Monitoring of the follow-up of the Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on Least-Developed and Net Food-Importing Developing Countries

In 1995, the Committee on Agriculture established notification requirements under which donor Members are required to submit data on food aid donations (quantity and concessionality) as well as information on technical and financial assistance and other relevant information on actions taken within the framework of the Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on Least-Developed and Net Food-Importing Developing Countries (NFIDC Decision).

The annual monitoring of the follow-up to the NFIDC Decision in accordance with Article 16 of the Agreement on Agriculture and under paragraph 18 of the Working Procedures of the Committee is an important element in the work of the Committee. It is undertaken on the basis, inter alia, of the Table NF:1 notifications.

Table NF:1 notifications are required by all donor Members in respect of actions taken within the framework of the NFIDC Decision. Annex 1 summarizes the record of Members’ Table NF:1 notifications for the implementation years 1995 to 2014. The list of notifying Members include signatories of the Food Aid Convention as well as other Members that have in the past identified themselves as food aid donors in their Table NF:1 notifications.

In April 2008, following the rise in global food prices and the crisis it triggered, the United Nations (UN) Chief Executives Board established a High-Level Task Force (HLTF) on the Global Food Security Crisis. The WTO is represented on the HLTF and has participated in its deliberations since its inception. The Task Force encourages a comprehensive approach to food security – availability, access, stability and utilization. On the occasion of the November 2010 annual monitoring exercise, Mr David Nabarro, Task Force Coordinator, was invited to an information session to address WTO Members, observer governments, and Secretariat staff, about the role and activities of the HLTF. Since 2013, the HLTF has oriented its work to support the Zero Hunger Challenge (ZHC). In the aftermath of the global food crisis of 2007/2008, the Committee on World Food Security (CFS) was reformed at its 35th Session in October 2009. The reforms envisage that the CFS becomes an inclusive international and intergovernmental platform dealing with global food security and nutrition.

Global actions to address food insecurity in general, and food price volatility in particular, were also adopted within the G-20 framework. Recognizing the importance of timely and accurate market and policy information and transparency towards meeting the challenges posed by price volatility the G-20 agriculture ministers agreed to launch the Agriculture Market Information System (AMIS) with a view to encourage policy dialogue and coordination of policy responses, and to build data collection capacity in participating countries. The AMIS Secretariat is housed in the FAO and other international organizations including the WTO contribute to the System.

Provisions of the NFIDC Decision and Implementation

The NFIDC Decision states:

“Ministers recognize that the progressive implementation of the results of the Uruguay Round as a whole will generate increasing opportunities for trade expansion and economic growth to the benefit of all participants.” (paragraph 1 of the NFIDC Decision)

“Ministers recognize that during the reform programme leading to greater liberalization of trade in agriculture least-developed and net food-importing developing countries may experience negative effects in terms of the availability of adequate supplies of basic foodstuffs from external sources on reasonable terms and conditions, including short-term difficulties in financing normal levels of commercial imports of basic foodstuffs.” (paragraph 2 of the NFIDC Decision)

The other four paragraphs of the NFIDC Decision contain a number of specific agreements in the areas of food aid, technical and financial assistance, differential treatment within the framework of any agreement on agricultural export credits, and a provision regarding access to the resources of the international financial institutions. In the following sections, these paragraphs are taken up one by one and supplemented by information available to the Secretariat regarding their implementation.

Developing country Members eligible as beneficiaries within the framework of the NFIDC Decision have regularly emphasized the need of an effective implementation of the Decision. During the 2014 NFIDC annual monitoring discussions, the Africa Group urged Members to improve the implementation of the NFIDC Decision so as to achieve its intended objectives. On that occasion some Members also emphasized the importance of establishing strong disciplines in the area of export competition in general and international food aid in particular.

At the tenth Ministerial Conference of the WTO (MC-10) at Nairobi, Ministers reaffirmed their commitment to fully implement the NFIDC Decision. WTO Ministers at MC-10 simultaneously also adopted the Decision on export competition which states that nothing in this Decision can be construed to diminish in any way the existing commitments contained in the NFIDC Decision nor shall the monitoring and review of the latter be affected.

Food Aid

In light of paragraphs 1 and 2 of the NFIDC Decision quoted above,

“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.” (chapeau to paragraph 3 of the NFIDC Decision)

The MC-10 Decision on export competition also includes disciplines on international food aid. In the context of the thrust of the NFIDC Decision on the availability and adequacy of food aid, the Decision on export competition in relation to international food aid disciplines says:

“Members reaffirm their commitment to maintain an adequate level of international food aid, to take account of the interests of food aid recipients and to ensure that the disciplines contained hereafter do not unintentionally impede the delivery of food aid provided to deal with emergency situations.”

Members, as a part of the MC-10 Decision on export competition, also agreed to review the provisions on international food aid contained therein within the regular Committee on Agriculture monitoring of the NFIDC Decision.

Review of Food Aid Levels and initiation of Food Aid Negotiations

In order to work towards the objective enunciated in the chapeau of paragraph 3 of the NFIDC Decision, Ministers agreed:

“(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 [...]” (paragraph 3(i) of the NFIDC Decision)

Review of food aid levels

The Food Aid Conventions remained in operation from 1967 to 2012 in a long series of multilateral co-operation instruments. The commitments of donor countries under the Food Aid Conventions were specified in terms of minimum annual contributions and provided a safety net in terms of international food aid availability. Under the Food Aid Convention 1999, the latest in a series of such Conventions, the combined minimum annual volume and value commitments of donor members stood at 4.8 million tonnes (in wheat equivalent) and EUR 130 million.

The Food Aid Convention, 1999 expired on 30 June 2012. On 1 January 2013, a new Food Assistance Convention (FAC) came into effect. The FAC expands the traditional focus of previous Food Aid Conventions and includes all forms of food assistance (in-kind donation of eligible products, cash transfers, cash-based or commodity-based vouchers, as well as nutritional interventions) towards meeting the needs of the most food insecure and vulnerable populations. Each donor country, party to the FAC, assumes annual commitment of food assistance (i.e. the “minimum annual commitment”) in terms of value or quantity or a combination of both to be notified to the FAC Secretariat. The annual commitments of the parties who have ratified, accepted or approved the FAC are as set out below.

The food aid shipments by donors under the Food Aid Convention often exceeded their combined minimum annual commitments. For example, food aid shipments in 2011/2012, as reported by the International Grains Council (IGC), totalled 5.7 million tonnes in wheat equivalent, representing a 4% decrease from the previous year. Similarly under the new Food Assistance Convention (FAC), the donors have consistently fulfilled their annual FAC commitments. The annual commitments of FAC donors in 2014 exceeded USD2.7 billion which were fulfilled by all donors and in many cases these commitments were comfortably exceeded.

There are a number of other sources of food aid data, particularly the Food and Agriculture Organization (FAO) and the World Food Programme (WFP). Data from these sources are not directly comparable with data reported by donors under the Food Aid Conventions mainly due to differences in country and product coverage, reporting period, and the use of delivery rather than shipment data.

WFP data show that global food aid deliveries present a cyclical pattern, with a record of 17.3 million tonnes reached in 1993.32 Another peak was reached in 1999 when food aid totalled 14.6 million tonnes. In this context, the Doha Ministerial Conference approved the following recommendation made by the Committee on Agriculture:

“WTO Members which are donors of food aid shall, within the framework of their food aid policies, statutes, programmes and commitments, take appropriate measures aimed at ensuring: (i) that to the maximum extent possible their levels of food aid to developing countries are maintained during periods in which trends in world market prices of basic foodstuffs have been increasing […].”

Chart 1 shows that total food aid deliveries as monitored by WFP have been generally following a declining trend over the last ten years.34 In 2014, global food aid deliveries were 2.8 million tonnes, comparable to an almost similar amount recorded in 2013, representing, however, a decline of more than 40% from the level in 2012. In 2014, the amount of total food aid to LDCs amounted to 1.7 million tonnes, whereas the corresponding amount channelled to NFIDCs equalled 0.4 million tonnes. In cases of some recipients, a decline in food aid amounts in 2013 and 2014 may have also resulted from an improved domestic food production especially of cereals, increased commercial imports and a declining share of food aid in total imports as well as a lessening of severity in some cases of the previous food emergency situations. Annex 2 gives a detailed breakdown of food aid deliveries by recipients during the period 2005-2014 as monitored by WFP. In absolute terms, Ethiopia, Syria, Pakistan, Sudan, South Sudan, Yemen, Kenya and Bangladesh were the major recipients of food aid in 2014.

According to WFP data, NFIDCs on the WTO list except for Antigua and Barbuda, Bolivarian Republic of Venezuela, Botswana, Gabon, Grenada, Dominica, Morocco, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines and Trinidad and Tobago have been occasional or regular recipients of food aid during the period 2005-2014. In terms of the food aid quantity, declining food aid deliveries to Kenya and Pakistan have been responsible for the decrease in total food aid channelled to NFIDCs over the recent period.

LDCs continue to be the major recipients of global food aid receiving more than 60% of global food aid deliveries in 2014. Among LDCs, Ethiopia, Sudan, South Sudan, Yemen and Bangladesh were the major recipients of food aid in 2014.

WFP statistics are compiled based on the following three food aid categories:

1. Emergency food aid – defined by WFP as being destined to victims of natural or manmade disasters – is freely distributed to targeted beneficiary groups, and is usually provided on a grant basis. It is channelled multilaterally through NGOs or, sometimes, bilaterally.

2. Project food aid aims at supporting specific poverty-alleviation and disaster-prevention activities. It is usually freely distributed to targeted beneficiary groups, but may also be sold on the open market and is then referred to as “monetized” food aid. It is provided on a grant basis and is channelled multilaterally through NGOs or bilaterally.

3. Programme food aid is usually supplied as a resource transfer for balance of payments or budgetary support activities on a government-to-government basis. Unlike most of the food aid provided for project or emergency purposes, it is not targeted to specific beneficiary groups. It is sold on the open market, and provided either as a grant or as a loan.

WFP statistics compiled in Chart 2 below indicate that emergency food aid provided in the form of relief in response to man-made emergencies or natural disasters remained the predominant category in 2014 accounting for 77% of total food aid deliveries. On the other hand, programme food aid, which accounted for 14% in 2005, has declined dramatically with its share becoming negligible in 2014. The share of project food aid has generally been consistent in the range of 23%.

Food aid may be distributed directly to beneficiaries or may be partly or fully sold in the recipient country to generate funds to finance, for example, the transport of food or other activities. Programme food aid is usually sold in the market. WFP data shows that over the last ten years (2005-2014), the amount of global food aid deliveries sold in market has been generally declining. This may in turn be resulting from shrinking share of programme food aid in the global food aid deliveries that is more usually sold on the market unlike most of emergency food aid distributed directly to beneficiaries.

WFP also categorizes food aid deliveries according to the origin of the food aid commodities:

1. Local purchases are the transactions by which food aid is purchased and distributed/utilized in the recipient country.

2. Triangular purchases are the transactions by which a donor provides commodities purchased in a third country as food aid to a final recipient country.

3. Direct transfers are the transactions by which food aid is directly delivered from donor to recipient countries. Such operations do not involve either local or triangular purchases.

Over the last 10 years (i.e. 2005 to 2014), the share of direct transfers in global food aid deliveries has declined from 69% to 50%, while the respective shares of local purchases and triangular transactions increased from 14% to 29%; and from 18% to 22%.

Initiation of food aid negotiations

In 1996, the Singapore Ministerial Conference adopted the recommendation by the Committee on Agriculture that in anticipation of the expiry of the Food Aid Convention 1995 and in preparation for the re-negotiation of the Food Aid Convention, action be initiated in 1997 within the framework of the Convention, under arrangements for participation by all interested countries and by relevant organizations, to develop recommendations with a view towards establishing a level of food aid commitments, covering as wide a range of donors and eligible products as possible, which is sufficient to meet the legitimate needs of developing countries during the reform programme.

Between January 1997 and March 1999, several meetings took place within the framework of the Food Aid Convention, including meetings with least-developed and net food-importing developing countries as well as potential new food aid donors. In December 1997, the Food Aid Committee decided to open the Convention for renegotiation taking into account, amongst other things, “the food security and trade liberalization objectives under the WTO and the World Food Summit Action Plan”. In early 1998, the Food Aid Committee confirmed its intention to bring a new Food Aid Convention into effect and held a further dialogue with representatives of food aid recipients regarding the main elements of the new Convention. The negotiations were completed on 24 March 1999 and the new Convention provisionally entered into force on 1 July 1999 for an initial duration of three years. Document G/AG/GEN/35 outlines the major changes introduced in the Convention. For example, the list of eligible products which may be supplied was broadened significantly beyond cereals; new provisions were included to improve the effectiveness and the impact of food aid. When allocating food aid, FAC members undertook to give priority to the LDCs and low-income countries, many of which are on the present WTO list of NFIDCs. Other eligible food aid recipients include low middle income countries and all other countries included in the WTO list of NFIDCs at the time of negotiation of the new Convention.

At the Doha Ministerial Conference, Ministers approved the recommendation of the Committee:

“[…] that early action be taken within the framework of the Food Aid Convention 1999 (which unless extended, with or without a decision regarding its renegotiation, would expire on 30 June 2002) and of the UN World Food Programme by donors of food aid to review their food aid contributions with a view to better identifying and meeting the food aid needs of least-developed and WTO net food-importing developing countries”. (G/AG/11, Part B paragraph 3 I(a) refers)

The Food Aid Convention 1999 was to expire on 30 June 2002. Initially, the Food Aid Committee agreed to extend it year after year. In June 2004, it decided to undertake its renegotiation with the aim of bringing into effect a “more effective instrument to provide food to those identified needs when food aid is the most appropriate response”. Furthermore, in view of the relationship between the review process in the Food Aid Committee and negotiations underway in the WTO, the Food Aid Committee decided that conclusive recommendations should await the outcome of the WTO negotiations. In these circumstances, the Food Aid Convention 1999 continued to be extended on an annual basis while informal deliberations were pursued between its members. At its 103rd Session, the Food Aid Committee launched the formal renegotiation process. The new Food Assistance Convention (FAC) was adopted on 25 April 2012. It was opened for signature on 11 June 2012 and entered into force on 1 January 2013.

The FAC expands the scope of FAC donors’ food assistance commitments beyond food and seeds. Some of the principles of the FAC include a focus on food assistance effectiveness and accountability, involvement of beneficiaries in the needs assessment, and an enlarged list of “eligible products” and “eligible activities” (including the provision of cash and vouchers and nutritional interventions). It addresses both short-term emergency assistance as well as long-term rehabilitation and development objectives. Article 3 of the FAC sets out the relationship between its provisions and the existing or future WTO rules, particularly on international food aid. The Decision on export competition adopted at MC-10 at Nairobi includes specific disciplines on international food aid. Some of these food aid disciplines in the MC-10 Decision also make a reference to the FAC.

Concessionality of Food Aid

To the end stated in the chapeau of paragraph 3 of the NFIDC Decision, Ministers also agreed:

“(ii) to adopt guidelines to ensure that an increasing proportion of basic foodstuffs is provided to least-developed and net food-importing developing countries in fully grant form and/or on appropriate concessional terms in line with Article IV of the Food Aid Convention 1986 […]”. (paragraph 3(ii) of the NFIDC Decision)

Under the Food Aid Convention 1999, all food aid provided to LDCs was to be in the form of grants and to represent at least 80% of members’ contributions. Similarly, under the Food Assistance Convention (FAC), no less than 80% of a party’s committed food assistance to eligible countries and vulnerable populations41 shall be in fully grant form. Donors are to seek to exceed progressively this percentage.

At the Doha Ministerial Conference, Ministers approved the recommendation that:

“WTO Members which are donors of food aid shall, within the framework of their food aid policies, statutes, programmes and commitments, take appropriate measures aimed at ensuring: […] (ii) that all food aid to least developed countries is provided in fully grant form and, to the maximum extent possible, to WTO net food-importing developing countries as well”. (G/AG/11, Part B paragraph 3 I(b) refers)

The issue of food aid to be in fully grant form also came up frequently in the NFIDC annual monitoring discussions. Members’ Table NF:1 notifications include information on the level of concessionality of the respective food aid deliveries to LDCs and NFIDCs. Most notifying Members have notified the provision of food aid to the countries concerned in fully grant form. In the case of the United States, the proportion of food aid in fully grant form ranged between 83% to 100% during 1995/1996-2002/2003, with the remainder being provided in accordance with the relevant FAC guidelines. For reporting years 2003/2004-2007/2008, the United States indicated in its notification that: “Title I aid is provided in fully grant form or on long-term concessional terms in accordance with Food Aid Convention guidelines. Aid under Food for Education, Title II, Title III, Food for Progress and Section 416(b) Programs is provided in fully grant form.”

In the agriculture negotiations under the “export competition” pillar on the theme of international food aid, Members specifically considered the question of providing food aid exclusively in fully grant form. The Decision on export competition adopted at MC-10 at Nairobi requires Members to ensure that all international food aid is in fully-grant form.