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TWN Info Service on WTO and Trade Issues (May14/04)
23 May 2014
Third World Network  

Public procurement and the right to food
Published in SUNS #7806 dated 19 May 2014

Geneva, 16 May (Kanaga Raja) -- States should align their public procurement policies and schemes with their duty to progressively realise the right to adequate food, the UN Special Rapporteur on the right to food, Mr Olivier De Schutter, has recommended.

In his final publication as Special Rapporteur, De Schutter, who is being replaced by Ms Hilal Elver of Turkey, described why public procurement is important for food and nutrition security strategies and identifies five key principles that should be integrated into public procurement schemes and modalities.

According to the Special Rapporteur, food procurement schemes should: (1) source preferentially from small-scale food producers and actively empower them to access tenders; (2) guarantee living wages as well as fair and remunerative prices along the food supply chain; (3) set specific requirements for adequate food diets; (4) source locally and demand from their suppliers that they produce food according to sustainable methods; and (5) increase participation and accountability in the food system.

"The effectiveness of such public procurement policies and programmes would be maximised by fully integrating them under right to food national strategies and framework laws, and by coordinating them with other food security policies," said the rights expert.

The report, titled "The Power of Procurement: Public Purchasing in the Service of Realising the Right to Food", also addressed the potential constraints found in the World Trade Organisation (WTO)'s Government Procurement Agreement (GPA).

It underscored that countries that are signatories of the GPA are not systematically prevented from establishing public procurement schemes that contribute to the realisation of the right to adequate food, as illustrated by many countries who reformed their school feeding programmes in recent years, but the GPA does impose restrictions on schemes that result in a discrimination between suppliers on the basis of their geographic location.

De Schutter noted that the vast majority of GPA signatories are OECD (Organisation for Economic Cooperation and Development) countries. Developing countries are not bound and therefore they are free to put in place procurement schemes that further food security by supporting local or regional farmers.

According to De Schutter, countries that have not signed and/or ratified the GPA have greater discretion with respect to the public procurement schemes that they may lawfully establish, and that this discretion can and should be used to advance the right to adequate food.

"The World Trade Organisation (WTO) Committee on Government Procurement should integrate the protection and realisation of all human rights, including the right to food, in the objectives to be pursued by ‘sustainable procurement'".

De Schutter said that the integration of the five principles identified in his report "should be fully integrated in the future work of the GPA, in particular in the Work Programme on Sustainable Procurement as specified in the revision of the GPA (GPA/112, Annex 7, para 1)."

In his report, the Special Rapporteur, highlighting that the public sector is an extremely important purchaser of goods and services, said that governments spend on average 12% of their GDP on public procurement in OECD countries, and slightly less in developing countries, with varying estimates.

All over the world, public authorities award contracts for food provision and food-related services for cafeterias in civil service buildings, hospitals, prisons, schools, universities, as well as social programmes such as in-kind transfers or social restaurants.

For instance, said the report, the public catering sector in the UK represents some 2 billion pounds Sterling per year (approximately US$3 billion or 3.16 billion euros).

It pointed out that school feeding programmes exist in almost all high- and middle-income countries, as well as in 70 out of the 108 low- and middle-income countries, with support from the World Food Programme (WFP).

However, other procurement schemes hold even greater economic significance, especially for in-kind food aid programmes managed by public authorities, it said, noting that in 2010-11, federal food subsidies in India (in-kind transfers of grain for the most part) accounted for 0.9% of India's GDP, while federal and state food subsidies accounted for 2.7% of total annual expenditure incurred by Indian federal and state governments.

"In some countries, public procurement of food has rapidly expanded over recent years. Brazil, for instance, increased its budget on its National School Feeding Programme fourfold between 2003 and 2011."

The procurement of local food products is receiving more support than at any time since the mid-2000s, generally for the benefit of small-scale farmers whose ability to sell their produce at remunerative prices is otherwise limited, said De Schutter.

While governments have the option to procure food by disregarding social imperatives and sourcing indiscriminately from global markets in the search for the cheapest opportunities, the Special Rapporteur said that in doing so, they would risk exacerbating the prevailing dynamics of global food systems, whereby commodities produced by industrial operators can be imported cheaply in bulk - often creating a ‘dumping' effect for domestic small-scale producers and adding to the numbers of those who will be in need of eventual state support, including publicly procured food aid.

"But public procurement can be used instead to support small-scale food producers, who are among the most marginalised in many developing countries, to improve their access to markets. This may have powerful impacts on the reduction of rural poverty."

The strategic use of public procurement can kick-start a process of agricultural transformation in developing countries, said De Schutter, advocating, in this context, the use of social protection programmes (like school feeding) to drive a demand-assisted agricultural growth strategy.

"The improved access to markets that results from such an approach makes it easier, less costly and less risky for small-scale food producers to engage with input and output markets," he added.

He also underlined that localising (or re-localising) economic activities, including food production and consumption, is now increasingly seen as an important component of sustainable development strategies.

"The social, economic and environmental benefits of localised public procurement strategies to farmers, citizens and consumers include a reduction of ‘food miles', access to fresh and nutritious food, and allowing small-scale producers to sell their products, since large-scale producers and commodity buyers dominate the global food chains and are more competitive on larger markets."

The Special Rapporteur, however, stressed that a series of obstacles need to be overcome in order to make public procurement work for small-scale food producers.

Some frequently noted obstacles include limited access to suitable storage and post-harvest handling infrastructure, which results in increased post-harvest loss and spoilage; shortcomings in the ability of farmers' organisations to help farmers improve productivity, pool marketable volumes, improve quality, identify markets, and negotiate sales; and lack of access to markets, credit and information about market dynamics.

According to De Schutter, procurement schemes should include clear procurement modalities favouring small-scale food producers (e. g. selection or award criteria favouring certain types of producers, decentralised small-scale procurement processes, purchase quotas or exclusivity for small-scale food producers, choice of products mostly grown by small-scale farmers such as specific local types and varieties etc.)

"States should therefore pay particular regard to the plight of small-scale food producers, including smallholders, pastoralists and herders, small-scale fishers and forest dwellers who together make up a significant share of food-insecure people."

Public procurement schemes can contribute to the realisation of the right to food, providing they not only establish measures to source preferentially from small-scale food producers but also establish support measures to actively empower small-scale food producers to access tenders, said the report, noting that different formulas have been used to ensure appropriate targeting of small-scale food producers.

Amongst others, it cited Brazil's Act No. 11, 947 of 16 June 2009 which provides that a minimum of 30% of the financial resources transferred by the federal government to states and municipalities in order to implement the National School Feeding Programme (PNAE), now covering more than 49 million children, must be used to buy food sourced from family-based farms.

In 2010, public authorities indicated that 1,576 municipalities were buying products from local family-based farms.

"The quota system established by Brazil in 2009, as part of the Zero Hunger strategy, is the first example of an innovative policy and a powerful tool for supporting family-based farms and specific vulnerable groups. By ensuring that public procurement schemes support family farms, it makes a significant contribution to the reduction of rural poverty, as well as to improved diets for children," said the report.

Another example cited by De Schutter is India's Public Distribution System (PDS), which although an important component of India's national food security strategy, does not integrate modalities to source preferentially from small-scale food producers.

The PDS is the main vehicle of the procurement of subsidised food to millions of food-insecure households. It procures, stores, rations and subsidises the retailing of major staple food grains through an important network of government warehouses and food retail outlets. In 2012, more than 85 million tonnes of rice and wheat were held in stock.

"While failing to target small-scale farmers, the PDS has nonetheless made efforts to decentralise its procurement policy in a way that prepares the ground for more ambitious geographical and social targeting on the purchasing side," said De Schutter.

Public procurement schemes could have greater impacts on the incomes of depressed farming areas, and by extension on alleviating food insecurity, by sourcing agricultural products not only from breadbasket regions - such as Punjab in the case of India - but from all regions of a country, said De Schutter, adding that this represents a significant break from past practice.

The report also cited India's National Food Security Act, No. 20 of 2013, which provides that the Central Government, the State Governments and the local authorities shall advance food and nutritional security, by striving to progressively realise certain objectives, including the revitalisation of agriculture and improvements in procurement, storage and movement-related interventions in the management of food stocks.

The revitalisation of agriculture includes "ensuring livelihood security to farmers by way of remunerative prices, access to inputs, credit, irrigation, power, crop insurance, etc."; and reforms in procurement include "incentivising decentralised procurement including procurement of coarse grains" and "geographical diversification of procurement operations".

"Though the new legislation is still in the first phase of implementation, these are important and welcome organising principles that illustrate a desire to use food aid as a tool to contribute to rural development and to supporting the incomes of small-scale farmers," said the rights expert.

The Special Rapporteur's report also said that school feeding programmes, social restaurants and in-kind social support programmes may improve food accessibility for all citizens or targeted vulnerable groups.

"However, the focus of these policies on the beneficiaries of food services should not obscure the importance of sustainable food systems ensuring living wages to all workers along the supply chain, as well as fair and remunerative prices to food producers, in order to guarantee that they are also in a position to purchase adequate food," said De Schutter.

He stressed that procurement modalities targeting small-scale food producers, combined with capacity-building measures, can yield significant positive effects.

Public authorities should also ensure that independent small-scale food producers are paid fair and remunerative prices for their products, he further said, emphasising that pricing mechanisms should be clear and transparent and show how prices incorporate production costs, risks and returns.

While a variety of price models exist (e. g. spot market-based pricing, split pricing, fixed prices and flexible price model), in the view of the Special Rapporteur, the ideal pricing mechanism is one replicating the formula used in fair trade schemes.

According to the report, the producer should be guaranteed a fixed minimum price based on the need to meet sustainable production costs and to ensure a living wage for all the workers concerned (including family members, where applicable), but the prices paid by the buyer should be higher if market prices increase.

The introduction of fair trade criteria in public tenders is another example of how procurement can contribute to fairer pricing, said De Schutter, adding that over 1,100 towns in 18 countries made commitments to increase their sourcing of fair trade products under the International Fair Trade Towns Campaign.

For instance, Spain has passed a Law on Public Procurement allowing for the inclusion of fair trade criteria in public procurement, while in Italy, seven regions (Toscana, Abruzzo, Umbria, Liguria, Marche and Friuli Venezia Giulia) have adopted the practice.

"Consistent with the duty to progressively realise the right to adequate food, public procurement schemes should promote diversified diets and facilitate access to nutritious, micro-nutrient-rich fresh foods, especially for vulnerable poor consumers; preferably by integrating targets in order to decrease consumption of fats, sugars, salt and animal proteins," said the report, adding that this is especially urgent in countries with rising child obesity levels.

In India, the report noted, the Decentralised Procurement Scheme introduced in
1997-98, particularly for implementation of the National Mid-day Meal Programme (NMMP) - one of the largest school-feeding programmes in the world, providing one meal per school day to around 150 million children - included an objective to source from a wider variety of foods (such as millet, pulses, eggs, soy beans) in order to improve nutritional outcomes.

In September 2012, the inclusion of millet in the NMMP was mandated by the Agriculture Ministry in order to increase the demand for the cereal and, thereby, enhance farm incomes, while the 2013 National Food Security Act also has a provision to provide subsidised millet along with wheat and rice.

In Brazil, the National School Feeding Program, a major component of the Zero Hunger strategy benefiting 49 million children, not only targets malnourishment, in particular in the North and North East, but also looks to address obesity through the composition of school meals.

Among wealthy countries, said the report, Scotland and Italy are considered pioneers in the ‘school food revolution' that includes strong food adequacy dimensions.

It stressed that public procurement schemes should discriminate in favour of sustainably sourced food, in line with the need to make the transition towards low-carbon and low-external-input modes of production, including agroecological practices, and that these schemes should also aim at supplying locally and seasonally, so as to reduce the ecological footprint of the food produced.

In the United States, more than 1,000 schools in 38 states, engaged in the Farm-to-School movement, aim to increase the role of fresh and local products in diets, while in France, similar initiatives have been promoted within the recent French National Food Programme.

De Schutter pointed out that many public purchasing programmes also target organic farming and seek to promote agroecological practices.

For example, Brazil's Public Food Acquisition Programme (PAA) offers strong price incentives (an additional 30 per cent) to organic farmers, and the federal government aims to procure ‘agroecological food products' from 25,000 small food producers by 2015.

Italy passed a law in 1999 explicitly promoting the use of organic, typical and traditional products in public procurement. The City of Rome took a leading role in improving its school service, which serves 150,000 children. In 2010, 14% of the food served in the city's schools was certified as fair trade, 26% was local, and 67.5% was organic.

According to the report, more than 50% of OECD countries reported in a survey conducted in 2007 that they had amended their legislation in order to introduce environmental criteria into public procurement.

"Public procurement schemes should go beyond merely imposing criteria upon contracting producers and consumers in a top-down fashion. Instead, they should aim at empowering a range of actors who are commonly marginalised in market-oriented food chains, including elected representatives (decentralised local authorities such as municipal councils), school authorities, students, parents, local producers, and nutrition experts," it said.

According to De Schutter, this can be achieved by increasing participation in the design, implementation and assessment of the procurement schemes, and by ensuring that relevant actors and institutions are held accountable to citizens.

He also said that particularly in times of economic downturn and attempts to reduce public debt, the costs anticipated are often seen as a major obstacle to making public procurement schemes more consistent with right- to-food strategies - contributing to improved food security and to better nutritional outcomes, while preserving the resource base.

"However, certain costs associated with public procurement should be treated as investments, rather than merely as expenses; and once their multiplier effects on the local economy and their positive social and environmental impacts are taken into account, they may in fact be seen as favourable to, rather than a liability for, healthy public budgets."

For instance, the report found that the total incremental benefits of supplying 50 million primary school-age children in Africa with locally produced food could potentially amount to about US$1.6 billion per year in 2003 prices (1.3 billion euros); of this total, 57% would accrue to consumers and 43% to producers.

In the United Kingdom, in programmes implemented in Nottinghamshire and Plymouth, it has been estimated that additional spending for sustainable and local procurement of school food generated a return of 3 pounds Sterling for every 1 pound Sterling spent.

De Schutter acknowledged that procuring from farmers' groups can indeed be more expensive than procuring from traders - up to an additional 17-18% in 2007 for millet in Mali, according to a study commissioned by the WFP.

"But such costs may be justified taking into account the full range of benefits, including higher incomes and improved market skills for small-scale food producers, as well as against the multiplier effects on the local economy," he said.

"A commitment by States to link right to food goals to their procurement contracts could have profound transformative effects. By creating a demand for sustainable diets, governments have the power to set a positive trend and accelerate a transition towards sustainable food systems that respect the rights of vulnerable groups, including small-scale food producers," said De Schutter.

He added that if States effectively implement the principles recommended in this report, "it will mean that private actors will have to comply with norms derived from the right to food in order to be eligible for government contracts, thereby developing practices which might spill over into corporations' other activities." +

 


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