U.S. Policy on International Food Aid Kate Kingery PA 8001: Transforming Public Policy Professors Crosby and Bryson February 25, 2008 U.S. Policy on International Food Aid The United States is the largest contributor to international food aid, providing nearly half of the world’s supply of food assistance for humanitarian and development purposes. The U.S. Government Accountability Office (GAO) (2007) estimates that Congress has approved an average of $2 billion per year since 2002 for food aid programs that have provided an average of 4 million metric tons of food commodities annually. Yet to the U.S. food aid system is considered highly inefficient and ineffective. According to the GAO (2007), rising costs for business transactions and transportation have resulted in a 52 percent decline in the average tonnage of food provided around the world between 2001 and 2006. These costs make up an estimated 65 percent of total emergency food aid. There are many factors that contribute to the inefficiency and ineffectiveness of U.S. international food aid including lack of clear intent and multiple goals attached to food aid, restriction of food aid donations to commodities and the related logistical challenges, monetization of food commodities, and strong financial incentives among multiple players to maintain the current system. Public Law 480 The U.S. first began providing food assistance to other countries in 1954 when President Eisenhower signed P.L. 480, the Agricultural Trade Development Assistance Act (Barrett & Maxwell, 2005). According to the U.S. Agency for International Development (USAID) (2008), the original intent of the act was to expand export channels for U.S. agricultural products. President Kennedy later renamed P.L. 480 the “Food for Peace” program (USAID, 2008) to reflect his rhetoric of promoting good relations around the world. The 1990 Farm Bill further refined the purpose of food assistance to reduce global food insecurity (Barrett & Maxell, 2005). Despite food aid helping hundreds of millions of people over the past 50 years, Barrett & Maxwell (2005) argue that international aid continues to be driven by donor country interests, and in the U.S. specifically, to support agricultural products, trade and foreign policy. The system of U.S. food aid allocation and distribution is one of the most complex among donor governments. Food aid is funded under four different authorities and managed by six programs under USAID and the U.S. Department of Agriculture (USDA) covering a range of objectives including humanitarian, economic, foreign policy, market development and international trade goals (GAO, 2007). The largest international food aid program is under Title II of P.L. 480, which is managed by USAID. Title II has provided an estimated 74 percent of the total in-kind distribution over the past four years, mostly for emergency assistance, according to the GAO (2007). In FY2006, Title II funding of $1.7 billion for emergency and development-related projects (GAO, 2007). Commodities and Cash Donations P.L. 480 limits U.S. food assistance to in-kind donation of agricultural commodities to other governments, multi-lateral agencies and private voluntary organizations (PVOs). Cash donations are not permitted. However, commodity distribution is slow, costly and inefficient. The GAO (2007) identified a number of logistical barriers that contributed to the inefficiency and ineffectiveness of U.S. food aid, primarily related to timeliness and quality of food reaching recipients. The U.S. maintains -2- stockpiles in different parts of the country and the world, and by law is required to transport all food aid on U.S. flag ships, which is usually more costly. The Cargo Preference Act, also enacted in 1954, requires that a minimum amount of food aid be shipped on registered U.S. carriers. In the 1985 Farm Bill, this minimum reached 75 percent of all food aid shipments with a subsidy estimated at more than $6,500 per day per ship (Barrett & Maxwell, 2005). The U.S. is the only donor country that continues to provide in-kind food aid despite considerable debate over the potential benefits of cash assistance, such as more timely delivery of aid in emergencies, appropriate commodity distribution and potential positive effects on local markets and economic development. According to the International Food & Agriculture Trade Policy Council (2007) most donor countries have shifted the majority of their food aid from commodities to cash. The European Union was the first major donor to provide cash food aid and many other countries have followed. There is general agreement among the many players in the food aid arena that some form of cash assistance is warranted, whether as a pilot program or a regular set aside under Title II. The Bush Administration proposed allowing up to 25 percent of Title II funds to be used for emergency cash purchases of food aid. However, this provision was not adopted by the House or Senate in the 2007 Farm Bill. The agricultural sector exerts considerable influence in Congress and many political leaders believe the agricultural lobby will not politically support a move to cash donations. -3- Monetization of Food Aid Congress began allowing the “monetization” of food aid in 1990 as a way to help cover costs of storage, transportation and distribution of food aid in recipient countries. By 2001, monetization of non-emergency Title II aid had reached an all-time high at 70 percent of the food donated to PVOs for non-emergency purposes (Barrett & Maxwell, 2005). Agricultural products may be sold in-country after they have been shipped from a storage site in the U.S. or other parts of the world. This is a highly inefficient practice and the local sale price of the commodity rarely meets the actual storage, transport and marketing costs. However, these organizations have come to rely on the monetization of food aid to supplement budgets for other development activities and to have the flexibility to provide more appropriate resources within a given country. The Alliance for Food Aid, a collaboration of fifteen PVOs that are involved with food and development assistance, promoted a change in the 2007 Farm Bill that would allow for a pilot program for regional emergency food purchases but continued to support monetization of food commodities because so many PVOs rely on this practice for financial support (ITAPC, 2007). Changing the system of monetization is much more contentious than allowing a portion of Title II funds to be used for cash donations to purchase food in local or regional markets. Iron Triangle A compounding factor in the inefficiency and ineffectiveness of the food aid system is the primary stakeholders themselves. The major beneficiaries in the current U.S. food aid programs are agricultural suppliers, maritime shippers and PVOs (Barrett & -4- Maxwell, 2005; ITAPC, 2007). These three industries are considered the “iron triangle” of the food aid arena because of the strong hold they each have in protecting their interests relative to food aid allocations and distribution. Within the agricultural industry—from farmers to commodity brokers to food processors—international food aid has been a lucrative channel for dumping surplus commodities. Ocean transport providers have benefited at a tremendous rate based on the requirement that three-quarters of all food aid be transported on U.S. commercial ships. Finally, PVOs have a vested interest in maintaining the practice of monetization as a mechanism for raising program revenue. Considering no changes to food aid system were made in the 2007 Farm Bill, there does not appear to be strong political will among members of Congress to break tradition. There are stakeholders who do support changes in U.S. food aid programs. In 2007 CARE USA publicly announced it would no longer accept U.S. food aid for purposes of monetization (CARE, 2006). This was a significant stance that will have a financial impact on the organization. Other PVOs have expressed support but have yet to publicly join CARE in changing their policies. Many players in the international community are interested in seeing a major change in U.S. policy. The U.N.’s World Food Program (WFP) and Food and Agricultural Organization (FAO) are global representatives for international food aid and have a strong interest in U.S. resource allocations and the policy agenda set by the largest donor country. Most importantly, however, are the recipient countries and individuals in need of food assistance. Perhaps no other stakeholders are more affected by dysfunctions in the food aid system. -5- References Barrett, C. & Maxwell, D. (2005). Food Aid After Fifty Years: Recasting its Role. London; New York: Routeldge. CARE USA. (2006). White Paper on Food Aid Policy. Atlanta: CARE USA. Government Accountability Office. (2007). Foreign Assistance: Multiple Challenges Hinder the Efficiency and Effectiveness of U.S. Food Aid. Statement of Thomas Melito, Director, International Affairs and Trade. Testimony Before the Subcommittee on Agriculture, Rural Development, Food and Drug Administration, and related Agencies, Committee on Appropriations, House of Representatives. Washington, DC: Government Accountability Office. International Trade & Agricultural Policy Council. (2007). U.S. Food Aid Policy and the Farm Bill. Farm Bill Series No. 4. Washington, DC: International Food & Agricultural Trade Policy Council. United States Agency for International Development. (2008). The History of America’s Food Aid. Retrieved February 22, 2008 from http://www.usaid.gov/our_work/humanitarian_assistance/ffp/50th/history.html. -6-