This is a joint post with Will McKitterick.
Washington is abuzz with rumors that the White House budget will include a far-reaching reform of US food aid that moves away from in-kind food aid transported on American ships. Even though no details are available, the plan faces considerable resistance from agricultural and maritime interests that profit from the current system. But current practices are inefficient, costly, and slow and most development advocates support the administration’s desire to shake things up.
According to reports, the proposal would restructure funding for PL480—more commonly known as Food for Peace—and shift some or all of the food aid budget to cash that could be used flexibly to provide assistance in ways that reduce costs and speed the delivery of food aid. Current law requires that food be purchased in the United States and mostly transported on American ships, which raises the cost of delivering food aid by a third or more and delays it reaching hungry people by up to 100 days (according to this 2009 GAO report). Some “development food aid” also goes to humanitarian organizations that sell the food in developing countries to raise money to finance their local development programs. So-called monetization is not only costly and inefficient, but it can also disrupt local markets.
Freeing food aid from the current in-kind and cargo preference shackles would allow some of it to be used for local and regional purchase, or for food voucher programs, that could support local markets and raise producer incomes in developing countries. But local and regional purchase can distort markets and will not be the right answer in every situation. The administration should focus on adding flexibility to US food aid, rather than replacing one set of shackles with another. Ultimately, the key to better food assistance rests on designing a delivery system with a variety of options so that interventions can be tailored appropriately to meet the situation at hand.
Assuming that President Obama proposes a reform along these lines, are the odds any better than 2008 when President George W. Bush proposed moving up to 25 percent of the Food for Peace program to cash? The Senate approved a farm bill last year that more than doubled the size of a pilot program on local and regional procurement, but it would still only be 10 percent of total food aid, and put modest restrictions on monetization. The House bill, which never made it to the floor, contained no reform of food aid at all. Already, lobbyists are working hard to rally their allies in Congress to end the proposal before it’s even announced.
Let’s hope that President Obama sticks to his guns with this bipartisan proposal. The United States is the largest food aid donor in the world, yet it’s the only one that has yet to untie its food aid. Doing so would both save the US taxpayer money and ensure that food assistance reaches the hungry and malnourished much faster.