Chris BarrettCornell University

May 12, 2011Congressional Research Service BriefingCapitol Visitor Center, Washington, DC

The Evolution of US Food Aid:Major Changes and Key Issues

United Nations Millenium Development Goal #1:Reduce by half the proportion of people (i) living on less

than a dollar a day and (ii) who suffer from hunger.

What role for food aid?- Save lives and fulfill human right to food- Protect assets (especially human health)- Facilitate productivity and asset growth where food

availability and poor market performance are limiting.

Food aid in support of MDG #1

Food aid is a complement to other resources. Need to embed food aid in broader dev’t strategy, not fit development strategies to food aid policies.

US still accounts for 50-60% of total food aid worldwide each year. US food aid policy drives global food aid system.

Background

51%

17%

7%

4%

21%

2009 Food Aid Flows by Donor

USA

EU (EC + bilateral)

Japan

Canada

Other

Source: WFP Food Aid Information System

1954-1990:

- Generous farm price supports and gov’t held stocks

- Large regions outside North American cereals marketshed

- Hunger widespread globally initially

- Cold War: food aid flowed initially to Asia, Latin America, Europe and North Africa

PL 480 was a direct response to these conditions and succeeded in meeting some of the resulting goals.

Times have changed.

Background

1. Price Supports and Gov’t Grain Stocks History:

- Gov’t stocks (CCC/FOR) down 95% 1987-2005

- Now procure based on IFBs, at a premium

- No price impact, yet myth persists b/c people conflate correlation with causality

Major changes

1990-present:

- Generous farm price supports and gov’t held stocks ended. Food aid now purchased rather than shipped from stocks.

- Globalization of US food market … covers the globe now.

- Cold War over (and food aid not politically effective).

- Food aid for trade promotion now violates WTO agreement on agriculture (and never really worked anyway).

5. Shift From Program to Emergency Food Aid:- Until 1992, most US food aid was “program” – govt-to-govt

concessional sales on credit: Title I and Section 416(b)- Now mainly to NGOs (>40%) and WFP/IEFR (>40%) for

emergency response (~80% of Title II now emergency)- Now 70% of flows are to Africa, up from ~1/3 in 1990s

Major changes

0

500

1000

1500

2000

2500

3000

3500

1980 1985 1990 1995 2000 2005

$ m

illi

on

s (r

eal,

bas

e ye

ar 2

000)

U.S. Food Aid Programs, FY1980-2009

PL 480 Title I PL 480 Title II Other (Title III, Food for Progress, IFEP, 416b, etc.)

Data sources: U.S. Dept. Of Agriculture, General Accounting Office, Bureau of Economic Analysis

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2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

1981 1983 1985 1987 1989 1991 1994 1996 1998 2000 2002 2004 2006 2008

Mill

ion

MT

del

iver

ed

Global Food Aid Flows

Emergency Project ProgramData source: WFP INTERFAIS

7. Other Donors Reformed Their Food Aid Programs- Budget integration: in Canada, EU and other key donor countries other than the US, food

aid moved within international development budgets and out of farm policy and agriculture budgets. This enables allocation based on humanitarian and development criteria.

- Untying: In the EU and Canada, the untying of food aid has been, in principle, complete. Cash is commonly provided instead of commodities and recipients can source from anywhere.

Example: when Denmark decoupled, replacing cheese and canned meat food aid with bulk grain, wheat flour, peas and vegetable oil, it generated 6x calories and 3x protein at lower cost, from 1990-1997.

Exception: US has neither budget integration nor significant untyingdget integration nor untying.

Major changes

Key issues

The Golden Hour, LRP and Untying of Procurement:- Golden Hour principle: rapid response essential. Delays are

expensive and deadly (2004-5 Niger example)- Other than US, more than 80% of global food aid is now LRP

because it is typically faster and cheaper than transoceanic shipments.

- Examples:GAO: 10-country averages in sub-Saharan Africa:

21 weeks for U.S food, 7-8 weeks for LRP

CFGB: Kenya, Ethiopia, & Afghanistan11-19 weeks for Canadian food, 4-6 weeks for LRP

- Farm Bill still sharply limits LRP in US food aid programs.

- (Expensive) prepositioning the best feasible option now

6Monetization- Insufficient resources for non-emergency development programming

makes it difficult to prevent new emergencies and to limit their adverse impact when they do occur.

- Insufficient cash resources to meet needs: distorts NGO behavior … monetization is the result. From ~10% of non-emergency Title II in the early 1990s to >60% the past several years.

- Monetization is a source of WTO tension (akin to an export subsidy).- Monetization is inherently inefficient.- Can be disruptive to host country markets, undermining efforts to

build up local commercial agricultural marketing channels.

Hence: - CARE’s 2005 decision to phase out monetization. - The importance of community development funds proposal

Key issues

4. Cargo preference- 1954 Cargo Preference Act to support merchant marine for

national security purposes … share increased 50-75% in 1985. Plus Great Lakes Set Aside added in 1996, further restricting shipping.

- Impact: higher freight costs. ACP resulted in a 46% markup over competitive freight costs.

- 70% of ACP vessels not militarily useful, yet these capture >90% of cargo preference premiums.

- And ~40% go to foreign shipowners.

- Pentagon/MARAD have an alternate program (Maritime Support Program) to maintain sealift capacity

Key issues

Budget Integration

- Especially if US food aid programs are formally focused solely on humanitarian and development objectives, bring all programs under USAID and foreign relations/development.

- Bureaucratic duplication between USDA and USAID is costly and unnecessary and invites criticism and skepticism (e.g., in WTO).

- IDA and EFSA as an example of how this can work.

Key issues

International Food Assistance Governance

- Food Aid Convention and FAO/CSSD ineffective – need to revise membership, accounting and adopt codes of conduct

- FAC presently being renegotiated

- FAO/CSSD could be shut down immediately with no loss

Key issues

Food aid remains important as part of the “twin track” strategy found in the 2009 Rome Principles.

US still leads the global food aid system.

But much has changed … the next Farm Bill is dealing with a radically different food aid program than what the US had 20 years ago.

Improving awareness of changed landscape will help build the coalitions necessary to tackle key remaining issues:

- LRP

- Monetization

- Cargo preference

- Budget integration

- Food assistance governance

Conclusion

Thank you for your time and interest!