Ideas to Action:

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Is Food Aid the Answer? Q&A with Arvind Subramanian

May 5, 2008

Rice farmersPresident Bush asked Congress last week to provide $770 million in emergency food aid to help alleviate the food price crisis that is destabilizing parts of the developing world and threatening to reverse years of progress in global poverty reduction. Arvind Subramanian, a CGD senior fellow with a joint appointment at the Peterson Institute for International Economics, discusses the president's surprise announcement in a Q&A that highlights the complex policy relationships between food, trade, and energy.

Q: What's your view of President Bush's food aid announcement?

A: A very good first step, both for recognizing the severity and urgency of the problem and for the assistance offered. But two key issues leave room for doubt and criticism. The doubt concerns timing. President Bush’s proposal would make this new aid available next year, although he has called for Congress to provide $350 million in supplemental funds for this year as well. Congress needs to approve the proposal so that the assistance can be provided sooner; otherwise, it might come too late to provide real help. The criticism: very little of the aid can be used to purchase the required food locally while the rest will have to be purchased and shipped from suppliers in the United States. As my colleague Kim Elliott pointed out in a recent blog post (see How NOT to Fix the Global Food Crisis), this policy results in roughly half of the already-inadequate U.S. food aid budget going toward distribution and transportation rather than feeding hungry people in poor countries. That seems like an unnecessary waste in the face of such suffering.

Q: What additional short-term steps would you recommend?

Rice farmers

A: Besides Congress quickly approving the president’s request and raising the ceiling on the amount of food that can be purchased abroad, a third useful step has been recommended by my CGD colleagues Peter Timmer and Vij Ramachandran (see President Bush Can and Should Do More to Address the Food Crisis: Let Japan Sell Its Rice Reserves). They have rightly called for the U.S. to drop its objections to Japan selling a large stockpile of rice that Japan stores under commitments negotiated with the United States and other trading partners under the World Trade Organization (WTO). The U.S. could relieve Japan of this obligation because a large part of this stockpile is comprised of U.S. rice that was exported to Japan. If these stocks are released, rice prices could come down substantially.

Q: What about the longer term?

A: Starting now and over the next couple of years, the U.S. and other countries need to work together to ensure that world trade in agriculture is supportive of agriculture, as Nancy Birdsall and I argued in a recent Wall Street Journal op-ed, Food and Free Trade. That includes getting rid of inefficient biofuel subsidies; ensuring that countries don’t impose export restrictions (as several have done in the recent episode) since these aggravate food shortages; and injecting some rationality into the genetically modified organisms (GMO) debate, where the EU in particular has taken an extreme position that could be impeding the spread of agricultural productivity, especially in Africa.

In the long run, the international community needs to devote much more energy to figuring out how to spark a Green Revolution in Africa—the part of the world that is most vulnerable to food price increases.

Q: How serious a problem, in your view, are the ethanol subsidies in the U.S.?

A: Very serious. According to the World Bank, a substantial share of the rise in maize prices over the last few years is due to U.S. ethanol production. For example, between 2004 and 2007, when prices rose sharply, almost all the increase in maize production in the world—about 50 million tons—went into U.S. biofuel production. The fuel versus food conflict is suggested by the following statistic: the grain required to fill the tank of a sports utility vehicle with ethanol (240 kilograms of maize for 100 liters of ethanol) could feed one person for a year. So, if all the U.S. biofuel production had gone into feeding mouths rather than Hummers, you are talking about a lot less hungry people. Africa expert Paul Collier calls the U.S. ethanol mandate and subsidies program “grotesquely inefficient” in today’s Financial Times.