[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
LOCAL AND REGIONAL PURCHASES: OPPORTUNITIES TO ENHANCE U.S. FOOD AID
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HEARING
BEFORE THE
SUBCOMMITTEE ON AFRICA AND GLOBAL HEALTH
OF THE
COMMITTEE ON FOREIGN AFFAIRS
HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
JUNE 4, 2009
__________
Serial No. 111-75
__________
Printed for the use of the Committee on Foreign Affairs
Available via the World Wide Web: http://www.foreignaffairs.house.gov/
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Washington, DC 20402-0001
COMMITTEE ON FOREIGN AFFAIRS
HOWARD L. BERMAN, California, Chairman
GARY L. ACKERMAN, New York ILEANA ROS-LEHTINEN, Florida
ENI F.H. FALEOMAVAEGA, American CHRISTOPHER H. SMITH, New Jersey
Samoa DAN BURTON, Indiana
DONALD M. PAYNE, New Jersey ELTON GALLEGLY, California
BRAD SHERMAN, California DANA ROHRABACHER, California
ROBERT WEXLER, Florida DONALD A. MANZULLO, Illinois
ELIOT L. ENGEL, New York EDWARD R. ROYCE, California
BILL DELAHUNT, Massachusetts RON PAUL, Texas
GREGORY W. MEEKS, New York JEFF FLAKE, Arizona
DIANE E. WATSON, California MIKE PENCE, Indiana
RUSS CARNAHAN, Missouri JOE WILSON, South Carolina
ALBIO SIRES, New Jersey JOHN BOOZMAN, Arkansas
GERALD E. CONNOLLY, Virginia J. GRESHAM BARRETT, South Carolina
MICHAEL E. McMAHON, New York CONNIE MACK, Florida
JOHN S. TANNER, Tennessee JEFF FORTENBERRY, Nebraska
GENE GREEN, Texas MICHAEL T. McCAUL, Texas
LYNN WOOLSEY, California TED POE, Texas
SHEILA JACKSON LEE, Texas BOB INGLIS, South Carolina
BARBARA LEE, California GUS BILIRAKIS, Florida
SHELLEY BERKLEY, Nevada
JOSEPH CROWLEY, New York
MIKE ROSS, Arkansas
BRAD MILLER, North Carolina
DAVID SCOTT, Georgia
JIM COSTA, California
KEITH ELLISON, Minnesota
GABRIELLE GIFFORDS, Arizona
RON KLEIN, Florida
Richard J. Kessler, Staff Director
Yleem Poblete, Republican Staff Director
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Subcommittee on Africa and Global Health
DONALD M. PAYNE, New Jersey, Chairman
DIANE E. WATSON, California CHRISTOPHER H. SMITH, New Jersey
BARBARA LEE, California JEFF FLAKE, Arizona
BRAD MILLER, North Carolina JOHN BOOZMAN, Arkansas
GREGORY W. MEEKS, New York JEFF FORTENBERRY, Nebraska
SHEILA JACKSON LEE, Texas
LYNN WOOLSEY, California
Noelle Lusane, Subcommittee Staff Director
Sheri Rickert, Republican Professional Staff Member
Antonina King, Staff Associate
C O N T E N T S
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Page
WITNESSES
Mr. Thomas Melito, Director, International Affairs and Trade
Team, United States Government Accountability Office........... 6
Mr. Jon C. Brause, Deputy Assistant Administrator, Bureau for
Democracy, Conflict, and Humanitarian Assistance, United States
Agency for International Development........................... 21
Mr. Bud Philbrook, Deputy Under Secretary, Farm and Foreign
Agricultural Services, United States Department of Agriculture. 30
Ms. Jean McKeever, Associate Administrator, Business and
Workforce Development, Senior Program Manager, Office of Cargo
Preference Program, Maritime Administration, United States
Department of Transportation................................... 37
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Mr. Thomas Melito: Prepared statement............................ 9
Mr. Jon C. Brause: Prepared statement............................ 23
Mr. Bud Philbrook: Prepared statement............................ 32
Ms. Jean McKeever: Prepared statement............................ 39
APPENDIX
Hearing notice................................................... 50
Hearing minutes.................................................. 51
LOCAL AND REGIONAL PURCHASES: OPPORTUNITIES TO ENHANCE U.S. FOOD AID
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THURSDAY, JUNE 4, 2009
House of Representatives,
Subcommittee on Africa and Global Health,
Committee on Foreign Affairs,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:40 a.m. in
room 2172, Rayburn House Office Building, the Hon. Donald M.
Payne, (chairman of the subcommittee) presiding.
Mr. Payne. Let me call this hearing to order. I was waiting
for the ranking member but many of you may know that he is
involved in a very intense case of a constituent who is in
Brazil, and the constituent's son is in a legal entanglement. I
assume he will be here if his schedule permits, but we will
move forward. As you know, there are always many conflicts in
our schedule.
Let me certainly welcome all of you here this morning for
this very important continuation of the subject that we have
been dealing with here at the Subcommittee on Africa and Global
Health for several years. Let me welcome all of you to the
fourth hearing that we have had of the subcommittee this year;
today's hearing is entitled ``Local and Regional Purchases:
Opportunities to Enhance U.S. Food Aid.'' The hearing will be
followed by a briefing of the same title.
This is the third in a series of hearings we have held on
U.S. food aid programs and security. The hearing will focus on
the results of a Government Accountability Office (GAO) report,
which I requested last year, related to the role that
purchasing food locally or regionally can play in improving
efficiency and effectiveness of the U.S. in-kind food programs.
The 2007 GAO report has shown that there was a great room
for improvement within our traditional in-kind food aid
programs. Local and regional procurement (LRP) and we will be
using the acronym for local and regional procurement. LRP is
the purchasing of food commodities in countries with emergency
food needs, or in another country within the region to be
provided as food aid.
As we will hear today, this approach is already being put
to use to some extent in U.S. programs and is used extensively
by the World Food Program, the WFP. As many of us know, the
U.S. is the largest food aid provider in the world. In 2008,
the U.S. gave $2.1 billion in U.S. commodities for WFP
emergency food operations. Almost all U.S. food aid is provided
in the form of U.S. commodity donations and it has been that
way for the last 50 years. Other donors such as the EU, the
second largest provider of food aid, have switched over almost
entirely to cash donations to WFP to purchase food aid. In
2008, the WFP purchase more than $1 billion worth of
commodities or 2.1 million metric tons worldwide. More than
half of those commodities were purchased in developing
countries.
In recent years, LRP have been discussed as a cost-
efficient time saving option to be employed to meet emergency
food needs, and it has been explored through several programs.
The food aid budget requests for Fiscal Year 2006 through 2009
include language authorizing the U.S. Agency for International
Development (USAID) to allocate up to 25 percent of funds for
food aid, Title II of P.L. 480--or as it has been recently
renamed, Food for Peace--to local or regional purchase. The
justification for this request was that it would increase
timeliness and effectiveness of our response to emergency food
aid needs. The language did not make it in the final bill.
The former administration's foreign bill proposal also
authorized P.L. 480 funds for LRPs. The 2008 Farm Bill did
include a 5-year $60 million U.S. Department of Agriculture
(USDA) pilot project for LRP. The U.S. Agency for International
Development (USAID) provided $125 million to implement LRP in
developing countries through Fiscal Year 2008 Supplemental
Appropriations Bill.
There are currently several LRP initiatives before the
111th Congress. President Obama's Fiscal Year 2010 budget
proposal has, in addition to other food security-related items,
$300 million in international disaster assistance (IDA) funds
for LRPs, cash transfers, and cash vouchers to meet emergency
food needs.
Additionally, the President announced, at the G-20 meeting
in April, his plans to double agricultural assistance toward
helping nations around the world reach and sustain food
security. Secretary Clinton has begun the plans, and we look
forward to holding hearings and working closely with the
administration on these new critical initiatives to see just
what form the new administration's programs will take.
Also under consideration are the Lugar-Casey Global Food
Security Act and a similar measure in the House, to be led by
Congresswoman McCollum, which I am collaborating with her as
this legislation moves forward.
Some of the questions which has been raised by LRP include
the following: One, could the U.S. respond to emergency food
needs at lower cost in a more timely manner if commodities were
purchased in locations closer to where they were needed?
Two, what risks would be associated with LRPs that would
make it a less effective response to emergency food needs and
provisions of U.S. commodities?
Three, could LRP contribute to agricultural development,
increased production, productivity, development of markets for
small holders or low-income farmers in developing countries?
Finally, could LRP adversely affect agriculture development
and make poor consumers more food insecure?
So there is still a number of questions that need to be
answered as we move forward. It is not as simple as it might
seem at first blush.
The GAO report found that, overall, LRP is more cost
effective and arrives quicker than U.S. in-kind donations. In
fact, 95 percent of WFP's local procurement in sub-Saharan
African costs roughly 34 percent less than similar food
purchased by USAID which was shipped from the United States to
the same countries between 2001 and 2008. This is quite
remarkable.
The report also mentions, however, some of the challenges
that prevent wider use of LRP. These include a lack of
reliability suppliers, poor infrastructure and logistical
capacity, weak legal systems, timing and restrictions on donor
fundings, and quality considerations.
There are also questions about the disruption factor on
local markets by LRP, a feature of the in-kind approach which
we have long decried. These issues highlight the need for
greater United States investment in these areas in Africa,
particularly in infrastructure and legal systems for long-term
development.
Other issues include the limitations on LRP due to cargo
preference requirements that 75 percent of the gross tonnage of
agricultural foreign assistance cargo be transported on U.S.-
flag vessels. These and other issues have been addressed in the
GAO report and will be discussed in this hearing.
It is my belief that we must begin to think more creatively
about our food aid program. Ultimately the objective should be
the elimination of food assistance. This can only be reached if
we focus on development of agricultural systems and
infrastructure, among other things, particularly in Africa.
However, food aid, including in-kind aid, will likely be a
feature of U.S. Government programs for a very long time for
several reasons.
One, there will always be emergencies. The global
population is set to increase dramatically over the coming
decades, and increasing industrialization across the globe will
lead to more urbanization and less agricultural production, and
we can see that in the United States. As we continue to see
industrial development, we see former farmlands being taken for
housing developments and industrial developments, et cetera. So
this is going to be a worldwide trend, especially in new
industrialized countries like Indian and China, countries that
are large food consumers.
In other words, there will likely always been the need for
food assistance somewhere in the world. It is incumbent upon
our generation to think strategically about how to strike a
balance between meeting the world's emergency food needs and
working toward long-term food security and the elimination of
chronic hunger among the world's poor.
I welcome the testimony of our distinguished panel. We will
hear from Tom Melito of the GAO; John Brause of the U.S. Agency
for International Development; Bud Philbrook of the U.S.
Department of Agriculture; and Jean McKeever of the U.S.
Department of Transportation. Following their testimonies and
members' questions, we will be briefed by Allan Jury of the
World Food Program.
The committee thanks each of you for your participation
today. I will open our panel for remarks from our members, and
then I will introduce our panelists. We will start with our
representative from California, Congresswoman Watson.
Ms. Watson. Thank you very much, Mr. Chairman.
Just to follow up with your opening, I would like to take a
few minutes to discuss the monumental nature of world hunger.
A child dies every 6 seconds because of malnutrition-
related causes, and already there are 963 million people
worldwide who go to bed hungry or malnourished. Two-thirds of
the world's hunger live in the Asian-Pacific region. Around the
globe the need for food assistance is on the rise as a result
of warfare, natural disasters, crop failure, or the inability
to work due to medical and illness reasons.
In the future, climate change too will play a role by
exacerbating water shortages in some areas while flooding
others.
As most of you may already know, UNICEF's humanitarian and
action report of 2009, which was released just this past
weekend, found they required a 17-percent increase from its
2008 funding level to meet emergency response needs worldwide.
This report also noted hunger is at a 40-year high in South
Asia, especially in Nepal, Bangladesh, and Pakistan. This is in
addition to the doubling in emergency needs in Eastern and
Southern Africa.
Through U.S. food aid, and though it does not solely focus
on emergency funding, it is a large function of the provided
aid irrespective of agency. The U.S. has traditionally provided
in-kind food aid which ensures quality and reliability rather
than contributing cash funds. In-kind aid requires over 100
days to reach its destination and in many instances it is
excessively costly. That is 100 days that food victims are
without food. With local and regional procurement, food aid can
reach those in need in a third of the time and at a lower cost.
In addition to speed and costs, local and regional food and
procurement provides incentives for farmers to raise cash crops
and government to invest in infrastructure building. I am aware
that local and regional procurement faces its own set of
problems. Small farmers are subject to the whims of the
environment, and thus cannot always deliver their promised crop
or the crop may not be up to standard. However, I feel that
local procurement holds much promise.
Each situation is unique, and we must concentrate on
developing a method to evaluate the best method of delivery, be
it in kind or aid or cash aid.
We must consider the rising fuel cost, the availability of
food in the locality, and the substainability of
the programs. We must not forget our goal, and that is to end
hunger. We must feed the hungry and teach them to feed
themselves as well, and I hope the panelists can enlighten us
on how best to do just that, and with that I yield back my
time, and thank you for the opportunity, Mr. Chairman.
Mr. Payne. Thank you very much, Congresswoman Watson.
Another Congressperson from California, Congresswoman Woolsey.
Ms. Woolsey. Thank you, Mr. Chairman.
I think what I am going to be listening for today, I am so
thankful to have such a great panel, is how with 850 million
malnourished people in this world of ours and 30-40 percent of
them in Africa, how we are going to sort of follow the parable
in the Bible that I couldn't tell you where it is and I am not
going to quote it right because I don't know that much about it
except that there is some truth in giving somebody a fish to
eat for that day, teach them to fish, and indeed they know how
to feed themselves from then on.
So I will be looking at ag development investment, local ag
and whatever the United States can do to help the local areas
feed themselves in the very best possible way, which means, of
course, they need development assistance and they need
infrastructure, irrigation, they need fertilizer, they need
power and power tools and machinery, and they need roads to
market. I mean, there is a lot that is missing in this picture,
but rather than just bring food from our country and handing it
to them I think we could do a lot better by bringing seeds and
education and the support that they need. I understand that is
what the Europeans and the Canadians are doing now, so I am
anxious to hear more about that. Thank you.
Mr. Payne. Thank you very much.
Today we will hear from our distinguished witnesses, Mr.
Melito, Mr. Brause, Mr. Philbrook and Mr. McKeever--Ms. If I
had looked up, I would have known that, but I was looking down.
Let me first introduce Dr. Melito, who is the director of
international affairs and trade team at the Government
Accountability Office, and they are the ones that do so much
good work in giving us reports that give us the tools that we
need to move forward, and I really thank that outstanding
government agency.
In this capacity, he is primarily responsible for GAO work
involving multilateral organizations and international finance.
Over the past 10 years, Dr. Melito has been focusing on a wide
range of development issues, including debt relief for poor
countries, international food security, and human trafficking.
Since 2007, Dr. Melito testified several times to Congress on
GAO reports on challenges U.S. agencies face in improving the
efficiency and the effectiveness of food aid.
Dr. Melito holds a M.A. and a Ph.D. in economics from
Columbia University, and a B.S. in industrial and labor
relations from Cornell University.
Next we will have Mr. Jon Brause who is currently serving
as the deputy administrator in the Bureau for Democracy,
Conflict, and Humanitarian Assistance. In this capacity, he is
responsible for disaster response, food aid, and transitional
assistance. Mr. Brause has 18 years of experience in USAID
covering procurement issues, operational and budgetary
policies, and programming and managerial management of
humanitarian and development resources.
During his tenure in the Office of Food for Peace, Mr.
Brause managed all aspects of the U.S. Government food aid
programming for humanitarian activities worldwide. Prior to his
current position, Mr. Brause was special assistant to the
president and senior director for relief, stabilization and
development at the National Security Council's Directorate on
International Economic Affairs.
Mr. Brause has a bachelor's degree in international
relations from University of California--Davis, and a master's
degree in national security strategic from the National Defense
University, National War College in Washington, DC.
Next we have Mr. Bud Philbrook representing the U.S.
Department of Agriculture. In 2009, Agriculture Secretary Tom
Vilsack appointed Bud Philbrook as USDA's deputy under
secretary for farm and foreign agricultural services.
In this role, Mr. Philbrook has responsibility for the
international side of the Farm and Foreign Agricultural
Service's mission area. His mission area includes the Foreign
Agricultural Service that works to expand exiting and build new
markets for U.S. products, improve the competitive position of
U.S. agriculture in the global marketplace, and to provide food
aid and technical assistance to foreign countries.
Mr. Philbrook received his bachelor's degree from the
University of Minnesota, his master's degree from the Hubert
Humphrey Institute of Public Affairs at the University of
Minnesota and earned a law degree from Hamline University
School of Law in St. Paul, Minnesota.
He and his wife Michele have three adult sons.
And finally we have Ms. Jean McKeever--McKeever--I will get
her altogether at one point. She joins us from the United
States Department of Transportation. Ms. McKeever serves as the
Assistant Maritime
Administration's Assistant associate administrator
for business and workforce development. She is responsible for
the agency's Title XI ship financing guarantee program, as well
as tax deferral funds for ship construction. In addition, she
oversees the Maritime Administration's shipbuilding, marine
insurance and labor and training programs.
Previously, she served as the associate administration for
shipbuilding at the Maritime Administration, a post that was
created in 2000 to combine the Maritime Administration's main
shipbuilding-related functions under one single manager. She
has served over 25 years in various financial and analytical
positions, most recently as deputy director of the agency's
Office of Ship Financing.
She holds her degree from Mount Holyoke College in
Massachusetts, and an M.B.A. from Frostburg State University in
Maryland.
Let me once again thank all of the panelists, and we will
begin with Dr. Melito.
STATEMENT OF MR. THOMAS MELITO, DIRECTOR, INTERNATIONAL AFFAIRS
AND TRADE TEAM, UNITED STATES GOVERNMENT ACCOUNTABILITY OFFICE
Mr. Melito. Mr. Chairman and members of the subcommittee.
I am pleased to be here to discuss how local and regional
purchase, or LRP, can provide opportunities to enhance U.S.
food aid. This hearing is of particular importance given
today's environment of growing global food insecurity in which
the United States and other donors face intense pressures to
feed the world's expanding undernourished population. The
number of chronically hungry people in the world has been
growing and now stands at almost 1 billion despite
international commitment to halve the number of hungry people
by 2015.
My testimony is based on our May 2009 report which is being
publicly released today. I will focus on four topics. First, I
will discuss the impact of LRP on the efficiency of food aid
delivery. Second, I will discuss the impact of LRP on economies
where food is procured. Third, I will discuss U.S. legal
requirements that could affect U.S. agencies' use of LRP.
Finally, I will summarize our recommendations regarding
improvements to U.S. agencies' use of LRP.
Regarding the first issue, we found that donors can reduce
food aid costs and delivery time through LRP. Our analyses show
that LRP in sub-Saharan Africa costs about 34 percent less than
similar food aid purchased and shipped from the United States.
However, the cost of LRP in Latin America was comparable to the
cost of U.S. in-kind food aid. We also found that in-kind food
aid donations to sub-Saharan Africa took on average 147 days
compared to about 35 days for locally procured food.
Despite these benefits, donors face challenges to ensuring
cost efficiency and timely delivery, including a limited number
of reliable suppliers and weak legal systems that could limit
buyers' ability to enforce contracts. In addition, while LRP
may provide food that is more suited to local preferences,
concerns persist about the quality of food aid procured in
developing countries. However, evidence on how LRP affects
donors' ability to adhere to quality standards and product
specifications has not been systematically collected.
Regarding the second issue, LRP has the potential to make
food more costly to consumers in areas where food is purchased
by increasing demand. However, steps are being taken to reduce
these risks, such as coordination among donors. LRP's impact
can depend on the scale of procurements and whether the market
is sufficiently integrated with neighboring markets to absorb
increased demand. The most significant challenge to avoiding
potential adverse market impacts when conducting LRP is
unreliable market intelligence.
For example, in 2007, inaccurate information on production
levels in Malawi led WFP to believe it was purchasing maze in a
surplus market. Malawi faced food shortages a few months later.
LRP does have the potential to support local economies by
increasing demand for agricultural commodities and raising
farmers' income, but little data exist to demonstrate that
these benefits have occurred or are sustainable in the long
term.
Regarding the third issue, legal requirements may constrain
agency's use of LRP.
First, LRP cannot be funded out of the Food for Peace Act,
but instead must come from other authorities such as the
Foreign Assistance Act.
Second, the Cargo Preference Act requires up to 75 percent
of the gross tonnage of all U.S.-funded food aid to be
transported on U.S.-flag vessels. However, there is
disagreement among U.S. agencies on how to interpret these
requirements, such as which agency is responsible for
determining the availability of U.S.-flag vessels. The
Memorandum of Understanding (MOU) that helps guide U.S.
agencies' implementation of cargo preference does not address
these areas of ambiguity. The resulting lack of clarity could
constrain agency's ability to fully utilize the authorities to
conduct LRP when responding to food emergencies.
Regarding the final issue, to address the concerns I have
just summarized, we recommend that USAID and USDA, first,
systematically collect evidence on LRP's adherence to quality
standards and product specifications; second, work with
implementing partners to improve the reliability of market
intelligence; and finally, work with the Department of
Transportation to update the MOU to resolve uncertainties
associated with the application of cargo preference.
In summary, the timely provision of food aid is critical in
responding to humanitarian emergencies and food crises. LRP has
the potential to meet the needs of hungry people by providing
food in a more timely and less costly manner. However, to fully
realize its potential, challenges to its effective
implementation must be addressed.
Mr. Chairman, this concludes my statement. I will be
pleased to respond to any questions you or the other members of
the subcommittee may have.
[The prepared statement of Mr. Melito follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Payne. Thank you very much. Mr. Brause.
STATEMENT OF MR. JON C. BRAUSE, DEPUTY ASSISTANT ADMINISTRATOR,
BUREAU FOR DEMOCRACY, CONFLICT, AND HUMANITARIAN ASSISTANCE,
UNITED STATES AGENCY FOR INTERNATIONAL DEVELOPMENT
Mr. Brause. Thank you, Chairman Payne and distinguished
members of the committee. I appreciate the opportunity to be
here today to address this important topic.
As I intend to keep my comments brief, I ask to submit for
the record a longer response to the information requested in
the committee's invitation, and a copy of the USAID/USDA Annual
International Food Assistance Report.
The committee is aware of the current economic global
economic downturn and continuing food security crisis impose
constraints that exacerbate the severity of emergencies and
further strain the capacity of both donors and the vulnerable
to respond to them. This is resulting in decreased purchasing
power, loss of livelihoods and the erosion of coping mechanism;
thus imperiling a generation's future in many countries. Today,
over 1 billion people live in poverty and chronic hunger, and
this number appears to be rising, and food insecurity respects
no boundaries. It is vital to U.S. Government interests to
enhance the capability and flexibility of USAID to respond to
emergencies.
While in-kind U.S. Government food aid remains our
primarily food assistance response, and is the most visible and
valuable humanitarian resource in the world, the ability to
procure food aid commodities locally and regionally over the
last 12 months has increased USAID's capability to meet
emergency food aid needs in an efficient and timely fashion. We
fill pipeline gaps prior to the arrival of food shipped from
the United States. We increase the total amount of life-saving
food aid that U.S. assistance resources can provide in response
to the crisis. It has also increased our understanding of LRP's
limitations and the need for further data collection, analysis
and discussion on its roles in the U.S. Government's
humanitarian tool kit.
Turning to the recently released Government Accountability
Office report on local and regional procurement, USAID
appreciates the amount of time and effort that is reflected in
the audit. We believe that it provides a useful perspective of
locally and regionally procured food assistance as a tool which
complements the U.S. Government's considerable humanitarian
response capabilities.
The GAO report supports our own experience this year that
LRP has the potential not only to stretch the food aid dollar
but also to reduce response times when in-kind food assistance
is not already in the pipeline. A current example of this is
Pakistan where due to sharp increases in the numbers of people
displaced by violence. We are procuring locally even while we
expedite the shipment of additional Title II assistance from
the United States.
While we agree that the impact data is currently lacking,
we believe that LRP has the potential to significantly
contribute to broader U.S. Government efforts to reduce global
food insecurity. By stimulating local and regional food
production, encouraging value-added post-harvest practices, and
supporting open and fair market practices, LRP can strengthen
the rural economy and reduce the vulnerability of those who
depend on it.
USAID concurs with the GAO comments on the need to pay
close attention to food aid quality, and its view that reliable
market intelligence is critical for any LRP efforts. We intend
to work closely with our non-governmental partners, WFP, and
our colleagues at USDA to tackle these important issues.
I would like to take 1 more minute of your time to give you
an idea of what we were looking at as we move forward in Fiscal
Year 2010. I made the point earlier that we believe LRP has a
special role to play in a whole of government approach to
addressing global food insecurity. As we move forward we intend
to work closely with our regional bureaus in USAID and the
interagency to help ensure that whenever possible our emergency
response supports other U.S. Government efforts to stimulate
agricultural productivity and strengthen the participation of
the small holder farmers in local and regional trade in the
developing world.
This could mean ensuring that Title II commodities are
available when food shortages threaten the lives and
livelihoods of assistance farmers, facilitating the flow of
food from surplus to deficit areas through local procurement,
or implementing a cash-based voucher program when food is
available in local markets but vulnerable households simply
cannot afford it.
Even as we respond to emergency needs, we want to make sure
that we are using the right tools at the right time and in the
right way to contribute to a sustainable solution to global
hunger.
I would again like to thank you for the support that your
committee has given the administration in addressing food
security needs abroad and demonstrating to the world the great
heart of the American people. I would be happy to take any
questions that you might have. Thank you very much.
[The prepared statement of Mr. Brause follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Payne. Thank you. Mr. Philbrook.
STATEMENT OF MR. BUD PHILBROOK, DEPUTY UNDER SECRETARY, FARM
AND FOREIGN AGRICULTURAL SERVICES, UNITED STATES DEPARTMENT OF
AGRICULTURE
Mr. Philbrook. Yes, Mr. Chairman and members of the
committee. I am pleased to appear before you to discuss the
role of LRP in the context of the United States Department of
Agriculture's food aid programs.
The 2008 Farm Bill directed USDA to undertake a local and
regional procurement pilot program to be completed in Fiscal
Year 2012. Local and regional purchase of food aid has the
potential to provide another tool in support of President
Obama's commitment to work in partnership with the people of
economically poor nations. This pilot program will help inform
USDA whether local and regional purchases are more quickly
available and cost effective than traditional food aid
donations.
Congress directed that the pilot program be used for
emergency food crises as well as field-based projects that
provide development assistance. Further, Congress directed that
it not disrupt local and regional markets, and the first step
was for the Secretary of Agriculture to submit a study on local
and regional procurement to the Congress, and that report was
provided in January of this year.
USDA consulted with USAID, other donor countries, PVOs and
the World Food Program, and the study found the following:
First, local and regional purchase is an important tool
enabling food aid agencies to respond quickly to emergency food
needs both during and after food crises and disasters; second,
local and regional purchase can be a timely and effective
complement to in-kind food aid programs; and third, to ensure
the success of LRP, market intelligence is critical.
USDA will issue guidelines to implement the pilot program
by mid-July. We will then solicit proposals to conduct field-
based local purchase pilot program. The Farm Bill provides $25
million each in Fiscal Years 2010 and 2011 for the pilot
program, and requires that a diversity of field-based projects
be undertaken in food surplus regions, food deficit regions,
and multiple geographic regions. Africa is designated as the
priority region, and USDA is required to conduct the majority
of field-based projects in Africa. A portion of the funds is to
be used for development assistance projects of not less than 1
year.
USDA has the capacity to implement the pilot program and
our experience with the pilot will help inform us for future
efforts.
USDA has reviewed the GAO study thoroughly, and we have
come to many of the same conclusions. We agree with GAO that
local and regional procurement is an important tool that can
reduce commodity and transportation costs and shorten delivery
times, and we share GAO's concern that poorly targeted local
and regional purchases have the potential to lead to price
spikes and shortages of staple foods in source countries. But
likewise, poorly targeted distributions of in-kind food aid
have the potential to depress prices and negatively impact
domestic production in recipient countries.
USDA agrees that the best way to mitigate these potential
adverse effects is through improved market intelligence.
In addition to feeding hungry people, USDA's food aid
programs are opportunities to use USDA's global capacity
building and development expertise to help developing countries
create sustainable economic growth that improves peoples'
lives. Successful development efforts come from the local
level. USDA and others have knowledge and resources that can
assist with development but the recipients--village farmers and
community folk--best know the barriers to their development and
what is required to move forward. We must work in partnership
with the recipients to design sustainable and effective human
and economic development projects.
We are particularly proud to administer the Food for
Progress and McGovern-Dole programs. To date, USDA has provided
meals to more than 22 million children in 41 countries and
boosted attendance in the schools served. These programs have
helped build school gardens and fish ponds, improve sanitation
systems, rehabilitate schools, and remove unexploded ordnance
that prevent children from attending school.
This administration is committed to a permanent solution
for food and security, and we look forward to implementing the
LRP pilot program and using it as another tool to achieve our
goal of feeding the hungry and malnourished, and I look forward
to answering any questions that you may have. Thank you.
[The prepared statement of Mr. Philbrook follows:]
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Mr. Payne. Thank you very much. And Ms. McKeever.
STATEMENT OF MS. JEAN MCKEEVER, ASSOCIATE ADMINISTRATOR,
BUSINESS AND WORKFORCE DEVELOPMENT, SENIOR PROGRAM MANAGER,
OFFICE OF CARGO PREFERENCE PROGRAM, MARITIME ADMINISTRATION,
UNITED STATES DEPARTMENT OF TRANSPORTATION
Ms. McKeever. Good morning, Mr. Chairman and members of the
subcommittee.
I appreciate the invitation to brief the House Committee on
Foreign Affairs, Subcommittee on Africa and Global Health, on
the recent Government Accountability Office study on local and
regional purchases, use for food aid.
The Cargo Preference Statute of 1954, as amended in 1985,
was envisioned by the Congress to help support the U.S.
Merchant Marine which is vital to the nation's defense by
requiring the use of U.S.-flag carriers for at least 75 percent
of food aid shipments. Support of the U.S. fleet was structured
in a way that reimburses the food programs on shipments in
excess of 50 percent of food aid shipped. Any additional costs
on the first 50 percent of food aid shipped under cargo
preference and not reimbursed are borne by the agencies
implementing the food aid programs.
Mr. Chairman, the subcommittee asked that we address three
specific issues in our testimony today. First, relating to the
need to update the Memorandum of Understanding, or MOU; second,
obstacles to ensuring that an updated framework governs the
application of cargo preference requirements to LRP; and third,
whether there are actions that Congress could take to clarify
the application of cargo preference with regard to LRP. I will
defer to my colleagues from the food aid programs on any issues
related to the implementation of food aid programs.
In regard to ensuring that an updated framework governs the
application of cargo preference requirements to U.S. food aid
that clarifies how they pertain to U.S. agencies' use of LRP,
we believe the requirements as established by law are clear,
and there are no obstacles.
Except as otherwise exempted by law, cargos financed by the
American taxpayer and moving by water are subject to 50-percent
carriage on U.S.-flag vessels when practicable. Only food aid
specified in 46 U.S.C. 55314, exported from the United States
is subject to the 75-percent requirement; otherwise it is 50
percent.
With regard to the GAO recommendations on the Memorandum of
Understanding, we maintain that the MOU is not an impediment to
the agency's use of LRP. The MOU among USAID, the Commodity
Credit Corporation of USDA, and the Maritime Administration
merely describes the process of how MARAD's ocean freight
differential reimbursement to USDA and USAID is calculated. In
addition, because LRP is subject to cargo preference at the 50-
percent level, the MOU is not applicable.
Finally, we appreciate the subcommittee's consideration in
asking whether there are actions that Congress could take that
could clarify some of the ambiguities in the application of
cargo preference requirements as they pertain to LRP. We
anticipate holding discussions with the agencies whose programs
are affected by the legislation in P.L. 110-417, and we look
forward to working with them toward an appropriate consensus in
advance of submitting regulations for review by the Office of
Management and Budget.
In summary, I want to thank the members of the subcommittee
and the chairman for your leadership in holding this hearing
today, and I will be glad to answer any questions that you may
have.
[The prepared statement of Ms. McKeever follows:]
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Mr. Payne. Thank you very much. I let me thank all of you
for your testimony, and we will move into questions, but before
I do that, I would like to welcome the members of the National
Assembly of Cambodia on my right-side of the room who are
visiting the U.S. Congress hosted by the National Democratic
Institute. We wonder if you would stand.
[Applause.]
Mr. Payne. Thank you. Let me begin by asking this question
and anyone could chime in. In your opinion, what are the macro
and microeconomic impacts locally and regional from local and
regional purchases vis-a-vis in-kind contributions?
For example, does it reduce unemployment while increasing
production as a result of increased consumer demand in
agricultural products? Is there evidence that the LRP leads to
agricultural and microenterprise development in general? Would
anyone like to tackle that? Yes.
Mr. Brause. Mr. Chairman, thank you very much.
We believe that the LRP can have significant impact in both
a macro level and a micro level, and as I think has been
pointed out, we have to be careful because those impacts can be
both positive and negative. We have to watch out that both LRP
commodities and in-kind food aid don't have a negative impact
on macro market systems in the countries in which they are
provided.
But in a more positive sense, having the flexible tools
available to us both in-kind food aid and LRP will let us
target our assistance so that we can have the greatest positive
impact on not only the vulnerable people but the market systems
in which they work and live.
Part of our efforts under LRP will be to strengthen the
local market systems for the small farmers, to give them the
knowledge and the technical skills they need to bring their
fruits to market so that they can strengthen their livelihoods
and increase the incomes that they have for their families.
So if LRP Is used properly, it can have an impact at the
household level and it can have an impact at the more macro
level in the countries in which it is used.
Mr. Payne. Thank you very much. I wonder if anyone would
like to talk about what kind of strategies or mechanisms you
recommend to increase effective and reliable market
intelligence, in order to make informed decisions about LRP. We
have heard that inaccurate information led to problems, and I
don't know if anyone could think of any strategies, or how we
can determine that information is more accurate. Yes.
Mr. Brause. Mr. Chairman, USAID has been paying very close
attention to the Belman amendment which is in the Food for
Peace Act which requires us to track the market impact of in-
kind food aid. That same system can be used to help us track
the potential impact of local and regional procurements on
market.
In addition, the Office of Food for Peace and USAID in
general support the famine early warning system which currently
has 25 offices around Africa and the world that track food
security issues, including market data to help ensure that we
have the information available to know what the right resource
should be to address a particular food security situation.
We also work very closely with our partners, the U.S. PVOs,
and the World Food Program who also have very significant
technical knowledge that allows them to identify the most
appropriate response for a given food security situation, and
we will be looking to them to help guide us as well on what
resources we should bring to bear on any particular situation
in the developing world. Thank you.
Mr. Melito. I would like to add that I agree with what Mr.
Brause said. Greater coordination though among the donors is
probably the area that they should press the most. I mean,
there are a lot of individual efforts going on. Each
transaction provides good information about the market, but if
you aggregate those transactions you learn a lot more, so
greater collaboration.
Mr. Payne. Thank you very much.
Let me just, before I yield, ask Ms. McKeever: You did
mention in your testimony that you will be getting together
with the various agencies to discuss the Memorandum of
Understanding, but I wonder, do you think that it is
recommended to revisit the 1985 statute of the Memorandum of
Understanding and to meet current food crisis cost effectively
and in a timely way?
Do you feel that there really needs to be a revisit. There
was some mention of ambiguity in the agreement, as was
mentioned in the testimony of Dr. Melito.
Ms. McKeever. In our view the Memorandum of Understanding
is strictly limited in scope to how our reimbursement
methodology works with regard to paying an ocean freight
differential to the food agencies when there is a preference
shipping requirement for cargos over 50 percent, between the 50
percent and 75 percent, is strictly a process memorandum of how
we pay that differential, and it doesn't extend to other
matters. It is very limited in scope.
So, to the extent there are matters in the cargo preference
arena that have to be clarified, we think it is more
appropriate to do it through regulation rather than expanding
that MOU which really is not germane to this particular topic.
That is strictly a procedural MOU, and we think it should be
kept that way and limited in scope to the ocean freight
differential payments. It wasn't intended to be an all-
encompassing vehicle to embrace any number of elements of the
cargo preference program. That was never the intention.
Mr. Melito. Mr. Chairman.
Mr. Payne. Yes.
Mr. Melito. GAO recommended in 2007 to update the MOU based
on our in-kind system which was directly related to the system
for compensating the programs. So there is a need to update the
MOU even within the context of DOT's criteria.
However, when the memorandum was created in 1987, when it
was signed, it never envisioned LRP, and these ambiguities do
have the potential to really restrict the use of LRP. So there
needs to be a vehicle for resolving the ambiguities and the MOU
is the most direct way to bring the agencies together and
resolve the issue. Thank you.
Mr. Payne. Thank you very much.
I will yield to the gentlelady from California,
Congresswoman Watson.
Ms. Watson. First, let me get to a domestic question that
has been of great concern to all of us. I would like to address
this question to Mr. Philbrook.
Unemployment is on the rise in this country. That doesn't
even have to be said. And as the tragic results of General
Motors having to declare bankruptcy, many of the families in
Michigan may struggle to provide food, and how is the USDA
planning on addressing the increase in demand for food stamps
in our nation, and can we provide enough food stamps to meet
the demand?
Mr. Philbrook. Congresswoman, I can't answer that question,
but we----
Ms. Watson. Is it an unknown?
Mr. Philbrook. I don't know that it is an unknown. It is
just way outside my area of responsibility or knowledge. But we
will get you answer to that question.
Ms. Watson. I would like to have that answered because
right here I am going to relate to the subject of this hearing,
but that has been on my mind----
Mr. Philbrook. Yes, we will----
Ms. Watson [continuing]. For the last 48-72 hours.
Mr. Philbrook. Yes, we will get you an answer to that
question very quickly.
Ms. Watson. Okay. I would like to address this to Mr.
Brause, and maybe Ms. McKeever, whoever. We are finding more
and more that international aid agencies are disjointed and
uncoordinated, and that has been mentioned, and oftentimes we
can find several agencies working in one area whereas other
areas are completely ignored. In terms of food aid, how does
the United States agencies coordinate with international
bodies, and how does the World Food Program coordinate with
other relief efforts, and how are efforts coordinated
internationally?
And are blankets and clothing say, you know, mixed kind of
aid along with food, are they shipped in the same shipments or
are they required to be shipped separately, and are they
locally procured?
So these are all relative kinds of activities. We just need
to have some clarity, so let me start with Mr. Brause.
Mr. Brause. Thank you very much.
Fortunately, I can tell you I just returned from a meeting
in Helsinki with a group of major donors. We were meeting with
the Office of the Coordinator for Humanitarian Affairs, Sir
John Holmes of the United Nations, and our whole sole purpose
was to discuss how we can better coordinate our assistance and
ensure that the response in any crisis is well coordinated,
well managed, and that all areas of assistance needs are
identified and met. So there is a great deal of work that is
actually done among the donors to ensure that we are always
cooperating.
Now having said that, of course, it is not a perfect
system, but for us that is why it is important that the United
States has as many tools available to it as possible to make
sure that we can fill gaps that develop. But I do want to say
that the coordination is actually quite good.
Also in the case of WFP specifically, I leave over the
weekend with Mr. Philbrook, we will be heading off to Rome to
meet with the World Food Program at their executive board
meeting which again is a gathering of all the donors who
support the World Food Program, and part of the purpose of
being there is to discuss how to better support their
activities worldwide.
Ms. Watson. I guess it was a couple of years ago we were in
Chad and we were told by Mr. Rusesabagina, who was the subject
of the movie that dealt with Darfur, and he said that shipments
of food from our various foreign agencies were hijacked and the
food never got to the camps. You know, they had 250,000 in the
camps in Chad which we visited. And so he bought his own
company, and the whole issue was security.
When we roll the trucks in, are we finding that we are free
to deliver the food or do we have trouble along the way? Is
there hijacking? Are they attacking these food supplies? And
anyone can respond that has any recent information.
Mr. Brause. Congresswoman, unfortunately the situation in
the developing world is rather difficult, and we find that in
many of the countries in which we work--Sudan, Somalia as
examples, and I guess now also in Pakistan--that security is a
very, very, very significant issue.
Ms. Watson. Yes.
Mr. Brause. And it can in fact impede our programs and the
efforts of the international community to meet the needs of the
vulnerable groups we are trying to help. So it is an issue and
all of the donors and the international organizations do work
together on security planning, but it is often an imperfect
system.
Can I answer one of your other questions? You asked whether
the other resources----
Ms. Watson. Right.
Mr. Brause [continuing]. That we provide are--whether they
are locally procured. In some cases they are locally procured
and in other cases they are procured in the United States. As
an example our assistance in Pakistan much of our materials are
being resourced in Pakistan because Pakistan has the markets
and the manufacturing capabilities to provide much of what the
displaced in Pakistan need. So in that example we do buy
locally.
Ms. Watson. Let me refer to Ms. McKeever. How do we
strengthen our food delivery programs?
Ms. McKeever. You mean in terms of ship security?
Ms. Watson. Yes.
Ms. McKeever. We are working very closely with DoD and the
U.S. Coast Guard and the State Department on security issues.
That is an ongoing very serious matter to all of us.
Ms. Watson. Yes.
Ms. McKeever. And as you are well aware, Congresswoman, so
those are--they are developing the best steps that could be
taken within the constraints under which we have to operate.
Ms. Watson. I want to address this question to the chair.
He just came back from Zimbabwe, in our conversation, we were
in South Africa, is about the food fights and the fact that
most of the native people were starving and they were eating
from the piles of garbage on the streets and so on. I would
hope that part of this discussion you would share with us what
are they doing about food there in Zimbabwe. And I yield back
my time.
Mr. Payne. Thank you very much. Just in a nutshell the
situation has improved in Zimbabwe. The currency has been
changed; it was hyper-inflation. Of course, it was very
worthless currency, and so it has gone to the dollar and the
rand, and interestingly enough, there are commodities that are
back on the shelves and the new MDC government, Tsvangirai and
President Mugabe are attempting to move forward, primarily
dealing with not only the food situation but the water
situation with cholera. We recently visited the water supply
for Harri and other parts to get first-hand knowledge of what
is going on, but thank you for your interest, and we will be
giving a report soon.
Congresswoman Woolsey.
Ms. Woolsey. Thank you, Mr. Chairman.
Maternal mortality in underdeveloped nations is a huge
problem. We know that, that is an understatement. We also know
that one of the keys to promoting healthy pregnancies and
births is good nutrition. So what would be the best effort--
probably you, Mr. Brause, would be the one that would talk
about this--to get food into these needy areas and make sure
that the people who need them the most get the food, who need
it the most get it, and that hey get quality food, balanced
diets of some sort? That has to be part of what we are working
on. And what role does food security plan in our overall goal
for healthier mothers and babies?
Mr. Brause. Thank you. Those are two critical issues that
Food for Peace has been working on, and actually the entire
agency has worked on not only with our food aid resources but
with our development assistance resources and our health
resources. But with food aid specifically, the Title II program
has been supporting material child health programs around the
world for decades and will continue to do so, and we work very
closely with our partner organizations who also feel very
strongly about addressing the needs of pregnant women and young
children to ensure that the children are born healthy and that
they develop healthy during those critical first few years, and
that leads me to the response on what we could do on food
assistance.
The Office of Food for Peace has just recently signed an
agreement with Tufts University School of Nutrition to do an
evaluation of the commodities that we have available to us and
their nutritional composition to meet the needs of the
beneficiaries around the world. And the group that we are
trying to work on now is the under twos. What commodities and
what nutritional makeup do those commodities need that would be
appropriate for young children? Because if you miss the
nutrition for children under two, then you have lost pretty
much the entire ball game, and we really, really want to focus
on that, and that is actually something that WFP and the NGOs
are keenly interested in.
So we are working together, if I might just add, with USDA
on that effort to make sure we get the best commodities
available.
Ms. Woolsey. Do you see any difference in delivery of these
food products between the urban areas and the rural areas, the
moms who do all the toting, walk miles to get commodities or
what they need? Do the urban families, are they treated
differently than the rural families? Is there a difference in
their health?
Mr. Brause. I would say generally in the rural areas
families have more access to locally grown foods, and we are
paying particular attention to the urban poor, and they are the
ones who often are in an environment where food is available
but they don't have access to it, so they have to make the
difficult decisions on what to buy and what not to buy.
Ms. Woolsey. Mr. Philbrook, you look like you wanted to say
something.
Mr. Philbrook. Well, thank you, Congresswoman. I just
wanted to add that in rural areas of developing countries, that
is where the largest percentage of the population is, up to 70
percent in many countries, and most of the women are also the
farmers. In fact, the vast majority of farmers in developing
countries are women. And so material health and child health
and nutrition need to go hand in hand with what women do, and
it would be our judgment that if we want to address the issue
that you raise we need to look at it comprehensively. We need
to do rural agricultural development, and that includes--that
includes a wide range of activities from extension information
to irrigation, appropriate irrigation technology, to education,
to health care, to assisting folks with understanding the
values of bio technology, et cetera. It is a comprehensive
development that needs to be done at the local level, at the
village level with local people, mostly with women. If we
address that comprehensively, then I believe we address the
issue that you raise.
Ms. Woolsey. And do you believe we also address the issue
of self-sufficiency for the communities?
Mr. Philbrook. That is the key, that would be one of the
key results of that activity, yes.
Ms. Woolsey. Okay. Thank you, Mr. Chairman. Thank you.
Mr. Payne. Yes, Congresswoman Watson wanted to ask another
question.
Ms. Watson. And I am sensitive to the fact that we have a
bill on the floor. But I want to address this to Mr. Brause
because you mentioned something that really triggered a memory.
Intelligence, in going into the--I guess the biology of the
food that we supply. I am reminded in the early seventies of
the Nestles Company sending Similax to the western coast of
Africa, and many of the babies died, and we realized then the
biological and endocrine makeup of the African child was so
different and they couldn't process the milk sugars and so on.
So in the laboratories that you mention, are we looking at
the kinds of foods that we send geographically? And you know,
if we don't have to time to really get into it, I could take it
in writing, but I am really concerned about the products that
we send over to meet the hunger needs.
Mr. Brause. Yes, ma'am. As a matter of fact, cultural and
regional food uses are a very big issue for USAID and the team
that we have working on this, and again it is going to take all
of us, it is going to take assistance from USDA and our
partners, and even it is going to take assistance from
industry. Our industry in the United States has the knowledge,
the depth of knowledge on food manufacturing and food nutrition
that we need to draw into this discussion. And so I think with
the help of Tufts we are going to have that kind of information
available to us very soon, and then again we will work with
industry to see if we can manufacture those products in the
United States.
Mr. Payne. Well, thank you very much. I had several other
questions, but because there is a vote on we will probably send
some questions to you in writing, this whole question of how to
deal with food aid. As a matter of fact it goes way back to the
potato famine in Ireland in the 1840s: It was a question of
food that was in the country, but it was high value food, and
the question about importing wheat from the United States and
the question was who is going to pay the tariffs as people
died. So this whole question of food and food security is
certainly not a new issue, and we certainly are trying to look
at how we can have the most positive impact, and we really look
forward to working with the GAO and the rest of you to try to
figure out what is the best way; how we avoid price and
securities; what happened in Ethiopia and Niger and other
places when food was purchased locally and destabilized the
market locally, and increased the price because of the scarcity
for local people. It is a very complicated issue as we know. We
will follow up with this, and since we have a vote, I would
like to adjourn the meeting. I did have many, many more
questions, but I would like to adjourn this portion of the
meeting and ask for our briefer, Mr. Jury, to come forward.
So thank you all very much, panelists. Briefing by
Mr. Allan Jury deleted from transcript
[Whereupon, at 12:03 p.m., the subcommittee
was adjourned.]
A P P E N D I X
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