A New Recipe for Aid: U.S. Food Aid Reform

Under the Food for Peace Act of 1954 (P.L. 480), the United States has provided food assistance to  approximately three billion people in 150 countries for nearly 60 years. While many have benefited directly from U.S. food programs in the last half century, the original food aid model established by P.L. 480 does not reflect  the current needs of food recipients and the financial and agricultural resources of the United States. In his budget proposal for FY2014, President Obama redistributed the funds of P.L. 480’s Title II to reduce inefficiency costs and to reach a broader range of people for the same cost.

Current Food for Peace Costs for Title II

P.L. 480 Title II

The Food for Peace Act (FPA) was implemented in a period of American agricultural surplus. In the aftermath of World War II, shipping food abroad was the most viable method of addressing global food insecurity for the United States. Today, Food for Peace’s main programs include:

  • Title I – Trade and Economic Development Assistance, which facilitates private support for food programs
  • Title II – Emergency and Development Assistance, which channels U.S. agricultural products in response to emergency and non-emergency food aid
  • Title III – Food for Development, which focuses on government to government grants to support food programs in  the least developed countries
  • Title V – Farmer to Farmer, which focuses on technical assistance between farmers in developed and developing countries

Title II of the Food for Peace Act has historically comprised the vast majority of U.S. international food aid spending and has virtually absorbed the funding, if not the responsibilities of Titles I and III of the Food for Peace (FFP) program. Managed by the United States Agency for International Development, Title II facilitates both emergency and non-emergency food programs through the disbursement of grants to eligible private voluntary organizations (PVOs) and international organizations (IOs). Once funding is received, these groups work with the USDA to ship the food over to its recipients.

 Food for Peace Program Chain

Critics of Title II have voiced concerns over the government’s inefficient use of funds. For example, a key component of this program is the practice of monetization, or the resale of U.S. agricultural commodities abroad. According to Government Accountability Office, monetization results in the loss of 25 cents per taxpayer dollar spent on food aid. Meanwhile, the Agricultural Cargo Preference policy requires that at least half of all U.S. cargo be transported by privately owned U.S. vessels. A 2010 study from Cornell University revealed that this policy may have cost the U.S. government $140 million dollars in 2006 that could have gone towards food aid instead. These inefficiencies have persisted because they protect domestic agriculture and shipping interests.

Redistribution

Under President Obama’s new proposal, Title II funding will be split three ways. A portion will be shifted to the Community Development and Resilience Fund (CDRF) and another to the International Disaster Assistance (IDA) program, both of which will be overseen by the USAID’s Office of Food for Peace. The remaining amount will be used to create an Emergency Food Assistance Contingency Fund (EFAC). The new design is intended to achieve all the goals of Title II with more efficiency.

Food Aid Reform: What Happens to PL 480 Title II
Proposed by Obama Administration for FY2014

Aware of the shortcomings of Title II, the administration has promoted the purchase of local and regional products as well as the distribution of food vouchers, thereby reducing food and transportation costs; the shift may even stimulate the local agricultural business. Furthermore, this shift will reduce the amount of time needed to aid crises as food will likely have a shorter distance to travel. The administration claims that 2-4 million more people can be reached under the new policy.

Nevertheless, monetization remains in place – the new proposal still requires 55% of IDA food aid to originate from within the United States. Moreover, powerful agricultural and shipping groups will attempt to preserve the current system.

Responses

The president’s new proposal, while received well by development experts and even Congress, has met tough opposition from the prominent farming and shipping groups across the country. Changes to Title II would create competition abroad for them in their respective sectors. Some worry that the move could cost hundreds of jobs and even in the loss of the food aid budget. By shifting to cash assistance from food, jurisdiction over the food programs would change as well, potentially affecting the monetary allocation of the food aid budget.

Additionally, several Congressmen have highlighted the consequences that the change would have on national security, noting the reduced domestic funding would compromise the sealift capacity of the U.S. merchant marine. Proponents have argued that the shift would have minimal impact on the already booming agricultural sector, which have grown considerably in recent years due to commercial exports. Others point out that declining food shipments and U.S.-flagged ships have hardly hurt either sector from accomplishing their goals. USAID administrator Rajiv Shah also notes that the switch would also reduce human costs in conflict zones such as Somalia while delivering aid.

The reality is that the government officials have constituencies to respond to at the end of the day. As Representative Gerald E. Connolly (D-Va.) comments, the proposal would make work in “an ideal world” where foreign aid did not compromise the interests of American citizens.

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