Embassy, September 28th, 2005

By Sarah McGregor

New, 'Moral' Food Aid Policy Takes Effect

New strategy aimed more at the world's poor and less at Canadian
farmers, gives Canada the moral high ground at upcoming WTO summit In a
new policy praised by NGOs and agricultural groups, much of Canada's
food aid budget will now benefit the starving people of the Third World
before it is used to enhance Canadian agribusinesses. Developing
countries will source half of Canada's food aid budget in a strategy
the International Cooperation Minister says will nourish hungry people
abroad more quickly and pressure other nations to follow suit.

Non-governmental organizations had been campaigning tirelessly to
change the long-standing federal policy that withheld 90 per cent of
the food aid budget for Canadian producers. Only 10 per cent could be
purchased overseas. The new policy allows for a 50-50 split of Candian
food aid.

Last week, those NGOs applauded the development agency for the more
flexible quota, saying it will cut transportation costs, boost
agriculture sales in poor nations, and get food into empty stomachs
rapidly.

The policy takes effect immediately, and it has already been used by at
least one organization. The Canadian Foodgrains Bank, anticipating the
new rules, decided this summer to purchase $1.25 million worth of maize
from South Africa's bumper crop to address the drought-induced food
crises in Zambia and Malawi. "We are pleased the government responded
to our requests to make the necessary changes," says Jim Cornelius,
Executive Director of the Winnipeg-based organization.

Aileen Carroll, the minister in charge of the Canadian International
Development Agency calls the new rule a "victory" and an important
policy change. "I think it's taking us in a direction that we have to
go"

The minister says her agency had been seriously exploring the
possibility of loosening restrictions since she took office about
21-months ago. But what clinched the deal was a nod from Canada's
powerful agriculture sector that it didn't oppose the loss in business.
The country's total food aid programs amounts this year to about $130
million, however it only accounts for about 0.3 per cent of total
agriculture sales.

"The Canadian Federation of Agriculture adopted a resolution [this]
summer that we would support [the policy] because it makes the food aid
dollar better and still provides an outlet for some surplus," says
Marvin Shauf, vice-president of the CFA, which represents 200,000
Canadian farmers. "It also sets an example for the rest of the world to
use food aid where food aid is needed, not as a marketing tool." With
that, Ms. Carroll won the support of Canada's Agriculture Minister,
Andy Mitchell.

But International Trade also had concerns about retooling important
policies during the ongoing Doha round of the World Trade Organization.

(Interestingly, last week's announcement coincided with a debate that
exploded at the WTO over whether the U.S. food aid program, which gives
donations in the form of food rather than cash, is a domestic subsidy.
Also last week, the U.S. Senate dismissed a White House bill to allow
more food aid to be bought abroad, according to the New York Times.)

In Ottawa, Conservative International Development Critic Helena Guergis
says she fully supports untying aid. However, she questions why Canada
would eliminate a possible ace card in the negotiations leading to
December's WTO Ministerial Summit in Hong Kong. "What else are they
bringing to the table then?" she asks.

Ms. Carroll says, quite the opposite, it will put Canada on the moral
high ground and bolster it as a country that plays by the rules. "It
reinforces Canada's position that we don't subsidize... that we don't
have trade-distorting policies," she says.

Mark Fried, communications and advocacy coordinator of Oxfam Canada,
agrees. "I don't see it as much of a bargaining chip," he says. "The
rules are not about tied aid, but the concern is rather the use of food
aid in order to undercut exporters, which is a very different problem."

He adds: "I think (the Canadian WTO delegation) can get more mileage
out of doing the right thing and showing the U.S. that it can be done
politically."

And so, International Trade Minister Jim Peterson was satisfied.
"Canada is showing that we're ready to be leaders in food aid reform,"
he says, in an email statement to Embassy. "Canada's decision to untie
food aid is about acting and not just talking."

The policy change is also thought to have other positive spin-offs. A
list of countries eligible to source the food aid includes least
developed, low-income and lower-income countries. It purposefully
bypasses nations known to provide trade-distorting domestic assistance.
That measure will also act as an incentive to farmers in the developing
world to reap bigger harvests that could be bought with the Canadian
dime, says Stu Clark, a policy analyst with the Foodgrains Bank.

It was virtually impossible to find any negative reaction to the news,
and Mr. Fried adds that the 50 per cent threshold is fair because
purchasing food in Canada sometimes makes sense.

Trevor Rowe, spokesperson for the North American arm of the World Food
Program, says Canada is a significant contributor to the UN agency and
the country's latest move will help alleviate food shortages in
southern Africa. "It means we will be able to respond faster. It plays
a critical role in ensuring that the crisis doesn't get out of hand,"
he says.

The Zambian Charg=E9 d'Affaires in Ottawa, Lubasi Nyambe, who just
arrived last month to open a new embassy, says he supports the policy
change because it will encourage the continent to spread foodstuffs
from areas of high productivity to low. "We will be able to source
within the country and that is the most important thing," he says "It
will help in the redistribution of food because there are some areas of
surplus and some areas of deficit."

Ms. Carroll says to prepare for more positive changes as the agency
rolls out its promises in the International Policy Statement published
in April. "It shows that we are determined to implement the IPS," she
says.