Volume XVIII No. 16:
In his fiscal year 2014 budget request, the President called for reforms to the international food aid system. This proposal included transferring much of the program from the Department of Agriculture to the U.S. Agency for International Development, and even cutting the top line level of funding yielding savings from a more efficient program. Unsurprisingly, the boosters of the existing system are outraged. What is surprising is who those boosters are. It’s not the non-governmental organizations devoted to combating world hunger. Many of them support the reform. No, it’s the agribusiness organizations and the shipping industry that are crying foul. And that helps explain the problems with system..
For the last several decades U.S. international food aid basically consisted of the government purchasing commodities and having them shipped overseas, predominantly on American ships at an annual cost of roughly $1.5 billion. There is even a system of “monetization,” where aid groups are allowed to receive the food, sell it on the market, and use the proceeds for other development projects in the countries that are being assisted. The existing system was touted by some as being good for farmers, good for shippers, and even good for the aid groups. But it is horribly inefficient.
Uncle Sam is spending cash acquiring commodities, shipping those commodities around the globe, and then converting them back into cash to fund development projects. In 2011, the Government Accountability Office (GAO) estimated that over a three year period the $722 million provided for this monetization scheme resulted in just $503 million going to development. That’s more than $200 million wasted, a loss of 30 percent. Furthermore, in some cases this dumping of agricultural commodities in foreign markets depresses local food prices, which can in turn discourage local food production – hardly a development goal.
In some cases time is of the essence, like after the tsunami struck Indonesia in 2004. But instead of sending cash to buy food aid locally and quickly (agriculture areas miles inland were unaffected by the disaster) the U.S. loaded rice and other commodities on the proverbial slow boat to China (well, Indonesia).
Under some of the food aid programs, millions of dollars have been directed to large companies like Land O’Lakes, and big agricultural interests like the American Soybean Association. Whether you are pro or con regarding food aid, it’s hardly an efficient way to provide aid.
The Administration’s plan isn’t radical. According to USDA Secretary Vilsack, more than half of food aid would still come from American producers. And the proposal directs $25 million to bolster the U.S. shipping fleet (which becomes very important for moving equipment in times of war). The proposal represents a common sense step in the right direction.
Last year farm profits were at near record levels, only surpassed by the year before. So agribusiness doesn’t need the international food aid subsidy. With cheaper competition from foreign shipbuilding and shipping lines, the problems facing the U.S. shipping industry are more structural and fundamental than any food aid program can patch over. If we as a nation decide that for humanitarian, diplomatic, and strategic reasons we will provide food aid, then we should do it in a cost effective manner that gets the most bang for our buck, and that means not lining the pockets of U.S. agribusiness and shipping interests along the way.