Why the U.S. Food Aid System Needs Reform
A little-noticed hearing before the Senate Foreign Relations Committee in mid-April had the potential to save millions of lives. The hearing concerned reforms to emergency food aid programs. Discussion focused on the proposed Food for Peace Reform Act of 2015. The act is identical to a 2014 bill that had garnered considerable Congressional support but ran into opposition by private shipping companies. This year's legislation is also bipartisan, with Senator Bob Corker (R-Tennessee), Senator Christopher Coons (D-Delaware), and Senator Jeanne Sheehan (D-New Hampshire) as cosponsors.
Importantly, the reforms included in the new bill would end the requirement that the United States be the source of almost all food aid, and that 50 percent of all food aid be carried on ships that sail under the U.S. flag. The bill would also terminate an inefficient and wasteful practice known as monetization that provides funds to NGOs for projects dedicated to increasing food security in very poor countries.
The United States will spend $1.36 billion on the Food for Peace program this year, and every year until 2018, under the terms of the 2014 Farm Bill. The program, first authorized in 1956, provides emergency food aid and funds projects to improve food security in very poor countries such as Mali and Bangladesh; war-ravaged countries such as Syria; and in countries such as Nepal that have suffered the deep, sudden impact of a major natural disaster.
The Food for Peace program takes up a tiny share of total federal government spending: less than 0.04 percent of the federal government's approximately $3.5 trillion annual budget. Nevertheless, in principle and in practice, every dollar allocated to emergency food aid should be used as effectively and efficiently as possible to ensure that the program helps as many people as possible. Currently, this is simply not the case.
A Straightforward Case for Reform
Most estimates indicate that the reforms included in the proposed Food for Peace Reform Act would enable the current program, using the same amount of money, to provide emergency relief annually to at least 4 million more children and adults than it currently reaches - and perhaps as many as an additional 10 million to 12 million people in dire need of help. This would be accomplished through reforms that would allow the United States Agency for International Development (USAID) to use transportation, grain, and other food commodity markets much more efficiently.
Mandating that all food aid be produced in the United States, and further requiring that the aid be carried on American ships, increases the cost of sending 1 ton of food destined for emergency relief by about 65 percent. The difference amounts to more than $400 million a year - not a stellar illustration of how to use markets efficiently. One important provision of the Food for Peace Reform Act would be to permit USAID to purchase food from regional and local markets much closer to the location of the disaster and the people in need of help.
The savings in both purchasing and transportation costs would be substantial. Forcing almost all food aid to come from the United States increases the time it takes the aid to reach the disaster area by almost seven weeks, with very serious consequences for morbidity and long-term health, especially for children.
Monetization is the practice of shipping food aid purchased in the United States to a developing country, where it is sold commercially in local markets by a U.S. Non-Governmental Organization. The money obtained from those sales is then used to fund the NGO's food aid projects, in that country or in a nearby country. The typical NGO ends up with less than $70 for every $100 spent on buying the food in the United States, shipping it to the targeted country, and marketing it.
The process is extremely wasteful. Indeed, some NGOs, such as CARE and Bread for the World, have refused to use the program. These organizations maintain that in the face of so many needs, such waste is appallingly unethical. Fifteen percent of the current funding for Food for Peace programs (around $260 million) currently goes to monetization. Ending the monetization practice would save about $100 million a year - funds that could be used to provide substantially more resources for food security programs.
The practice of requiring over half of all U.S. food aid to be shipped in U.S.-flagged, privately owned ships under what is called food aid cargo preference should also be ended. This would enable USAID to use markets efficiently when purchasing food aid. By itself, the requirement that at least fifty percent of all U.S. food aid on an annual basis be carried by U.S.-flagged ships - even though 40 percent of these ships are effectively owned by foreign multinational corporations - has been conservatively estimated to increase the cost of shipping food aid by about $150 million a year.
The primary beneficiaries of those indirect subsidies are mostly privately owned shipping companies. These companies have not been reluctant to make campaign contributions to Congressional members whose districts include the ports used by their ships. In other words, the food aid cargo preference program appears simply to be another example of the corporate welfare that derives from crony capitalism.
Advocates for food aid cargo preference claim the program helps ensure that the U.S. mercantile fleet can adequately support sea lift capacity for the military in times of war. Several General Accountability Office reports, as well as independent academic studies by researchers at Cornell and George Mason Universities, have questioned the validity of this claim on several grounds.
First, a substantial majority of the ships used to carry food aid over the past decade have not met Department of Defense criteria for vessels that could viably be used in military sea lift operations.
Second, there are no facts to support the claim that the use of the U.S. mercantile fleet to transport food aid creates a lot of economic activity in the United States, spurring the creation of thousands of new jobs. Independent estimates indicate that no more than 650 jobs for U.S. mercantile sailors and port workers are created by the approximate $150 million being paid to the shipping companies. That amounts to taxpayers paying almost $250,000 per job. Certainly, many more jobs would be created if these monies were spent elsewhere in the U.S. economy.
More important, if the monies were allocated to emergency food aid - to the Food for Peace program - they would save millions of additional lives. American food aid is a genuinely humanitarian effort. It generates a surprisingly extensive amount of goodwill for the United States among aid recipients and government officials around the world, thus contributing to a more secure world. No wonder, then, that a bipartisan group in the Senate Foreign Relations Committee is seeking to ensure that Food for Peace Program funds are used in the most efficient way to help millions of people whose lives have been devastated by natural and man-made disasters.