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A public policy blog from AEI
In Coleridge’s classic poem, The Rime of the Ancient Mariner, the Ancient Mariner, a grizzled and unpleasant old sea salt, forces an unfortunate wedding guest to stop and listen to his story.
He (the Ancient Mariner) holds him with his glittering eye—
The Wedding-Guest stood still,
And listens like a three years’ child:
The Mariner hath his will.
In much the same way, USA Maritime (a coalition that lobbies on behalf of shipping companies) appears to be playing the role of the grizzly ancient mariner, holding the House and Senate Agricultural Committees still with its glittering eye. Its story? Food aid must be purchased in the United States and shipped by US shipping companies under an American flag to maintain the effectiveness of the US food aid program. The coalition has vigorously opposed changes to the Food for Peace program that would reduce the amount of food aid cargo handled by US shippers.
US shippers have played a key role in facilitating the distribution of aid when local procurement was not possible. 40 years ago, markets in many developing regions were not sufficiently reliable to provide the food that was demanded.
That landscape has now changed. Local markets are far more reliable and sophisticated, and the costs of shipping US-grown food abroad now outweigh the costs of purchasing it locally. It is time that the Ancient Mariner added a new verse to his Rime: how he stepped away from his previous glories so that more of the world’s poor could be fed.
As work by Cornell Professor Christopher Barrett and others has unequivocally demonstrated, the requirement that food aid be domestically sourced results in 30% to 50% of non-emergency food aid being wasted on unnecessary packaging and transportation costs.
A much wiser, more effective, and more efficient use of taxpayers’ dollars would be to allow the funds to be allocated with complete flexibility by USAID in its subsidiary programs, including allowing most of the funds to be used for local sourcing. Local sourcing allows US food aid dollars to be used to procure food aid much closer to the region of need, rather than from the United States. The impacts on genuine US shipping companies would likely be considerably less than imagined.
For example, one major shipping company, the Maersk Line, with local headquarters in Norfolk, Virginia, is apparently a wholly owned subsidiary of the Maersk Group, a multinational corporation with its headquarters in Copenhagen, Denmark, where the company was founded. The Maersk Group owns and operates a wide collection of subsidiary companies in the global energy and shipping industries. For the Maersk Group, having a US shipping subsidiary is useful precisely because it can then compete for the business of shipping food aid around the world at US taxpayers’ expense.
A particularly unfortunate approach to non-emergency food aid, embedded in farm bill food aid legislation since 1985
is the practice of monetization. Monetization of food aid is the practice of shipping US food (in bagged or processed form) to developing countries and allowing private non-profit aid organizations to sell the food in urban markets to obtain monies, which in turn are used to carry out development and aid programs in other areas.
One result is that the monetization program wastes at least 30% of the monies spent by taxpayers on non-emergency food aid. The other is that the non-profit organizations which benefit from the monetization program have joined forces with the shipping companies to become avid lobbyists for its continuation. Some non-profit organizations – for example CARE, OXFAM, and Bread for the World – have heavily criticized monetization as a waste of tax dollars and damaging to aid efforts. But others have become the program’s strongest advocates.
In the Senate and House Agricultural Committees, therefore, the monetization beat goes on. So perhaps the best thing that could happen is first for agricultural groups who represent the interests of farmers to recognize that their members are being disadvantaged by the program. They would be better off if more corn, wheat, soybeans and peanuts were being purchased by US food aid dollars in world markets, instead of those dollars flowing to shipping companies owned by Danish and other multinational corporations.
Second, monetization could be made much less attractive to the non-profits who currently benefit from the process by capping the revenue they obtain from selling food-aid food in third country markets at 50% of what is called the import price parity for a commodity. This is a “delivered to foreign market” price that includes shipping and handling costs which is estimated by the US Department of Agriculture Agricultural Marketing Service for different commodities purchased in the United States and shipped to overseas ports. Any income they earn above that amount could be returned to the taxpayer or allocated for other aid programs.
Aligning incentives for non-profit groups who deliver US aid to support a food aid program in which taxpayer funds are used more efficiently to help more impoverished people is always a good idea. Making monetization less attractive and, at the same time, shifting federal food aid resources to local sourcing and direct aid programs through which many of the non-profits have done great work in the past would be a great deal for the world’s poor, the US taxpayer, and the non-profits themselves.
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