Chapter 6


subsidies or distribution of production inputs, health and education services, or food and
nutrition programmes (e.g. FFW projects, social security nets, feeding programmes, see
section 3 of Chapter 5). Meanwhile such approaches constitute essential elements of
adjustment programmes.

To the extent that financial assistance is provided not as grant but as credit, the provisos
mentioned above still hold; although external credits may be on favourable terms, they
contribute to increased indebtedness and have to be paid from future export earnings.

Sources of external finances are international financial institutions such as IMF and World
Bank, bilateral public donors, as well as private commercial banks. The credit conditions in
terms of interests and amortisation vary significantly, depending on the credit source. the
conditions on the international monetary market, the state of the economy of the recipient
country, and the purpose of credit financing. IMF and World Bank play a pivotal role, not
only as sources of external finance (e.g. through structural adjustment lending operations) but
also in their policy advisory function and as facilitators for credits from other sources.
Ideally, the conditionalities of adjustment lending should provide the basis for sustainable
growth with equity, in turn for the alleviation of chronic food insecurity. Even if fully
effective (there are certain reservations as to this point, see section 9 of Chapter 4), this can,
however, only be achieved to the extent that the causes of food insecurity have been internal
development constraints that can be tackled with internal policy changes and supported with
external assistance.

4. International Trade and Food Security

4.1 Unbalanced international trade

International trade can make substantial contributions and has crucial implications for the
food security of countries and households. Food supplies can be stabilised and increased by
food imports, the import of productive resources can help increase domestic food production
and supplies, export production generates employment and income for large segments of the
population, and the foreign exchange proceeds from exports provide for the capacity of a
country to buy on the world market what it needs. The importance of trade policies for food
security was recognized by the World Food Summit and is reflected in Commitment No. 6:
"We will strive to ensure that food, agricultural trade and overall trade policies are conducive
to fostering food security for all through a fair and market oriented world trade system" (see
Chapter 6, section 5).

In principle, according to the theory of comparative advantage that is usually cited to
demonstrate the benefits of trade, international trade should increase development
opportunities and welfare for all participants. However, some fundamental assumptions of the
theory apparently do not apply in practice. International trade is characterized by major
imbalances, and the benefits from trade are unequally distributed. Some important features
are highlighted below:

* Since the end of the Second World War the volume of international trade (exports) has
 increased from 207 Billion US-$ (1947) to 3,336 Billion US-$ (1991). The increase has


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