Briefing Papers Number 3, June 2008 | Page 6

U.S. Official Development Assistance by Sector 2005-2006 1985-1986 Humanitarian Aid 2% Other 8% Commodity Aid and Program Assistance 55% Social Administrative Infrastructure 18% Economic Infrastructure 4% Agriculture 11% Industry and Other Production 2% Other 23% Humanitarian Aid 13% Social Administrative Infrastructure 42% Commodity Aid and Economic Program Assistance Infrastructure 5% 11% Industry and Other Production 3% Agriculture 3% Source: OECD Development Assistance Committee 2007 statistical annex. imposed on developing countries during the 1970s and 1980s as a condition of financial support restricted poor governments’ expenditures and promoted one-sided trade liberalization. These were policies driven by rich countries through the World Bank, International Monetary Fund and other international financial institutions. During this period, low global prices for cereals made it easy to argue that developing countries could neglect agriculture and buy needed food on international markets. Trade restrictions and subsidies have had two troubling effects. First, maintaining production levels well above those that would prevail in the absence of restrictions and subsidies—thus increasing global supplies of staple crops—drove world prices down and made it difficult for African farmers to compete even in their own markets. Second, rich countries restricted the markets available to African farmers in order to protect their own farmers. This unfair market environment gave poor countries good reasons not to invest much in agriculture. In 2003, the International Food Policy Research Institute estimated that protectionism and subsidies in industrialized nations cost developing countries about $23 billion annually in l ost income.32 U.S. Assistance for Agricultural Development Among donor countries, the United States has been particularly neglectful of agriculture in developing countries. U.S. foreign assistance has had a proliferation of special initiatives and earmarks, from both the administration and Congress, that have tended to squeeze out funding for agriculture.33 The FY2008 budget for agricultural investments in developing countries is illustrative. While there was a slight increase in overall funding for development assistance, funding that is not earmarked and could be used for agriculture has declined significantly. Lack of funding has forced steep cuts in U.S. support for international 6  Briefing Paper, June 2008 agricultural research centers, where vital work is being done in how agriculture can adapt to climate change and other topics crucial for food production. It’s important to note that when developing countries are given the opportunity to prioritize their needs, they have consistently asked for more agricultural support than donors have been giving in recent years. The U.S. Millennium Challenge Corporation (MCC) funds development assistance “compacts” in poor countries that are well governed and invest in their people. These compacts are based largely on the country’s own assessment of development priorities. And in fact, more than half of the funds committed to date by the MCC are for agriculture and related rural infrastructure. The low, stable commodity prices that prevailed up until last year allowed the international community to turn its attention to education, maternal and child health, water and sanitation, and global pandemics like HIV/AIDS. These are crucial areas of work for poverty reduction. But because there are limited resources available for long-term poverty-focused development assistance, the effect has been to crowd out funding for agriculture and rural infrastructure. The growing global hunger crisis—rapidly rising food prices and the inability of poor people around the world to cope with them—is largely a consequence of this underinvestment. Helping to Create the Conditions to Reduce Hunger and Poverty What role can developed countries play in addressing the global hunger crisis and reducing hunger and poverty in the long term? Food aid can and does go a long way toward meeting the immediate needs of hungry people. In 2006, interna-