Food-for-aid Under Fire

by Daniel T. Griswold

Daniel Griswold is director of the Cato Institute, Center for Trade Policy Studies.

December 14, 2005

With talks on reducing farm trade barriers at an impasse, two related but second-tier issues took center stage today. On the issue of export subsidies for farm products, the European Union wants the United States to commit to eliminating its food-for-aid program.

The EU's position is partly justified. When the United States government sends U.S.-produced food to such disaster areas as Darfur in the Sudan, the primary motivation is to provide humanitarian relief. But such aid also can displace commercial sales by other countries, driving down global prices for farmers in other poor countries, while conveniently relieving the United States of some of its excess production caused by our own domestic subsidies and protection. If we want to help people facing famine, cash is usually a better form of aid (and voluntary private aid is better than forced, government-to-government aid). Cash allows the recipients to buy what they most need, and to buy it from local markets when more cost-effective.

The EU's position, though, also serves a less noble purpose. The EU is by far the largest practitioner of farm export subsidies, and it has been unwilling to talk seriously about deep cuts in agricultural trade barriers. So the fuss over a particular kind of export subsidy may be serving as a distraction from the real purpose of the WTO -- to encourage mutually beneficial reductions in trade barriers among its members.

The other issue to emerge is so-called "duty free, quota free" access for the least developed countries. With universal reductions in farm trade barriers temporarily on the shelf, the talk has turned to a proposal that the rich countries would completely open their markets to all imports from the world's 50 or so poorest countries. The idea has humanitarian appeal, and would no doubt raise income for millions of the world's poorest people. In a special briefing on Wednesday afternoon to U.S. industry reps in Hong Kong, U.S. Trade Representative Rob Portman explained why the United States has been reluctant to jump on board the "duty free, quota free" bandwagon.

First, we already have the most open major economy to imports from the least developed countries. Second, the EU and Japan and other developed economies can say they will offer such access, but can withdraw it at any time on specific products through "safeguard" actions. Third, in the past ten years, EU imports from the least-developed countries have been falling while U.S. imports from the least developed countries have been increasing.

The implication: U.S. actions speak louder than EU promises.

A final reason why "duty free, quota free" may not be such a hot idea: It does nothing to address the poverty-perpetuating trade barriers of the poor countries themselves. As a new Cato study documents, African countries remain mired in poverty not because of the trade barriers of rich countries but because of their own, much higher barriers.

Sadly, tragically, that is a subject that almost no one in Hong Kong is talking about.