13: Food Aid
Reform of Food Aid Programs Other Information:
The President strongly supports aid that feeds hungry people overseas and helps U.S. farm income. However, we must also avoid
adverse commercial or trade impacts. Food aid saves many lives, and recently averted a famine in the Horn of Africa. But its
humanitarian purpose is being eroded by other uses having little to do with food. To better meet the President’s objectives,
and strengthen U.S. food aid, the Administration is committed to reforming food aid programs to ensure that overseas food
donation programs target food aid to the genuinely hungry and avoid waste and adverse impacts. THE PROBLEM • Six different
programs run by two government agencies provide international food aid. They sometimes duplicate each other. For in-stance,
Indonesia received food aid under four of these programs in a single year. The Department of Agriculture (USDA) and the Agency
for International Development both have created similar bureaucracies to administer food aid. • Food aid programs are afflicted
by waste and questionable spending. For in-stance, proposed food aid expenditures have included projects such as building
a noodle factory and providing trucks that were promptly confiscated by the recipient country’s government. There are other
cases of U.S. commodities being discarded because the recipient country rejected U.S. food standards and implementing partners
did not handle the commodities properly. In addition, food donations to Angola and Central American countries were discarded
because of damage that occurred during shipping. It is quite common for donated food to be sold for cash in disaster areas
while more efficient cash relief was also available. • Some of this aid is inefficient. For instance, the General Accounting
Office (GAO) noted that, of the nearly $250 million the United States spent to send wheat to Russia in 1999, the intended
recipients, Russian pensioners, only realized $64 million in benefits be-cause of high administrative and transportation costs.
• Some of the aid may be counterproductive, a condition agencies strive to avoid. For instance, sending food to a country
that does not need it for serious humanitarian purposes may undermine local farmers and efforts to privatize the agricultural
sector in transition countries. Like-wise, large food aid shipments through state-owned distribution enterprises in a number
of former Soviet republics in the early 1990s may have inhibited efforts in those countries to privatize these enterprises.
• Aid may not always help U.S. farmers. First, farm income is much less affected by food aid than in the past. For instance,
the previous Administration used 416(b) and the Commodity Credit Corporation Charter Act authorities to donate food when U.S.
market prices were very low-precisely the time when USDA already was paying farms the difference between the market price
and a higher price floor. In addition, food aid has become less important as an export mechanism as commercial exports have
grown. Finally, evidence suggests food aid may displace commercial sales or substitute for USDA programs intended to boost
farm income. • The sale of U.S. donations in overseas markets to generate cash, a practice known as monetization, can impede
U.S. commercial exports, lower market prices, induce black market activity, and thwart market development for U.S farm products.
Theft is also an issue. For example, employees of an organization delivering food aid were prosecuted for stealing commodities
in Haiti. Though praised for its flexibility, monetization is economically inefficient because the sale price generally does
not cover the cost of providing the commodities, especially when the additional shipping cost of the U.S. cargo preference
requirement are added. • Some food aid programs are charged by members of the World Trade Organization as conflicting with
U.S. goals of liberalized trade to the extent that aid displaces commercial sales. U.S. food aid has tended to rise in volume
when prices are low, and drop when prices are high—precisely the time when food-deficit countries are least able to buy food.
However, the United States has committed in the Food Aid Convention to supply a minimum of 2.5 million tons annually, regardless
of U.S. prices or supplies, and the United States has resisted other nations’ support for lower aid levels when prices are
high. The Ad Hoc Humanitarian Food Aid Initiative, authorized to operate since 1998 when prices were low, unfortunately enabled
some trade partners to misleadingly criticize U.S. food aid policy goals. THE EXPECTED RESULTS • More reliable levels of food
aid, allowing recipient countries, cooperating sponsors, and U.S. administrators to plan for their needs. The proportion of
the total food aid program that relies on unpredictable surplus commodity availability will not exceed 10 percent. • More
food security for hungry people, through better-focused programs, clear and consistent policy objectives, and more efficient
use of budget resources. • Improved safeguards to avoid any potential displacement of United States or third country commercial
sales, leading to more effective impact of food aid on U.S. farm income. • Greater efficiency and transparency in the management
and implementation of U.S. food aid programs.
Objective(s):
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