Even pity has a price: Food aid - OXFAM Part 1 Excerpt
Wednesday, 22. March 2006, 02:43:31
PDF formatted report from Oxfam on food aid. My first impression was food aid was a simple transaction between one country using its resources to help another. But it has very heavy restrictive involvement.
US food aid programs
Criticisms have been levelled at US food aid programs, in connection with issues of efficiency, effectiveness, and targeting. As mentioned above, the USA is the largest donor currently utilizing program food aid. While the use of this type of food aid has declined in recent years, it saw large spikes during the 1990s, when the USA made large shipments to Russia. The USA also retains the ability to use program food aid to dispose of surpluses in the future.
The USA is also the only major donor to sell food aid to developing countries, rather than providing it exclusively in grant form. The USA is also the only major donor to disburse a large proportion of its food aid on a bilateral basis, rather than channeling it through international organizations such as the World Food Program. Although the USA provides the majority of the WFP's resources, its donations are almost entirely in-kind rather than in cash. Other countries provide cash which the WFP can use to source and distribute food commodities close to where they are needed.
The US approach to food aid involves an 'alphabet soup' of programs and acronyms. Overall, food aid is administered by two agencies, the US Department of Agriculture (USDA) and the US Agency for International Development (USAID). There are several mechanisms and authorizations for food aid.
Public Law 480 (PL 480) was enacted in 1954 with three 'titles', each facilitating different kinds of food aid:
- Title I provides 'program' food aid to recipient governments. Most Title I food aid is provided in the form of concessional sales, rather than in grant form. Title I is administered by the USDA, and has a strong emphasis on expanding US export markets. All Title I food aid is monetized (i.e. sold on local markets). For fiscal year 2003, the largest recipients of Title I food aid were Indonesia, Jordan, the Philippines, and Uzbekistan.
- Title II is administered by USAID, and provides for the donation of US agricultural commodities to meet emergency and non-emergency food aid needs. NGOs, the WFP, and governments are eligible for Title II food aid. As much as 70 per cent of non-emergency project food aid is monetized by NGOs or recipient governments to fund development projects.
- Title III is administered by USAID, and provides for donations of US agricultural commodities to the world's poorest countries. Title III food aid has not been utilized recently.
Section 416(b). This program, authorized in permanent law and administered by the USDA, provides for the donation overseas of agricultural commodities held as surplus stocks. This component of food aid is most variable, because it is entirely dependent on the availability of surplus inventories. In 2003, the program was allocated about $149m ($110m for distribution by private voluntary organizations and US government agencies, and $49m for distribution via the WFP).
Food for Progress is administered by the USDA and provides commodities to support countries that have made commitments to 'expand free enterprise' in their agricultural sectors. The commodities can either be donated or sold on concessional terms. This program was funded with approximately $158m in 2003.
The Bill Emerson Humanitarian Trust is primarily a reserve of up to 4m tonnes of wheat, corn, sorghum, and rice that can be used to help fulfill PL 480 food aid commitments to developing countries, to meet emergency needs or when US domestic supplies are short. The Bush Administration recently tapped the trust to meet food aid needs in Africa and Iraq.
McGovern-Dole International Food for Education and Child Nutrition Program provides commodities and financial and technical assistance to carry out pre-school and school food-for-education programs and maternal, infant, and child nutrition programs. NGOs, cooperatives, the WFP, and foreign governments are all eligible organizations for carrying out these activities. The USDA administers this program.
The US food aid system creates opportunities for a variety of private interests to skim off benefits in the procurement, packaging, transportation, and distribution of commodities. Many inefficiencies result from the US insistence on sending commodities for food aid. For example, the US government requests bids for sales of surplus agricultural commodities from a limited list of pre-qualified US-based agribusiness companies, and arranges the transportation of these commodities from the USA to recipient countries on US-flagged ships. The bidding process results in purchase and transportation expenses that are substantially higher than market costs.
US shipping companies are major beneficiaries of food aid programs: US law mandates that 75 per cent of all food aid transport be handled by shipping companies carrying the US flag. In 2002, $261 million - over one-third of total US food aid program costs - was allocated to US shipping companies. The share of international cargo, other than US food aid, carried by US-flagged ships has been declining and now accounts for less than 3 per cent of US import and export tonnage.
A select group of US cereals traders also benefits from these tidy arrangements for food aid. In March and April 2003, the 'competitive' acquisition process resulted in contracts for grain purchases in excess of $28m. This was shared among just four companies: Cargill, Louis Dreyfus, ADM/Farmland, and Kalama Export Company. According to the US Government Accountability Office, only 18 US companies were qualified to bid for food aid contracts even when volumes of food aid shipments were at their peak between 1991 and 1994.
Box 2: Canada's food aid: reform incomplete
Canada is the world's second largest food aid donor after the USA in terms of per capita donations. Its food aid policy is also the world's second most restrictive, requiring 90 per cent of the budget be spent on the purchase and shipment of Canadian commodities. Only the USA, where virtually all food aid is tied to US purchases, is more restrictive.
As in the USA, Canadian food aid policy dates from the early 1950s and grew out of a desire to clear markets of surpluses. Commodity surpluses in Canada are now rarely large, because agricultural commodities sell, even if prices are low. Yet the legacy of decades past remains bound up in Canada's food aid rules.
Canadian food aid is less trade-distorting than that of the USA because very little of it is monetized; all of it is provided in the form of grants from the government's operating budget. In 2003, for example, Canada provided 70 per cent of its food aid as project aid, flowing through the WFP and Canadian NGOs. Thirty per cent went as emergency aid, and none as program food aid. Canada has not contributed any monetized food aid since 2000.
Yet the 90 per cent rule makes for some perverse results in addressing hunger. Much of the available funding for food aid is spent on expensive transportation that feeds no-one. Of the $165m budgeted for 2005, $66m (40 per cent) will be spent not on food, but on shipping. In August 2004, for example, the price of local wheat in Nazaret, Ethiopia was C$248 per tonne. The price in Montreal was virtually the same: C$253 per tonne. But to deliver Canadian wheat to Nazaret cost an additional C$172 for each tonne.
Due largely to the inefficiencies of tied aid, Canada has reduced its food aid budget substantially over the years, spending aid money instead to fund nutrition programs. Under the 1967 Food Aid Convention, Canada promised to provide 420,000 tonnes annually, about 12 per cent of the total pledged by all donors, although its share usually exceeded that level. By 2000, Canada's shipments fell to 30 per cent below its commitment. And its volumes of food aid have yet to regain pre-2000 levels.
Some form of untying is essential if Canada's food aid is not to disappear altogether. Simply untying is not the answer, since Canada is loath to spend its aid budget on subsidized US or EU commodities.
Canadian NGOs have proposed new rules for Canadian food aid that would permit the flexibility to purchase food locally. Local or regional purchase would be permitted if:
- the needed commodity was not produced in Canada; or
- the purchase would be more cost-effective than shipping from Canada; or
- in cases of urgent need, delivery could be made more quickly.lrackl@suntimes.com
Since adopting similar criteria, the EU has procured an average of 28 per cent of its food aid locally or regionally. Such local purchase flexibility is essential if food aid is to fulfill its primary intent: to feed hungry people who need assistance.
Source: Canadian Foodgrains Bank and Oxfam Canada
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