Debate on aid policy should be a priority

WORLD VIEW:DRAMATIC IMAGES from the current food crisis bring home how steep price rises over the last year have affected the world's poorest people.

They include a smouldering slum in Haiti after food riots there, Thai farmers protecting rice farms from looters, winding queues outside Philippine food stores and soldiers guarding grain supplies in Africa. World Bank president Robert Zoellick says that the near doubling of food prices over the past three years could push 100 million people deeper into poverty and the same organisation warns that 33 governments are at risk of political instability as a result.

Zoellick insists that now is the time to complete the Doha world trade round. "If ever there is a time to cut distorting agricultural subsidies and open markets for food imports, it must be now. If not now, when?"

His analysis is shared by EU trade commissioner Peter Mandelson, but decidedly not by Irish farming organisations or the Irish Government. Is it too simplistic to think the food price problem could be so resolved? What are the implications of this timing for Ireland's agriculture, trade and development aid policies, often more in tension than in harmony?

Responding to Zoellick, the Harvard Kennedy School economist Dani Rodrik raised the following issue in his informative policy weblog on April 4th: "Wouldn't the removal of these distorting policies raise world prices in agriculture even further? And in fact aren't these price effects the main channel through which agricultural trade liberalisation in the North is supposed to benefit the South?" He quoted a 2006 World Bank study on the effects of trade liberalisation which showed it would increase, not decrease, world food prices, so that coarse grains, wheat and rice will rise between 4 and 7 per cent if there is a successful trade round with removal of all restrictions.

He put this to Zoellick, who insisted that import liberalisation in developing countries would work the other way, and compensate. Rodrik disagrees and uses the exchange to illustrate the complexity of this issue, compared to the ideological positions of free trade advocates.

Many other factors feed into the food price shock, among them biofuel crop diversion; climate change effects of desertification; flooding and drought; demand for new foods among huge Chinese and Indian middle classes; world population pressure; market distorting export restrictions; hoarding, profiteering and speculation by hedge funds.

It will take emergency planning and aid to overcome the initial shock, before longer term economic adjustments are made. But neither aid nor laissez faire policies are sufficient. Among the necessary changes is a revaluing of agriculture's role in developing states, as is argued this week in the report by agricultural economists meeting in Alexandria. That raises interesting issues for Irish policy.

Paul Walsh, professor of international development studies in UCD, points out that whereas Ireland's development aid budget directed towards Africa is growing strongly - in line with the Government's commitment to bringing ODA to 0.7 per cent of gross national income by 2012 - Irish trade with that continent is very low.

This paradox opens up the question of what development aid is intended to do. Should it be planned as an indefinite transfer of resources from a richer Ireland to poorer states, concentrating on human capital projects in health and education especially - and delivered largely by NGOs and aid agencies? Or could it trigger self-sustaining growth based on agricultural investment, innovation and infrastructure, enabled through better governance by civil servants and ministries - drawing in Irish agribusiness firms, research organisations, government departments and universities as well as the NGOs?

Arguably, the latter approach has a greater potential to deliver real development. This would not necessarily displace the more established forms of aid, but supplement them so as to engage Ireland's own expertise more effectively in what is set to become a substantial €1.5 billion annual budget in five years' time - just before the Common Agricultural Policy is phased out. It will be easier to justify and sustain that level of expenditure if it has a more concrete impact on the domestic economy.

That is not an argument for tying aid to trade, but for linking it more coherently to other policies. It should be debated more openly. Walsh's predecessor, Helen O'Neill, makes a similar case for shifting from direct poverty reduction to a direct role in promoting economic development. "For example, some of the increased aid resources might be used to help strengthen commercial processing and trading activities in Ireland's programme countries" - (Ethiopia, Lesotho, Mozambique, Tanzania, Timor Leste, Uganda, Zambia and Vietnam). That could include backward linkages from industry to agriculture, promoting commercial production of livestock, food crops, fish or trees and forward linkages between these primary commodities and processing industries for food, feedstuffs and construction.

The major question facing many of the states most directly affected by the food price increases is whether they can be encouraged to make such a shift between urban and rural, and industrial and agricultural development. They need aid-assisted rural development policies, which will increase their agricultural production (and help urban poor return to rural areas they have recently left) and some policies to reduce food prices in urban areas (by creating national food stocks). These contrasting priorities are worth more debate, as the Doha deadline looms and food prices continue to rise.