U.S. Food Aid Mostly Agribiz Entitlement Program

by Jim Lobe

(IPS) WASHINGTON -- U.S. food aid is inefficient, wasteful and designed in most cases to benefit domestic constituencies, particularly U.S.-based agribusiness firms, shipping companies and some NGOs, according to a new report released this week by the Minnesota-based Institute for Agriculture and Trade Policy (IATP).

The 47-page report, "U.S. Food Aid: Time to Get It Right," calls for a major overhaul of food aid programs, including "untying" the assistance from U.S.-origin and shipping requirements, as well as the practice of monetization -- that is, providing food to NGOs or local governments for sale so that the proceeds can be used for aid work or other purposes.

It also calls on Washington to do more to encourage local food production in poor countries, particularly in Africa, to ensure long-term food security by investing more in agriculture, establishing a system of emergency food reserves, and encouraging multilateral agencies, in consultation with recipient countries, to adopt uniform rules on food aid.

"Food aid is about saving lives -- often in desperate situations," said IATP program director Sophia Murphy, who co-authored the report with Kathleen McAfee, a geographer at the University of California in Berkeley.

"But food aid also has to be part of a much larger strategy to build and protect food security. We have to make sure we are not feeding people now who will still be food aid recipients in 20 years," she noted. "The U.S. food aid program today fails this critical test."

Food aid, which by definition must be either free or sold at "concessional rates," currently constitutes less than two percent of all food trade internationally and a tiny 0.015 percent of world food production.

Total food aid deliveries last year came to 7.5 million metric tons, down from 10.2 million metric tons in 2003. Of those totals, two-thirds consisted of emergency aid for dealing with natural or human-made disasters in 2003; 59 percent was emergency aid last year.

The United States, which provided a whopping 56 percent of all food aid last year, is far and away the largest supplier. It is followed by the European Union with 20 percent, Japan (eight percent), and South Korea, Canada, Australia, and China, each of which accounted for about 2.75 percent of the global total.

Apart from South Korea, the U.S. is alone among donors in selling part of its food aid, instead of giving it away.

While the U.S. was the single biggest provider, it and other major donors often channel supplies through third parties. Thus, multilateral agencies, such as the World Food Program (WFP), provided 51 percent of food aid delivered in 2003; NGOs, 28 percent; and bilateral sources, such as national aid agencies, 21 percent, according to a WFP report published last year.

Last year, the major recipients included Ethiopia, North Korea, Sudan, Bangladesh and Eritrea.

Washington's dominance of the global food aid picture has made it the subject of two major complaints at the World Trade Organization (WTO).

First, while the monetization of food aid generates money for NGOs to pursue other aid activities, according to the report, it also reduces prices for local producers and traders in poor countries, effectively rigging the market against them. All such programs should be phased out, according to the report.

Second, export credits provided to U.S. agribusiness result in food dumping -- overseas sales of food for less than the costs of production. According to the report, the EU has now put forward a proposal at the WTO, which will be taken up at the next Ministerial Meeting in Hong Kong in December, requiring all food aid to be cash-based and untied from requirements that it originate in the donor country.

U.S. food aid is currently provided under six different programs controlled by two different bureaucracies, the Agriculture Department and the U.S. Agency for International Development (USAID). That results in administrative confusion and some duplication, according to the report.

What makes U.S. food aid more objectionable, however, is the "iron triangle" of interest groups that are its greatest beneficiaries. These groups -- agribusiness, shipping companies, and NGOs -- enjoy a "stranglehold on food aid practice," according to the report, perpetuating a dysfunctional system through their influence on Congress and the government.

Under U.S. law, for example, a minimum of 75 percent of U.S. food aid must be sourced, fortified, processed and bagged in the U.S, and only a handful of firms, notably Cargill and Archer-Daniels Midland (ADM) are qualified to bid on the procurement contracts. The result is that the government has paid on average about 11 percent more than open-market prices for food aid.

U.S. law similarly requires that 75 percent of all food aid must be transported on U.S.-flagged vessels, despite the fact that the shipping industry has been failing over the past few decades and currently handles only three percent of all U.S. imports and exports (excluding food aid) and, according to recent study, cost nearly 80 percent more than foreign-bulk carriers using the same routes with similar cargo.

While NGOs take pride in keeping their costs low and in using the money made from food aid sales to help the poor, they find themselves supporting a system that threatens local producers and traders in the interests of maintaining "an important revenue stream for ...funding of their ongoing development work," according to the report.

Other food aid donors provide much of their food aid to NGOs in the form of cash, precisely to avoid harming local markets and hence, long-term food security.

IATP is calling for a transition to an untied, cash-based food aid system, including the phasing out of all sales of food aid and monetization; the imposition of strict limits, except in cases of emergencies, on shipping food aid over long distances; much-greater efforts at increasing domestic food production in poor countries; and the abandonment of policies promoted by the World Bank and the International Monetary Fund that require countries to invest more in export crops in countries where such strategies have failed to improve the plight of the poor.

"African farmers are capable of producing a lot more food for their communities and nearby regions," according to McAfee. "But policies of the U.S, the WTO, and the World Bank promote the use of African land and resources for export crops instead, and many African governments neglect agriculture for domestic food needs. This must change, or hunger will increase.