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US, Europe Wrestle Over Food Aid in Search for World Trade Deal


The United States sends huge amounts of its surplus food to less developed countries suffering from hunger. But this is now the subject of a trade dispute at global talks in Hong Kong. European officials say the program is more about promoting U.S. products than solving world hunger - an argument that is one of many blocking the way on how to implement a global deal on freer trade.

European Union Trade Commissioner Peter Mandelson says the United States needs to make some changes in its food aid policy. "It distorts trade and depresses local production," he said. "A radical reform of U.S. food aid, therefore, is an essential part of any agreement we may reach in this round."

Mr. Mandelson and other European officials are using this week's World Trade Organization meeting in Hong Kong to criticize U.S. direct surplus food donations to the developing world.

European Union Agriculture Commissioner Mariann Fischer Boel says the sheer amount of U.S. food arriving in poor countries hurts more than it helps in that it pushes local producers out of business. "Twenty percent of the U.S. wheat production is exported as food aid, and more than 50 percent of the skim milk powder," he said. "And this is of course influencing the whole world market, that is obvious."

At the heart of the Europeans' complaint is that the food ends up not as just a donation to the desperately hungry but can be diverted for sale - lowering market prices.

The European Union began providing food aid in the form of cash only more than a year ago, and wants Washington to follow suit.

But U.S. Trade Representative Robert Portman says the Europeans are blowing this out of proportion as U.S. aid only amounts to about one percent of global food trade. "I sense a sort of European obsession right now with cash only in food aid," he said. "Does the United States think we should deal with the commercial displacement issue? Absolutely. But this sort of obsession with 'how do we stop food aid' seems to me to be a little bit misplaced."

U.S. negotiators say the European Union is emphasizing food aid to deflect attention from broad criticism of huge European subsidies to its farmers - blocking market access for much of the developing world.

Gawain Kripke, Senior Policy Analyst for the humanitarian group Oxfam, says he agrees. "It's a disappointment that food aid has become a political football in the negotiations," he said. "And the EU has been using food aid, frankly, as a bit of a political target because they have their own things they're trying to protect."

Developing countries like Brazil say they need to see a better offer on European agriculture if this week's World Trade Organization Meeting is to produce any progress.

Nevertheless, Oxfam's Mr. Kripke says Europe does has have a point in that Washington uses food aid as an international trade tool. "In fact, in the food aid legislation is a mandate that food aid be used to open up new markets for the United States," he added. "That's a trade no-no, and that's not an appropriate use of food aid, and it's entirely appropriate that that kind of thing be limited by the WTO."

Mr. Kripke says the United States should begin moving toward a food aid system based more on cash, and stop shipping food aid to countries, which are not in the middle of an urgent famine.

But not all aid groups agree on this either. One of the most vocal critics of cash-only food aid is the United Nations World Food Program - the world's largest humanitarian organization. The WFP has run an advertisement in the Financial Times all this week, calling for trade negotiators to leave food donations in place.

Anthea Webb, a spokesperson for the WFP in Rome, says the organization needs both cash and actual food donations. She illustrates her point with a recent example from the African country, Niger. "The local providers of food aid, the local traders, defaulted on their contracts to sell us food. There simply wasn't food available in the markets," she said. "So, we were really stuck - and thanks to in-kind food donations we managed to get food aid through to people who were literally starving."

David Johanson, an International Trade Lawyer for U.S. Senator Chuck Grassley, says there are other good reasons to be cautious about switching to cash-only food aid. "One of the biggest issues is the problem of possible corruption, when you're sending large amounts of money to other countries," he said. "Another problem is that we're quite certain that if food aid is made cash-only, the amount of food aid given will actually decrease."

Ms. Webb, from the World Food Program, says all food donors should follow the WFP's example of making sure donations do not get converted into cash. "We don't monetize food. We don't take it, sell it, and fund other projects that way," she said. "We're confident that what we do doesn't distort markets and as soon as we get any signs that we might be headed in that direction, we change tactics."

Humanitarian groups propose the creation of a global governing body to oversee food aid distribution around the world. That organization, they say, would help prevent donated food from entering world markets. It would also arbitrate which poor countries should receive food aid, and which should rely on more market-oriented actions to deal with their food shortages.