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Date: Tue, 06 Sep 2005 08:41:37 -0700
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Subject: USA/Africa: Call for Food Aid Reform


USA/Africa: Call for Food Aid Reform

AfricaFocus Bulletin
Sep 6, 2005 (050906)
(Reposted from sources cited below)

Editor's Note

On August 26, just before Hurricane Katrina hit the Gulf Coast of
the United States, the World Food Programme called for the
international community not to turn away from Niger, as food
contributions began to tail off with less than half of the budget
funded. As subsequent images of devastated New Orleans both
displaced and evoked comparisons with "Third World" catastrophes,
there was abundant material for reflection on U.S. and
international responses to entirely predictable disasters.

The debate on the U.S. government failure to respond to Hurricane
Katrina and the fault lines of race and class it exposed to public
view is just beginning, and hopefully will continue. The public
debate on the parallel structural failure to respond to ongoing
crises in Africa, however, has hardly been opened.

Most reporting on the failure to respond to famine in Niger, and
the ongoing food crises elsewhere in Africa where donors are not
meeting UN emergency appeals, has focused on the quantity and
timing of aid. A report released in July by the Institute for
Agriculture and Trade Policy in Minneapolis takes on another issue.
U.S. food aid, which represents 57 percent of world food aid
deliveries, is particularly inefficient, most notably because
government policy prioritizes shipping food from the U.S. at high
expense rather than providing cash for purchase of food in the
affected countries or their neighbors. The interruption of river
traffic on the Mississippi, the export channel for most U.S. grain,
has further highlighted the importance of having flexibility to
resort to other sources.

The report analyzes these and other flaws in the current program,
and proposes specific reforms. Despite the vested interests in the
current system, it notes, none of the major U.S. beneficiaries - -
large agribusiness firms, shipping companies, and non-governmental
organizations used to channel the aid - - would be seriously
damaged by reforms.

This AfricaFocus Bulletin contains the press release from IATP on
the new report, and excerpts from an article by IATP director
Sophia Murphy and from the full report, which is available on the
IATP website (http://www.iatp.org).

[Note: This is the first AfricaFocus Bulletin after a break for the
month of August. Bulletins this month will include important
material from earlier in the summer as well as more recent
material.]

++++++++++++++++++++++end editor's note+++++++++++++++++++++++

U.S. Food Aid Needs Major Reform, New Report
Current System Not Addressing Long-term Causes of Hunger

July 27, 2005

Contact: Ben Lilliston, 612-870-3416, [log in to unmask]

Minneapolis - U.S. food aid programs are plagued by inefficiency
and are not addressing the long-term causes of hunger and food
insecurity in the developing world , according to a new report by
the Institute for Agriculture and Trade Policy (IATP).

The report, U.S. Food Aid: Time to Get it Right, points out that
the main beneficiaries of the U.S. food aid system are agribusiness
companies bidding on food aid contracts, U.S. shipping companies
that transport the food internationally, and private voluntary
organizations (PVOs) that rely on sales of food aid in developing
countries to generate funds for their other aid work (a practice
called monetization).

The report found that this unusual political alliance blocks
urgently needed reforms of U.S. food aid. The U.S. practice of
sending food for sale or distribution in countries facing hunger is
inefficient, expensive and slow. The U.S. should move towards food
aid programs based on cash for purchasing food in or near the
country where food aid is required. Almost all other major food aid
donors have moved away from the donation of commodities.

The report, authored by IATP Trade Program Director Sophia Murphy,
and Kathleen McAfee, Visiting Scholar in Geography, University of
California-Berkeley, can be read at: http://www.iatp.org.

"Food aid is about saving lives often in desperate situations,"
said Murphy. "But food aid also has to be part of a much larger
strategy to build and protect food security. We have to make sure
we are not feeding children now who will still be food aid
recipients in 20 years. U.S. food aid today fails this critical
test."

U.S. food aid programs are a hot topic at the World Trade
Organization (WTO), where other countries criticize the two
practices that are largely unique to the U.S. First, the
monetization of food aid generates development dollars for PVOs at
enormous expense and often to the detriment of local producers and
traders in developing countries. Second, taxpayer-funded export
credits facilitate food dumping: overseas sales of program food aid
for less than the costs of production. A European Union proposal at
the WTO would require that all food aid be cash-based and untied
from requirements to source commodities in the donor country. Food
aid is expected to be a point of contention at the next WTO
Ministerial in Hong Kong in December.

U.S. food aid also suffers from administrative confusion, according
to the report. Two departments - USAID and the U.S. Department of
Agriculture - oversee six separate programs. The U.S. is the
world's largest food aid donor, funding 57 percent of global food
aid deliveries in 2004. Yet, the U.S. is the only food aid donor,
aside from South Korea, that sells part of its food aid. All other
countries donate all their contributions. And, the U.S. provides
less food aid when food prices are high and aid is most needed.

The report concludes, "in the name of the poor overseas, very large
sums of money are now paid to prop up U.S. shipping firms and to
buy food at higher than market prices from U.S. based food
processors and other agribusinesses." The report found that most
food aid is self-interested and politicized, rather than focused on
the needs of the hungry.

While the world has seen increases in food production, food
dependency in many developing countries has grown. Food production
per in Africa is 10 percent less than it was in 1960. Sub-Saharan
Africa now receives half of total food aid contributions. More than
200 million people in Africa are undernourished and of those, about
40 million in any one year face acute hunger. Countries in parts of
Latin America and much of sub-Saharan Africa that once fed
themselves and exported food are now net food importers.

"African farmers are capable of producing a lot more food for their
communities and nearby regions. But policies of the U.S., the WTO,
and the World Bank promote the use of African land and resources
for export crops instead, and many African governments neglect
agriculture for domestic food needs. This must change, or hunger
will increase," Dr. McAfee explains.

Food aid programs must have a two-fold objective: to meet emergency
needs, preventing deaths today, and to help build sustainable and
self-reliant food systems across the world for tomorrow. The report
makes a series of recommendations on how to improve U.S. food aid,
including:

* Transition to an untied, cash-based food aid system;

* Phase out sales of food aid;

* Impose strict limits on in-kind food aid;

* Protect and promote people's right to food;

* Protect and promote countries' rights to determine their own food
security strategy;

* Establish strong and enforceable multilateral guidelines.

***************************************************

Feeding More for Less in Niger

By Sophia Murphy

New York Times, August 19, 2005

[Excerpts. For full text visit http://www.nytimes.com]

The famine unfolding today in Niger has too many familiar
characteristics. One of the poorest countries in the world is in a
deadly crisis - one foreseen and ignored until the cost of
intervention had jumped from $1 per child to $80, according to the
United Nations. Many people have died and more will die in the
coming weeks and months because rich countries failed to respond in
time. United Nations agencies first appealed for money and food in
November, but governments have only started to respond seriously in
the last few weeks.

... the United States' food-aid system has two main problems - ones
that other major donor countries have already taken steps to solve.

First, almost all the aid is in the form of food produced in the
United States. The government buys food from American commodity
traders. The food is fortified, bagged and shipped by American
firms. This approach usually results in costs well over market rate
for food, handling and transport. The emphasis on using American
commodities and firms is grossly inefficient and means that food is
slow to arrive where it is needed. It also prevents the
establishment of local food systems.

Most other major donors, particularly those in the European Union,
give money instead of food. This frees agencies like the United
Nations World Food Program to buy food from farmers near the
affected country - farmers who are often very poor - and to send
the food quickly where it is most needed.

To its credit, the Bush administration proposed designating an
additional $300 million for food to be bought from local or
regional sources this year, but Congress rejected the proposal.

The second major problem is that the United States sells some of
its food aid. It is the only country other than South Korea to sell
food aid (albeit for less than commercial prices) or give it to
intermediaries that then sell it. Private American aid
organizations receive American food aid and sometimes sell the food
at local markets to raise money for their other aid programs in the
country. Governments of recipient countries also sell food aid at
local markets to raise money. The result is a subsidized sale that
creates unfair competition for local farmers and commercial
traders.

The current system ensures that the United States' food aid falls
far short of its potential. While our food aid saves lives, it
could save many more. And most important, the system fails to
strengthen food production and systems of food distribution in
vulnerable countries. If we want our contributions to tackle the
root causes of hunger, then the United States government needs to
make immediate changes to the food-aid system.

It should transition to cash-based aid and phase out sales of food
aid. The United States also needs to work with other donors and
local governments to establish regional reserves in the most
vulnerable parts of the world so that local authorities and private
agencies can respond to crises quickly. The government should make
multi-year guaranteed donations to the World Food Program so that
the agency has the financial reserves to allow it plan its
responses to emerging crises. The United States should also
simplify its food aid system, which consists of six different
programs administered by two agencies.

The best food aid is flexible, timely, responsive and provides a
buffer for tragic food shortfalls caused by devastation from
disease, war or nature, while strengthening the systems of food
production and distribution in the countries and regions it is
trying to help. ...

Sophia Murphy is the director of the Trade Program at the Institute
for Agriculture and Trade Policy in Minneapolis.

*************************************************************

Excerpts from U.S. Food Aid: Time to Get It Right

[5] Who Benefits from U.S. Food Aid?

To understand the politics of U.S. food aid, particularly the
government's reluctance to reform food aid in line with
internationally recognized best practices, it is essential to
understand who benefits from the existing system. Three interest
groups support the status quo on U.S. food aid: agribusiness firms
(especially food processors but also some farmer cooperatives),
maritime companies, and a small but powerful group of
non-governmental organizations, or private voluntary organizations
(PVOs), as they are more commonly known in the U.S. Some food-aid
analysts refer to this group as the "iron triangle" because of
their stranglehold on food aid practice. While their goals and
activities differ greatly, these three interest groups cooperate to
perpetuate food aid programs in their current form. All three use
the same myths to rationalize food aid.

Agribusiness

Agribusiness companies bid on food aid contracts offered by the
USDA Farm Service Agency (FSA). U.S. law requires that a minimum of
75 percent of U.S. food aid be sourced, fortified, processed and
bagged in the U.S. Only a limited number of firms are qualified to
bid on the procurement contracts and a few large corporations
dominant. In 2003, just two firms, Cargill and Archer-Daniels
Midland (ADM), won the contracts to provide a third of all U.S.
food aid shipments. ...

Agribusiness in the U.S. is a highly concentrated business: three
firms (Cargill, ADM and Zen Noh) export over 80 percent of U.S.
corn and over 60 percent of U.S. soybeans; three firms (Cargill,
ADM and Conagra) dominate flour milling; three firms (Bunge, ADM
and Cargill) have 71 percent of the U.S. soybean crushing business;
and, three firms (Cargill, Cenex Harvest States and ADM) dominate
export terminal handling facilities (which are essential to
shipping the grain out). This dominance is the main reason just two
firms and not just any two firms, but Cargill and ADM handle so
much U.S. food aid. ...


Shipping Companies

The second, and perhaps most important, beneficiary of U.S. food
aid programs are shipping and maritime interests. U.S. law
stipulates that 75 percent of all food aid must be transported on
ships fl ying U.S. fl ags. The percentage was increased from 50
percent in the 1985 farm legislation, against the wishes of USDA,
USAID and farm groups. ...

According to Barrett and Maxwell, "In the 2000- 2002 period, nearly
40 percent of total costs of U.S. food aid programs were paid to
U.S. shipping companies."

U.S. shippers are failing as businesses. U.S. carriers now handle
only 3 percent of U.S. imports and exports (excluding food aid).
Using 1991-93 data, the U.S. General Accounting Office (GAO)
established that U.S. bulk carriers cost 75.9 percent more than
foreign bulk carriers over the same routes and shipping the same
commodities. Barrett and Maxwell used the same methodology to
analyze the 1999-2000 date for 416(b) and Food for Progress
shipments, and found the premium for using U.S. ships had gone up
to 77.7 percent. ...

Just as food aid is not significant enough a share of global totals
to make a difference to the price received by farmers at the
farmgate, so it is not particularly significant as a share of the
global shipping business. Most of the U.S. shipping companies
involved in food aid make their real money on container vessels,
where they are more competitive. Food aid brings in a tidy and
reliable profit, safe from competition, but only a small number of
shippers would go bankrupt without it. ...

Private Voluntary Organizations and Monetization

Private voluntary organizations (PVOs) comprise the third arm of
the iron triangle. Barrett and Maxwell reviewed the numbers for
eight of the main NGOs engaged in food aid. Together these eight
NGOs had almost $1.5 billion in gross revenues in 2001, and three
alone (CARE, World Vision and Catholic Relief Services) account for
well over four-fifths of this total. The eight reviewed were
Adventist Development and Relief Agency International, Africare,
CARE, Catholic Relief Services (CRS), Food for the Hungry
International, Project Concern International, Technoserve, and
World Vision. Barrett and Maxwell calculated that food aid was
worth an average of 30 percent of these eight organizations' gross
revenues in 2001.

The PVOs' interest in protecting the status quo is less obvious
than that on the private companies involved.

After all, the PVOs' credibility depends on delivering, and being
seen to deliver, help that goes straight to those in need, making
a real difference on the ground in developing countries. These
agencies pride themselves keeping their overhead costs low and are
committed to the eradication of poverty. This makes their active
lobbying to preserve the status quo around food aid much more
difficult to justify than the lobbying of firms whose obligation is
to maximize corporate profits. In fact, most NGOs would probably
prefer to manage financial resources than to act as food brokers to
fund their development work.

The trap for these NGOs is dependence on monetization: the
relatively new but rapidly expanding feature of project food aid.
Monetization is the sale of food aid on local markets in developing
countries to generate funds for development projects. Originally,
limited monetization was allowed to enable PVOs to cover the
financial costs associated with handling food aid (storage, for
example). Since 1990, however, monetization has become an important
revenue stream for PVOs' funding of their ongoing development work.
The problem is uniquely American because other aid-donor
governments provide much of their food aid in the form of cash, so
few non-U.S. NGOs are tempted to sell food aid to cover their
costs. ...

The PVOs are caught for several reasons: large sums of money are
involved relative to NGOs non-food aid revenues, the money comes
with relatively few strings attached, and food aid shipments are
good for the books, because a relatively large sum of money can be
realized for relatively little administrative cost. And, they fear
that attempts to reform food aid will simply end food aid
altogether, when politically powerful U.S.-based agribusiness and
U.S. maritime shippers lose their stake in the system. ...

Is U.S. food aid worse than others?

Two things stand out about U.S. food aid. One, as it contributes
roughly 65 percent of the global total, what the U.S. does really
matters in the food aid world. Two, the U.S. has continued to spend
a lot of money on expensive and sometimes damaging kinds of food
aid, rather than showing leadership towards best practice. It is
not that the U.S. is alone in its bad habits: Canadians have an
even higher domestic procurement requirement, with a 90 percent
minimum threshold for in- kind food aid. South Korea also sells
food aid, rather than providing only grants. The E.U. disbursement
of food aid funds is so slow that the timing of their assistance a
critical variable in assuring good results can make it less useful
than in-kind donations, even those these have to be procured and
shipped from thousands of miles away. Japan uses food aid to get
rid of unwanted rice imports, forced on it by the WTO Agreement on
Agriculture's minimum import requirement for countries that did not
convert market access barriers into tariffs. Nonetheless, most food
aid donors have made important reforms to their food aid programs
in recent years: the U.S. has not.

The main problems with U.S. food aid are:

1. Food aid sales, under Title 1 of PL 480. Although program food
aid is now less than a tenth its former size, the U.S. continues to
sell food aid.

2. The insistence on minimum levels of U.S. procurement,
processing, bagging and shipping. Best practice would create a more
flexible system, designed to be responsive to recipients' needs.
The E.U.'s greater reliance on local and triangular purchases
contributes to shipping costs of less than one half those paid by
the U.S. The Bush administration this year proposed carving out a
further $300 million for local and triangular food aid from
existing food aid resources. Congress, encouraged by food aid PVOs
and other lobbyists for the status quo, rejected the proposal.

3. The time lag created by insisting on in-kind food aid. Food aid
shipments from the U.S. take an average of five months to reach
their destination making them pointless for rapid response, and
potentially harmful if the shipments arrive at a time when domestic
production is available in the market. It is true the E.U. has
bureaucratic problems with the disbursement of its food aid cash
that can make its local and regional purchases slow as well. This
situation has to be improved. But the U.S. will not be able to
improve its performance until it moves towards an untied system
that favors food purchases in developing countries, near where the
food aid is needed.

4. In-kind food aid wastes money. An OECD study published in 2005
determined that in-kind food aid, by conservative estimates, is at
least 30 percent more costly per metric ton than the much smaller
portion of food aid that is purchased in third countries. Food aid
that is purchased in the recipient country usually costs less than
food purchased in the open global market and far less than food aid
procured in donor countries.

5. Food aid needs a single government home, with an agency that is
responsive to recipient needs and which knows how to work with the
multilateral community engaged in responding to emergencies and
fostering long-term food security. ... In 1990, the Farm Bill
declared the sole purpose of all U.S. food aid to be food security.
It is time its administration reflected that worthy ambition.

6. Continued links between ... the storage of domestic commodities
and food aid contributions, such as exemplified in the Bill Emerson
Humanitarian Trust. The trust pays private companies to store food
against possible shortfalls; the result is the companies involved
have become an active lobby to stop the commodities being used
(they are only paid if they hold the grain in their silos). ...

*************************************************************
AfricaFocus Bulletin is an independent electronic publication
providing reposted commentary and analysis on African issues, with
a particular focus on U.S. and international policies. AfricaFocus
Bulletin is edited by William Minter.

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