Let Them Eat Subsidies

The Obama administration could revolutionize aid and save billions -- if only Congress would stand up to the farm lobby.

Scott Olson/Getty Images
Scott Olson/Getty Images

With massive, senseless cuts to the U.S federal budget looming, it is the rare kind of deal that should unite Republicans and Democrats. After all, with fairly minor changes to how we deliver food assistance abroad, we could achieve hundreds of millions of dollars of efficiencies (cue applause from budget hawks), while actually saving far more lives abroad (cue applause from humanitarians.) You would think this was a no-brainer, but then you wouldn’t know Washington very well. A fleet of well-connected lobbyists linked to large agribusiness and the shipping industry is already scrambling to strangle sensible food aid reforms before they even see the full light of day.

The kerfuffle began several weeks ago, as rumors spread that the Obama administration planned a major restructuring to the $1.45 billion that falls under Title II of its Food for Peace program, budgeted through the U.S. Department of Agriculture, but implemented through the U.S. Agency for International Development. The Food for Peace program is used to support both emergency food aid during humanitarian crises and to serve as a source of funding for NGOs to carry out development work. For example, Food for Peace programs in Yemen last year helped target more than 550,000 people displaced by internal unrest, while trying to blunt a growing food crisis exacerbated by rising fuel prices that have undercut agricultural production.

For all its good deeds, the Food for Peace program has also long supported some of the most obviously ridiculous practices in the entire international development portfolio. Like most ridiculous practices in Washington, these customs came with names that made them either difficult to decipher or oppose, such as ‘cargo preference’ and ‘monetization.’

To understand both concepts, it is important to underscore the degree to which America’s food aid programs, by far the largest in the world, have also served as corporate welfare over the years. Let’s start with the concept of ‘cargo preference.’ In the mid-1950s, Congress legislated that 75 percent of all U.S. food aid be shipped aboard U.S. vessels. The law was originally passed based on a justification that these cargo ships and their crews could help serve as a reserve for the U.S. Navy in times of war. Such a military justification is now completely anachronistic, and indeed many of these ‘U.S. flagged vessels’ are actually foreign-owned. All that cargo preference restrictions now achieve is to make U.S. food aid slower and more expensive to deliver, while giving these shipping firms a huge entitlement. The General Accounting Office has suggested that the law annually adds some $200 million to the budget in unnecessary transportation costs, and USAID has estimated that up to half of its spending on food aid goes to transportation costs.

Not surprisingly, both Republicans and Democrats have long believed that simply buying food for humanitarian crises closer to where it is needed makes a great deal of sense. Let’s say there is a crisis in South Sudan and the United States wants to deliver food assistance. Currently, the U.S. government buys excess crops in Kansas or Iowa. These crops are then transported overland, let’s say to New Orleans. The food is then put on a U.S.-flagged ship that may or not actually be owned by an American company. This ship then makes the arduous journey around the tip of South Africa or through the Suez, and then offloads, probably in Tanzania. The food is then shipped overland through Kenya and into South Sudan where it is distributed.

Now let’s consider what almost every other country and multilateral organization on Earth does when it needs to deliver food aid to South Sudan. It finds a local or regional market where appropriate food is available closest to South Sudan. It purchases the food directly in Kenya, Tanzania, or Ethiopia, and moves it with minimal transportation costs to where it is needed. It is faster, cheaper, and saves more lives. It makes sense.

Buying food closer to where it is needed is not a new idea. President George W. Bush tried in four successive budgets to direct up to one-quarter of the Food for Peace program to local and regional purchases, as did his proposed Farm Bill in 2008. Lobbyists were able to largely defeat that effort, only allowing for small-scale pilot programs to be implemented. Renewed efforts to reform these practices stalled last year as the broader Farm Bill bogged down on unrelated issues.

But for the height of foolishness, one need only to look at the current U.S. practice of ‘monetized aid.’ Ostensibly designed to fund development projects, monetized aid looks more like a Rube Goldberg drawing come to hideous life. U.S. taxpayer dollars are used to purchase farm commodities, usually in the American midwest. Again, they are shipped extraordinary distances at extraordinary costs on U.S.-flagged vessels. Then, the food is given to an international NGO, the NGO sells the food on the local market, and the NGO is allowed to keep the proceeds of the food sales to use for local development projects.

As the former chief of the World Food Program Catherine Bertini and former Secretary of Agriculture Dan Glickman have noted, "monetized U.S. food aid typically generates only fifty to seventy cents of revenue on each taxpayer dollar spent." So the sale of about $400 million in food aid through the monetization effort generates only between $200-$280 million for the NGOs. The U.S. government could simply write a check for $280 million a year to these groups, save at least $120 million a year, and put a bunch of unneeded procurement specialists out of business.

So that brings us to the current imbroglio. Although details remain gauzy, the administration seems to have decided that the much of the Food for Peace program is simply broken beyond repair. (Anyone familiar with these programs or who has watched Congress try to handle the recent Farm Bill would probably reach the same conclusion.) So it appears the administration is simply trying to zero out much of the funding directed to USDA for the Food for Peace program and shift such funding directly to USAID, where it can be managed without the absurd rules governing monetization and cargo preference.

Lobbyists being lobbyists, they have reacted with mock outrage, suggesting that cutting the funding to USDA amounts to some sinister effort to slash international food assistance, when in all likelihood the administration is simply trying to introduce common-sense reforms that mean not one single less person actually receives U.S. food aid. Indeed, it is almost impossible to find anyone opposed to food aid reforms who is not richly benefitting from the current ludicrous system. The most vocal opponents of food aid reform have included the likes of ‘USA Maritime‘ and ‘The Alliance for Global Food Security,’ and both appear to be serving as very active mouthpieces for vested interests — like the Maersk shipping line — that are making big dollars off of programs to help the world’s poorest and hungriest.

The administration needs to get the full details of its plans for food aid in the 2014 budget on the table quickly, or all those companies who are taking both the U.S. taxpayer and a bunch of poor refugees for a ride are going to make sure it is all business as usual.

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