June 14, 2013

Proposed U.S. Food Aid System Reforms Much Needed, Texas A&M Professor Tells Congress

A bill before Congress this week will, if passed, provide much-needed reform to the U.S. humanitarian aid system, says a Texas A&M University professor, by feeding the world’s hungry with food procured locally ― in the country or region that the aid would be distributed ― as opposed to costly shipping of food from the U.S., thousands of miles across the globe.

Andrew Natsios, an executive professor at Texas A&M’s Bush School of Government and Public Service and the former head of the U.S. Agency for International Development (USAID), testified before the House Committee on Foreign Affairs in support of the Food Aid Reform Act (H.R. 1983), bipartisan legislation proposed by the committee’s chairman Rep. Ed Royce (R-Calif.) and ranking member Rep. Karen Bass (D-Calif.).

Andrew Natsios

Andrew Natsios

The bill proposes reforms similar to those proposed by President Obama this year and President George W. Bush before him, and according to Natsios, the reforms would allow U.S. food aid agencies to feed more hungry people for less cost.

“It is a reform that encourages free market principles, improves government efficiency, will save lives and lower costs while still providing expanding services to those in need,” Natsios told the committee.

The U.S. food aid program, known as the Food for Peace program, has saved millions of lives over the past half-century, said Natsios, but could be more efficient and less costly by the use of locally procured food. Most U.S. food aid, 82 percent, is shipped from the States to sub-Sahara Africa, a long, complex and expensive process, he said.

“Since 2003, the Food for Peace program has spent 49 percent of its budget on transportation and handling costs and only 40 percent on actual commodities,” he explained. “In other words, in the last 10 years, the U.S. government has spent more on transporting, storing and distributing the food than on the food itself.”

He pointed to a 2009 study by the General Accounting Office that looked at local and regional procurement (LRP) and found that local food procurement is more cost effective than shipping food from overseas, and it greatly shortens delivery times.

The U.S. Department of Agriculture in 2012 ran a local and regional purchase pilot program, Natsios told the committee, “and found that, for nearly every type of commodity, the costs of procuring in the U.S. and transporting the commodity was higher than purchasing the commodity locally.”

Part of the problem with shipping food aid, he said, is with the Cargo Preference Act of 1954 which says 50 percent of food aid must be shipped on U.S. flag-carriers, of which there are only 13 U.S. Department of Transportation-qualified firms. “This greatly increases the costs of shipping these commodities by limiting the number of companies able to bid on the shipping contracts,” he told the committee.

Another problem with the current system, Natsios explained, has to do with the practice of monetization, whereby when food aid has been received, usually by the World Food Program (WFP) or non-governmental organizations (NGOs), one of two things occurs. “Either the food is distributed to feed the hungry or in the case of NGOs, it is sold in the local markets for local currency that is used by the NGOs for other development projects,” he said. “Monetization is often seen as a source of revenue for the NGOs to fund their projects, but this indirect form of payment is a very inefficient and brings along an array of problems. For one, NGOs often sell the food aid at less than market prices, which rarely, if ever, make up for the original costs of procurement and shipping. In addition, this influx of food aid at low prices into local markets often undermines local farmers, making it difficult for them to compete.”

Natsios said that while monetization can cause problems, there are times when it can be an important tool in fighting famines and the decision should be left up to Food for Peace officers, not by law or interest group pressure in the U.S.

children in Somalia

Natsios says it's estimated that proposed food aid reforms will allow the U.S. to feed between four and 10 million more of the world's hungry. (Photo credit: Sadik Gulec/Shutterstock.com)

“One of the major factors leading to widespread deaths in famines is the sharp rise in food prices in local markets over short periods of time, usually after a major crop failure,” he said. “In Somalia in 1991, the price of grain increased between 700-1200 percent in less than a one-year period. This was the immediate cause of the Somali famine which killed 250,000 people. USAID has intervened in markets by auctioning food aid locally to reduce prices to a more normal level, so that more people can afford to buy food in the markets. Any food aid reforms should not preclude market interventions to stabilize food prices during famines.”

According to Natsios, USAID estimates that as many as four million more people could receive food aid after the enactment of the reforms without having to appropriate any additional money. “One brief by the Center for Global Development put the figure even higher, at 10 million additional people if the reforms are enacted,” he noted.

Response time is another major issue with food aid reform and in the USDA pilot program, Natsios explained, the total time for local purchases for emergency situations averaged 56 days, while the current system took 130 days. “That is 74 days, in an emergency situation, where men, women and children who are in desperate need of food aid, are not getting the food that they need to survive,” he said.

In addition, he noted, purchasing food from local markets helps struggling countries economically. “We have considerable evidence that purchasing food locally provides additional support to local farmers and helps to boost the local economy.”

The need for reform is dire, said Natsios, who in his years of aid work, “personally witnessed the great strengths and weaknesses of our food aid program. In fast onset famines such as Somalia in 1991-92 and wars involving mass population displacement, such as in Darfur in 2003 and 2004, I watched people die waiting for food aid to arrive.”

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Media Contact: Lesley Henton, News and Information Services at Texas A&M University; 979-845-5591, lshenton@tamu.edu

 

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