Dr Annamaria La Chimia School of Law University

Dr Annamaria La Chimia School of Law, University of Nottingham Tied aid and tied food aid within the framework of international law

© Dr Annamaria La Chimia, Today we will look at: Aid in the context of international cooperation What is tied aid? Effects of tied aid Data Rationales International steps to untie aid Legal perspectives: International trade rules: WTO and FAO Regional trade rules: the European Union

© Dr Annamaria La Chimia The challenge of the century: development for all!!! In Monterrey Donors committed to: 1) Increase the level of aid granted to poor countries and, above all 2) To enhance the effectiveness of aid

© Dr Annamaria La Chimia What is tied aid? n n Aid provided on condition that goods and services for the aid financed projects are purchased from the donor country only. The recipient country MUST ACCEPT the tied aid condition if it wants the aid

© Dr Annamaria La Chimia Tied aid is n One of the most discussed cases of policy incoherence in donors’ development aid projects n “if we are serious about effectiveness we must call tied aid what it is- designed more for domestic constituencies at home than developing countries, and end it” Mr Wolfensohn, World Bank President

© Dr Annamaria La Chimia n n Effects of tied aid Increases prices of between 15 -30% Increases administrative costs Distorts the nature of the aid

© Dr Annamaria La Chimia DATA Donors still tie a considerable percentage of their aid –although recent data show donors are untying aid The economic crises has brought tied aid back! and change the definition of aid?

© Dr Annamaria La Chimia Critique of current data system Uncertain what donors include in their data Often unilaterally change description Is there the need to strengthen monitoring

© Dr Annamaria La Chimia, n n Tied food aid According to the DAC food aid continues to be overwhelmingly tied –up to 90% for some donors

© Dr Annamaria La Chimia n n n Effects of tied food aid costs to the donor of providing tied food aid instead of financing commercial imports to be at least 30%. the actual cost of tied direct food aid transfers is, approximately 50% more than local food purchases and 33% more costly than procurement of food in third countries.

© Dr Annamaria La Chimia, School of Law, University of Nottingham RATIONALES FOR TYING n POLITICAL n ECONOMIC n Prisoner’ s dilemma

© Dr Annamaria La Chimia International Steps towards untying aid n n DAC Recommendation on untying aid to least developed countries (entered into force on January 2002) European Commission Communication Untying: Enhancing the effectiveness of aid 18. 11. 2002 COM(2002) 639 final n Food Assistance Convention

© Dr Annamaria La Chimia Legal question: How far, if at all, is the practice of tying aid contrary to international and regional free trade rules? • The WTO Agreements • The EC’s internal regime

© Annamaria La Chimia, School of Law, University of Nottingham Tied aid does not violate the GATT since it relates to Government Procurement n Art. III. 8 excludes government procurement from the NT obligation n The GP exemptions applies, arguably, also to MFN

© Annamaria La Chimia, Government Procurement Agreement (GPA) Tied aid does not violate the GPA because of an exception for procurement funded by international assistance, including development aid, and procurement funded by grants, loans and other assistance. (Art. II(3)(e)(i) and (iii) Increase of negotiation power for developing countries if exception were abolished A more ‘development oriented’ WTO

© Annamaria La Chimia Tied food aid – legal perspective ART 10 of the WTO Ao. A Art. 9 of the FAC/Art 3 of the 2012 Food assistance Convention

© Annamaria La Chimia Tied aid and regional trade agreements The Single Market and tied aid TIED AID VIOLATES THE TREATY on the Functioning of the EU setting up of the tied condition: ECJ in Open Skies Case C-476/98 esp. para. 154 implementation of the tied condition by MS Art. 34 TFEU applies to public procurement Du Pont de Nemours Case C-31/88