The Evolution of US Food Aid: Major Changes and Key Issues Chris Barrett Cornell University May 12, 2011 Congressional Research Service Briefing Capitol Visitor Center, Washington, DC Food aid in support of MDG #1 United Nations Millenium Development Goal #1: Reduce by half the proportion of people (i) living on less than a dollar a day and (ii) who suffer from hunger. What role for food aid? - Save lives and fulfill human right to food - Protect assets (especially human health) - Facilitate productivity and asset growth where food availability and poor market performance are limiting. Food aid is a complement to other resources. Need to embed food aid in broader dev’t strategy, not fit development strategies to food aid policies. Background US still accounts for 50-60% of total food aid worldwide each year. US food aid policy drives global food aid system. 2009 Food Aid Flows by Donor 21% USA EU (EC + bilateral) 4% 51% Japan Canada 7% Other 17% Source: WFP Food Aid Information System Background 1954-1990: - Generous farm price supports and gov’t held stocks - Large regions outside North American cereals marketshed - Hunger widespread globally initially - Cold War: food aid flowed initially to Asia, Latin America, Europe and North Africa PL 480 was a direct response to these conditions and succeeded in meeting some of the resulting goals. Times have changed. Major changes 1. Price Supports and Gov’t Grain Stocks History: 1990-present: - Generous farm price supports and gov’t held stocks ended. Food aid now purchased rather than shipped from stocks. - Globalization of US food(CCC/FOR) market …down covers the globe now. - Gov’t stocks 95% 1987-2005 - Now procure based on IFBs, at a premium - Cold War over (and food aid not politically effective). - No price impact, yet myth persists b/c people conflate correlation with causality - Food aid for trade promotion now violates WTO agreement on agriculture (and never really worked anyway). Major changes 5. Shift From Program to Emergency Food Aid: - Until 1992, most US food aid was “program” – govt-to-govt concessional sales on credit: Title I and Section 416(b) - Now mainly to NGOs (>40%) and WFP/IEFR (>40%) for emergency response (~80% of Title II now emergency) - Now 70% of flows are to Africa, up from ~1/3 in 1990s Global Food Aid Flows U.S. Food Aid Programs, FY1980-2009 16.0 $ millions (real, base year 2000) Million MT delivered 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 1981 1983 1985 1987 1989 1991 1994 1996 1998 2000 2002 2004 2006 2008 Data source: WFP INTERFAIS Emergency Project Program 3500 3000 2500 2000 1500 1000 500 0 1980 1985 PL 480 Title I 1990 PL 480 Title II 1995 2000 2005 Other (Title III, Food for Progress, IFEP, 416b, etc.) Data sources: U.S. Dept. Of Agriculture, General Accounting Office, Bureau of Economic Analysis Major changes 7. Other Donors Reformed Their Food Aid Programs - Budget integration: in Canada, EU and other key donor countries other than the US, food aid moved within international development budgets and out of farm policy and agriculture budgets. This enables allocation based on humanitarian and development criteria. - Untying: In the EU and Canada, the untying of food aid has been, in principle, complete. Cash is commonly provided instead of commodities and recipients can source from anywhere. Example: when Denmark decoupled, replacing cheese and canned meat food aid with bulk grain, wheat flour, peas and vegetable oil, it generated 6x calories and 3x protein at lower cost, from 1990-1997. Exception: US has neither budget integration nor significant untyingdget integration nor untying. Key issues The Golden Hour, LRP and Untying of Procurement: - Golden Hour principle: rapid response essential. Delays are expensive and deadly (2004-5 Niger example) - Other than US, more than 80% of global food aid is now LRP because it is typically faster and cheaper than transoceanic shipments. - Examples: GAO: 10-country averages in sub-Saharan Africa: 21 weeks for U.S food, 7-8 weeks for LRP CFGB: Kenya, Ethiopia, & Afghanistan 11-19 weeks for Canadian food, 4-6 weeks for LRP - Farm Bill still sharply limits LRP in US food aid programs. - (Expensive) prepositioning the best feasible option now Key issues 6Monetization - - - Insufficient resources for non-emergency development programming makes it difficult to prevent new emergencies and to limit their adverse impact when they do occur. Insufficient cash resources to meet needs: distorts NGO behavior … monetization is the result. From ~10% of non-emergency Title II in the early 1990s to >60% the past several years. Monetization is a source of WTO tension (akin to an export subsidy). Monetization is inherently inefficient. Can be disruptive to host country markets, undermining efforts to build up local commercial agricultural marketing channels. Hence: - CARE’s 2005 decision to phase out monetization. - The importance of community development funds proposal Key issues 4. Cargo preference - 1954 Cargo Preference Act to support merchant marine for national security purposes … share increased 50-75% in 1985. Plus Great Lakes Set Aside added in 1996, further restricting shipping. - Impact: higher freight costs. ACP resulted in a 46% markup over competitive freight costs. - 70% of ACP vessels not militarily useful, yet these capture >90% of cargo preference premiums. - And ~40% go to foreign shipowners. - Pentagon/MARAD have an alternate program (Maritime Support Program) to maintain sealift capacity Key issues Budget Integration - Especially if US food aid programs are formally focused solely on humanitarian and development objectives, bring all programs under USAID and foreign relations/development. - Bureaucratic duplication between USDA and USAID is costly and unnecessary and invites criticism and skepticism (e.g., in WTO). - IDA and EFSA as an example of how this can work. Key issues International Food Assistance Governance - Food Aid Convention and FAO/CSSD ineffective – need to revise membership, accounting and adopt codes of conduct - FAC presently being renegotiated - FAO/CSSD could be shut down immediately with no loss Conclusion Food aid remains important as part of the “twin track” strategy found in the 2009 Rome Principles. US still leads the global food aid system. But much has changed … the next Farm Bill is dealing with a radically different food aid program than what the US had 20 years ago. Improving awareness of changed landscape will help build the coalitions necessary to tackle key remaining issues: - LRP - Monetization - Cargo preference - Budget integration - Food assistance governance Thank you for your time and interest!