THE PUSHPIN PUNDIT

 

 

The International Food Stamp

(posted March 28, 2006)

 

 

       Back in the 1980’s, the late economist Willis Peterson proposed an international food stamp program.  Peterson hoped that such a program could replace rich-country farm subsidies and in-kind food aid.  For its time, the proposal was quixotic:  farm subsidies were firmly entrenched in American politics and in the politics of other rich countries.  Now, however, that situation is changing, and the idea of an international food stamp program deserves another look.

       The large subsidies paid by rich countries to their farmers have come under severe pressure in negotiations at the World Trade Organization and in WTO legal proceedings.  If WTO negotiations for a new (“Doha Round”) agriculture agreement are successful, rich-country agricultural subsidies will be limited.  A new agriculture agreement may also impose some limitation on U.S. food aid programs that ship surplus food from American farms to developing countries.  American-style food aid is essential in dealing with humanitarian emergencies, but it is widely seen as an inappropriate instrument for the relief of chronic hunger, as it displaces local producers.

       While rich countries have in principle committed themselves to reduce farm subsidies, it will be difficult for them to face down politically powerful farm interests that insist on the continuation of subsidies.  Moreover, food-importing developing countries are concerned about coping with the rise in food prices that would follow the reduction of rich-country farm subsidies.  If price rises due to subsidy reductions are combined with the withdrawal of American-style food aid, a new WTO agricultural agreement could cause famines in the poorest countries.

        An international food stamp program can help to address these problems.  By increasing effective demand for food worldwide, a food stamp program would benefit many rich-country producers, partially compensating them for the loss of subsidies.  In this way the program might facilitate subsidy reduction.  The program would of course be welcomed by producers in developing countries; unlike food aid provided in kind, the stamps could be used to purchase locally-produced food.  Best of all, the plan would combat world hunger by increasing the purchasing power of consumers in the poorest countries.

       In light of continuing worldwide pressure against farm subsidies, rich-country governments might support a well-funded food stamp program as the path of least resistance to aid their farm interests.  American farmers have long supported the U.S. food stamp program; a well-constructed international program might draw similar support from rich-country farmers. 

       To maintain political support for the program, great care must be taken in determining the formula according to which rich nations are expected to contribute. At first blush, the obvious way to fund the program is for rich countries to divert to food stamps the funds that they previously used for farm subsidies .  But if EU producers benefit far less than American producers from each dollar put into food stamps, can the EU be expected to convert subsidies to stamps at the same rate as America?  And if Australian producers benefit greatly from the program, shouldn't Australia make a substantial contribution, even though it does not subsidize its farm producers to the same extent as others? 

       Probably a major part of the contribution formula should be: From rich countries according to the volume of their farm exports to developing countries that receive stamps under the program.  The contribution of a rich country to the program would thus depend on the benefits its producers receive from the program.  But while the contributions of a rich country should depend on the amount of food it exports to developing countries, the stamps that people in a developing country receive must not depend on the amount of food the developing country imports from rich countries.  A developing country whose consumers use the stamps mostly for local products should receive the same value of stamps as an otherwise-identical developing country whose consumers use the stamps mostly for imported food. 

       The current controversy over farm subsidies presents an opportunity to combat world hunger.  An international food stamp program could harness the political power of rich-country farmers for the benefit of the world’s poor.  

 

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