US Lawmakers Debate Reform to Global Food Aid Schemes

23 April 2015

The long-running debate over potential reforms to the US’ global food aid programmes has resurfaced in Washington political circles, with a Senate panel debating last week potential legislation on the subject.

The bill under scrutiny was introduced in February by Senator Bob Corker, a Republican from the US state of Tennessee, and Senator Chris Coons, a Democrat from the US state of Delaware.

The legislation is still in the committee phase, with the Senate Foreign Relations Committee – chaired by Corker – holding a hearing on 15 April to present arguments for reforming current US laws on food aid and review the management of the country’s global food assistance schemes.

Known as the Food for Peace Reform Act of 2015, the legislation is identical to a previous bill that the two senators introduced last year, which did not make it out of committee mainly due to opposition from the maritime industry and some other interest groups, analysts say.

The legislation, if passed, would free up as much as US$440 million per year to feed up to 12 million more people faster and at a lower cost, Corker argued in a press release.

“Our current system for acquiring and distributing food aid is inefficient and often hurts the very communities it is trying to help,” Corker said, highlighting the importance of allocating US resources in the most effective way available.

In order to become law, the proposed reforms must receive approval in both the US Senate and House of Representatives and be signed off on by the President.

“There is a modest chance that the bill with further food aid reforms will be adopted in the coming months,” Stephanie Mercier, ‎Senior Policy and Advocacy Adviser at the Farm Journal Foundation, told Bridges. However, lawmakers will have to figure out how to address the concerns of different interest groups, meaning that the final language will likely change from the Corker-Coons version.

From his side, US President Barack Obama is also pushing for the reform of US food aid programmes. In his fiscal year budget proposals for 2014, 2015, and 2016, his Administration asked to use food aid funds for local and regional procurement of food, food vouchers, or cash transfer.

Proposed reforms

With an annual average budget of about US$2.2 billion over the past decade, Washington is the world’s largest donor of food aid, with Food for Peace activities averaging nearly US$1.7 billion.

Current law requires that the bulk of food aid commodities must be produced in the US. In addition, at least 50 percent of food aid must be shipped from the US to recipient countries on American-flagged vessels. Moreover, 15 percent of all US donated food must be sold by aid organisations in recipient countries – a practice known as “monetisation.”

The legislation sponsored by Corker and Coons proposes “cost-effective procurements” that would allow food aid agencies to purchase food both in the US and in local or regional recipient markets, or to provide vouchers or cash transfers to people in need, depending on which is most cost-effective.

The proposed reforms would also remove the cargo preference requirement and would provide USAID with the flexibility to ship on readily-available vessels, which proponents say could save approximately US$50 million per year from the USAID budget and speed up the delivery of food aid.

The bill also suggests eliminating the practice of monetisation. According to USAID, this could feed an additional 800,000 people and free up about US$30 million per year.

Years of debate

Calls for food aid reform date back several years. Lately, supplemental funds and new programmes such as the Emergency Food Security Program have allowed aid agencies to buy food locally and regionally and to provide targeted cash transfers or food vouchers to people in need. However, the bulk of food aid is still purchased in the US and shipped via US vessels.

“The 2014 Farm Bill advanced meaningful reform,” Director of Food for Peace Dina Esposito said during last week’s hearing, allowing the US Agency for International Development (USAID) to reduce monetisation, purchase food locally and regionally, and help disaster victims access food in local markets.

“The major problem around the current system is that it is too inflexible,” Erin Lentz, Assistant Professor of Public Affairs at the University of Texas, told Bridges.

The 2014 Farm Bill failed to relax the core restrictions placed on the Food for Peace programmes managed by USAID, Lentz explained.

Poverty advocacy groups such as Oxfam America and CARE USA have been among those advocating for Congress to reform the current legislation, citing the importance of increasing the efficiency of US food aid programmes, such as by improving flexibility in food aid delivery rules.

According to USAID estimates, allowing flexibility in delivering food aid will have a substantial effect in reducing nutrition deficiency-related morbidity and mortality for about four million people annually.

The calls for reform come after various studies from academics, civil society groups, and the public sector have lately suggested that the current system of delivering US food aid is inefficient, arguing for loosening existing rules.

For instance, a 2009 report by the Government Accountability Office (GAO), an independent agency providing audit and evaluation to Congress, found that sourcing food locally or regionally – rather than requiring it to be produced in the US – can slash costs and improve delivery time.

The report found that local procurement in sub-Saharan Africa cost about 34 percent less than similar in-kind food aid purchased and shipped from the US. Moreover, food aid from the US can take four to six months to reach recipient communities. Instead, locally or regionally procured food can reach those community 11 to 14 weeks sooner.

Another GAO report deemed the practice of monetisation to be wasteful and inefficient, citing potential adverse market impacts in recipient countries. The report calculated that food aid agencies are usually able to obtain at best US$0.75 on every taxpayer dollar spent by selling food in local markets.

“The sale of food aid on local markets is terribly inefficient,” Eric Muñoz, Senior Policy Advisor with Oxfam America, told Bridges.  “It is viewed as an export subsidy by some,” he continued, noting that this creates tensions when trying to make space for legitimate food aid in a new agriculture agreement among WTO members.

“A much more effective use of such funds would be simply to provide the NGOs with grants to accomplish the relevant aid-related objectives,” said Vincent Smith, a professor at Montana State University’s Department of Agricultural Economics and Economics, during last week’s Senate Foreign Relations hearing.

That hearing, Smith later told Bridges, clearly showed that the US should adopt a flexible discipline for delivering food aid. Nevertheless, the maritime industry reportedly opposes the move, given their reliance of food aid funds to support a US maritime fleet, Smith said.

Agricultural Cargo Preference has been justified by maritime interests as providing necessary support for maintaining a US maritime fleet that would support national defense in cases of war, Smith explained. However, he added, some studies show that cargo preference makes little contribution, if any, in ensuring US military preparedness.

“The maritime industry is trying to keep things as they are,” Mercier told Bridges. “Hopefully, last week’s hearing will give a renewed focus to the ongoing discussions.” If the bill does not go through this time, she continued, the next opportunity to reform US food aid programmes will be the next Farm Bill that is enacted after the current one expires in 2018.

Effects on US agricultural sector?

The proposed new discipline would not only reduce cost and time of providing food aid, but could also “reinforce economic recovery, support local farmers, and generate jobs,” in recipient countries by introducing food vouchers or targeted cash transfers, Esposito said during last week’s hearing.

The proposed reform, Smith told Bridges, “doesn’t hurt US agriculture in any meaningful way. If anything, it may benefit the sector.” Food aid constitutes a marginal share of US agricultural exports.

The cost-saving effects generated by the reform would enable the US government to purchase 50-60 percent more food aid with the same budget, with a subsequent increase of global food demand for crops such as corn, wheat, and rice, Smith explained.

ICTSD reporting.

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