

93

180

184

Germany

202

211

220

199

187

162

Greece

25

25

15

4

12

0

Ireland

5

6

10

4

9

12

Italy

86

84

75

134

160

77

Luxembourg

2

2

8

4

4

2

Netherlands

90

92

92

70

95

105

Spain

4

0

3

38

21

10

Sweden

76

42

71

110

50

61

United Kingdom

105

103

141

214

66

91

India

8

7

11

25

4

0

Japan

821

292

356

1149

331

720

Norway

14

32

45

65

63

58

Switzerland

35

43

42

37

47

25

United States

3037

2273

2787

6403

7247

4697

WFP purchases

0

17

11

3

38

65

Other Donors

285

212

286

179

232

75

             

Total Shipments

7397

5605

6241

11250

11168

8464

of which:

            

Wheat

4847

3621

4102

7624

7874

5239

Rice

1135

649

723

1697

991

1326

Coarse Grains

1414

1335

1416

1929

2303

1899

of which to:

            

Africa

2526

2061

2281

2581

2955

3051

Asia

3911

2526

3132

5365

4227

4357

Latin America and the Caribbean

602

611

553

984

827

690

Others

358

407

275

2320

3159

367

to Special Country Groupings 2/:

            

LIFDC (82 countries)

6400

4691

5480

8404

7561

7399

LDC (49 countries)

3313

2699

2863

4006

4139

3568

NFIDC (21 countries)

645

503

631

780

773

1149

Channeled multilaterally

2317

2325

2214

3373

3233

3268

As percentage of Total shipments

31

41

35

30

29

39

Source: World Food Programme.

1/ To express cereal food aid in grain equivalent, wheat, rice and coarse grains are counted on a one to one basis; for grain products, appropriate conversion factors are used to determine the grain equivalent.

2/ Same countries may appear in more than one special country groupings.

Annex Table 4: Non-cereal food aid 1995-2000, by commodity

Product

1995

1996

1997

1998

1999

2000

 

(.... thousand tonnes)

Bulgur, Wholemeal

226.1

153.6

121.5

226.7

212.3

145.7

Blended Foods

326.5

417.4

393.4

486.9

505.7

318.7

Skim Milk, Evaporated

54.6

25.9

17.3

24.9

55.2

41.5

Pulses

729.5

508.2

405.5

433.8

1178.0

586.3

Dry Fruit

1.9

6.7

2.6

0.2

2.4

1.9

Meat & Products

6.6

8.0

8.6

4.2

234.5

25.0

Vegetable Oils

315.5

285.4

286.3

355.0

319.3

376.8

Fish & Products

19.0

15.9

14.5

10.2

16.0

7.6

Edible Fats

3.5

9.0

4.3

6.9

1.0

1.8

Sugar

83.1

49.3

49.2

26.7

32.0

48.7

Butter Oil

1.8

1.1

0.4

0.2

0.2

0.2

             

Non Cereals, Total

1260.8

987.1

894.8

914.7

1904.5

1182.6

Source: World Food Programme.

Annex Table 5: Number of Notifications to the CSSD, 1990 to September 2000

 

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

By aid-supplying country

177

188

189

173

137

134

234

168

428

518

76

By WFP

38

41

26

12

15

13

39

18

0

0

0

Recipient countries involved in:

Bilateral notifications

63

70

74

78

67

58

62

68

58

137

58

Type of Transaction (all commodities):

Type 1

103

147

167

160

101

72

145

95

71

179

56

Type 1 & 2

55

17

4

36

9

6

9

8

199

207

1

Type 2

103

140

90

128

77

48

37

23

53

25

16

Type 3

-

-

-

-

-

-

-

-

-

-

-

Type 4

13

35

24

43

24

23

31

15

14

17

-

Type 3 & 4

-

-

-

-

-

-

-

-

-

-

-

Type 5

-

20

19

5

4

5

7

3

11

2

-

Type 1 & 6

-

-

-

-

-

-

-

-

-

-

-

Type 6

26

78

69

56

76

44

35

18

40

66

-

Type 9

-

-

-

-

-

-

-

-

1

-

-

Type 10a

51

23

43

46

38

33

19

22

39

22

3

Type 13

-

-

2

-

-

-

-

-

-

-

-

Total Transactions

351

460

418

474

329

231

283

184

428

518

76

Number of aid-supplying countries

10

11

9

11

11

10

11

10

11

8

6

Source: FAO, CSSD

1 For details see FAO (2001), Reporting procedures and consultative obligations under the FAO principles of surplus disposal: A guide for members of the FAO Consultative Subcommittee on Surplus Disposal, FAO, Rome

2 The second reference to food aid is under the Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on Least-Developed and Net Food-Importing Developing Countries (paragraph 3):

“Ministers accordingly agree to establish appropriate mechanisms to ensure that the implementation of the results of the Uruguay Round on trade in agriculture does not adversely affect the availability of food aid at a level which is sufficient to continue to provide assistance in meeting the food needs of developing countries, especially least-developed and net food-importing developing countries. To this end Ministers agree:

(i) to review the level of food aid established periodically by the Committee on Food Aid under the Food Aid Convention 1986 and to initiate negotiations in the appropriate forum to establish a level of food aid commitments sufficient to meet the legitimate needs of developing countries during the reform programme;

(iii) to give full consideration in the context of their aid programmes to requests for the provision of technical and financial assistance to least-developed and net food-importing developing countries to improve their agricultural productivity and infrastructure.”

3 Although many governments consider that implicit subsidies by State Trading Enterprises should also be considered among circumvention issues, in terms of this paper they would seem to belong to one of the four categories mentioned above rather than constituting a separate category. Comprehensive data on the value of any implicit subsidies involved are not available.

4 The policy implication of this comparison for the recipient countries is that considering the potential benefits they could expect from such NFCTs they have a better basis on the position to take in multilateral negotiations on the desirability of such transactions.

5 To illustrate the complexities involved, consider the definition of food aid under the FAO Principles. Theoretically, some of the transactions covered under the Register of Transactions are by no means grants. For instance, this includes sales on credit when the period of repayment may be as low as three years (type 10) or government sponsored loans of agricultural commodities repayable in kind (type 9). Such transactions could have a very low degree of concessionality which may be lower than that of some types of export subsidies or export credits.

6 Donors should note that the categories 3, 11, 12 and 13 are considered tied sales transactions and are subject to Article 10(4)(a) of the WTO Agreement on Agriculture which states: “Member donors of international food aid shall ensure (a) that the provision of international food aid is not tied directly or indirectly to commercial exports of agricultural products to recipient countries.”

7 Excluding the World Food Programme which is covered under category 6.

8 The delegate of India reserved his Government’s position on the inclusion of this item.

9 The delegate of India reserved his Government’s position on the inclusion of this item.