[Senate Hearing 114-74]
[From the U.S. Government Publishing Office]
S. Hrg. 114-74
AMERICAN FOOD AID: WHY REFORM MATTERS
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HEARING
BEFORE THE
COMMITTEE ON FOREIGN RELATIONS
UNITED STATES SENATE
ONE HUNDRED FOURTEENTH CONGRESS
FIRST SESSION
__________
APRIL 15, 2015
__________
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COMMITTEE ON FOREIGN RELATIONS
BOB CORKER, TENNESSE, Chairman
JAMES E. RISCH, Idaho BENJAMIN L. CARDIN, Maryland
MARCO RUBIO, Florida BARBARA BOXER, California
RON JOHNSON, Wisconsin ROBERT MENENDEZ, New Jersey
JEFF FLAKE, Arizona JEANNE SHAHEEN, New Hampshire
CORY GARDNER, Colorado CHRISTOPHER A. COONS, Delaware
DAVID PERDUE, Georgia TOM UDALL, New Mexico
JOHNNY ISAKSON, Georgia CHRISTOPHER MURPHY, Connecticut
RAND PAUL, Kentucky TIM KAINE, Virginia
JOHN BARRASSO, Wyoming EDWARD J. MARKEY, Massachusetts
Lester E. Munson III, Staff Director
Jodi B. Herman, Democratic Staff Director
(ii)
C O N T E N T S
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Page
Cardin, Hon. Benjamin L., U.S. Senator from Maryland, opening
statement...................................................... 2
Coons, Hon. Christopher A., U.S. Senator from Delaware, statement 4
Corker, Hon. Bob, U.S. Senator from Tennessee, opening statement. 1
Esposito, Dina, Director of the Office of Food for Peace, United
States Agency for International Development, Washington, DC.... 4
Prepared statement........................................... 6
Mercier, Stephanie, senior policy and advocacy adviser, Farm
Journal Foundation, Alexandria, VA............................. 31
Prepared statement........................................... 33
Responses to questions submitted for the record by Senator
David Perdue............................................... 68
Ray, David, vice president for policy and advocacy, CARE USA,
Washington, DC................................................. 20
Prepared statement........................................... 22
Responses to questions submitted for the record by Senator
David Perdue............................................... 71
Smith, Vincent, AEI visiting scholar, professor of economics,
Department of Agricultural Economics and Economics, Montana
State University, Bozeman, MT.................................. 25
Prepared statement........................................... 27
Responses to questions submitted for the record by Senator
David Perdue............................................... 67
Additional Material Submitted for the Record
Written statements submitted by:
Rev. David Beckmann, president, Bread for the World.......... 48
The U.S. Maritime Industry................................... 50
Mercy Corps.................................................. 52
Gawain Kripke, policy director, Oxfam America, Washington, DC 54
Save the Children............................................ 57
Dr. Carolyn Woo, president and chief executive officer of
Catholic Relief Services................................... 63
(iii)
AMERICAN FOOD AID:
WHY REFORM MATTERS
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WEDNESDAY, APRIL 15, 2015
U.S. Senate,
Committee on Foreign Relations,
Washington, DC.
The committee met, pursuant to notice, at 9:33 a.m., in
room SD-419, Dirksen Senate Office Building, Hon. Bob Corker
(chairman of the committee) presiding.
Present: Senator Corker, Gardner, Perdue, Cardin, Shaheen,
Coons, Murphy, and Kaine.
OPENING STATEMENT OF HON. BOB CORKER,
U.S. SENATOR FROM TENNESSEE
The Chairman. The Foreign Relations Committee will come to
order.
I want to welcome our witness. I understand there may be
circumstances where you may need to depart. We are just glad
you are here. If you need to leave in 2 minutes, leave. I
understand that there may be something occurring that will
cause that. So please, just whatever makes you comfortable.
I am glad to be here with our outstanding ranking member,
who I have enjoyed working with so much. And I am glad we are
having this hearing today on something that is so important to
people around the world.
I do not normally read opening statements. I think I may do
it. We have been sort of focused on another issue for a while,
but I think people know that since 1954, U.S. international
food aid programs have helped to feed over 3 billion people and
promote food security in over 150 countries. Most U.S. food aid
is provided through Food for Peace, which is currently funded,
on average, at $1.6 billion annually. Over the past 5 years,
U.S. food aid has helped 56 million people, on average, per
year.
Today's hearing will provide the committee with an update
on the current operations of the program, including the
challenges it faces while responding to increasingly dangerous
emergencies.
This increasingly challenging global environment has
illustrated to Congress the need for greater flexibility in how
Food for Peace operates. The law requires that 100 percent of
the food aid to be delivered be U.S.-purchased commodities, and
50 percent of that is to be shipped on U.S.-flagged vessels.
While recent reforms in the farm bill provide some
administrative funds to be used for such things as locally and
regionally purchased food aid and/or food vouchers, this
limited flexibility must be executed in tandem with U.S.-
purchased commodities. The cargo and commodity preferences
create inefficiencies that undermine our ability to get maximum
impact in addressing poverty and suffering from our U.S. food
aid dollars.
In some cases, where U.S. national security interests are
at stake, like in Syria and other regions in conflict, U.S.
food aid plays an important role in U.S. policy and engagement.
These interventions would not be possible if we relied on U.S.-
purchased commodities.
Increasing flexibility in the Food for Peace program would
provide up to $444 million in savings, allowing the United
States
to reach as many as 12 million more starving people, up to 2\1/
2\ months faster in some cases.
Again, I think this just jumps out at us, that self-imposed
limitations--I am tired, I have not had a lot of sleep. I will
just say that the special interests that capture this program
cause people around the world to starve.
While the impact of reforming U.S. food aid overseas is
profound, the domestic implications are minor, as food aid only
contributes 1.41 percent to net farm income and 0.86 percent to
agriculture exports.
I have joined forces with my friend and colleague, Senator
Coons, by authorizing with him the Food for Peace Reform Act.
We are seeking to increase the flexibility of our food aid
programs and are looking to our witnesses today to illustrate
why reform to the program matters.
For many around the globe we are not yet reaching but
could, it is a matter of life and death.
Again, we thank you for being here. I look forward to
turning to Senator Cardin and maybe Senator Coons, who has been
such a champion.
But I hope that out of this hearing, something is going to
occur where we will do the things necessary to make sure that
our U.S. dollars help those people that today, as we sit here
in this comfort, are starving because of special interests here
in our own Nation.
With that, Senator Cardin.
OPENING STATEMENT OF THE HON. BENJAMIN L. CARDIN,
U.S. SENATOR FROM MARYLAND
Senator Cardin. Senator Corker, first of all, thank you for
convening this hearing.
Yesterday, this committee dealt with a very visible issue
of national security, and that is preventing Iran from becoming
a nuclear weapon state. Today, we are dealing with another
issue of national security, but it is not quite as visible as
the possibility of a nuclear Iran.
I think we all understand that extremists get their
strength from people who are desperate and have little hope.
And when you are hungry, you are desperate.
So this is an issue, as I see it, of national security. It
also, of course, is an issue of what this country stands for,
the values of America, what this country has been, a leader
worldwide in promoting the right values.
So I welcome this hearing. I thank Senator Corker, I thank
Senator Coons, for their leadership in bringing forward reform
of our food aid and the Food for Peace program so that we can
do more with the resources that we have.
Senator Corker pointed out the incredible record that this
country has had since 1954. Three billion people have benefited
from U.S. programs in 150 countries. That is an incredible
record.
But let me give you one that we are not proud about. Since
2009, the Food for Peace program has lost about 37 percent of
its funding, in spite of the fact that the international need
has grown. Today, 805 million people are estimated to be
chronically hungry; and 51.2 million people have been displaced
by conflict. So the needs today are greater, and the resources
are less.
The United States has provided international leadership.
Because I represent the Senate at the United Nations, along
with Senator Johnson, I have had the opportunity to be up at
the United Nations to talk about the millennium development
goals and discuss where we have been successful. But to get
people out of poverty and hunger is an international effort.
These millennium development goals are working. But U.S.
leadership is critically important.
So we have to do a better job with Food for Peace. And the
legislation that the two of you have brought forward is about
using our money more efficiently. It has been estimated that we
could serve as many as 8 million to 12 million more people with
the same amount of resources, if we reform the system--8
million to 12 million. I know numbers. You do not see numbers.
You could have all those people here today. I think it would be
a very visible reminder that we have to do a better job, and it
really could have a major impact on our goals and on our
national security.
I do want to give a word of caution. There are serious
issues that have to be resolved, if we are going to be able to
move this legislation forward. We have concerns in the maritime
industry. We have concerns with U.S. agriculture. We have
concerns by the partnerships with our NGOs, dealing with
lockbox and monetization and other issues. These are legitimate
concerns, and we are going to have to work through that.
But, Mr. Chairman, if we can work through the nuclear
review agreement, this should be a piece of cake. We should be
able to get this done.
So I look forward to hearing from our witnesses. I would
ask unanimous consent that I can put statements in the record
from Catholic Relief Services, which is headquartered in
Baltimore, MD; the U.S. Maritime Industry; and Bread for the
World.
The Chairman. Without objection.
[Editor's note.--The statements mentioned above can be found in
the ``Additional Material Submitted for the Record'' section at
the end of this hearing.]
The Chairman. I am glad that these entities that have so
much to do with this program will have a chance. I know we
tried to accommodate additional witnesses. But anyway, I am
glad you made that statement.
I wonder if Senator Coons would like to make an opening
comment.
STATEMENT OF HON. CHRISTOPHER A. COONS,
U.S. SENATOR FROM DELAWARE
Senator Coons. Thank you, Chairman Corker. I will be brief.
I just want to thank Ranking Member Cardin and you,
Chairman Corker, for continuing to bring forward a spirit of
bipartisanship and a focus on important and difficult issues.
Out of yesterday's markup, I continue to be optimistic we
can tackle all sorts of big challenges.
Food aid reform is one that has eluded any significant
progress for a long time. As you have both cited, it has made
enormous impacts around the world. It has fed billions of
people over decades.
But the twin challenges we face are how to make this
program more efficient so that it reaches more people, so that
it does the best we can with taxpayer dollars. Yet how do we
sustain food aid so that we do not, by making changes that
pursue efficiency, suddenly wake up and realize we have lost
half or two-thirds of the funding, and in reaching to feed 8
million to 12 million more, ultimately end up feeding fewer?
That is the political Rubik's Cube that we need to work
together to solve.
There is no doubt. There have been studies from GAO to
George Mason to nonprofit groups. There is no doubt the current
system is inefficient, and it wastes a significant amount both
of the commodity and costs. But the core question is, Can we
make it both more efficient and more sustainable? I really look
forward to working with both of you to achieve that goal.
Thank you for this hearing today.
The Chairman. Thank you. And I think people should know,
for the record, one of the reasons that we are having this
hearing today is a commitment that was made to Senator Coons,
as we closed out last year, that we would deal with this issue.
So I thank him for his leadership.
Our first witness is director Dina Esposito, as long as she
is here, from the USAID Office of Food for Peace. Director
Esposito manages the Food for Peace program, which responds to
acute food insecurity by providing in-kind food aid locally and
regionally procured food aid, food vouchers, and cash transfers
to millions of people affected by conflict and natural
disasters annually.
In addition, it also supports interventions in critical
areas such as nutrition, health, agriculture, and livelihood to
address the underlying causes of poverty and hunger among the
poorest of the poor with development food aid.
Thank you for being here and sharing your thoughts. Please
take however long you wish to share those thoughts. Then we
will have questions. Thank you very much.
STATEMENT OF DINA ESPOSITO, DIRECTOR OF THE OFFICE OF FOOD FOR
PEACE, UNITED STATES AGENCY FOR INTERNATIONAL DEVELOPMENT,
WASHINGTON, DC
Ms. Esposito. Chairman Corker, Ranking Member Cardin, and
distinguished members of the committee, thank you for inviting
me today to testify on the administration's efforts to
modernize and improve the U.S. food aid programs. We appreciate
the opportunity to share how USAID's Office of Food for Peace
is working to make our food assistance programs more efficient
and effective in a changing world.
We likewise recognize and appreciate your bipartisan
interest in modernizing food assistance as expressed in your
recently introduced Food for Peace Reform Act.
I first started in humanitarian aid work back in the early
1990s. At that time, I had the opportunity to visit with
refugees and displaced persons in many hotspots around the
world. Today, as the Food for Peace director, I am still
visiting troubled spots.
While the circumstances are equally tragic, and our
commitment just as constant, I am struck by just how different
our response options now are. Expanding markets, new
technologies, and other innovations make the world a different
place.
But these opportunities are accompanied by new challenges.
Today, more people are affected by conflict and natural
disasters than any time since World War II. And the cost of
traditional food aid is rising, making it increasingly
difficult to meet even minimum levels of global need.
Given these factors, and an overall constrained budget
environment, further reforming U.S. food aid programs to
advance our humanitarian, economic, and national security
interests make sense. Our reform proposals build on a clear
evidence base of the last 5 years, as well as bipartisan
efforts, dating from President Bush's initial calls for reform
after the food price crisis in 2008. Those calls laid the
groundwork for Food for Peace's emergency food security
program. This initiative established in 2010 through the
international disaster assistance account supports local and
regional procurement and targeted cash and voucher-based food
assistance.
Our data confirms the analysis undertaken by the Government
Accountability Office that food purchased locally and
regionally is more cost-efficient. For Africa, it is, on
average, 34 percent more efficient than shipping food aid from
the United States. Response time is also faster. U.S. in-kind
food commodities can take 4 to 6 months to reach beneficiaries
while food purchased closer to those in need can cut that time
in half.
I want to provide two real-world examples of how
flexibility in our food assistance programs is making a
difference. More than 10 million Syrians are displaced today,
and 4 million are refugees in neighboring countries, including
Lebanon and Jordan. Most do not live in camps. They live in the
towns and cities of these middle-income countries where
commerce is active and grocery stores accessible.
To address this vast and complex crisis, donors, led by the
United States, are supporting a food assistance debit card so
refugees can buy food in local markets. The debit card not only
provides greater choice and dignity to those war victims but,
as importantly, eases the pressure on host communities by
supporting local merchants and adding jobs through expanded
businesses. Meeting life-saving needs in this way contributes
to the stability of U.S. allies in this troubled region.
After a natural disaster, responding rapidly can mean the
difference between life and death. Following Hurricane Haiyan
in the Philippines, we responded with the purchase of local
food stocks that reached storm victims within days of the
event. Six weeks later, U.S. food commodities prepositioned in
the region arrived, followed by more food from the United
States.
Growing our ability to always respond with the right tool
at the right time led to the administration's fiscal year 2014
food aid reform proposal. While the proposed reforms were not
adopted, the 2014 farm bill did give Food for Peace 7 percent
increased flexibility. This reform alone helped us to reach
some 600,000 additional beneficiaries last year. But we could
do so much more.
Food for Peace regularly finds opportunities to improve
efficiencies. Just recently, we saved $4 million in the
Democratic Republic of Congo by buying food locally as part of
our relief response. With greater flexibility, we would have
purchased even more locally, generating an additional $12
million in savings.
Missed opportunities like these are why the President's
fiscal year 2016 budget once again includes a request for
reform of food aid programs.
I must emphasize that reform does not equal no U.S. in-kind
food. Last year, for example, the United States provided
120,000 tons of U.S. food to South Sudan when conflict cut off
millions and markets were not functioning, pulling that country
back from the brink of famine. This was the right tool at the
right time, which is what food aid reform is all about.
I would be remiss if I did not close by saying that we at
the USAID Office of Food for Peace are proud to be managing the
resources so generously provided by the American people to
alleviate hunger and suffering overseas.
I also want to recognize our many stakeholders who make
this work possible and honor those who risk their lives to
deliver assistance to hungry people around the world.
Thank you again for your continued commitment to ending
global hunger. I look forward to your questions.
[The prepared statement of Ms. Esposito follows:]
Prepared Statement of Dina Esposito
introduction
Chairman Corker, Ranking Member Cardin, and distinguished members
of the committee, thank you for inviting me today to testify on the
United States Agency for International Development's (USAID) efforts to
modernize and improve U.S. food aid programs. We appreciate the
opportunity to share how USAID's Office of Food for Peace (FFP) is
working to make our food assistance programs more efficient and
effective in a changing world. We likewise recognize and appreciate
your bipartisan interest, as expressed in the recently introduced Food
for Peace Reform Act, to see food aid modernized.
I first started in humanitarian aid work in 1989 and in the early
1990s I had the opportunity to visit with refugees and displaced
persons in many hotspots around the world, including in places like
Liberia, Mozambique, South Sudan, and Somalia. Today as the USAID/FFP
Director I am still visiting trouble spots and while the circumstances
are equally tragic, I am always struck by just how different the
response options available to us are--the use of electronic food
vouchers and mobile money to deliver assistance, new technology to
better identify beneficiaries, satellite imagery to confirm public
works projects are completed--the world is a different place.
USAID is the largest provider of food assistance in the world and
we are seeking to maintain our leadership role--to be the best at what
we do--by evolving our programs with the times. So today I would like
to share with you the evolution of food aid and how evidenced-based
learning can improve our programs. I also want to highlight how we are
currently using the flexibility provided through the International
Disaster Assistance account and how the critical reforms in the 2014
farm bill are enabling USAID to reach more people quickly and cost-
effectively. These reforms serve as the basis for USAID to continue to
pursue additional flexibility in food crises to use the right tool at
the right time.
looking back, looking forward
In 1954, President Eisenhower created the Food for Peace program to
ship surplus U.S. food to the developing world and to countries still
recovering from World War II. For over 60 years, the Food for Peace
Title II program has allowed the United States to live up to its
historic mission to alleviate hunger around the world. Through the
generosity of the American people we have fed billions of the world's
neediest people--perhaps the largest and longest running expression of
humanity ever seen. This has been--and continues to be--possible
through the incredible partnership with American farmers, implementing
partners, maritime industry partners, and Congress. While we look back
on these American achievements with pride, we must also recognize that
the world has changed. New opportunities and challenges are presented
to us.
Some of the countries that have received title II U.S. food and
other foreign assistance, such as the Republic of Korea, have developed
strong economies and become important U.S. trade partners. Foreign
direct investment now exceeds development assistance in many of the
poorest regions of the world and there is steady economic growth in
remote parts of the globe, including in many places where we have
historically shipped United States food aid. People can now use cell
phones to receive emergency transfers and humanitarian workers can
access local banks and food markets to buy and transfer aid to those in
need in a way that fosters greater local economic activity and may help
to reduce the severity of food crises and their underlying causes.
At the African Union Summit in June, African leaders committed to
ending hunger and halving poverty on their continent by 2025 and
building resilience to climate-related events, like droughts. USAID/
Food for Peace's programs support the United States Government's lead
initiative in this area, Feed the Future. As part of this effort,
USAID's programs seek to decrease hunger by increasing both
agricultural production and the incomes of smallholder women and men in
areas with high malnutrition and poverty rates who rely on this sector
for their livelihoods.
Rising costs and growing needs
Within the changing global landscape, the role of United States in-
kind commodity food aid is changing. Strong commercial demand for
United States food means that commercial exports have risen
dramatically. And food aid has declined as an overall share of United
States food exports, representing less than one-half of one percent of
the total value today and an even smaller share of overall U.S.
agricultural production. USAID shipped over 3 million tons of in-kind
aid in 2003, as compared to just over 1 million last year--in large
part due to the rising costs of delivering food aid and the complex
nature of many food security crises.
While we are getting less for our dollar with United States in-kind
food assistance the need for emergency food assistance is higher than
ever as a record number of civil conflicts and natural disasters
continue to threaten the livelihoods of the poorest men, women, and
children around the globe.
The U.N. High Commissioner for Refugees reported last year that
more than 51 million people are displaced today by conflict--more than
at any time since World War II. The numbers are staggering--for every
one person who returned home last year, four more were displaced; 3
million new refugees fled their countries in the last 3 years--half of
them children; and there are now 33 million conflict-affected people
still inside their home borders--more than 5 million of them displaced
in just the last few years. The places generating these grim statistics
are familiar to you--Syria, Iraq, South Sudan, the Central African
Republic, Somalia, to name a few.
Coupled with these conflict drivers of hunger, the increasing
frequency and volatility of extreme weather events, slow or stagnant
economic growth, and high food prices are impacting millions more.
Drought in Central America, and East and West Africa has deepened
hunger across these regions and in Asia extreme storms inflict
devastation in places like Vanuatu and the Philippines. At the same
time, the Ebola epidemic in West Africa is fueling hunger by disrupting
agriculture and other sectors, pushing millions already living on the
edge deeper into poverty.
The U.N. Food and Agriculture Organization (FAO) estimates that
today more than 800 million people go to bed hungry; one in five
children is stunted--meaning their physical and cognitive development
has been impaired by lack of proper nutrition; and every 7 seconds a
child dies from hunger related causes.
investing in our global prosperity
There has been enduring bipartisan support for United States
leadership in combating hunger not only because it is the right thing
to do, but because that response is also part of our arsenal to advance
the security and prosperity of the United States.
Fragile states, shrinking economies, and extreme poverty are not
fertile ground for American businesses seeking foreign markets. And
there is an emerging consensus that food insecurity joins with other
factors to worsen instability in societies. Lack of access to food can
trigger conflict and civil unrest as it did in more than 48 countries
around the world during the food price crisis in 2008. Hunger can drive
competition for water and land (food production resources) as we have
seen in parts of Africa, and a vicious cycle can emerge of food
insecurity driving conflict, which in turn further deepens food
insecurity. Displacement and hunger driven by chronic poverty and
recurrent crises can give incentives to individuals--including
unemployed or underemployed youth--to join rebellions, criminal gangs,
or extremist groups. Struggling families often take desperate measures
as they seek to cope: men migrate in search of work, women may be
vulnerable to trafficking or other forms of exploitation, girls are
pulled out of school, children take to the streets to beg, and families
begin to disintegrate.
Against the backdrop of a changing environment offering new options
for aid delivery, a growing number of people affected by conflict and
natural disasters, the rising costs of traditional food aid, and the
tight budget environment the United States faces today--reforming U.S.
food aid programs is a logical step to advance our economic and
national security interests.
The President's FY16 proposal for reform, which requests a modest
increase in our ability to provide food assistance not tied to
procurement of United States food, would allow us to reach some 2
million additional people in food crises without
an increase in budget. It also allows us to provide that assistance
through means
that promote growth and help the world's most vulnerable emerge from a
cycle of extreme poverty and instability.
rationale for food aid reform
Gaining speed, saving money, improving recovery after emergencies
The Government Accountability Office (GAO) in a 2009 report found
that purchasing food locally and regionally, rather than shipping it
from the United States, is more cost-effective and greatly shortens
delivery times.\1\ For example, the study showed that buying food in
Africa and Asia was 34 percent and 20 percent less expensive,
respectively, than shipping food aid from the United States.\2\ Studies
by Dr. Chris Barrett of Cornell University show significant cost
savings for many foods--such as bulk grains or pulses (lentils, peas,
and beans)--ranging from 53 percent savings for the less expensive,
local cereals to 25 percent for pulses.\3\
Response time is also generally faster and in an emergency, speed
can mean the difference between life and death. The GAO found that food
aid from the United States typically takes 4 to 6 months to reach
beneficiaries while locally and regionally purchased food can reach
those in need as much as 11-14 weeks sooner. The GAO found that
shipping food from the United States to sub-Saharan Africa took 100
days longer than local or regional procurement. Moreover, having the
option to use cash-based responses allows us to plan better because
response times are shortened, particularly in cases where harvest
conditions form the basis for needs.
It is true that the United States has improved in-kind food aid
response times in recent years through prepositioning of food supplies.
Today, at any one time, up to 60,000 tons of U.S. food stocks are in
our prepositioning supply chain. This innovation has been invaluable.
It does, however, add to overall costs and has certain constraints that
limit its effectiveness. Limited shelf life for some commodities,
repeated fumigations to keep commodities stored safely, uncertainty
over what commodities will be needed where, and the appropriateness of
an in-kind response, are all factors we must consider as we store food.
Speed and cost efficiency are not the only reasons we seek more
flexibility. In some cases, giving a disaster survivor a food voucher
or targeted cash transfer can reinforce economic recovery, support
local farmers, generate jobs, reduce tensions, and create good-will
toward the displaced for those hosting them and reinforce their
appreciation for the American people and their generosity. At the same
time, those receiving aid are accessing a more nutritious diet,
including local fruits and vegetables, and have the dignity of choice
to select items familiar to them and their families.
Ending monetization for sustainable development
I have been speaking almost exclusively about how food aid reform
improves our emergency humanitarian responses. I would like to turn for
a moment to our development efforts. USAID/Food for Peace administers
5-year development projects in many parts of the world to address the
underlying causes of food insecurity. These programs are a vital part
of USAID's agenda to build resilience in communities facing chronic
poverty and recurrent crises, such as droughts and storms. For
instance, in areas prone to drought, we train farmers to prevent soil
erosion and conserve water so that they can increase their yields
during dry periods. We teach mothers how to prepare healthy foods for
their children and improve their access to nutritious foods to counter
malnutrition. We facilitate better livestock management and help them
diversify how they make a living, all so that they are better prepared
to bounce back and are less reliant on humanitarian assistance when a
crisis hits.
USAID/Food for Peace partners provide in-kind food to communities
on the ground, while also carrying out development activities that
address the underlying causes of food insecurity. Before the historic
changes in the 2014 farm bill, we were limited under title II to fund
these activities by buying food in the United States, shipping it
overseas, and selling it so that we had local currency on hand to run
the projects (i.e., monetization). According to a 2011 GAO study, USAID
lost on average 24 cents on the dollar for monetization because on
average it costs us more to buy and ship food than we can recover when
we resell it abroad. According to the GAO this inefficiency meant that
USAID ``lost'' $91 million through the monetization process over just
the 3 year period analyzed.\4\
Having cash resources directly available means that USAID can
simply provide partners with the resources they need to implement
development activities, rather than burdening them with higher staff
requirements and costs to implement the complicated and inefficient
monetization process, freeing up time as well as valuable dollars that
can be invested elsewhere. Last year, thanks in large part to the
reforms in the farm bill, providing cash to partners rather than
monetizing food aid allowed FFP to save $21 million and reached an
additional 570,000 people.
food aid reform progress to date
Calls for food aid reform date back to the second Bush
administration and it was ultimately the food price crisis of 2008,
with millions of people suddenly unable to feed their families and
civil unrest rapidly following the sudden price spikes, that led to
Congress providing USAID with supplemental funds for food assistance
interventions such as the local and regional purchase of commodities
for the first time. In 2010, the administration requested and received
funding for emergency food assistance in the base appropriation of the
International Disaster Assistance (IDA) account, authorized through the
Foreign Assistance Act. USAID used these funds to establish the
Emergency Food Security Program (EFSP) to buy food locally and
regionally and to provide targeted cash transfers or food vouchers so
that people in food crises could buy food directly in local markets. At
the same time, we put in place practices to ensure oversight and limit
any potential for fraud or misuse of funds. This can range from the use
of biometric identification practices to post-distribution monitoring
that ensures food assistance is reaching the intended beneficiaries.
We prioritize these limited resources for programs where United
States in-kind food aid cannot arrive in time or when other forms of
food assistance are more appropriate, efficient, or cost-effective--
such as in Syria. We did detailed analyses of a number of our 2012 EFSP
programming and found results consistent with the GAO and Cornell
University data on cost-savings, saving on average 33 percent by buying
food locally and regionally compared to shipping similar commodities
from the United States.
In the FY 2014 Budget request, President Obama proposed reforms to
shift funding from title II into State/Foreign Operations foreign
assistance accounts, mainly IDA and Development Assistance (DA). Under
the proposal, up to 45 percent of IDA resources could be used for
interventions such as local and regional purchases, cash transfers, and
food vouchers. The USAID/FFP development programs would have been
funded with Development Assistance funds, ending the need for
monetization. We estimated that efficiencies gained from this proposal
would have allowed us to reach an estimated 4 million additional people
without an increase in funding for food aid.
While the proposed reforms were not adopted, USAID continued to
press for reform through subsequent budget requests, as well as during
the reauthorization of the farm bill. The 2014 farm bill advanced
meaningful reform, offering USAID for the first time new flexibilities
that increased the limited amount of cash available to support title II
programs by seven percent to reduce monetization, purchase food locally
and regionally, and help disaster victims access food in their local
markets.
The administration's FY 2015 and FY 2016 title II budget proposals
build on these past proposals and achievements and seeks an additional
25 percent of the $1.4 billion requested in title II funding for
flexible food assistance programming. We estimate this will enable
USAID to reach an additional 2 million emergency beneficiaries.
Why more flexibility is needed
The need for additional flexibility is clear. Despite these
critical improvements to the title II program and the additional IDA
resources that USAID/FFP has received over the past several years, much
of the IDA has been needed has to meet the exponentially increasing
needs in Syria. USAID/FFP now spends some $500 million a year to help
meet the needs of more than 10 million Syrian displaced persons and
refugees in the region. And let us be clear--without these flexible
funds, we would not be able to feed people inside Syria and would have
great difficulty feeding those displaced within the region,
particularly where refugees are dispersed within host communities.
Similar to our title II budget, our IDA budget for emergency food
assistance for the rest of the world has remained stable since 2010,
even as needs have grown in places like Sudan, the Central African
Republic, northern Nigeria, and Ukraine. With regard to the new
flexible funding in the farm bill, we have prioritized its use first
and foremost to largely end monetization above the current statutory
minimum required for the development programs.
With the cash flexibility we have, we still miss opportunities to
run faster, more efficient, and effective emergency programs. Just this
week we have learned that congestion in the port in Cameroon has
disrupted the offloading of United States food, which in turn will
delay its arrival in Chad, where refugees from the Central African
Republic and Sudan are in need of emergency food assistance. And we
have learned that increased global demand for United States sorghum
will preclude our ability to buy this staple commodity for our programs
over the next 4 months. Additional funds for local and regional
procurement would not only help mitigate these kinds of unforeseen
events, it would also allow us to help more of those in desperate need.
I want to emphasize that even as we seek additional flexibility,
the majority of the title II request is for in-kind food. USAID will
continue to need United States commodity food aid. Last year, for
example, a large-scale in-kind food response was exactly the right
response in South Sudan when conflict cut off millions and markets were
not functioning. USAID provided nearly 120,000 metric tons to help save
lives and pull South Sudan back from the brink of famine. With 3.5
million people projected to face extreme food insecurity by June,
United States in-kind commodities will continue to be a critical part
of USAID's response there. During the Sahelien drought of 2012 United
States food arrived at the height of the lean season when markets were
not well stocked; we provided just over 209,000 metric tons of United
States food for that response. The President's FY 2016 proposal
envisions continued need for United States in-kind food, both
traditional commodities as well as United States manufactured
specialized products to treat malnutrition, known as ``blended'' and
``ready to use'' foods. Many parts of the world do not manufacture
these specialized nutrition products and they are playing an
increasingly critical role in the prevention and treatment of
malnutrition, especially for children.
how food for peace uses existing flexibilities
I would like to share some examples of programs we have funded with
the flexibility provided through the new farm bill and the IDA funding.
From assisting refugees to responding to typhoons, food aid reform has
allowed us to tailor our assistance to be more efficient, accountable,
and responsive to local needs.
Syria
Since the onset of the Syrian crisis, USAID has provided more than
$1.4 billion to respond to the needs of refugees as well as those
impacted by conflict inside Syria. In the past, the Assad regime turned
away United States food shipments, and regime and extremist attacks
make it impossible to provide United States-branded food products. In
response, our partners procure commodities regionally for prepackaged
food parcels for individuals and flour for bakeries to help feed more
than 4.8 million people inside Syria. We are also supporting a debit
card approach to provide food assistance to more than 2 million Syrian
refugees in neighboring countries. Most Syrian refugees are not in
camps but live in host communities widely dispersed geographically,
many of them in towns and cities where markets are available. By
providing a debit card with a prepaid sum, refugees can go to the
market and choose a variety of foods, including fresh fruits and
vegetables. The debit card not only drastically simplifies the
distribution of food and provides greater choice, better nutrition, and
dignity to Syrian refugees, but also eases the pressure on host
countries by supporting their local economies. According to the U.N.
World Food Programme (WFP), the food voucher program has created 1,300
new jobs and injected approximately $1 billion into the economies of
Lebanon, Jordan, Turkey, Egypt, and Iraq since the program began. This
also helps reduce the stress on host communities and build and sustain
community support for refugees as the situation in Syria continues to
deteriorate.
Last year, I had an opportunity to visit with a Syrian woman at a
refugee camp in Turkey. She explained how the daily visit to the market
helped to normalize what is not at all a normal situation. She fled her
seaside town and a comfortable stone-built home where she lived with
her two sons and their wives. Now she lives in a tent, sharing showers
and other facilities with hundreds of others. The ability to shop on a
daily basis and prepare foods familiar to her helps her get through the
day.
Market-based approaches to reaching refugees and displaced people
are increasingly preferred throughout the world and other major donors
have modernized their food aid, adopting this approach. Current funding
flexibilities would preclude the United States from shifting toward
this approach for other refugee populations, including in Kenya and
Ethiopia where these new methods are being brought to scale.
Philippines
In response to Super-Typhoon Haiyan in the Philippines in 2013 we
used both United States in-kind food and cash-based assistance: we
airlifted United States specialized foods that served as daily meal
replacements for those who lost their homes, and we provided an
immediate cash grant that allowed the U.N. and the Government of
Philippines to tap into local rice stocks and distribute them within 5
days of the storm. Six weeks later, this help was supplemented by U.S.
in-kind food--mostly rice--which arrived from prepositioned stocks in
the region. And in the recovery phase, when markets had begun to
function again, we supported a cash transfer program that allowed
survivors to begin to access local markets again and revive local
economic activity in the hardest hit areas. Had that storm happened at
the end of the fiscal year when our limited pool of flexible funds was
expended, our response would have been less timely, less effective, and
more costly.
Kenya
In Kenya, we are using a variety of tools to build the resilience
and address the emergency food assistance needs of the between 1 and 4
million Kenyans each year who do not have enough food during the lean
season just before the harvest. In remote areas where people do not
have easy access to markets, we provide in-kind food aid to meet needs.
For those who can access markets in semiarid counties, we use
electronic cash transfers for food purchases to avoid disrupting
functioning markets and to support livelihoods. We are also providing
farmers with the tools and know-how to increase their agricultural
production, even during tough times.
Ndeli Samuel, a widow with four children, is training with other
community members to learn new farming techniques that will save water
when irrigating crops in the arid zones. In return, she receives a U.S.
in-kind food ration for her participation because local markets are not
accessible. Ndeli's training workshop was one of more than 700
resilience projects that USAID's implementing partner is undertaking to
help farmers adopt simple but effective technologies to improve water
and land use in the tough climate of Kenya's drylands. Ndeli says she
is now ready to graduate and teach this technique to others in her
community. She now grows enough crops for her family and is selling the
rest to her neighbors. Here cash resources are critical so that we can
help farmers buy better farming tools and train them in the farming
techniques that helped Ndeli and her family increase their food
security. These efforts are critical to USAID's resilience agenda,
which seeks to help the world's most vulnerable build adaptive
capacities so that they can mitigate and bounce back from droughts,
conflict, and other risks they face.
conclusion
Be it relief or development, USAID's food assistance programs are
evolving based on years of experience, evidence-based learning and a
willingness to innovate to assure hunger needs and United States
interests are met in some of the world's toughest places. In our 60th
anniversary year, we look back with pride at all that has been
accomplished and look ahead, clear-eyed and focused, on the challenging
work today's crises present to us. As part of USAID's mission to end
extreme poverty and promote resilient, democratic societies, we are
committed to continuing to find ways to work smarter and better so we
can effectively and efficiently combat hunger around the globe. The
President's food aid reform agenda furthers these goals.
I would be remiss if I did not close by saying that we in USAID/
Food for Peace are proud to be entrusted with these resources and
leading global humanitarian efforts to reach those most in need of food
assistance. Our goal is to remain the best at what we do. We recognize
our many partners who make this work possible and honor those who risk
their lives or have lost their lives in their mission to deliver
assistance to hungry people around the world.
We are proud to be carrying out this lifesaving work on behalf of
the American people and appreciate the longstanding bipartisan
congressional support for the mission of ending global hunger.
Thank you again for this opportunity to testify about why we have
prioritized food aid reform as an agency and an administration. I look
forward to your questions.
----------------
End Notes
\1\ GAO, International Food Assistance: Local and Regional
Procurement Can Enhance the Efficiency of United States Food Aid, But
Challenges May Constraint is Implementation, June 2009.
\2\ GAO, 2009, 16.
\3\ Lentz, E., Barrett, C. B., & Gomez, M. I, ``The Impacts of
Local and Regional Procurement of U.S. Food Aid: Learning Alliance
Synthesis Report.''
\4\ GAO, ``International Food Assistance: Funding Development
Projects Through the Purchase, Shipment, and Sale of U.S. Commodities
Is Inefficient and Can Cause Adverse Market Impacts,'' June 2011.
The Chairman. Thank you. Thank you very much for what you
and your staff do on behalf of our country. It is deeply
appreciated.
Just to begin, what would be the implications for U.S.
national security if you did not have the flexibility that you
now have in Syria and in the region in delivering aid, and you
had to rely solely on U.S. commodities?
Ms. Esposito. Senator Corker, the Syrian example is a great
one. I tried to describe in my testimony just how important it
is to assuring that we are helping our allies address the
tensions that can arise when so many people arrive in the
country, stressing water services, social services. We have a
very politically unstable situation, obviously. By providing
this kind of assistance, we can help mitigate additional,
further insecurity.
In Lebanon, for example, one in four persons is now a
refugee. To put that in perspective, proportionally, that is
like 80 million people coming to the United States in just a
few years' time with little or no resources. So you can imagine
the kind of tremendous stress that puts our allies under.
So this is part of our toolkit, part of our effort to
mitigate instability within the region.
The Chairman. So, critics of us not purchasing food created
in the United States say that it increases the chance of using
unsafe food.
In the places where we have been able to use local and
regional food, has this been a problem?
Ms. Esposito. Senator Corker, I just want to underscore how
seriously we take this issue. Whether we are using in-kind
United States food or locally procured food, food safety
standards are rigorously followed.
Food safety standards of recipient countries must be met.
We require testing for human pathogens and toxins. During the
last 4 years, there have been no reports of unsafe food with
regard to our local or regional procurement.
We are, though, remaining vigilant. We are expanding our
commodity management training for all of our partners, and we
have reissued our commodity management guide, which is relevant
whether we are using in-kind food or locally and regionally
procured food.
The Chairman. So if I hear you correctly, that allegation
is a hoax.
Ms. Esposito. We have no reports of unsafe food.
The Chairman. Okay.
Critics of reform also claim that cash-based programs
transfer cash from the United States to corrupt governments,
but we know that the aid is being provided directly to
beneficiaries. So can you discuss this issue for us?
Ms. Esposito. Thank you, Senator.
The in-kind food program, the voucher program, these
programs are implemented by the same trusted partners who have
been implementing in-kind food aid for the last 60 years.
You are right, we do not give any of our title II food
assistance to governments. Our partners assess need
independently. They target based on that need. They register
people to be sure we can monitor who is getting the aid. We are
relying on established financial institutions, including banks,
to help with our transfers. And we have a series of new
technologies that allow us to ensure that the resources are
going to the people who need it the most.
So for example, the debit card program in Jordan and
Turkey, we are able to track every item purchased in the
grocery store because it is scanned with a barcode just like
here, and we do not pay the vendors until we are sure that the
funds were used properly.
So there are a lot of new ways, new tools, that we have
available to us to mitigate the risk of unintended use for
these resources.
The Chairman. So generally speaking, that criticism is a
hoax. [Laughter.]
Ms. Esposito. Whether in-kind or locally or regionally
procured, we do all we can to ensure that there are no
unintended uses of our resources.
The Chairman. I am sure there are examples, minor examples.
But generally speaking, that is not the case.
Ms. Esposito. That is correct.
The Chairman. So we are the only major developed country in
the world that still provides the bulk of our food aid through
domestic commodities.
Ms. Esposito. Yes, Senator.
The Chairman. I think that kind of speaks for itself.
I just would like to know, does this make it more difficult
for us to coordinate with other multilateral agencies and other
donors in really hard-hit areas like Haiti, for example, in
dealing with making sure that people have food when they need
it?
Ms. Esposito. Senator, the coordination really varies from
country to country, and it depends on the context. So in some
circumstances, there is certainly room for different
approaches, depending on the nature of the problem.
I think the real challenge comes for our partners when
other donors are requiring or asking for one modality, and we
are, in turn, asking for different modality. So running dual
types of platforms can be extremely complex for our partners.
But it is very, very context specific.
The Chairman. So the other developed countries like us that
care deeply about making sure that people have food, they have
more flexibility. We are sort of locked in.
Ms. Esposito. That is right. And they will press those
partners to do the work in the most efficient way possible.
The Chairman. So as the perceived most innovative free
nation in the world, we are really behind the rest of the world
when it comes to feeding the poor. Is that correct?
Ms. Esposito. Senator, we are a global leader in food
assistance, and we are very proud of that leadership role. But
we think that we could be more effective if we had additional
flexibility.
The Chairman. Listen, thank you for being here, and I look
forward to the questions from our distinguished ranking member.
Senator Cardin. First of all, I join the chairman in
thanking you for your incredible service to this country and to
our global goals. It is a challenge because the world is never
staying still and the challenges in the countries you are
working in become very difficult at times, and you are still
able to move forward. So we thank you very much for that.
Food aid cargo helps sustain U.S. commercially flagged
fleets. There are concerns that if we change cargo preference,
we may not be able to sustain the national defense sealift
capabilities our military needs without significant additional
Federal expenditures.
So how do you intend to balance the efficiency issues that
you are trying to get in the food program with ensuring that we
have adequate sealift capacity?
Did I stump you?
Ms. Esposito. Could you repeat the question, please?
Senator Cardin. Yes. Using U.S.-flagged vessels not only
helps U.S. industry, but also helps the Department of Defense
to have sealift capacity in the case of a national need. If you
reduce the amount of food being shipped by U.S.-flagged
vessels, it requires additional commitments by the Department
of Defense to make sure that we have sealift capacity available
in the case of emergency.
So how do you balance to make sure that the U.S. food
program is contributing to our ability to be ready in the event
of need by merchant marines?
Ms. Esposito. Thank you, Senator, for clarifying the
question.
The Department of Defense has released a statement
supporting the President's fiscal year food aid reform proposal
and its ability to improve our humanitarian responses. The
Department of Defense stated that the proposal will actually
not impact U.S. maritime readiness or its ability to crew surge
fleet.
Senator Cardin. That is not consistent with the information
I have received, so I would appreciate if you could clarify
that in specifics. I would be very interested to get a
commitment from the Department of Defense that they would not
be seeking additional resources to meet those needs.
If that is the case, I think we should have that on the
record--that they can maintain their sealift capacity--because
that is not consistent with other information that we have
received.
Ms. Esposito. Thank you, Senator. We can share the
statement from the Department of Defense, but I, certainly,
cannot speak on behalf of the Department of Defense.
Senator Cardin. Let me go to my second point and that is
that it is critically important that we are working with the
international community. We cannot do this alone. But the U.S.
Government cannot do it without our NGO partners. They provide
a great deal of the help here. Yet, our NGO partners have
concern about the legislation that is pending.
If we, on one hand, increase the government efficiencies
but lose our private partners, the end result is less
availability of food aid globally through the U.S. players.
So again, we still have concerns from the NGO community.
How do you intend to resolve those issues?
Ms. Esposito. Senator, we are open to dialogue with all the
partners, be it maritime, our PVO partners to find the best way
forward, so that we can find common ground and have a
sustainable platform for this program moving forward.
With regard to flexibility, my perception is that there is
actually great opportunity and have been new opportunities for
PVO partners with the flexibility that we are garnering. We see
an expansion of PVO responses in emergencies. They normally do
not like to handle large commodity-based programs, but they
have a lot of agility when it comes to these new types of
approaches, local and regional procurement, electronic
transfers.
So in Syria, for example, more than $100 million of our
emergency money is going to PVOs to help with that response. In
Haiti last year, we had both drought and hurricane and the
entire emergency response was mounted on a PVO platform.
With regard to development, the flexibility we have
garnered so far has eliminated the practice of monetization,
which is this practice of buying food in the United States,
shipping it overseas, and selling it.
I have heard just unanimous appreciation from that.
Senator Cardin. There is no question there is reform here
that they support. But, bottom line, there is still opposition
because they believe it takes away their ability to fund their
programs, that they need the flexibility. I think we have to
work with the NGO community to resolve those issues.
I want to get to one other question, which is pretty
fundamental. When I first came to the U.S. Congress in 1987, we
could not pass a foreign aid bill. There are many reasons we
could not do it, but there was a lack of support among the
American people in understanding the role that we play in
international development assistance as part of our national
security budget. That was part of it.
But we did not advertise well that the fact that most of
the foreign aid is American-produced products. And when that
got better understood, we got more support. And we have strong
support for this program because U.S. agriculture says, look,
we are selling our products. We are selling them to the
government. The government is then using it for international
development assistance. So it is a win-win situation. And it
acts, in many respects, as a countercyclical problem for
American farmers. Now we are saying we are going to cut that
back.
How do you intend to be able to maintain the strong support
that we have in this country from the agricultural community
when fewer American farm products are going to be used for
development assistance?
Ms. Esposito. Senator, thank you for that question. I
think, as we all know, the agricultural products in the United
States have been the backbone of the aid program for 60 years.
We expect that they will continue to be key partners in future
operations.
I mentioned the South Sudan program, and there are many
others where we will continue to require American in-kind food
aid.
But I would point out that because of rising food and fuel
prices and the cost of doing business, there has actually
already been a very significant decline in the amount of food
that is used in the relief programs. So today we actually
represent less than 1 percent of the total food that is shipped
overseas.
And there is such a strong commercial demand right now. And
we actually compete with those commercial demands when we buy
our food. So for example, we heard even just last week that we
are not going to be able to buy sorghum or we should not expect
to buy sorghum in the United States over the next 4 months
because global demand is so high that there is just a lack of
availability of that.
So on the one hand, I would like to think that U.S. farmers
will see that they will continue to play a vital role and that
the American people will see that by doing this program more
efficiently and more effectively, we continue to meet our
national security and humanitarian interests.
Senator Cardin. Thank you.
The Chairman. Thank you, Senator.
Senator Gardner.
Senator Gardner. Thank you, Mr. Chairman.
And thank you to the director for being here this morning.
I am a little nervous. I see that Senator Coons has stepped
out. I have been following him at every single meeting today so
far. I do not know what I am missing, so I hope you will let me
know, if his staff is here, if there something I should be at.
But I do want to thank the director for the opportunity to
be here. I have a couple questions for you. I came in halfway
through your testimony, so I want to maybe ask some things that
you covered in that.
In your testimony, you state that while we are getting less
for our dollar with the United States in-kind food assistance
and the need for food assistance, it talks about we are getting
less for our dollar with U.S. in-kind food assistance.
What do you mean by that statement? Are you talking about
price? You are talking about commodity prices?
Ms. Esposito. Thank you, Senator, for the question.
So as an example, in the early 2000s, it used to cost us
$400 a ton to buy, ship, and program a ton of food overseas.
Today, it is more than $1,200.
Senator Gardner. The first number was?
Ms. Esposito. $400.
Senator Gardner. $400, now it is $1,200.
Ms. Esposito. Correct.
Senator Gardner. And what is a ton of food. You are not
just referring to peas, lentils, beans? What you are referring
to when you say a ton of food?
Ms. Esposito. So it is an average cost, but it does include
grains, peas, as you said, lentils, and vegetable oil are the
primary basket that we ship.
Senator Gardner. But usually no produce kinds of things?
Ms. Esposito. Correct.
Senator Gardner. Apples.
Ms. Esposito. Correct.
Senator Gardner. And that is because of the shipping and
the long shipping times.
Ms. Esposito. That is correct, Senator.
Senator Gardner. Now will that change a little bit because
you have some prices down? I think winter wheat is $4.97 a
bushel in Byers, CO, today. Corn is down to its probably pre-
2007 levels in some places. That changes up and down. It ebbs
and flows.
Ms. Esposito. That is correct.
Senator Gardner. The study that you cite in your testimony
by Dr. Barrett at Cornell talks about buying food in Africa and
Asia. It was 34 percent and 20 percent less expensive,
respectively.
Did that study take into account perhaps farm programs
within those countries that may or may not provide certain
subsidies to their farmers that they do not here, just out of
curiosity?
Ms. Esposito. I do not have the specific countries,
Senator. I do know that they are extremely poor countries in
Africa. And to my knowledge, there are not farm subsidy
programs in those countries.
Senator Gardner. Okay, so you are not talking about buying
it for us to use there. We are talking about helping them build
a sustainable base of agriculture. That is what you are talking
about.
Ms. Esposito. That is correct.
Senator Gardner. Okay. I wanted to make sure that is what
it was talking about and not simply saying that we are buying
it to subsidize.
Let us say lentils, what percentage of U.S. production does
U.S. food aid represent for the in-kind side of Food for Peace?
Ms. Esposito. Senator, thank you for the question.
I am not sure about lentils per se, but altogether, it is
less than 1 percent of our----
Senator Gardner. But it is not 50 percent. We are talking
about a very small fraction of U.S. production. I would think
that an economist would not argue that you are driving and
setting the market price. I would not think that that is the
case.
So giving you the flexibility that you need to provide more
specific or a better form of aid, if that means displacing some
kind of in-kind production, it would be better for you and
better for our partners, correct?
Ms. Esposito. Yes, Senator.
Senator Gardner. Thank you.
And then I may have missed this in your testimony, is there
a balance and does it change year by year between in-kind
contributions of U.S. aid and cash assistance? How do you
prepare for that? I mean, does it depend country by country,
situation by situation?
Ms. Esposito. Senator, it is very context-specific. So we
discussed the Syria example where it would not be appropriate
to use the in-kind food. On the other hand, in South Sudan, and
in the Sahelian countries during drought, we use substantial
sums of food.
So food aid reform does not mean necessarily it is always
going to be exactly the same amount every year, the balance.
But we do think it is going to give us the flexibility to get
the right tool at the right time.
Senator Gardner. It does mean flexibility. Yes, very good.
Thank you.
Thank you, Mr. Chairman.
The Chairman. Thank you.
I know you were not feeling particularly well when you came
in. I hope the response you got today makes you feel a little
bit better. We, certainly, thank you for being here.
I do want to make a comment, which may generate the need
for a response from others, but it is not USAID's job to ensure
that our military policy and sealift capacity is met, is it?
Ms. Esposito. No, sir.
The Chairman. That is sort of a DOD problem, is it not?
Ms. Esposito. Yes, Senator.
The Chairman. I would just say, look, I realize we have
some sensibilities that will have to be dealt with. I would
hope that the reason Americans, whether they are in the
agriculture business or the maritime business or whatever, or
the NGO business, especially the NGO business, would support us
making changes because other people will not starve.
I would hope that people would support this because it is
an important American value. And I hope that as we move through
this, in spite of the fact that, let us face it, people make a
living off U.S. programs, in some cases to the adversity of
people who are starving, I would hope we would figure out a way
to first prioritize the great work that you are doing and this
American value that exists for this program. So thank you.
I think there may be a response.
Senator Cardin. Thank you, Mr. Chairman. You got my
attention, you did.
I strongly support our food program and our development
assistance programs. I always have. And I would like to see a
larger share of the budget and have said that publicly and will
continue to support that.
I also want to make sure that every dollar we spend is used
in the most efficient way. So I agree with the chairman on that
point. We cannot justify inefficiencies in any of our programs.
So I agree with you.
But I regret that many Americans do not share our view of
the importance of development assistance and instead say that
we have not taken care of problems at home. You have to do that
first.
We do both, and we could do a better job at both. But our
success in these programs depends upon broad support. And the
issues that are being raised with the U.S.-flagged vessels,
with the NGO community's partnerships, and dealing with the
agricultural community, are sensitive issues that I know the
chairman understands and ones I think we need to be sensitive
to as we try to pass a reform bill.
That was my only reason for raising it, but I want to have
more efficiencies in the programs. We have broad support for
the reforms that are in your proposal by all sectors of the
stakeholders.
And what I said originally, I think this is an area where
we should be able to try to get together on.
The Chairman. And, as you mentioned, coming in, I am sure,
that based on what has happened over the last week, we,
certainly, should be able to deal with this.
I would say that one of the things that would hit a chord,
I think with every American, is using even the same dollars
that we are spending--the same dollars that we are spending--to
reach millions more to make sure they are not starving. And
with the passage of this legislation, we, certainly, could make
that happen.
Senator Gardner. Thank you, Mr. Chairman. I think it goes
back to some of the questions I was asking.
In the House of Representatives, I represented a district
that was the 11th most-agricultural district out of 435
districts. Colorado has some of the highest wheat- and corn-
producing counties in the Nation. Growing up in an implement
dealership, I never remember farmers coming in and saying,
well, you know, USAID is doing this or that to the program,
therefore, I think market prices are going to be dropping
today, or we are really going to do well because of it. The
talk was what we can continue to do to help our partners.
So I think flexibility is key, knowing that it is not about
what price is, it is not about the affected market is going to
do that day because of a program, because you are talking about
1 percent or less of a commodity, and maybe more in some cases,
but you are not talking about a market-setting kind of rate. So
that should not be a part of the conversation.
What ought to be a part of the conversation is giving the
tools, the flexibility, and the resources we need to best
provide our neighbors around the world with the aid they need
so they can grow up with more opportunity instead of less.
The Chairman. Very good. Thank you.
Thank you. Goodbye. [Laughter.]
Okay, we will now turn to our witnesses on the second
panel. Our first witness is Mr. David Ray, vice president for
policy and advocacy at CARE USA. Mr. Ray has over 20 years of
experience working at CARE USA. Founded in 1945, it is one of
the largest and oldest humanitarian aid organizations focused
on fighting global poverty.
CARE USA is an important implementing partner of the Food
for Peace program and was an early adopter of some of the food
aid programs we are discussing today.
I thank you for allowing my daughter to intern with you in
Tanzania years ago. It had a huge impact on her life. I thank
you.
Our second witness is Dr. Vincent Smith, professor of
economics at the Montana State University and visiting scholar
at the American Enterprise Institute. Dr. Smith's research
includes an examination of agricultural science policy,
domestic and world commodity markets, risk management, and
agricultural trade policy. He has authored nine books and
monographs, and published over 100 articles on agriculture and
other policy and economic issues.
Our third witness is Dr. Stephanie Mercier, a senior policy
adviser at the Farm Journal Foundation. Prior to that, Dr.
Mercier--am I pronouncing it correctly?--was a chief economist
at the Senate Agriculture Committee from 1997 to 2011. Thank
you for your service here. She was involved in several reform
efforts made to the Food for Peace program.
With that, I will recognize Dr. Ray.
Thank you all for being here. We look forward to your
testimony and your assistance in helping us navigate these
issues. Thank you.
STATEMENT OF DAVID RAY, VICE PRESIDENT FOR POLICY AND ADVOCACY,
CARE USA, WASHINGTON, DC
Mr. Ray. Chairman Corker, Ranking Member Cardin, members of
the committee, thank you for the invitation to testify here
today. I am David Ray, vice president of CARE, a global
humanitarian organization.
As you mentioned, Senator, CARE was founded in 1945, when
22 American organizations sent what became known as care
packages to the starving survivors of World War II. CARE's work
now stretches across 90 countries, reaching more than 72
million people in 2014.
CARE has been a partner of the Food for Peace program for
the past 60 years. While we are proud to be part of this great
effort, even good programs can be made better. CARE has been a
longtime champion of reforming title II funding to make it more
flexible, effective, and efficient.
In fact, we believe in food aid reform so strongly that we
put it over our own pocketbook. In 2006, CARE voluntarily ended
our participation in open market monetization, the practice of
purchasing commodities here; shipping them to developing
countries; and then selling them, often at a loss, in order to
generate funds for development programs. This decision has cost
CARE more than $45 million annually in Federal funding since
that time.
While the proceeds of monetization can be put to good use,
a GAO report estimated that monetization results in an average
loss of more than $.30 on the dollar. Research has shown that
open-market monetization also risks destabilizing local markets
by flooding them with low-priced U.S. commodities.
In fact, it was this potential to undermine the very small-
scale farmers and communities we serve that prompted CARE to
transition away from open market monetization.
Since that time, CARE has called for an end to the legal
requirement to monetize, and we continue to push to make U.S.
food aid programs more flexible, efficient, and effective.
Experience has shown us that while sending U.S. food is
sometimes the appropriate thing to do, there are often more
effective responses to crises. The cost of buying U.S.
commodities and shipping them on U.S.-flagged vessels has
proven to be as much as 30 to 50 percent higher than purchasing
food locally or regionally, and it can take as much as three
times longer to get food to the people who need it most.
Our point is this: Regulations governing the food aid
program, with few exceptions, tie organizations like CARE to
using one tool--U.S. commodities. It is like telling a
carpenter, here is your toolbox but you can only use your
screwdriver. Practitioners need flexible funding to use the
right tools for the right jobs, whether it is cash transfers,
vouchers, local or regional purchase, and/or efficiently
transported U.S. commodities.
For example, CARE is working in Haiti to establish a
country-led food voucher programs targeting the poorest 10
percent of the population. CARE's program called Kore Lavi,
which translates to ``Support Life,'' provides eligible
participants with vouchers to buy locally produced staple and
fresh foods. It also distributes four to five U.S. commodities
to supplement the diets of pregnant and lactating women and
children under the age of 2 who are in the critical thousand
days window.
The program does four main things. First, it allows the
most vulnerable to access locally produced fresh and staple
foods and badly needed nutritional support, and to do so with
dignity. Second, it allows participants to save their scarce
resources, $500,000 so far, with the top two savings
expenditures being school and medical fees. Third, it builds up
the overall economy by creating demand for local farmers'
products. Fourth, it reinforces the Haitian financial system as
vendors receive payments through their formal banking accounts
or through partner microfinance institutions.
Accountability is insured by providing participants with
hologram imprinted identification cards, complete with their
thumbprint, picture, and a unique ID number. There is oversight
on what foods are sold, and there are in-person reporting
stations for persons to report concerns or complaints.
Finally, because Kore Lavi was designed and implemented in
partnership with the Haitian Government, the program is setting
the ground for a sustainable assistance program that can be
country-led and country-run in the future.
While Kore Lavi uses a mix of vouchers and in-kind
commodities, there are times when only vouchers or commodities
are needed. But U.S. commodities are just one tool in our
toolbox, a tool that is not always appropriate and should not
continue to be the required method of response for title II
emergency and nonemergency programs.
In conclusion, Mr. Chairman, Ranking Member, CARE
recommends that Congress increase the amount of flexible
funding provided within title II to improve the cost-
effectiveness of programs, enabling them to reach more people,
save more lives, all at no additional cost to the taxpayer.
I thank the committee for its time, and I look forward to
answering your questions.
Thank you.
[The prepared statement of Mr. Ray follows:]
Prepared Statement of David Ray
Chairman Corker, Senator Cardin, members of the committee, thank
you for the invitation to testify here today and for the opportunity to
present CARE's perspectives and experiences on international food aid
reform. My name is David Ray, and I serve as the Vice President for
Policy and Advocacy at CARE USA, a humanitarian organization that
fights poverty and its causes around the world.
CARE traces its roots back to 1945, when 22 American organizations
combined forces to rush emergency food rations in the form of ``CARE
Packages'' to the starving survivors of World War II in Europe. Since
that time, CARE's work has evolved and now stretches across 90
countries, reaching more than 72 million people in 2014. Last year,
CARE's humanitarian projects supported more than 2.6 million people's
access to quality food and improved nutritional well-being in 37
countries prone to, or affected by, conflict and disasters.
Ensuring that our Nation's international food aid programs achieve
success at reducing hunger around the world is a critical challenge for
all of us, and CARE shares your commitment to combating hunger by
providing effective and accountable programming wherever it is needed.
food aid reform and care's story
CARE has been a proud partner of the Food for Peace program for 60
years--
a program with the explicit goal of combating world hunger and
malnutrition and their causes, and promoting broad-based, equitable and
sustainable development. CARE's work, together with the U.S. Government
and implementing partners, has helped to save countless lives, and
protect and improve the health and well-being of millions of people
living on the edge of disaster.
And while CARE is proud to be a part of this great effort, even
great programs can be made better. This is why CARE recommends that
Congress increase the amount of flexible funding available through
Title II ``Food for Peace'' funding--so that food aid dollars can be
more effective and reach more people.
CARE's mission is to provide lasting, equitable, and sustainable
development, which is guided by the needs and participation of the
communities we serve. It's these principles, along with our nearly 70
years of experience, which inform our advocacy on international food
aid reform and our implementation of food aid programs.
In 2006, CARE made the decision to voluntarily be the first, and
only, NGO to end the practice of open-market monetization--a decision
that cost CARE at least $45 million in federal funding every year. For
those who are unfamiliar, open-market monetization is the practice of
purchasing commodities here in the United States, shipping those
commodities overseas, and then selling them--often at a loss--in order
to generate funds for development programs. While the work of the
resulting programs can be helpful, it is an inefficient practice. A GAO
report estimated that monetization results in an average loss of 30
cents on the dollar.
Beyond being far less efficient than the logical alternative of
simply providing cash to fund food security programs, open-market
monetization is fraught with risk including the destabilization of
local markets by flooding them with low priced U.S. commodities. It was
this potential to undermine the very small-scale farmers and
populations that we are aiming to serve, along with the need to stretch
every dollar, which prompted CARE to transition away from open-market
monetization. As of 2009, CARE no longer participates in, or takes any
proceeds from, open-market monetization. Currently, CARE confines its
use of monetized food aid to state-sponsored a relief program in
Bangladesh that has a guaranteed return rate and involves targeted
distribution in conjunction with the host government.
But, beyond the practice of monetization, CARE's experience has
shown that taxpayer dollars for emergency and nonemergency U.S. food
aid have the potential to go even further and to be even more
effective.
Simply put, decades of experience has shown us that sending U.S.
food is sometimes the appropriate thing to do, and sometimes it is not.
Shipping food from the United States to developing countries is slow,
expensive, and sometimes unpredictable. The cost of using U.S.
commodities has shown to be significantly higher, in many cases 30-50
percent higher than alternative untied food aid purchased locally or
regionally, and it can take as much as three times longer to get food
to the people who need it most. CARE has seen the evidence showing that
when U.S. commodities suffer untimely deliveries or are poorly
targeted, it can have unintended, and sometimes harmful, economic
consequences.
Moreover, U.S. commodities are often simply not enough to
effectively address acute and chronic hunger. Practitioners need
flexibility in food aid funding so that they can use a variety of tools
to provide appropriate emergency and nonemergency responses that
contribute to recovery, enhanced resilience and long-term development.
For CARE, its partners, and other food aid actors, flexibility means
having the option to use the right tools--whether it is cash transfers,
vouchers, local/regional purchase, and/or efficiently transported U.S.
commodities.
Our point is this: regulations governing the food aid program, with
few exceptions, tie organizations like CARE to using one tool: U.S.
commodities. It's like telling a carpenter, here's your tool box but
you can only use your screwdriver to build my house.
Decisions about whether to distribute vouchers, to local or
regionally purchase food, or to use food secured in the United States
should be based on three factors: (1) Local market conditions; (2) the
local or regional availability of food in sufficient quantities; and
(3) the quality of that local food to meet local needs. Where markets
work well, and food is locally available, cash transfers or vouchers
are generally the most efficient. When food is locally available but
markets do not function well, direct distribution of local or
regionally purchased food is likely to be the most appropriate option,
and where food is not locally or regionally available in sufficient
quantity and quality, shipping food may be called for. If malnutrition
is a critical issue, and foods available on the local market are not
adequate to meeting nutrition needs, foods may need to be imported. In
other instances a mix of these responses may be required.
kore lavi: an example of flexibility
Recently, incremental food aid reforms in the 2014 farm bill took a
step in the right direction by providing some increased flexibility in
title II funding. These reforms have been leveraged with the cash-based
Community Development Fund and the Emergency Food Security Program--
both of which are outside of the title II programming and funded
through the State-Foreign Operations Appropriations bill. As a result
of this leveraging, we are beginning to show what untied, flexible food
aid funding can do.
Using flexible funding out of the Community Development Fund and
leveraging U.S. commodities provided through title II nonemergency
support, CARE has established a promising voucher program in Haiti that
is building the capacity of the Haitian Government and local markets to
help support the most vulnerable and chronically malnourished members
of the community.
As you know, the levels of poverty and food insecurity in Haiti
have been long-standing, and were only intensified by the devastating
2010 earthquake. Currently, 60 percent of the Haitian population lives
on less than $1.25 a day.
CARE's program, called Kore Lavi (which translates to ``Life
Support''), is targeting the bottom 10 percent of the Haitian
population living below that $1.25 a day poverty line. The program is
providing them with a mix electronic vouchers to buy locally produced
staple foods and paper vouchers for the weekly purchase of fresh foods.
Kore Lavi--as with all of CARE's voucher or cash transfer programs--was
designed and is being implemented with strict commitment to oversight,
accountability, and country ownership. In addition, there is visible
USAID branding throughout the program, so that participants know where
this assistance came from.
One the most important points of effectiveness and account ability
in project design comes with the practice of identifying who needs
services the most and who can participate in the program. CARE, along
with a consortium of partners, has worked with the Haitian Ministry of
Social Affairs to set up, populate, update, and run a database system
of eligible participants, who were identified through an on-the-ground
census that was executed by CARE and its partners. Both the composition
of the food that the vouchers can redeem, along with their overall
value ($25 USD, which covers approximately 30 percent of monthly
dietary needs) was also decided in conjunction with the Haitian
Government and in consideration of local market capacities.
The identified eligible participants were then provided hologram-
imprinted identification cards complete with their thumb print,
picture, and a unique identification number. This card can be taken to
a participating vendor, often located in remote areas, on a monthly
basis in order to receive their choice of a mix of six locally produced
staple foods (corn, rice, millet beans, wheat, lentils, oil). There are
strict vendor-limitations to only sell locally produced staple foods in
order to rebuild market demand and support local agricultural
production. Staple food vendors use mobile phones to access the
participant database to verify the recipient, and to report what
locally produced staple foods were provided. Once the transaction is
verified, the vendor can redeem their payment through their formal bank
account--a practice which is also helping to build up the Haitian
financial system.
A similar system is also used by participants for the purchase of
fresh foods at local markets through the use of time-limited and color-
coded paper vouchers
can be used throughout the month. Small-scale vendors of fresh foods,
who are often women, are identified as a Kore Lavi vendor with a wide-
brimmed hat and a branded ID badge (the hat enables illiterate
consumers to identify these vendors). Because these small-scale vendors
often do not have mobile phones or bank accounts, CARE has partnered
with local microfinance institutions to provide same day vendor payment
for the used paper vouchers--thus allowing for these small-scale
vendors to meet their own food needs. Since CARE believes that
accountability should run both ways, there are in-person reporting
stations at each market for participants and vendors to report
complaints and have their questions answered.
In addition to the electronic and paper vouchers, a special focus
has been put on identifying and reaching vulnerable pregnant and
lactating women, and children under the age of 2 who are in the
critical 1,000 days window. These women and children are also eligible
to receive additional rations of fortified U.S. commodities to help
ensure their nutritional needs are met while still enabling them to
access local, fresh foods.
Kore Lavi is now in its second year, and so far the program has
reached approximately 125,000 chronically hungry individuals and has
partnered with 387 vendors. Some program participants have accumulated
savings with the money they have not spent as a result of using the
vouchers. As of now, this collective savings amounts to approximately
$500,000 through 20-cent deposits, with the top two savings
expenditures going to pay for school and medical fees. In short, Kore
Lavi supports participants' food security, allows them to participate
in a formal market, save their scarce resources, and exercise their
sense of dignity by being able to make their own food choices. In turn,
local farmers are able to receive a fair price for their products,
participate in a stronger market, and meet the needs of their
community.
It is important to note that the participant database developed by
Kore Lavi is in the process of being transitioned over to the Haitian
Government, so that capacity is fully developed to maintain and update
the database in the future. The end goal of the program is to
transition the whole process over the Haitian Government. Because Kore
Lavi was designed and is being implemented in conjunction with the
Haitian Government, the program is laying the groundwork for a
sustainable country-led assistance program that can be county-run in
the future.
This is the type of work than can be done with funding flexibility
food aid funding--work that not only addresses immediate needs, but
builds a brighter future.
And, this is the kind of flexibility that CARE would like to see
baked into title II funding, instead of having to patch together small-
scale solutions due to the constraints of tied aid.
conclusion
Kore Lavi is just one example of the type of programming that could
be scaled up, replicated, or expanded with untied, flexible food aid
funding. By taking advantage of the small amount of flexible funding
currently available, Kore Lavi does not rely on monetization, therefore
allowing CARE to support local businesses and ensure that taxpayer
dollars are stretched as far as possible.\1\
While Kore Lavi uses a mix of vouchers and in-kind commodities,
there are circumstances when a voucher-only approach is appropriate,
and there are times when U.S. commodities are needed. In instances like
South Sudan, where markets are broken and local/regional food is not
available, in-kind food aid is valuable when it arrives on time and
reaches the people who need it most. This is also the case for programs
like Kore Lavi, where locally produced fortified foods are not
available but badly needed for pregnant and lactating women. But, U.S.
commodities are just one type of blunt instrument--an instrument that
is not always appropriate and should not continue to be the required
method of response for title II emergency and nonemergency programs.
In conclusion, although current law provides authority for limited
cash assistance, CARE recommends that Congress increase the amount of
flexible cash assistance provided within title II programs and consider
new strategies on how best to make those resources available. Not only
would this substantially improve the cost-effectiveness of both
emergency and nonemergency programs, it would also result in more
people being reached, more lives being saved, and more sustainable
solutions to hunger and poverty.
Mr. Chairman, members of the ommittee, I thank you for your time
and I look forward to answering your questions.
----------------
End Notes
\1\ The Haitian Government specifically requested no monetization
for this program. This request was consistent with findings of a
Bellmon Analysis study, which also indicated that food aid monetization
would be very problematic within the local economy. Therefore, CARE
would have been unable to implement programs to address food security
without use of limited flexible funding that is leveraged outside of
title II, through the Community Development Fund.
The Chairman. Thank you very much.
Dr. Smith.
STATEMENT OF VINCENT SMITH, AEI VISITING SCHOLAR, PROFESSOR OF
ECONOMICS, DEPARTMENT OF AGRICULTURAL ECONOMICS AND ECONOMICS,
MONTANA STATE UNIVERSITY, BOZEMAN, MT
Dr. Smith. Chairman Corker, Ranking Member Cardin, members
of the committee, thank you so much for inviting me to speak
with you today on this important issue.
From their inception, U.S. emergency and other food aid
programs have accomplished a great deal in alleviating hunger,
malnutrition, morbidity and mortality among the world's most
desperately poor people. However, they simply have not been
nearly as efficient and effective as they can be and should
have been in providing the aid that mitigates the adverse
effects of hunger and malnutrition among millions of children
and adults.
A wide range of academic analyses that have already been
cited and government reports are remarkably consistent in
drawing the following conclusions about the current U.S. food
aid program.
First, the current practice of using monetization to fund
NGO programs is highly wasteful and inefficient, yielding less
than $.70 of usable funds for every tax dollar expended. Many
NGOs deserve to have their food and food-security-related
programs funded, but the programs should be funded directly and
efficiently with appropriate oversight about how the funds are
used, to ensure they are effective and efficient programs.
Second, agricultural cargo preference is an exceptionally
financially costly way of shipping food from the United States
to the ports of entry in the regions where the aid is needed. A
conservative estimate is that it increases the cost of shipping
food on average under food aid programs by 46 percent, about
$150 million a year in 2006 dollars, never mind current
dollars.
As a result, the U.S. Government spends more on shipping
food than on purchasing the food delivered, according to the
GAO. In comparison, Canada in 2012, for example, used 70
percent of its food aid funds for food and only 30 percent for
administration and transportation. Canada uses local sourcing,
for example, and does not, to my knowledge, involve
monetization.
Further, in combination with the current requirement that
food aid be mainly sourced from the United States, the cargo
preference requirement significantly contributes to otherwise
unnecessary delays up to 2 months, as the chairman noted, in
delivering emergency food aid. The impacts of these delays
themselves have severe adverse effects, particularly on the
morbidity status of children and their long-run ability to be
productive citizens.
Agriculture cargo preference have been justified by private
maritime interests as providing essential support and
maintenance for a U.S. maritime fleet that can provide military
prepared support vessels in time of war. The overwhelming
weight of the empirical evidence, not just from DOD but from
other studies, is that cargo preference as applied to food aid
makes very little effective contribution to maintaining the
military preparedness of the U.S. maritime fleet through
providing additional mercantile fleet capacity that can be used
by the Department of Defense.
Current estimates indicate that fewer than 11 relatively
small ships and less than 500 sailors are affected by the
foreign aid program. Those numbers are estimates and subject to
question by everybody, but they are ballpark pretty accurate.
Maritime interests have also made a related claim that
food-aid-related cargo preference creates many thousands of
high-paying jobs that has a large effect on the U.S. economy,
both by expanding the U.S. Merchant Marine Service and
decreasing port service activities. Adding 500 jobs is not
having a big impact on the economy, with apologies to
everybody. And parenthetically, the funds being used for those
jobs are being diverted from other activities that would
generate economic activity, too.
The net effect of these programs on the economy is close to
zero. I would be tempted to say negative, but then I would be a
bigoted economist and I cannot say that.
A related important humanitarian concern is the food
carried mainly under cargo preferences is mainly carried by old
and slow ships, and that is probably contributing to the delay
in delivering food from the United States.
The clear primary beneficiaries of cargo preference are the
private maritime interests that largely support that program,
particularly the companies that own the vessels. Many of these
vessels would have been decommissioned as noncompetitive, both
in intracoastal transportation and international
transportation, were it not for the food aid program, at least
that is the evidence that appears to come from the George Mason
study that was referred to earlier and by the work by Bageant,
Barrett, and Lentz.
Finally, I would like briefly to discuss the issues
associated with local and regional sourcing of food aid.
Permitting complete flexibility or as much flexibility as
possible for USAID and other government food programs to
locally and regionally source emergency aid and other forms of
food aid is clearly a much more cost-effective way and faster
method of delivering the needed aid than requiring sourcing
from the United States.
That is not to say that no food will be sourced from the
United States. Processed food is clearly optimally sourced
right now from the United States in many contexts,
particularly, for example, in relation to peanut butter and
products like that.
The humanitarian impacts of allowing substantial
flexibility in sourcing food, as has already been discussed in
this session, are very substantial. A minimum estimate of 2 to
4 million people, and a maximum estimate of 8 million to 10
million people, would benefit by reallocating the funds to more
flexible sourcing.
At the same time, permitting local sourcing will have no
measurable economic impacts on income of U.S. farmers or the
overall performance of the agriculture sector. In fact, if
anything, having more money to buy food aid food in the form of
wheat and corn, which wheat and corn is a global market,
actually would enhance global demand for those foods. That
would actually be of more benefit--although a minuscule
benefit, it must be said--to the corn growers of Iowa and the
wheat growers of Colorado and Montana.
In summary, ending these practices would generate
tremendous benefits in terms of improving humanitarian aid, and
they would benefit the United States in many domains--
economically, politically, and in terms of the good will that
we would accumulate around the world that is so important to
all of our efforts to sustain a democratic and productive
society.
Thank you, sir.
[The prepared statement of Dr. Smith follows:]
Prepared Statement of Dr. Vincent H. Smith
Chairman Corker, Ranking Member Cardin, and distinguished members
of the committee, thank you for the opportunity to testify today about
the future of U.S. food aid programs. I am honored to be invited to
discuss these programs, their importance, and the need to reform them.
Summary
The central goal of any government program should be to meet the
program's core objectives as efficiently and effectively as possible.
From their inception, U.S. Emergency and other Food Aid Programs have
accomplished a great deal in alleviating hunger, malnutrition,
morbidity, and mortality among the world's most desperately poor
populations. However, they have not been nearly as efficient and
effective as they can be and should have been in providing aid that
mitigates the adverse effects of hunger and malnutrition of children
and adults.
This has especially been, and continues to be, the case with
respect to emergency food aid. A plethora of academic analyses and
government reports (including a long sequence of General Accountability
Office reports) have been remarkably consistent in drawing the
following conclusions about the current U.S. food aid program.
1. The current practice of monetization (allowing NGOs to sell food
aid food shipped from the U.S. in local markets and use the proceeds to
fund their aid-related programs) is highly wasteful and inefficient.
Many NGOs deserve to have their food aid and food security related
programs funded, but the programs should be funded directly with
appropriate oversight about how the funds are used to ensure they are
effective and efficient.
2. Agricultural Cargo Preference (ACP) is an exceptionally
financially costly way of shipping food aid from the United States to
the ports of entry in the regions where the aid is needed. Worse, in
combination with the current requirement that food aid be mainly
sourced from the U.S., the cargo preference requirement significantly
contributes to otherwise unnecessary delays in delivering emergency
food aid. The impacts of these delays have themselves had severe
adverse effects on, especially, morbidity and mortality rates among
children.
3. Agricultural Cargo Preference has been justified by Maritime
interests as providing essential support for the maintenance of a U.S.
maritime fleet (including both ships and sailors) that will be
essential for providing military preparedness needed to support the
effective defense of the country in time of war.
The overwhelming weight of the empirical evidence is that ACP makes
no, or at best minimal, effective contribution to maintaining the
military preparedness of the United States through providing additional
relevant and useable mercantile fleet capacity (in terms of both
sailors and ships) for DOD purposes. In other words, the evidence makes
nonsense of the claim that ACP plays any critical role with respect to
U.S. military preparedness.
4. Maritime interests have also made a related claim that ACP
creates many thousands of high paying jobs and has large effects on the
U.S. economy, both by expanding the U.S. merchant marine service and
increasing port service activities as well as through what are called
``multiplier effects.''
A recent U.S. Department of Defense estimate of the direct marine
service effects is that ACP increases the employment of sailors in the
U.S. mercantile marine fleet by between 375 and 495 jobs a year. Those
jobs cost the taxpayer an estimated annual average additional outlay
about $100,000 per job over an above what would be otherwise be spent
to transport U.S. food aid from the United States to the destinations
where the food is needed. These are funds that annually, under the
current food aid programs, are directly reallocated from providing food
aid to over 2 million very poor people a year.
A related further important humanitarian concern is that food
carried under cargo preference by U.S.-flag ships is typically carried
on old and slow ships (which adds to the labor and other costs incurred
through the cargo preference program), delaying the delivery of the
emergency food aid to the children and adults who need it. Barrett and
Lentz (2014) point out that such delays result in increased
malnutrition and morbidity among, perhaps especially, children.
Almost no ``multiplier effects'' or broader economy-wide impacts
derive from these maritime jobs, in part because they simply involve
the reallocation of government funds from one use to another use, and
in part because some of the international maritime sailor's income is
inevitably directly spent in foreign economies. In addition, in any
case, multiplier impacts associated with new government spending are
relatively small (multipliers are almost never estimated to be larger
than about 1.8).
5. The primary beneficiaries of the agricultural cargo preference
mandate are the private shipping companies, whose vessels are approved
for and used to carry food aid shipments under the ACP. Effectively,
ACP is a straightforward and relatively wasteful form of corporate
welfare that imposes substantial humanitarian costs on some of the
poorest and most desperately in-need families and children in the world
by reducing the effectiveness of U.S. Food Aid programs.
6. Permitting complete flexibility, or as much flexibility as
possible, for USAID and other government food aid programs to locally
and regionally source emergency and other forms of food aid is a more
cost-effective and faster method of delivering the needed aid than
requiring sourcing from the United States. The humanitarian impacts of
allowing substantial flexibility in souring food aid have consistently
been estimated be very substantial, reducing nutrition deficiency
related morbidity and mortality for an average of over 4 million
children and adults on an annual average basis.
At the same time, permitting local and regional sourcing will have
no measurable economic impacts on the incomes of U.S. farmers or the
overall performance of the U.S. agricultural sector. Paradoxically, for
many of the crops raised by U.S. producers and used as food aid--such
as corn, wheat, and rice--if anything a shift to local and regional
sourcing will have positive, rather than negative, effects on the
prices they receive for their crops. The reason: these are crops traded
in global markets and a more efficient use of U.S. food aid funds will
increase global use and demand for those crops, albeit in very modest
amounts relative to the global production of wheat, corn, rice, and
other food aid commodities.
agricultural cargo preference: issues and evidence
The following issues are central to any assessment of agricultural
cargo preference as the policy is applied to U.S. emergency and other
food aid:
(a). Does the U.S. cargo preference program as applied to U.S. food
aid programs have a substantial and adverse impact on the cost of
delivering food aid to the people who desperately need that aid?
(b). Does the food aid related U.S. agricultural cargo preference
program in any substantive way enhance the military preparedness of the
United States by expanding the capacity of the private U.S. merchant
marine service to support U.S. military efforts in other countries?
(c). Who are the primary beneficiaries of the government revenues
that have to be spent as a result of the food aid related U.S. cargo
preference program? Is this just corporate welfare in disguise?
(d). Does the food aid related U.S. cargo preference program have
substantive positive impacts on the U.S. economy either through job
creation within the U.S. mercantile marine or by creating additional
economic activity?
(a). Does the U.S. cargo preference program as applied to U.S. food
aid programs have a substantial and adverse impact on the cost of
delivering food aid to the people who desperately need that aid?
The evidence on the impact of cargo preference on the delivery
costs of U.S. food is unambiguous and large and is derived from
multiple analyses by different sources. Perhaps the most careful
academic study to date, by Bageant, Barrett and Lentz (2010), using
conservative assumptions about the nature of the U.S. Department of
Transportation Marine Administration data available on food aid
shipping costs, estimates that food shipped on U.S.-flagged cargo
preference vessels costs 46 percent more than shipping the same aid at
competitive rates. A more recent independent study by a research group
at George Mason University obtained very similar estimates.
Quite stunningly, in fiscal year 2012 (October 1, 2011 to September
30, 2012) the General Accountability Office (2014) reported that 45
percent of Food for Peace funds was spent on food aid transportation
while only 40 percent of those funds was spent on food aid. In
contrast, for example, Canada spends 70 percent of its food aid budget
on food aid (Barrett and Lenz, 2014). While part of the reason for the
exceptional proportion of total U.S. Food for Peace program outlays
allocated to transportation is the current mandate to source most food
aid from the U.S. rather than from local or regional markets closer to
the areas of need, the impact of the cargo preference requirement on
those costs, conservatively estimated to be about $150 million a year,
is also substantial.
(b). Does the food aid related U.S. agricultural cargo preference
program in any substantive way enhance the military preparedness of the
United States by expanding the capacity of the private U.S. merchant
marine service to support U.S. military efforts in other countries?
The empirical evidence is also surprisingly clear on this issue.
Cargo preference for food aid does little or nothing to increase the
ability of the private companies that form the U.S. Maritime Service to
provide services to the Department of Defense (DOD) in time of a major
war. That is, applying cargo preference requirements to food aid
shipments has no effective impact on the military preparedness of the
United States. Two relatively recent detailed analysis of registration
(Bageant, Barrett and Lentz, 2010; George Mason University, 2015) have
concluded that the overwhelming majority of U.S.-flagged ships approved
for transporting foreign aid under the cargo preference mandate do not
meet the criteria established by the Department of Defense for a
mercantile ship to be viable for military purposes (only 17 of 61 ships
appeared to meet the DOD criteria in 2006). Tellingly, most of the
ships fail on to meet the DOD criteria on two important grounds: they
are too old and they cannot be readily used as roll-on/roll-off or
liner container ships (they are bulk carriers or tankers) (Button, et
al, 2015). Employment effects associated with the food aid cargo
preference mandate are also very modest.
The program is estimated by the Department of Defense to increase
employment in the mercantile marine by between about 350 and 495
sailors with U.S. citizenship. In terms of the potential contribution
of these individuals to the military preparedness of the United States,
when compared to the numbers of navy personnel who leave the U.S. Navy
and Coastguard each year (well in excess of 30,000), many of whom can
be rapidly retrained to serve as mercantile marine support personnel,
these numbers are very modest. The estimated additional cost to the
Federal Government of hiring these additional 350-495 sailors is
approximately $100,000 per sailor (Bageant, et al, 2010; Button, et al,
2014).
Additional so-called ``multiplier effects'' almost certainly do not
exist for two reasons. First, allocating the funds in other ways would
have similar initial employment effects in term of numbers of jobs for
U.S. citizens (though not in the mercantile marine service) and,
second, multiplier effects are, in fact, much smaller than indicated
some recent mercantile marine industry supported studies, recently
reviewed by Button, et al (2015), have claimed. In the context of an
economy that is enjoying some growth, a multiplier effect of one may be
too small, but a multiplier effect of two is almost surely much too
large, and one of 8.6 (a number used in one study of the employment
effects of agricultural cargo preference program) is simply the product
of a lively imagination.
(c). Who are the primary beneficiaries of the government revenues
that have to be spent as a result of the food aid related U.S. cargo
preference program? Is this just corporate welfare in disguise?
The older U.S.-flag ships typically used for carrying cargo
preference food aid have been estimated to have much higher operating
costs than U.S.-flag ships used to transport goods between U.S. ports
because, as they have aged and become slower, these ships become much
more expensive to run in terms energy efficiency, labor requirements,
and other costs associated with maintaining them (Button, et al;
Bageant, et al). These additional costs associated with the U.S.-
flagged older ships mean that they would almost surely not be
competitive with other carriers in almost any other market (including
ocean-based transshipment between U.S. ports that requires cargo
preference carriage by U.S.-flag ships).
Thus, one reasonable interpretation of the food aid cargo
preference program is that it allows the companies who own those ships
to continue to make profits from them (Bageant, et al; Barrett and
Lentz; Button, et al.). Effectively, therefore, the primary
beneficiaries of the food aid cargo preference program are the
companies that own the U.S.-flag ships that carry those cargos. Some of
the U.S. registered shipping companies, several of which appear to be
owned and controlled through holding companies by large foreign-based
multinationals, seem to exist primarily because that is the way through
which those companies can access economic profits from the food aid
cargo preference program. Without that program, those older ships,
which apparently do not meet the DOD criteria for militarily useful
vessels, would otherwise be decommissioned.
(d). Does the food aid related U.S. cargo preference program have
substantive positive impacts on the U.S. economy either through job
creation within the U.S. mercantile marine or by creating additional
economic activity?
Any employment effects are trivial and, in fact, it is not clear
that they are positive. Allocating the approximately $100,000 per
mercantile marine job elsewhere in the U.S. economy could well have
larger employment effects, depending on where the funds were allocated.
The central public policy issue has nothing to do with employment per
se, but with whether the food aid component of the cargo preference
program increases military readiness in any substantive way. The answer
provided by independent assessments of the program is consistently that
such is not the case.
local and regional sourcing: issues and evidence
The evidence is unambiguous. As Lentz and Barrett (2014) and
previous studies have consistently reported (for example, GAO, 2009;
Barrett and Maxwell, 2005) local and regional sourcing result in
substantial cost savings. Equally importantly, economically efficient
sourcing from optimal suppliers and locations substantially reduces the
time taken to deliver emergency food aid to where it is needed,
dramatically reducing the morbidity and mortality effects on the target
populations (Lentz and Barrett).
A politically relevant question is whether allowing for complete
flexibility in sourcing food aid would adversely affect U.S. farmers.
Most food aid involves commodities traded on global markets such as
corn and wheat. To the extent that food aid reform, crucially including
a shift to local and regional sourcing, will enable the U.S. Government
annually to purchase 50 to 60 percent more food aid with any given food
aid budget (Lentz and Barrett), the impact will be to increase global
annual demand for crops such as corn and wheat.
Clearly, the net effect would therefore be to increase average
prices received by U.S. and other farmers for those commodities. It is
important to emphasize, however, that for commodities like corn, wheat,
and rice, U.S. food aid makes up very small proportions of total world
consumption and therefore any price effects would essentially be
unobservable. Even for small acreage commodities like peas and lentils,
impacts on prices received by U.S. farmers as a result of food aid
purchases appear to be very small. For processed commodities like
peanut butter, it currently appears that the U.S. remains the optimal
source for obtaining food aid. Hence economic impacts on U.S.
agriculture from ending the U.S. sourcing mandate are likely to be very
small and, in terms of prices received by U.S. farmers could be
beneficial (although miniscule in size).
the practice of monetization
Monetization, the practice of shipping U.S. food to foreign
destinations to be sold by nongovernment agencies in commercial markets
to obtain cash to be used for other aid related projects, is simply a
waste of resources (see, for example, GAO, 2011; Lentz and Barrett,
2014). The practice results in the NGOs obtaining 70 to 75 cents for
every dollar of tax funds used in the monetization process. A much more
effective use of such funds would be simply to provide the NGOs with
grants to accomplish the relevant aid related objectives.
Unequivocally, to ensure that such funds are used for the intended
purposes, USAID and USDA would have to carefully monitor their use, but
such monitoring is already needed in the context of the monetization
process.
References
Bageant, E.R., C.B. Barrett and E. C. Lentz. ``Food Aid and Cargo
Preference.'' Applied Economic Perspectives and Policy, 4, 2010, 624-
641.
Barrett, C., and E C. Lentz. ``Highway Robbery on the High Seas.''
The Hill, May 30, 2014.
Barrett, C.B., and D.G. Maxwell. ``Food Aid After Fifty Years:
Recasting Its Role.'' London, Routledge, 2005.
Button, K., W. Ferris, and P. Thomas. ``The Political Economy of
Shipping Food Aid Under the Cargo Preference Regime.'' School of Public
Policy, George Mason University, MS-3B1, 2015.
George Mason University. ``Impact of Government Food Aid Reforms on
the U.S. Shipping Industry: Preliminary Results.'' 2015.
Lentz, E.C., and C.B. Barrett. ``The Negligible Welfare Effects of
the International Food Aid Provisions in the 2014 Farm Bill.'' Choices,
3rd Quarter, 2014.
U.S. AID. ``Food Aid Reform: Behind the Numbers.'' Fact Sheet,
2013.
U.S. Government Accountability Office. ``International Food
Assistance: Local and Regional Procurement Can Enhance the Efficiency
of U.S. Food Aid but Challenges May Constrain Its Implementation.''
2009. GAO-09-570.
U.S. Government Accountability Office. ``International Food
Assistance: Funding Development Projects Through the Purchase, Shipment
and Sale of U.S. Commodities is Inefficient and Can Cause Adverse
Market Impacts.'' 2011, GAO-11-636, Washington DC.
U.S. Government Accountability Office. ``International Food Aid
Prepositions Speeds Delivery of Emergency Food Aid But Additional
Monitoring of Time Frames and Costs is Needed.'' 2014, GAO-14-277,
Washington DC.
The Chairman. Thank you, Doctor.
Dr. Mercier.
STATEMENT OF STEPHANIE MERCIER, SENIOR POLICY AND ADVOCACY
ADVISER, FARM JOURNAL FOUNDATION, ALEXANDRIA, VA
Dr. Mercier. Mr. Chairman, Ranking Member Cardin, members
of the committee, thank you for holding this hearing today on
the critical topic of U.S. international food aid. I appreciate
the opportunity to provide testimony on this matter.
I am Stephanie Mercier and I serve as the senior policy and
advocacy adviser for the Farm Journal Foundation. The
foundation has not taken a formal position on this issue, so
this testimony reflects my views alone. I also would like to
note that I worked as a consultant for a number of humanitarian
NGOs over the last few years as well.
I worked on food aid policy issues for about the last 18
years, primarily as part of my portfolio on the Democratic
staff of the Senate Agriculture Committee between 1997 and
2011. In that role, I helped to lead the committee's work on
the trade title in two farm bills, in 2002 and 2008, and we
were able to make modest reforms in the direction of improved
efficiency and flexibility for the title II program in both
bills.
Those modest reforms were continued in the 2014 farm bill
passed in February of last year. The reforms to the Food for
Peace program proposed in the bill introduced by the chairman
and Senator Coons in February would take a giant stride further
down that path.
In the 2002 farm bill, Congress first began to recognize
that the traditional mode of U.S. assistance did not always
offer the optimal response. This approach consists of
purchasing and shipping U.S.-sourced commodities after a
natural disaster or conflict had already occurred and people
were already going hungry. In that bill, Congress authorized
USAID to set up prepositioning warehouses that allowed them to
hold commodities that could be quickly dispatched when
emergencies arose.
Congress expanded the authority for prepositioning in the
2008 farm bill, allowing USAID to establish additional sites.
The bill also increased its share of title II funding that
could be used to cover certain types of nonfood expenses from
around 5 percent previously to a maximum of 13 percent.
The other major milestone in the 2008 farm bill was the
establishment of a pilot program to test whether or not
efficiency gains might be available from allowing U.S.
resources to be used to purchase food locally or regionally,
rather than insist on always being U.S.-sourced commodities.
Independent studies of that LRP pilot found that buying
locally was less expensive for most commodities and that the
food on average delivered in about half the time as it took for
food that was sourced and shipped from the United States.
The 2014 farm bill moved that dial on reform further. It
raised the share of title II funds that could be used to cover
nonfood expenses from 13 to 20 percent, and expanded the
category of eligible expenses. That legislation also authorized
the standing LRP program for up to $80 million dollars annually
to be run by USDA in part as a complement to the school feeding
program that they operate.
To augment the limited flexibility available under current
Food for Peace rules, USAID established the Emergency Food
Security Program, or EFSP, in 2010. It was designed to utilize
LRP and other cash-based mechanisms under the broad authority
of the Foreign Assistance Act, giving them some ability to
tailor the U.S. response to the variety of circumstances under
which international food assistance is needed.
There has been a lot of reference to Syria already in this
hearing. I think that is a perfect example of how flexibility
can be used to great advantage.
I would like to point out, however, that there is no need
to assume that the legislation that Senators Corker and Coons
introduced would necessarily turn title II into an entirely
cash-based program. We know from the results of the pilot
program that there are some commodities--vegetable oil, in
particular--that are actually cheaper to produce and ship from
the United States than they are to buy locally through
recipient countries.
We also know that there will always be some situations
where the problem is simply that there is not enough food in
the local area. For those beneficiaries, sourcing U.S. food and
shipping it is still going to be the best solution.
In its early years, the Food for Peace program was an
important component of U.S. agriculture policy. In 1957, in
fact, it was estimated that U.S. food had accounted for about
30 percent of all U.S. ag exports. Today, however, food aid
shipments account for less than 1 percent of total ag exports.
While U.S. farmers continue to take justifiable pride in
providing food for hungry people, this program is no longer
really viewed by most in agriculture as a key engine of
economic growth for their industry.
For the last several decades, the United States has been
the leading provider of humanitarian food assistance around the
world, and that is a status we must maintain. However, that
assistance is still delivered primarily by a mechanism that was
appropriate for the market environment of the 1950s but no
longer adequately meets the needs of the people the program is
intended to serve.
It is past time for U.S. food aid to enter the 21st
century. Congress should allow USAID to provide the type of
assistance that can be tailored to the complex environment
where hungry people around the world are often found.
Thank you for the opportunity to testify, and I am ready to
answer any questions you might have.
[The prepared statement of Dr. Mercier follows:]
Prepared Statement of Dr. Stephanie Mercier
Mr. Chairman, Ranking Member Cardin, members of the committee,
thank you for holding this hearing today on the critical topic of
international food assistance that the United States provides to hungry
people around the world. I appreciate the opportunity to provide
testimony on this matter.
I am Stephanie Mercier, the Senior Policy and Advocacy Adviser for
the Farm Journal Foundation. The Foundation has not taken a formal
position on the issue of food aid reform, so any opinions expressed in
my testimony are mine alone. In the last 3 years, I have also served as
a consultant to a number of humanitarian NGOs who support reform of
U.S. food aid programs. That group includes CARE, which is represented
on this panel by Mr. David Ray, their Vice President for Policy and
Advocacy, as well American Jewish World Service, Bread for the World,
and Oxfam America, among others.
I have worked on food aid policy issues for about 18 years,
primarily as part of my portfolio as chief economist for the Democratic
staff of the Senate Agriculture Committee between 1997-2011. In that
role, I helped to lead the committee's efforts in crafting provisions
of the trade title in the 2002 and 2008 farm bills, and we were able to
make modest reforms in the direction of improved efficiency and
flexibility of the Title II ``Food for Peace'' program in both bills.
Those modest reforms were continued in the 2014 farm bill passed in
February of last year. The reforms to the Food for Peace program
proposed in the bill introduced by the chairman and Senator Coons in
February would take a giant stride further down that path.
In the 2002 farm bill, Congress first began to recognize that the
traditional mode of U.S. assistance under the title II program, which
consisted of purchasing and shipping U.S.-sourced commodities after a
natural disaster or conflict had already occurred and people were going
hungry, did not always offer the optimal response. Implementing
partners reported struggling to avoid so-called pipeline breaks, during
the period when the affected area had insufficient food and U.S.
commodity food aid had not yet arrived. In that bill, Congress
authorized the U.S. Agency for International Development (USAID) to set
up warehouses to hold food aid commodities that could be quickly
dispatched when emergencies arose. This greater degree of flexibility,
called prepositioning, enabled the Agency to reduce the time needed to
deliver assistance.
Congress expanded authority for prepositioning in the 2008 farm
bill, allowing USAID to establish additional sites. The bill also
increased the share of title II funding that can be used to cover
certain types of nonfood expenses under Section 202(e) of the Food for
Peace Act, from around 5 percent to a maximum of 13 percent. That
initial bump-up in the 202(e) percentage allowed USAID to provide more
cash resources to implementing partners, reducing the sale of
commodities in fragile, often poorly functioning markets, a process
called monetization, by about 10 percentage points. Monetization has
traditionally been used to cover the nonfood components of nonemergency
projects. Both provisions improved the efficiency of the program, by
reducing the delivery time for food aid substantially and the cost of
running development programs under title II. A recent GAO study found
that using commodities stored at prepositioning warehouses cut delivery
time for emergency aid by about 2 months compared to shipping directly
from the United States.
The other major milestone in the 2008 farm bill was the
establishment of a pilot program intended to test, in a rigorous way,
what gains in efficiency might be available from allowing U.S.
resources to be used to purchase food closer to where the beneficiaries
are actually located, in the local area if possible or from neighboring
countries if that is the closest surplus area. The legislation provided
$60 million in mandatory funds for USDA to run this local and regional
procurement, or LRP pilot program. Independent studies on the results
of the LRP pilot found that buying locally was less expensive for most
categories of commodities. Local purchases of unprocessed grain were on
average 35 percent less costly, and averaged 31 percent less for
unprocessed pulse crops such as peas and lentils. In addition, it was
almost always more expeditious to buy locally instead of buying and
shipping U.S.-sourced commodities for food aid. The emergency projects
under the pilot program had an average response time of 56 days, as
opposed to 130 days needed for comparable U.S.-sourced commodities to
arrive at their destinations.
The 2014 farm bill moved the dial on reform further, raising the
share of title II funds that can be used to cover nonfood expenses from
13 to 20 percent, and expanding the category of eligible expenses. The
legislation also authorized a standing LRP program (for up to $80
million annually) to be run by USDA in part as a complement to the
McGovern-Dole international school feeding program. The new program has
yet to receive funding, although the President's FY16 budget proposed
$20 million for that purpose.
To augment the limited flexibility available under current Food for
Peace Program rules, USAID established the Emergency Food Security
Program (EFSP) in 2010. It was designed to utilize LRP and other cash-
based mechanisms under the broad authority of the Foreign Assistance
Act. USAID now has some ability to tailor the U.S. response to the
variety of circumstances under which international food assistance is
needed. The steps USAID has taken in recent years have allowed the
Agency to reduce the need of implementing organizations to monetize
U.S. commodities under title II development projects around the world,
except to meet the overall monetization minimum requirement of 15
percent that remains in effect. GAO studies in recent years indicated
that monetization transactions often generated proceeds that were 76
percent or less of what was originally spent on the commodity in the
United States.
This flexibility has also been crucial to addressing emergencies in
places like Syria over the last few years, where it is almost
impossible to safely provide U.S. food as assistance, so they have used
cash assistance or food vouchers instead. However, there are some
situations, such as in the Democratic Republic of Congo or the Central
African Republic, where flexible resources would be helpful but are not
available because of the limitations in place. S. 525 would expand that
flexibility by a significant margin--I understand that USAID has
estimated that the bill's increased flexibility would enable them to
help about 12 million more recipients annually, which would amount to a
33-percent increase in the reach of the program compared to FY13
estimates.
I would like to point out, however, that there is no need to assume
that this legislation would necessarily turn the title II program into
an entirely cash-based program. We know from the results of the LRP
pilot program I described earlier that there are some commodities that
are cheaper to produce and ship from the United States than to purchase
locally in recipient countries. This was broadly the case for vegetable
oil, which on average costs $100 less per ton to buy and ship from the
United States than it did to procure the same product locally. In
general, the more highly processed the commodity was, the smaller the
difference in cost between U.S.-sourced and foreign-sourced products.
The pilot also showed that it was cheaper to buy a range of food aid
commodities from the United States and ship to nearby destinations in
Central and Latin America than to buy locally.
We also know that there will always be some situations where the
problem is simply inadequate food for those in need in the targeted
region. For those beneficiaries, sourcing U.S. food will remain the
best solution. In South Sudan, for example, there has been insufficient
food locally to feed the population since the most recent outbreak of
civil conflict there in December 2013. As a result, USAID has provided
more than $530 million in title II food aid targeting 3.2 million
people over the past year and a half. No EFSP resources have been used
there, because there's little food available in the region.
The Food for Peace program has been around for a long time--the
program celebrated its 60th anniversary last summer, and it is
estimated to have helped more than 3 billion people over that period.
However, like every other U.S. agricultural policy, it needs to be
modernized to better reflect the current market and policy environment
as well as make use of advancements in knowledge and practice about the
best approach to addressing acute and chronic food insecurity.
In its early years, the Food for Peace Program was an important
component of U.S. agricultural trade policy--in 1957, it is estimated
that U.S. food aid accounted for about 30 percent of all U.S.
agricultural exports. Today, food aid shipments account for less than 1
percent of total U.S. agricultural exports. In fiscal 2014, U.S. food
aid shipments totaled less than 1 million tons, due in large part to a
combination of high commodity and transportation costs. While U.S.
farmers continue to take pride in providing food for hungry people,
this program is no longer viewed by the most in the agriculture sector
as a key engine for expanding U.S. agricultural trade.
Another source of inefficiency in the current food aid program is
the requirement that 50 percent of all U.S. food aid be shipped on
U.S.-flagged vessels, otherwise known as agricultural cargo preference.
One recent study by two economists from Cornell University estimated
that shipping on U.S.-flagged vessels in 2006 was 46 percent more
expensive than using foreign-flagged shipping. Until recently, the cost
of that inefficiency was largely borne by the U.S. Department of
Transportation, which was required to reimburse the food aid agencies
for at least a portion of the additional costs associated with
utilizing U.S-flagged shipping. However, the reimbursement requirement
was repealed as part of the Bipartisan Budget Act of 2013, and now
those additional costs mean that fewer hungry people can be fed with
the same level of food aid resources.
If preserving military useful sealift capacity is the goal of
agricultural cargo preference, it seems to me there are a lot more
efficient ways to provide that support than by diverting resources
intended to help the poorest people in the world. The Department of
Transportation maintains a roster of 60 U.S.-flagged vessels which
receive a direct annual subsidy under the Maritime Security Program
(MSP) to be ready to be activated in a military emergency. However, a
recent analysis conducted by a team at George Mason University found
that fewer than half of the U.S.-flagged vessels which carried U.S.
food aid during the period of 2011-13 were actually included in the
MSP, and those ships carried only 18 percent of the food aid moved on
U.S.-flagged ships on a volume basis. The other U.S.-flagged ships
carrying food aid were not eligible for the MSP during that period
because either they were too old or did not have the right type of
shipping capacity.
Some have raised concerns about the quality of food that might be
purchased locally or regionally with U.S. resources under a flexible
food assistance program such as S. 525 would create. I anticipate that
implementing partners would be required to monitor the quality of the
food they distribute whether it is procured in the United States or
abroad, as has been the case with other LRP activities conducted by the
U.S. Government. In the 2008 farm bill, specific requirements for
quality testing were written into the statutory language for the LRP
pilot program. The study on the pilot reported few problems in meeting
those requirements, with only a few defaults on contracts due to
quality problems with the delivered commodities, and the rejected
commodities had to be replaced at no cost to the program. The Annual
Program Statement (APS) under which applications are made for both
title II emergency food aid and EFSP resources requires that food
products procured locally or regionally must meet the recipient
country's food safety standards, and if no standards exist, they must
meet international Codex Alimentarius standards instead.
For the last several decades, the United States has been the
leading provider of humanitarian food assistance around the world, a
position we can all take pride in. However, that assistance is still
delivered primarily by a mechanism that was appropriate for the market
environment at the time that the Food for Peace program was established
60 years ago, but no longer adequately meets the needs of the people
the program is intended to serve. It is past time for U.S. food aid
policy to enter the 21st century--Congress should allow USAID and USDA
to provide the type of assistance that can be tailored to the complex
environments where hungry people around the world are often found.
The Chairman. Thank you all for your testimony. I think you
have all been most helpful. There are not many Americans, I
realize, who watch these kinds of panels, but this panel is
selected jointly by Republicans and Democrats, and it is
amazing to me that the message is exactly the same by the
panelists.
I want to ask a few questions and then make a statement,
and then turn to our ranking member.
Dr. Smith, it is my understanding, if I heard you
correctly, that 70 percent to 75 percent of the ships moving
food aid are not militarily useful. Is that correct?
Dr. Smith. The evidence in a study by Bageant, Barrett, and
Lentz shows that approximately 70 percent of the vessels that
move food aid are too old and/or are of a not particularly
useful type for the Department of Defense to use in sealift
capacity. Bulk carriers, for example, and tankers are not the
ideal vessels.
Many of the vessels used in food aid are over the age that
the Department of Defense identifies as being a reasonable age
for shipping, and they tend to be the older, slow vessels.
There really is an argument, and there is, certainly, lots of
anecdotal evidence, that these ships are actually brought in to
the marine fleet services of the companies that use them, these
70 percent of them that are not eligible, in order to take
advantage of the food aid program reimbursements, which tend to
be relatively large. These are not vessels, many of them, that
would be competitive in any other way.
So effectively, this becomes a corporate welfare program
for a limited number of companies, some of whom are primarily
foreign-owned through holding companies.
The Chairman. It is my understanding that that number
actually could be as much as 40 percent foreign-owned. Is that
correct?
Dr. Smith. That is the estimate in the literature, yes.
The Chairman. Yes. So to go down the same path we did with
our former witness, first of all, food aid certainly is not
designed for national security. But the fact that this actually
has significant effect on our national security again is a
total hoax. Is that correct? Let me say, mostly a hoax, okay?
[Laughter.]
Dr. Smith. Distinguished Chairman, I want to respond in a
British House of Cards way: You might say that. Perhaps I could
not.
The Chairman. I have not seen House of Cards, but I
understand they say those kinds of things.
Dr. Smith. If I may, there is a related issue. The related
issue is that there is a fairly rapid growth in the
intracoastal shipping that requires cargo preference for U.S.
boats. There is growth there. The recent George Mason study
shows that.
That growth far exceeds, on an annual basis, any loss of
capacity that might be associated with moving cargo preference
away from food aid cargoes.
So if you think about it this way, there are events
occurring within that sector that have offsetting effects that
are not related to food aid that are related to the cargo
preference requirements for shipping from one U.S. port to
another.
That is an important point. The 450 sailors I mentioned in
my testimony, those are real people. And a legitimate question
for the committee would be, would those people that lose their
jobs? The answer is there is growth in shipping, in terms of
the amount of product being carried? So it seems very unlikely
that a change in the way in which food aid has to be shipped
would cause sailors en masse, those 450 sailors, to all lose
their jobs or perhaps any of them to lose their jobs. And that
matters because these are real people.
The Chairman. Well, based on the amount of money we are
blowing, I think you said we are spending more on shipping than
on food.
Dr. Smith. That is the GAO report evidence, yes.
The Chairman. These 450 folks could be sent to Tahiti and
supported for the rest of their lives better than any of us,
and we would still be saving huge amounts of money. So I think
we can figure out a way to deal with that.
Dr. Smith. Well, if you send them to Montana, Senator, that
would help our population.
The Chairman. Very good.
This is for everybody. In recent years, some countries in
Africa have received U.S. food aid in the form of U.S.
commodities for several years in a row. Do you think this has
hampered some recipients' ability to recover from the shock of
the initial disaster that they faced? This is for all of you,
briefly.
Dr. Mercier. Thank you, Mr. Chairman, for the question. I
think probably there are a number of reasons why some of these
countries may be facing multiple years of need for assistance.
Some of the times it is continuing civil conflict. Sometimes it
is continued bad weather.
But I think the fact that they may even be becoming
dependent on U.S. food may be hampering their ability to take
steps in their own lives that would help them adjust to the
changes. So I suspect that the presence of that food every year
is also hampering the ability of local markets to adjust and
recover from the disaster.
So in some ways, I think it does contribute.
Dr. Smith. You have to weigh the benefits and the costs.
For an economist to say that is in an inevitable thing, I know.
But the benefits are that you keep people going. And there
are adjustment processes that have to take place.
The evidence on the impact, the econometric, the
statistical evidence on the impact of food aid supplies on
local prices is that those effects are, if there, very small in
most cases. That is what the data says. That is the data-driven
evidence. So that would be my comment in this context.
So that speaks to the likelihood of adversely affecting the
development and production of food by smallholder farmers
around the world.
Mr. Ray. As the only noneconomist on the panel, I will just
speak from the point of view of an operational NGO. Our
experience, certainly, suggests, if we had more flexibility,
that kind of support could be provided in ways that actually
helps to rebuild economies, that helps to build self-sustaining
market systems in ways that help people recover more quickly
and more thoroughly.
The Chairman. Listen, again, I want to thank Senator
Cardin, Senator Coons, Senator Kaine, Senator Gardner, who was
here earlier. I think that we have an opportunity here to work
together to solve this problem.
I will say that I wish every American could have seen this
testimony today. What is happening in food aid in our Nation,
for a few special interests that benefit only marginally, is a
national disgrace--a national disgrace. I am going to do
everything in my power to make sure that every American I come
in contact with is aware that a few special interests that have
negligible impact, really, on them, but they have this Nation
in their grip, people are dying and starving--dying and
starving--because of this national disgrace of corporate
welfare that is totally unnecessary, totally unnecessary to the
beneficiaries.
So I thank you for being here. I look forward to working
constructively with people on this committee, as we have so
much recently, to ensure that our focus here is on making sure
that people who are hungry have the basic food elements that
they need to survive.
Thank you very much.
Ranking Member Cardin.
Senator Cardin. Evidently, your comments brought in
reinforcements. [Laughter.]
As I said earlier, I strongly support a more robust Federal
budget for development assistance, including food aid. I am
very disappointed that we not only have not had an increase,
but we have had a decrease. We should be increasing the size of
the pie going to these national security issues and furthering
the policies of America. And I want to make sure that every
dollar we spend is spent in the most cost-effective, efficient
way. So I join the chairman, Senator Coons, and others in that
regard.
I do feel, though, obligated to respond on the U.S.-flagged
issue. I will be the first to acknowledge that I am not an
expert on this. I do not serve on the committees that deal with
this issue.
But let me just quote from the person who is responsible
for that, General Paul Selva, who is the current commander in
the U.S. Transportation Command who spoke directly about this
issue before the Senate Committee on Armed Services on March 19
of this year. He was commenting about the reductions of cargo
being used on U.S.-flagged vessels and specifically referenced
the reductions in food aid.
He said, ``With the recent vessel reductions, the mariner
base is at a point where future reductions in U.S.-flagged
capacity puts our ability to fully activate, deploy, and
sustain forces at increased risk.'' Now, that is the person who
is responsible for our defense needs as to what is happening
with U.S.-flagged vessels.
Now let me quote from Maj. Gen. Kathleen Gainey commenting
about our merchant marines as the fourth arm of the Department
of Defense and critical to the Nation.
So this is a defense issue. I agree with the chairman that
food aid's purpose is not national defense from the point of
view of the merchant marines. I agree with you on that. But I
do think we need to know the impact it has on U.S. readiness.
The last point I would mention, quoting from the U.S.
Maritime Industry, that the alternative here is to use foreign-
flagged vessels for national defense, or for DOD to build,
maintain, and operate the requisite vessels itself.
I just think that is an issue that we have to be mindful
of. I want to make sure our programs are efficient. It is not
this committee's specific charge to deal with this issue, but I
do think it is a matter that we have to be mindful of as we go
through these types of issues.
Let me turn my questioning, though, to an issue that we
have more harmony on. I have already mentioned that there is a
concern when you reduce the amount of local produced products,
as far as popular support is concerned. I think that is a fact.
It is something we have to deal with.
I do believe, though, there is tremendous benefit by local
sourcing of agriculture in the host country. I think it gives
us an opportunity to develop the type of economy that will be
able to sustain itself and grow and provide for its own people.
So there are a lot of advantages to local sourcing.
I also think it allows us the opportunity to deal with
other goals of development assistance, and that is creating the
structures within countries to make sure that they deal with
corruption and deal with gender equity. In agriculture, that is
a very important factor.
But when we source locally, we have the opportunity to have
a more direct impact and can really make the lasting changes
that can bring about stable countries that can take care of
their own needs. So I think that is a real important plus for
local sourcing.
I talked to former administrator Shah about this on several
different occasions, as to how we can improve local capacity
and build the types of structures that will be in our long-term
interest.
So I just would welcome the thoughts of any of the
panelists as to how we could be more effective in local
sourcing to develop the type of sustainable institutions within
the host countries that will give real hope for future
stability and economic opportunities in these countries.
Mr. Ray. If I could just refer back to the Kore Lavi
program I mentioned in my testimony, in Haiti. In that
particular instance, I think it is a good example of how we are
working very closely with the Haitian Government both to design
the program and to build their capacity to operate that program
long after we and the U.S. Government leave.
There are also secondary benefits in terms of helping to
build the financial system because we are working through the
formal financial system as well as building up the informal
financial system through microfinance organizations.
As part of that, we are also having an effect on the
agricultural industry more broadly by increasing demand for
locally produced products and bringing, in this case, very
purposefully more women into that value chain so that they, in
fact, can continue to improve their own lot and the lot of
their families and communities for many years to come.
Senator Cardin. That is very beneficial. The gender issue
is critical in these countries. Agriculture is an area where
there has been huge discrimination against women.
Mr. Ray. Absolutely.
Senator Cardin. So it seems to me that if we leverage local
sourcing, we can do that with a focus to really make a lasting
change, not just feeding hungry people but giving them a future
of hope and a much more stable country.
Dr. Mercier. Senator Cardin, there is another example. The
World Food Programme has run a program they call Purchase for
Progress, or P4P, over the last several years where they focus
resources on procuring food from smallholders, from
cooperatives, not from big conglomerates or multinational
firms, but from small producers. And it has been very, very
effective in terms of helping build capacity and building
confidence among those smallholder farmers that they can
produce a product and have a reliable market to be able to sell
into.
So I think that is an example of the kind of things you are
looking at. It is something that WFP has been working on and
perfecting for several years now.
Senator Cardin. Mr. Chairman, I was very pleased to hear
from the previous witness about steps they are taking to deal
with corruption, because I am very worried about corruption and
the efficiency of our programs.
It does seem to me that the reforms that you are working on
really will give us a better opportunity to deal with these
problems in-country, not just providing food but providing a
way in which they can have a sustainable future. I think the
way the program is being administered from the anticorruption
angle is a huge step forward.
The Chairman. Thank you. Thank you so much for your input
and just tremendous successes we have had recently.
Senator Perdue.
Senator Perdue. Thank you, Mr. Chairman.
Thank you, folks, for being here this morning.
Having lived outside the United States, I have witnessed
the benefits of what you guys do and I want to applaud what you
do, and especially the operation CARE being based in Georgia.
I am very proud, Mr. Ray, that you are here.
Dr. Mercier, I have just a couple questions. From the
business sector and business perspective, your recommendations
about increasing efficiency, what reforms and what benefits
could those reforms bring to the U.S. agriculture business? And
how can that help provide for the needs that we are trying to
meet in the programs that you guys are representing? Talk about
our port systems and national security, as well as shipping.
As part of that, my observation is that one of the problems
we have in these host countries that we are trying to ship to
is infrastructure.
Our State exports to a lot of poultry. One of the problems
you have is you can get it to their ports. Once it gets to the
port, it is very difficult to distribute within the countries.
So protein, fat, sugar, those things are in high demand there.
Can you just speak to some of those issues as we look at
this?
Dr. Mercier. Yes. I think what you are getting at goes far
beyond what international food aid really provides, and that is
a broader international ag development effort. I have seen food
aid as being the starting point of U.S. assistance.
You have a region of a country where there is a drought or
civil conflict, people just do not have enough food, and you
try to figure out what is the optimal response for meeting that
emergency need. But you also think beyond that, to some extent,
as to how you help that population transition into being more
self-sufficient, building up the infrastructure.
So one of the things that I think is an important
development in recent years is the recognition that you need to
try to build resiliency in those local populations. So you need
to have a combination of instruments and programs that help
them do that. Part of that is making sure they have enough food
when they are really hungry and that is largely a food aid
issue.
But beyond that, it is international development. It is
helping them get seed. It is helping them build roads. It is
helping, as in the case of the poultry exports, build capacity
at the ports so they can have some cold storage, so they can
actually utilize U.S. or other sources of protein.
So it is a combination. There are a number of institutions
within USAID, not just the Office of Food for Peace, but also
the Bureau for Food Security, who are focusing on making these
kinds of opportunities available to these folks.
Senator Perdue. Thank you, Mr. Chairman.
The Chairman. Senator Coons.
Senator Coons. Thank you, Chairman Corker, for convening
this and leading this effort.
Thank you, Senator Cardin, for your insight and your
questions.
I want to pursue three lines of inquiry, if I might.
First, on monetization. David, I want to commend CARE and
you for giving up what is tens of millions of dollars of
potential cash for CARE in recognition, if I understood your
testimony correctly, that there are harmful effects to
monetization, that is not just inefficient, it also, in some
instances, has been documented to have a negative impact on
resiliency and on the development of markets in some of the
countries we are most trying to help.
Why does monetization continue as a practice? What would be
the potential benefits and how might we structure a reduction
to monetization and offset it with a more efficient and
responsible practice for supporting NGOs, whose primary purpose
is providing relief to those who are struggling with food
insecurity?
Mr. Ray. Senator, thank you for your question and for your
recognition.
There are a couple of reasons that monetization continues.
Perhaps the most concrete one is that it is required by law.
Fifteen percent of the----
Senator Coons. This is leading up to my question about
reforms we could make by law.
Mr. Ray. Right. So 15 percent of title II nonemergency
funds are required to be monetized, and so they are.
But on a practical level, there are organizations who
continue to monetize because it supports very important ongoing
development programs. If, in fact, that money was made
available as cash, then we would not have to monetize and we
could be actually getting a hundred percent of the value of
those dollars rather than $.70 or less on the dollar, and
actually do more good.
The Chairman. Senator Coons, if I could, could I add a
minute or 2 to your time, and for people who are just watching
this, ask your witness to explain how monetization works?
Senator Coons. Sure.
The Chairman. I think it would be helpful to everyone and
help build a case for what you are trying to----
Senator Coons. If you would, please, because once you
really grasp what monetization is and how it works, it is hard
to see it as an admirable practice.
I am not meaning to impugn those NGOs who benefit from
monetization.
Mr. Ray. Not at all.
Senator Coons. They provide valued and needed services. But
the inefficiency of it really is striking.
So, Mr. Ray, if you could?
Mr. Ray. As I mentioned in my testimony, monetization, very
simply put, is the practice of buying commodities here,
shipping them to developing countries, selling them there,
often at a loss, and then using those proceeds to fund long-
term development programs.
Certainly, our argument has been that it would be a much
more efficient and effective way to fund those programs to just
supply the money rather than go through that very convoluted
method and, in fact, losing money on the whole transaction.
Senator Coons. And in the same spirit, Dr. Smith, you
testified somewhat about the sealift, the maritime fleet that
is sustained through cargo preference. Senator Cardin shared
some important testimony in front of the Armed Services
Committee that suggested that sealift remains an important
priority for our national security.
You testified earlier that there is a significant mismatch,
that a lot of the fleet that is being used for food aid really
is not helpful or relevant for maritime military sealift. If we
were to simply more directly fund through DOD the maintenance
of a DOD appropriate sealift capacity, what difference might
there be in efficiency of outcome?
Dr. Smith. I have not run those numbers, and I have not
seen a clear number.
Senator Coons. A rough impression.
Dr. Smith. A rough impression is, let us have a program
that has one goal, not that is diverted to a program that has
another goal.
Senator Coons. Right.
Dr. Smith. That is the fundamental message.
If DOD thought the expansion of capacity was important on a
maritime basis, then DOD should be making the decisions about
allocating funds there. But if I am a general or admiral or
even a Senator with issues associated with maritime shipping, I
would really like someone else to have to pay for those costs,
rather than use my chits.
That is really what we are seeing. We are seeing a litany,
if you like, or almost a liturgy, from the maritime interests
that say this is a vital piece of support. If you look at the
dollars, the amount of dollars that actually go to the maritime
private sector from food aid are much smaller on a per ship
basis than $3.1 million annually than currently ships qualified
as a DOD ready for shipment are currently getting.
There is a complete mismatch there. The problem, of course,
is that all of the funds that come out of food aid into
shipping reduce the capacity of the food aid programs at
current funding levels
to deal with genuine human tragedy. And that is what is really
problematic.
It is not problematic that the Department of Defense wants
to make sure they have adequate resources to protect this
Nation. And it is not problematic--if I owned a ship, I would
want cargo preference, too. We understand profit incentives.
Senator Coons. Understood. So that brings me to my last
question, which I think is really the key question here, Dr.
Mercier. And the whole panel might address this.
So we are using food aid partly to provide food aid, and
partly to provide relief from food insecurity, and partly to
sustain sealift capacity, and partly to sustain maritime labor,
and partly to provide monetization support for NGOs.
The concern that has always been raised in these
conversations is, what would the impact be if we significantly
streamlined and modernized this program so that DOD is paying
for sealift and we are providing direct support for NGOs that
are doing important development work? And where it is
appropriate, we are buying U.S. commodities and shipping them
on Jones Act ships and delivering them with American labor. And
where it is not, we are doing direct, flexible, local
procurement or direct provision through electronic means, as
you testified.
How would we sustain food aid? How vital are these sectors
to sustaining the allocation of food aid?
Senator Cardin raised this central point. The
appropriations for food aid have gone down in recent years. I
would love to hear from all three of you, what is your
guesstimate of the impact on food aid for the long-term, if we
were, in fact, to make it more efficient?
Dr. Mercier. Thank you for the question, Senator Coons.
This is an issue that was of great concern for me when I worked
on the Agriculture Committee. Sort of what I worked through
over the years is that you need to maintain a balance, and I
think it is important to recognize, just based on the LRP pilot
program, that there is going to be continuing need to purchase
U.S. commodities for use in these programs.
In some cases, it is going to be because it is more cost
effective. That is largely the case with the more value-added
commodities, processed products, vegetable oil, that kind of
thing. It is still going to be more cost effective to buy here
and ship it overseas. That is especially the case for nearby
destinations like in Central America or Latin America.
Then there are some places where there is just simply not
enough food, and we need to supplement that with U.S.
commodities.
So this is going to continue to be a program that uses U.S.
food. It just needs to be one that has other mechanisms
available as well.
The maritime issues, I recognize that this is a legitimate
national security objective, to provide assurance of having
that sealift capacity in the need of emergency, but I do not
think this is a cost-effective way of doing it, as Dr. Smith
mentioned. The data suggests that a lot of the ships carrying
food aid are not suited for that reason.
Senator Coons. I am out of time. My question is not about
cost-effectiveness. I think we have discussed in great detail
how cost inefficient this is.
My question is about whether or not the NGO community and
the good intentions of the American people are enough to
sustain food aid at its current levels or higher, or whether
these other communities of interest have to be engaged in order
to sustain food aid?
Any opinions from Mr. Ray or Dr. Smith would be welcome as
well.
Dr. Smith. Let me speak to the agricultural sector, because
a lot of my work is on agriculture.
There is a clear case to be made that American farmers
actually will benefit by more efficient use of current dollars
because it essentially increases global demand for these key
commodities, wheat, corn, rice, and so on.
There is a paradox here. The litany has always been wrong
here, that the notion that you have to buy American for
American farmers to benefit is simply wrong. If we take the
crude economic view that what they care about is the price of
wheat or the price of corn or the price of peanut butter, what
matters is how much is being taken off the global market in
these globally traded commodities.
I think that is the case that a wide array of supporters of
food aid should make. I think they are also shooting from the
hip with no expertise in this area at all.
There are things that we can do to make it clear to the
American farmer that their work is critical to feeding the
world. For example, where possible, stamping all food aid
delivered in bulk as provided with the support of the American
farmer is a very nice way to go, where that is politically
appropriate. Things like that are important in sustaining
effort.
It is unclear to me that the mercantile service is really
an important factor in overall development aid here. It is
unclear to me what they are doing. It seems to me, to be
honest, that the private maritime interests are lobbying for
their corporate welfare.
And there is an issue about assuring adequate capacity for
the marine fleet to support DOD efforts. There are other ways
to go that are more efficient, and I am going to stop there
because I am not an expert in how politically you form those
alliances that help them get more money in other directions
that would be efficient, but less money than they are currently
taking out from the cargo preference approach.
Senator Coons. Mr. Chairman, do you want to let Mr. Ray
answer the question?
The Chairman. Sure.
Mr. Ray. Thank you. If I may, Senator, I think you bring up
really critical points and something that, certainly, has been
of concern to us. The last thing we want to do is see support
for these vital programs reduced.
I will, however, say this, as an organization with 1
million supporters around the country and 250,000 members of
our citizen advocacy network in every district and State around
the country, our experience has been that the most effective
way to build support for foreign assistance programs, and for
this program, in particular, is for it to be as effective and
efficient as possible.
If we can deliver on that, we will generate public support
for this program. I am confident we can retain the level of
public support that will provide political support and backing
to Members of Congress to continue to fund this program.
Senator Coons. Thank you. Thank you, Mr. Ray.
Thank you to the whole panel for your testimony.
Thank you, Mr. Chairman.
The Chairman. Thank you.
Senator Coons, thank you for asking the great question
about what if food aid were focused on food aid. That would be
a good thing.
I would just say, editorially, I doubt there are other aid
programs that we participate in that have such a small amount
of corporate welfare interests that cause us to waste as much
money. I just cannot believe 450 sailors are generating the
support for this aid program. And I just hope that we will
figure out a way to deal appropriately with it.
Senator Shaheen.
Senator Shaheen. Thank you, Mr. Chairman, and thank you to
you and Senator Coons for this legislation, and to all of the
panelists for not only your testimony this morning, but for
your great work in helping to provide food aid to people around
the world.
You know, I share the sentiments that have already been
expressed, that it is very important for us to look at the
budget for food aid and try to increase that, but that we also
need to be as efficient as possible, and that there are a lot
of things about the current program that do not seem to work in
a way that is understandable for the American people.
I share your point, Mr. Ray. I think people want what
government does to be effective and efficient. And if we can
make that case, it is much easier to get support for the
programs the government provides.
I had a couple specific questions that have come up as a
result of Senator Cardin's question and raising the concerns
about the maritime industry. Does anybody know--and maybe you
know this, Senator Cardin--what percentage of cargo that is
shipped by the U.S. maritime industry is actually food aid?
Dr. Mercier.
Dr. Mercier. Yes. There are three kinds of cargo that are
affected by cargo preference rules. The biggest by far is
military cargo. So it is tanks. It is fuel. It is the kind of
things that we need our military overseas to have access to.
That is about 86 percent of it. Food aid is about 6 to 8
percent. And then the remainder is material that is shipped out
under transactions by U.S. Import-Export Bank, those kinds of
things.
So food aid is a very, very small share of what is covered
by cargo preference right now.
Senator Shaheen. Is there a dollar amount that accounts for
that, or a percentage of income of the U.S. maritime industry
that can be attributed to food aid?
Dr. Smith.
Dr. Smith. A group at George Mason has estimated that less
than 1 percent of the total value of cargo that is carried by
the maritime fleet, either commercially or under cargo
preference, is food aid. And the followup is you always have to
remember that the majority of that amount that is being shipped
is being shipped on ships that are not included in the DOD
assessment of military preparedness.
Senator Cardin. Senator, would you yield just for 1 minute
so I can get Dr. Mercier to just comment?
Senator Shaheen. Sure.
Senator Cardin. As we are winding down our military
operations, would the percentage of food aid increase since we
are now transporting less military?
Dr. Mercier. I suppose that is possible, but the tonnage
that is being shipped under food aid is also declining over
time. As recently as 5 years ago, we were talking 4 million or
5 million tons of food aid, and I think over the last couple
years, it has been about 2 million tons.
So both numbers are going down, and so I am not sure the
relative shares are going to be changing that much.
Dr. Smith. And just to come back to a point that was made
earlier; in 2002, corn was selling at $2.20 a bushel. Today, it
is selling at $3.80. And the budget available for food aid has
not changed measurably at all.
So a ton of corn, a ton of wheat, costs more money for
reasons that are probably not germane here but do not trivially
relate to ethanol.
Senator Shaheen. We do not want to go into that here right
now. [Laughter.]
We can talk about sugar though. I am happy to talk about
sugar.
Sorry.
Again, I apologize for missing your testimony, so some of
you may have addressed this. But in 2008, the farm bill
authorized a pilot project for local and regional procurement.
Do we have a report or data from what that pilot program showed
us? And can any of you comment on that?
Dr. Mercier. I think I can comment on that because I helped
write the language for the provision. There has actually been a
couple different reports that have been studying the results of
the pilot program. One was specifically required under the
statutory language and then a separate one was done by a
consortium of NGOs and Cornell University. And pretty broadly
what they showed is that for most commodities, when you have
the cost of the commodity, plus the cost of shipping it from
the United States as compared to the cost of buying it locally;
you are saving anywhere between 30 to 50 percent by buying it
locally. There are a couple of exceptions, which I mentioned in
my testimony, vegetable oil being one.
And the other important main finding in both studies is
that it is much faster to do it when you procure locally. I
think the average was 130 days to ship from the United States
to recipients and about 56 days, so less than half the time, if
you procure locally for the emergency projects at least.
Senator Shaheen. So who is the second country, in terms of
providing the most food aid around the world, to the United
States? Does anyone know?
Dr. Smith. Senator, we can get that information to your
office very quickly. A wild guess is that it is going to be a
combination, in the developed world, of Australia, Canada, and
various European Union countries.
Senator Shaheen. That would have been my guess.
Dr. Smith. But China is doing a lot, and that is why I want
to say I will look that up for you.
Senator Shaheen. Okay. And can you also speak to how they
provide food aid? Is it similar to what we do in the United
States? Or do they more of the local and regional procurement?
Dr. Mercier. Most of the aid provided by other donor
countries is cash-based. Canada still does a mixture but I
think it is predominantly cash-based. They still do some
Canadian-sourced commodities, but most of the rest of the world
has given their NGOs the flexibility that is being proposed in
this legislation for the United States.
Senator Shaheen. And finally, Senator Coons raised this
issue, but there are vested interests who benefit from the way
the current system operates. So where is the most opposition
coming from to changing the way the current system works?
Dr. Smith. I would defer to the distinguished Chair of this
committee, but a good guess is the maritime interests have been
very aggressive.
Senator Shaheen. Certainly, we have heard from the maritime
interests. Are there others?
Dr. Smith. Some NGOs are concerned about losing their
ability to compete for the cash. Whether that is any sort of a
good reason for changing the system is entirely another matter.
In fact, it sounds to me like the worst possible reason or
among the worst possible reasons.
Senator Shaheen. And several of you alluded to farmers. I
have not heard from any farmers in New Hampshire that they are
concerned about changing the way food aid works, but they are
probably not benefiting a lot from the current program. So
where are farmers on these changes?
Dr. Smith. It depends on who is speaking. That is
critically----
Senator Shaheen. When you say that, you mean who is
speaking for the farmers or who represents the farm industry?
Dr. Smith. Yes, it depends on which lobby you are going to
listen to. Perspectives have changed, though. In 1956, the corn
growers and wheat growers would have been extremely supportive
of food aid. They would have seen it as a major source of the
demand for their product.
Today, it is a trivial proportion of the total global
demand for wheat and corn, for example. And we compete in
global markets, not local markets.
If anything, making reforms that would take more corn, more
wheat, more rice, more peanut butter, off the market would be
beneficial for those groups.
And an important issue, as I alluded to earlier, is that it
is true that you want the American farm community to believe
that it is making a significant contribution to helping genuine
problems. Most farmers are good people.
Senator Shaheen. I believe that.
Dr. Smith. Some maybe not, but most. No, overwhelmingly the
farmers I know are genuine people who want to make a living,
but they also recognize the importance of what they do
globally. So it is important to communicate the American
productivity at the farm level is a major contributor to our
ability as a global community to feed the world, and to
recognize their contributions in some way. But it does not have
to be through sourcing wheat in Ekalaka, MT, which is in the
middle of nowhere--trust me, I have been there--or anywhere in
Iowa.
Senator Shaheen. Mr. Chairman, can I ask the other two to
respond to that?
The Chairman. Sure.
Dr. Mercier. Senator Shaheen, we actually had a concrete
example in 2013 after the President made his proposal. There
was actually an amendment in the House to the farm bill that
would have implemented a lot of things he proposed. There was a
floor vote on this issue. I was involved with consulting with
NGO community at that point.
We found the most effective opposition came from the
maritime industry and the associated labor unions. Agriculture,
as far as we were able to tell, did not really engage very
actively for the most part. There were a few exceptions. We
believe the rice industry was involved to some extent. But most
of them had much higher priorities in that farm bill, as they
usually do.
Senator Shaheen. Thank you.
Mr. Ray.
Mr. Ray. I would just say, from the NGO perspective, there
has been substantial support among the NGO sector for these
kinds of food aid reforms. In fact, in the lead-up to this
hearing, 28 NGOs signed a letter of support for the kind of
food aid reform that Senators Corker and Coons have proposed.
There are, of course, concerns around the issue of
monetization, but I think we have already spoken to that issue.
Senator Shaheen. Right.
Thank you very much.
The Chairman. Anybody else have any closing questions or
comments?
I want to thank all of you for being here. I think this
testimony has been outstanding, as has the hearing.
My guess is, to follow up on Dr. Smith's comments, I would
bet that while there are associations and entities that lobby
on behalf of various industries, if you will, I would bet if
the members themselves were aware of the negative impact this
lobbying was having on people who were starving, I do not
believe there would be as much lobbying taking place.
I do not think they have any idea that there are paid
lobbyists up here that are causing people around the world to
starve. I just have greater faith in the American people,
greater faith that if these groups they are representing, if
the individuals actually knew what was happening, they would be
ashamed and they would cause it to stop.
So I thank you all for being here.
Mr. Ray, thank you for the example your organization is
setting.
Dr. Mercier, thank you for all your efforts through the
years to cause reforms to happen.
The meeting will be adjourned, although for questions, the
record will remain open through the end of the day Friday.
Thank you all for being here.
[Whereupon, at 11:16 a.m., the hearing was adjourned.]
----------
Additional Material Submitted for the Record
Written Statement of Rev. David Beckmann, President, Bread for the
World
I appreciate the opportunity to submit written testimony on a
subject very close to my own heart and a prime policy interest of Bread
for the World.
My name is David Beckmann, president of Bread for the World, a
collective Christian voice urging our Nation's decisionmakers to end
hunger at home and abroad. Our network of thousands of individual
members, churches, and denominations ensures Bread's presence in all
U.S. congressional districts. Through the support of these members
around the country and in partnership with faith groups and churches,
we have worked for over 40 years to help ensure that no person faces
the burden of food insecurity.
The dimensions of global hunger are well known: More than 805
million people--or one in every nine people globally. Poor nutrition
causes nearly half (45 percent) of deaths in children under 5,
approximately 3.1 million children each year. For such demeaning hunger
and poverty to persist when we have the technological and economic
means of ending it is a moral affront to American values.
Food aid has been an important tool in combating global hunger, and
has saved many lives. The United States can rightly feel proud of its
role as the world's most generous donor of food aid. Our efforts have
saved millions of lives. However, with changes in technology and
transportation, it is time to modernize food aid to create a faster and
more flexible program to help eradicate hunger
The food aid environment has changed significantly from when Food
for Peace was initiated over 50 years ago. Changes in the food aid
program are overdue. Any food aid reform efforts should include the
following.
First, increased flexibility to deliver food aid in the best way
possible. Current law requires nearly all of food aid to be commodities
produced in the United States. Commodity food aid is not always the
most appropriate response to food insecurity, whether chronic or
emergency. One life-affecting consideration is that of timeliness,
ensuring the quickest response to emergencies or windows of
opportunity. Other considerations include market impact--whether the
commodity food aid serves as an incentive or disincentive to local or
regional production and commerce--and commodity composition--i.e.,
whether the needs are best served by commodities or products available
from the United States.
In order to facilitate the most effective and efficient responses
to food insecurity, Bread for the World strongly supports allowing both
U.S. and locally or regionally procured (LRP) commodities, vouchers,
and cash transfers to be used. Two independent evaluations by the
Government Accountability Office and a congressionally mandated study
by Management Systems International found that local and regional
procurement (LRP) programs have an average cost-saving of at least 25
percent compared with similar in-kind food aid programs. In some cases,
these savings can increase to over 50 percent, as a Cornell University
study documented, along with a 62-percent gain in timeliness of
delivery. Local and regional procurement, and vouchers or cash
transfers are not going to be appropriate in every case and need to be
carefully applied, but there is already sufficient information and
experience to clearly demonstrate the circumstances under which this
instrument can be effectively applied.
Second, we support loosening the restrictions that mandate the
processing (``value added'') of food aid and U.S.-flag shipping. While
these reflect legitimate interests, our main focus should be on meeting
needs and saving lives, and employing the most appropriate and
efficient means to that end. Surely, other means can be found for
ensuring the viability of the U.S. merchant marine than by imposing
onerous and costly restrictions on the shipment of food to meet the
urgent nutritional needs of hungry people around the world.
Finally, we would like to eliminate the process of monetization.
With some food aid, food is donated to a poor country and then sold
there. The revenue is used to fund projects carried out by private
charities or intergovernmental organizations. Unfortunately, a recent
GAO study found monetization loses an average of 25 cents on every
taxpayer dollar spent, and according to USAID, eliminating monetization
could feed an additional 800,000 people and free up an estimated $30
million per year.
God is moving in our time to overcome hunger and poverty around the
world. The world has reduced poverty and hunger; extreme poverty has
been cut in half and 100 million people have escaped from hunger in
just the past decade alone. Undeniably, U.S. food assistance has played
a leading role in achieving these results. Yet, clearly there is more
we can do, and we have the obligation and the opportunity to end
hunger. We need to take advantage of every means for doing so.
Moreover, in difficult budget circumstances, when all programs must
be justified, proposals to increase cost-effectiveness, save time and
costs, and potentially reach more people should be strongly considered.
The changes to the food aid program noted above will, I am confident,
move the United States closer, in concert with the NGO community,
intergovernmental organizations and other donors, toward meeting this
urgent objective.
______
Written Statement from the U.S. Maritime Industry
______
Written Statement of Mercy Corps
On behalf of Mercy Corps, an Oregon-based humanitarian and
development nonprofit organization, we would like to thank the chairman
for his deep commitment to food aid reform and for holding this
important hearing. Mercy Corps works in over 40 countries around the
world. We are dedicated to alleviating suffering, poverty and
oppression by helping people build secure, productive, and just
communities. A major foundation of our work is in helping communities'
increase their food security; Mercy Corps' agricultural programs are
valued today at more than USD $200 million and implemented in 27
countries.
Mercy Corps supports the chairman's and committee's continued
efforts to reform U.S. food aid programs to make them more efficiently
help the world's most vulnerable people. We would like to offer the
following testimony that highlights the urgent need for reform in title
II emergency and nonemergency programs, the importance of building
resilience in the developing world and provide recommendations to the
committee for additional steps to take to continue to support food aid
reform.
local and regional procurement and the
use of cash in emergency responses
With unprecedented emergencies around the world and limited
resources to respond to these crises, it has never been more important
to encourage innovations that improve emergency food aid. Local and
Regional Procurement (LRP) is the purchase of food aid in the country
or region of distribution, or the use of cash and/or vouchers for the
purchase of food and/or nonfood items that reduce food insecurity among
the targeted population.
Mercy Corps has been a leader in researching and implementing LRP.
Our research has found that LRP is more efficient, cost-effective and
has a high impact. Specifically, LRP provides:
Efficiencies: LRP ensures hungry and malnourished people
receive food quickly. While U.S. commodities can take 4 to 6
months to arrive to the implementing organization, the average
time for Mercy Corps' LRP programs to procure commodities was
just over 1 month. This means LRP can ensure essential food
assistance reaches those who are hungry and malnourished more
than 70 percent faster than food aid provided through
international commodity shipment.
Cost Effectiveness: LRP maximizes the number of people
reached with each dollar of assistance. A cost comparison of
comparable goods showed that in Central Asia and Africa, Mercy
Corps' LRP programs cost an average of 27 percent less than
programs based on shipment of U.S. commodities.
High Impact: LRP ensures food assistance programs enhance
food security and sustainable development. Research found Mercy
Corps' LRP programs are effective at improving the food
security of those targeted for assistance, both immediately and
in the longer term. Beneficiaries reported that LRP programs
enhanced their psychological well-being, and helped families to
avoid negative coping mechanisms, such as selling off
productive assets to feed their families in times of crisis. By
ensuring beneficiaries are able to gain access to the foods
they traditionally eat, LRP programs may yield greater
nutritional benefits. Private sector vendors reported that LRP
programs helped them to expand businesses, build their own
capacity, and integrate into formal systems, leading to more
rapid and sustainable economic recovery.\1\
We would therefore recommend the committee support efforts to allow
for significantly increasing flexibility within title II emergency
programs to allow for more LRP and the use of cash and vouchers in
emergencies. This increased flexibility would allow for the U.S.
Government to reach millions of more vulnerable populations at no
additional cost to the taxpayer.
the importance of non-emergency programs and ending monetization
There are over 800 million people around the globe that do not have
enough food to eat. In our decades of experience, one of the most
effective programs we have seen to promote food security and address
the underlying causes of hunger is the Title II Food for Peace Non-
Emergency programs. These multiyear programs are an essential tool to
helping communities build their resilience to crises and over time,
decrease the need for emergency, lifesaving interventions. Addressing
root causes of hunger so that the world's most vulnerable can rise out
of poverty is a cornerstone of nonemergency programs.
Yet nonemergency programs, as originally codified in 1954, included
a heavy reliance on the practice of monetization, the conversion of
U.S. commodities to cash by selling them in overseas markets. Money
from the sale of U.S. commodities are made available to fund program
costs, like buying scales to weigh infants to ensure they gain weight
properly or fund trainings for smallholder farmers in how to improve
their yields. While the programmatic use of the funds gained from
monetization is extremely helpful in building the capacity of
communities to fight hunger, the actual practice of monetization is--
the vast majority of the time--extremely inefficient. From costs lost
in shipping U.S. commodities on U.S.-flagships, to shipping food inland
to the point of sale, to storing the food, then organizing the actual
sale of the food on the open market, monetization takes time and money.
Moreover, the market prices available in other countries for the
commodities sold through monetization can often be lower than the total
investment that the U.S. Government has made in purchasing and shipping
the food. The Government Accountability Office's 2011 report, ``Funding
Development Projects through the Purchase, Shipment, and Sale of U.S.
Commodities Is Inefficient and Can Cause Adverse Market Impacts'' found
that USAID's average cost recovery was 76 percent, while USDA's was 58
percent. In addition, USAID could not guarantee that the sale of
commodities did not have an adverse effect on the local markets.\2\
From our personal experiences with monetization, we often face
considerable setbacks including food that spoils in transit that cannot
be sold, or in the case of the Democratic Republic of Congo, a monopoly
by one buyer of wheat, who drives down the price of the commodity we
are trying to monetize, further decreasing funds we can use of
programs. Of particular frustration to our staff is that in order to
program effectively, we need to know how much funds we will receive in
advance from monetization so we can plan out activities over the
following 6 months to a year. With monetization though, the amount of
cash we will actually receive for food security programs can be
radically different than what was planned for or needed.
Eliminating the need to monetize and providing cash directly to
implementing partners for programmatic purposes would be vastly more
efficient. Any efforts by the committee to eliminate the need to
monetize would be greatly appreciated, including working to increase
the amount of overall cash flexibility in title II programs to
eliminating the provision in the 2014 Farm Bill that requires at least
15 percent of nonemergency funding be monetized. In FY 2015, we would
also appreciate the committee's attention to ensuring sufficient cash
(like from the Community Development Fund, appropriated out of the
State and Foreign Operations Subcommittee) is available for
nonemergency programs so that programs that were not supposed to
monetize are not suddenly forced to monetize mid-year, which could
dramatically impact our programs and beneficiaries.
building resilience with flexible funding
mechanisms in non-emergency programs
Addressing the root causes of food insecurity will require USAID,
USDA, and implementers to break out of traditional ``siloes'' and link
food security to other development challenges, including governance,
conflict mitigation and peace-building. For example, in Karamoja,
Northern Uganda, where 12.5 percent of children face acute
malnutrition,\3\ a major underlying factor contributing to food
insecurity is lack of land tenure. If we are to comprehensively address
hunger, we need the flexibility to analyze and respond to what the
drivers of food insecurity are on the ground, including supporting
efforts of smallholder farmers to gain access to land and the legal
sector. While this may appear like a governance issue, it actually is a
food security related activity and needs to be addressed if we are to
tackle the drivers of hunger. The current authorities outline in
existing legislation (the 2014 Farm Bill and underlying statute) for
nonemergency programs allows for this needed flexibility to address
these underlying causes of hunger. We consider the structure of
nonemergency programs as a model for other parts of USAID, and while
not a food aid reform issue per se would encourage the committee to
look at the nonemergency, multisectoral approach as a successful model
for development programs. We would also urge the committee to support
this important flexibility and maintain existing authorities for title
II nonemergency programs in any future authorizing or reform
legislation.
Again, we would like to thank the chairman for holding this
important hearing and his continued leadership to improving the U.S.
Government's response to food insecurity. We look forward to supporting
your, and the committee's, efforts to make every taxpayer dollar as
effective as possible in the fight against global hunger.
----------------
End Notes
\1\ Local and Regional Procurement: a Case Study of Mercy Corps'
Programming in Haiti, Kyrgyzstan and Niger.
\2\ `` Funding Development Projects through the Purchase, Shipment,
and Sale of U.S. Commodities Is In efficient and Can Cause Adverse
Market Impacts.'' GAO-11-636. June, 2011.
\3\ UNICEF Global Appeal January 2014.
______
Written Statement of Gawain Kripke, Policy Director,
Oxfam America, Washington, DC
Moving From Food Aid to Flood Assistance: Broadening the Horizons
of the Food for Peace Program
Chairman Corker, Senator Cardin, members of the committee, thank
you for holding this hearing on the critical need to strengthen a vital
program to fight global hunger: international food aid. Oxfam is
providing this statement for the record to identify issues and concerns
with the current Food for Peace programs and to urge the committee to
take steps to increase the impact and improve the overall efficiency
and effectiveness of the U.S. food aid program.
Oxfam America is a global organization working to right the wrongs
of hunger, poverty, and injustice. As one of 17 members of an
international confederation, we work with people in more than 90
countries to create lasting solutions, including saving lives in
emergency settings, developing long-term solutions to poverty and
campaigning for social change. Our concerns regarding the current Food
for Peace program are grounded in more than 60 years of institutional
experience working on food emergencies as well as our research and
policy analysis on a wide range of agriculture and food security
issues, of which food aid is one important aspect. Oxfam America does
not take U.S. Government assistance and Oxfam affiliates do not
implement U.S. food aid projects.
It is important to acknowledge and applaud the generosity of the
American people in serving as the world's most generous donor of food
aid. Each year, the United States provides approximately half of all
food aid globally. This proud history has helped to reach hundreds of
millions of people suffering from acute and chronic hunger, in both
emergency and nonemergency settings. The need for this assistance
remains as urgent as ever: according to latest estimates, one in nine
people around the world are food insecure,\1\ and due to current crises
in, Iraq and South Sudan among other places, 77.9 million people will
need humanitarian assistance, including food, in 2015.\2\
Given this overwhelming need, U.S. assistance must be designed and
delivered to maximize reach and impact. Currently, it is not optimized
for these purposes. Public Law 480, also known as the Food for Peace
Act, has not kept up with best practices in the delivery of food
assistance thus undermining the humanitarian focus of this aid program.
It was authorized in 1954, and while some amendments have been made to
law since then, the fundamental approach to U.S. food aid--buying food
from the United States and shipping it overseas, often on U.S.-flag
vessels--remains fundamentally unchanged.
Moving from food aid to food assistance
There are and will remain instances where U.S.-procured food aid is
necessary, but, this approach is both outdated and inappropriate in
many cases. In-kind food aid distributions, of the kind supported
through U.S. food aid projects, are most appropriate in instances where
food availability is limited in the immediate area; and/or where
markets are not effectively functioning. But as is often the case even
in the midst of food crises, it is not markets that have collapsed;
rather very poor households have no income to purchase available food.
Activities such as local and regional procurement and the use of
vouchers or delivery of cash for food security purposes are all proven,
effective ways of delivering assistance. For more than a decade, Oxfam
and other aid organizations, in collaboration with donors and
multilateral agencies, have been experimenting with evaluating and
refining the use of these tools to support vulnerable communities
facing food insecurity. From early pilot projects in Pakistan and
Malawi, to ongoing efforts to meet the needs of refugees affected by
the Syria conflict, there is a robust and growing body of evidence
documenting the efficacy of taking a more flexible response to food
emergencies, one that does not rely primarily or exclusively on
purchasing and shipping grain and other food items from the United
States.
Building on this body of evidence, the 2008 Farm Bill authorized a
Local and Regional Procurement Project. The experience and lessons
learned from the Pilot Project were well documented.\3\ They showed
that, for most commodities, getting locally procured food aid to people
in need is cheaper resulting in significant cost savings. Locally
procured unprocessed cereals, for example, were 35 percent less
expensive on a delivered basis than food aid purchased and shipped from
the United States. Additionally, by eliminating the need for
transoceanic shipping, LRP projects also resulted in substantial time-
savings as well 56 days on average (LRP) compared to 101 days (U.S.-
sourced).\4\ In a companion study, researchers at Cornell University
found that the procurement of food aid on local or regional markets did
not induce higher food prices. Additionally, recipients reported being
more satisfied with locally purchased food aid since it tended to be a
more familiar product.\5\
The Local and Regional Procurement Project became a permanent
program in the 2014 Farm Bill. However, this program does not amend the
main titles of the Food for Peace Act (title II being the most widely
used program under the Food for Peace Act). Moreover, the program did
not receive appropriations in 2014, the first year it was available for
funding.
In Oxfam's own experience, the use of cash can also meet food
security objectives. In 2012 in response to an expected food crisis
across the Sahel region--resulting from among other things a drought
induced crop failure that threatened to worsen already high levels of
chronic food insecurity in the region--Oxfam designed and delivered a
cash-based intervention in the Tillabery region of Niger. The project
targeted highly vulnerable households, and the distribution schedule
coincided with the harvest, giving households the opportunity to
stockpile grain at a low price. Followup surveys found that the average
recipient household spent more than half the assistance they received
on food and that a significant number of these households reported
improved food security status. These households were also less likely
than the control sample to go into debt for food purchases.\6\ Among
the uses of the remaining cash not spent on food, households reported
investing in livestock and agriculture products and paying school fees.
These expenditures represent strategic investments that may make food
aid interventions less necessary in the future.
The Food for Peace Act should be updated to allow the U.S. Agency
for International Development to utilize a broader set of tools in
reaching food insecure households in need of support. Doing so will
modernize U.S. assistance, moving from a one-size-fits-all food aid
paradigm to a broader, more inclusive food assistance paradigm.
Critically, it will improve the overall functionality of the program,
increase the number of beneficiaries that can be reached with U.S.
taxpayer dollars, and ensure programs are appropriately tailored to
specific contexts.
Addressing the agriculture cargo preference requirement
In addition to the Food for Peace Act, the Cargo Preference Act of
1954 also has an important bearing on how U.S.-sourced food aid is
delivered. Under current law, at least 50 percent of food aid must be
shipped on vessels registered in the United States, with a largely
U.S.-citizen mariner crew and flying the U.S. flag. This requirement is
intended to ensure the existence of a robust U.S.-flag fleet. It also
links humanitarian food aid with national security interests since the
purpose of the U.S.-flag vessel requirement is to ensure adequate
sealift capacity during times of national emergencies requiring
military response. However, the U.S.-flag ocean-going fleet has
suffered a significant decline over the last 50 years, a trend that the
agriculture cargo preference program has had little impact over.
The agriculture cargo preference (ACP) requirement is both costly
and is the subject of political capture. In a review of this program,
researchers found that this requirement drives up the cost of shipping.
The difference between the lowest competitive bid for shipment and the
winning U.S.-flag bid is known as Ocean Freight Differential (OFD). It
has been estimated that fulfilling the U.S.-flag vessel requirement has
cost U.S. taxpayers $146 million annually in OFD.\7\ Moreover, these
gains are captured by a small number of companies. Analysis conducted
by George Mason University, just three companies--Maersk, Sealift and
Liberty--handle 80 percent of food aid shipments.\8\
Given the scarcity of resources and the overwhelming humanitarian
need, the Agriculture Cargo Preference requirement should be scrapped,
allowing USAID and USDA to use the lowest cost carrier to deliver food
aid that requires ocean transportation.
In the absence of the elimination of the agriculture cargo
preference requirement, other more immediate reforms can be taken to
improve the delivery of U.S. food aid. For instance, in previous years,
USAID was reimbursed for OFD charges resulting from the U.S.-flag
vessel requirement. This reimbursement was eliminated with the Budget
Act of 2013, so food aid administering agencies now bear the full cost
of these programs. This reimbursement could be reinstated.
Additionally, changes in how the 50 percent ACP requirement is
calculated can reduce costs and improve aid delivery. However, no
formal agreement on this issue has been reached between USAID and the
Department of Transportation's Maritime Administration (MARAD). One
potential explanation for this is MARAD's unwillingness to properly
balance the interests of its client companies against those of another
agency of the Federal Government. The problems with agriculture cargo
preference demonstrate how food aid and the issue of cargo preference
are seen by some--both inside Congress and out--as first and foremost a
tool to subsidize American industry.
An alternative approach to the issue of cargo preference would be
to more fully engage the Department of Defense in its administration
and to reimburse food aid implementing agencies for the higher costs of
using U.S.-flag vessels.
Ending the practice of monetization
The 1990 Farm Bill included a provision to allow for the sale of
U.S.-sourced food aid on developing country markets. Presently, at
least 15 percent of nonemergency food aid must be monetized. Aid
organizations have used this practice to generate revenue to fund food
and nutrition related development activities. These are important
projects, but the use of monetization is an inefficient mechanism and
at worst risks undermining local markets and negatively impacting
small-scale producers.
The Government Accountability Office has looked extensively at the
P.L. 480 Food Aid program, including the use of monetization. Their
findings document massive waste in monetization activities due to the
inability of organizations undertaking monetization to recoup the full
cost of purchase and transportation in end market sales. Between 2009
and 2011, the GAO found that $219 million in food aid was lost in the
process of monetization.\9\ Had USAID and USDA the ability to fund
these development activities directly rather than relying on
monetization, these savings could have resulted in a greater number of
people reached through the U.S. Food for Peace program. It would have
additionally avoided any potentially negative market impacts resulting
from monetization activities.
In recent years, USAID has taken steps to reduce the use of
monetization. Changes in the 2014 Farm Bill increased the percentage of
funds that could be used to pay for program costs not related to direct
commodity distribution. In addition, USAID has drawn on Development
Assistance funds, outside of the of P.L. 480 budget, to augment food
aid funding and ensure that development programs do not have to
monetize. However, without a specific change in law eliminating the use
of monetization, some monetization will occur (at least at the 15
percent minimum) and USAID could return to a substantially greater use
of monetization with all of its inherent risks and inefficiencies.
By moving from an in-kind food aid program to a food assistance
approach, adapting tools to specific contexts and ensuring a steady and
predictable flow of funding for nonemergency food security projects,
the use of monetization would not be necessary to fund highly impactful
development activities.
Breaking political gridlock to reform the Food for Peace Act
In both the previous and current administrations, proposals have
been put forward to reform the Food for Peace Act. At the same time,
Congress has sought a path forward that would untie a percentage of
U.S. food aid, allowing for it to be used flexibly. In the context of
the 2014 Farm Bill, an amendment in the House of Representatives to
overhaul U.S. food aid fell just 9 votes short of passage on a strong
bipartisan basis. More recently, the Food for Peace Reform Act of 2015,
introduced by Senators Corker and Coons proposes a bold transformation
of U.S. food aid that addresses the issues and concerns identified in
this statement.
The budget proposals by the administration as well as the
legislative proposal introduced by Senators Corker and Coons deserve
consideration and vote by Congress. The Senate Committee on Foreign
Relations has an important role to play in reviewing the P.L. 480
program and in working with the Agriculture Committee, the current
committee of jurisdiction for P.L. 480, to develop solid, ambitious
reforms that will reinvigorate support for the program, eliminate
inefficiencies and ensure continued focus of the program on meeting
humanitarian and development objectives.
----------------
End Notes
\1\ U.N. Food and Agriculture Organization (2014)`` State of Food
Insecurity in the World: Strengthening the Enabling Environment for
Food Security and Nutrition.''
\2\ UNOCHA (2015) ``Global Humanitarian Overview: 2015.''
\3\ See: US Department of Agriculture (2012) ``USDA Local and
Regional Procurement Pilot Project: Independent Evaluation Report.''
\4\ Ibid.
\5\ Lentz, et. al. (2012) ``The Impacts of Local and Regional
Procurement of U.S. Food Aid: Learning Alliance Synthesis Report.''
\6\ Tumusiime, E (2015) ``Do Early Cash Transfers in a Food Crisis
Improve Resilience? Evidence from Niger.'' Development in Practice
25:2, 174-187.
\7\ Barrett, C. (2010) ``Food Aid and Agriculture Cargo
Preference.'' Note that this is for fiscal year 2006 only.
\8\ Ferris, W. (2014) ``Impact of US Government Food Aid Reforms on
the U.S. Shipping Industry: Preliminary Results.''
\9\ U.S. Government Accountability Office (2010) ``International
Food Assistance: Funding Development Projects Through the Purchase,
Shipment and Sale of U.S. Commodities is Inefficient and can Cause
Adverse Market Impacts.''
______
Written Statement of Save the Children
On behalf of Save the Children, we thank Chairman Bob Corker,
former Ranking Member Bob Menendez and members of this committee for
holding this hearing and for the opportunity to submit written
testimony. Save the Children strongly supports the need to pursue
common-sense reforms of U.S. international food aid that will benefit
millions of vulnerable children and families in need around the world.
Save the Children invests in childhood--every day, in times of
crisis and for our future. We are in our 83rd year as a child-focused,
nonprofit organization working to inspire breakthroughs in the way the
world treats children and to achieve immediate and lasting change in
their lives. Today we work in 21 states across the nation and 120
countries in the developing world to give children a healthy start, the
opportunity to learn and protection from harm. In 2013, our programs
helped more than 143 million children worldwide, including 250,000 in
the United States.
Save the Children has been designing and implementing some of the
most complex international food security and nutrition programs for
more than five decades. In addition to building long-term resilience to
reduce chronic hunger for children and their families, we also mobilize
rapid life-saving assistance for people caught in humanitarian
emergencies such as Syria, Iraq, South Sudan, and Yemen.
Our organization is a proud partner and implementer of Food for
Peace emergency and nonemergency programs. Currently, Save the Children
is implementing Food For Peace programs in 13 countries totaling around
$350 million. In addition, Save the Children is the second-largest
implementer for the U.N. World Food Programme (WFP)--the largest
recipient of Food For Peace P.L. 480 Title II emergency funding. In
2013, Save the Children distributed 125,000 Metric Tons of emergency
food commodities for WFP, reaching an estimated 1 million people. We
stand by the food security work we do with Food For Peace in saving and
transforming children's lives.
As cochair of the Modernizing Foreign Effectiveness Network (MFAN),
Save the Children is strongly committed to aid effectiveness and the
goal to maximize efficiencies in U.S. policy by eliminating wasteful
rules and regulations. In alignment with our leadership in MFAN, and
based on our organization's own experience on the ground, we support
food aid reforms that will make a concrete difference for children
globally. We urge Congress and the administration to make P.L. 480
Title II food aid (also referred to as U.S. food assistance) more
efficient and cost effective in order to allow U.S. food assistance
programs to reach more children at no additional cost.
critical importance of u.s. food assistance
Great progress has been made in the fight against hunger and
malnutrition. In just the last decade, the world has witnessed a
dramatic and positive shift for children. Extreme poverty has been cut
in half; 100 million people have escaped from hunger; and the numbers
of children dying under the age of 5 fell at a faster rate than ever
before. Investments in United States Agency for International
Development (USAID) and specifically the Food For Peace program have
made a vital contribution to these gains and are directly helping to
reduce global food and nutrition insecurity and achieve the U.S. global
commitment to ending preventable child deaths.
Despite this progress however, hunger and malnutrition still remain
unacceptably high. One in every eight people around the world faces
chronic hunger and an estimated 100 million people endure extreme
hunger crises. In sub-Saharan Africa the numbers are even higher, with
one in four people undernourished. Malnutrition is the underlying cause
of nearly half (3.1 million) of all child deaths under 5 and can reduce
a country's Gross Domestic Product by as much as 16.5 percent (UNECA,
The Cost of Hunger in Africa, 2014). Chronic child malnutrition remains
stubbornly high, causing 165 million children to suffer stunted
physical and cognitive growth that robs them of reaching their full
potential. Experts estimate the return on investment in nutrition to be
$16 for every $1 dollar invested--a ratio comparable to infrastructure
(Global Nutrition Report, 2014). Experts also show that investments in
agricultural growth is at least two times as effective at reducing
poverty as growth in other sectors (World Bank, 2008).
During the 2007 global food price crisis that pushed an estimated
100 million additional people into poverty, some 60 food riots and
protests raged in nations across the globe. Scholars and others point
to the fundamental food crisis as a key trigger of the political
upheavals of the Arab Spring. U.S. investments to combat global food
and nutrition insecurity are invaluable. The benefit of such
investments are inextricably linked to the security of our Nation and
creating a more stable and prosperous world.
While Save the Children supports U.S. food aid reform, we also
strongly support robust funding of the Food For Peace P.L. 480 Title II
program (also referred to as the Food For Peace program). Food For
Peace is the primary vehicle providing U.S. emergency food aid and
multiyear food security development to millions of children and
families each year. In 2013, Food for Peace title II made an enormous
difference in the lives of almost 36 million people experiencing deep,
acute or chronic poverty and food insecurity. The Office's unique focus
on serving the poorest, most vulnerable, most chronically food insecure
people acts as a foundation for other development investments. It also
has the greatest level of expertise in implementing interdisciplinary,
integrated approaches to tackle the most complex development problems.
These multisectoral programs play a vital role in addressing child
malnutrition, preventing famines and building the resilience of
vulnerable populations to withstand future shocks. Robust investments
in Food For Peace not only helps the United States address current
crises but also helps prevent future emergencies as well.
support for food aid reform
While the United States remains the largest donor of global food
assistance, there has been a sharp net drop of over half a billion
dollars in title II funding since 2009. Transportation costs of U.S.
food aid have also risen dramatically. We urge Congress to increase
funding of Food For Peace P.L. 480 Title II in fiscal year 2016 to
$1.75 billion from its current $1.466 billion. At the same time, we
also recognize that tight budget constraints and continued global
demand for food assistance make it more important than ever that U.S.
taxpayer dollars be spent in the most efficient way possible to
maximize reach and effectiveness.
Save the Children has been a long-time supporter of both U.S.
international food aid and food aid reform. To our organization,
reforming U.S. food aid is about making an excellent program even
better by increasing its reach and cost-effectiveness. The
inefficiencies of U.S. food aid stem from the rules of the P.L. 480
Title II account that tie U.S. food assistance almost entirely to
American-grown agricultural commodities and strict cargo preference
requirements. The inefficiencies of these rules are well documented by
the General Accountability Office and teams of independent academic
researchers led by Christopher Barrett at Cornell University. They are
further complemented by published results of the U.S. Department of
Agriculture's (USDA) Pilot Local and Regional Procurement program
authorized in the 2008 Farm Bill.
Large portions of U.S. international food aid are inefficiently
spent on shipping and handling rather than used to reach more children.
In 2012, almost 50 cents of every $1 of U.S. was spent on shipping and
handling. (For example, in 2012 ocean freight and inland transport
costs were 58 percent for emergency and 37 percent for nonemergency,
totaling 47.5 percent.) We are encouraged by the momentum in Congress
and the administration to address this issue. Our organization has been
supportive of a variety of thoughtful and constructive reform
proposals. These include the President's proposed reforms in his budget
requests starting in fiscal year 2014 as well as the reform amendment
introduced by House Foreign Affairs Chair and Ranking Members,
Representatives Royce and Engel, which lost by just nine votes in the
House of Representatives vote on the 2014 Farm Bill. It also includes
the immensely helpful incremental reforms that passed in the 2014 Farm
Bill and 2014 Omnibus and the expansive reform proposal put forth by
Senators Bob Corker and Chris Coons in the Food For Peace Reform Act
(S. 525).
All of these reform proposals mentioned above have had at least
three key elements in common that elicited Save the Children's support.
1. Food aid reforms would result in reaching more children--
sometimes millions more, using the same level of investment. In the
case of the Royce-Engel amendment for example, which increased the
flexibility of title II to 45 percent and kept 55 percent of food aid
tied to U.S. agricultural commodities, the reach of the program would
have increased by 2 to 4 million more people. The recent Corker-Coons
proposal, which completely unties U.S. food aid from U.S. agriculture
and cargo preference requirements, is estimated to increase the reach
of title II by as many as 12 million more people. The estimates all
include varying assumptions that range in uncertainty, including annual
levels of funding, but even the most conservative estimates would
dramatically increase the numbers of children reached.
2. Reforms would result in a reduced need to monetize food
commodities, the practice of reselling U.S. food commodities in local
and regional markets to raise funds for USAID title II development
programs. USAID and the General Accountability Office (GAO) estimate
losses from monetization to be 25 to 30 percent on average (GAO-11-636
and USAID Behind the Numbers). The Agriculture Act of 2014 (2014 Farm
Bill) made great progress in this area by increasing the percentage of
cash-based resources allowed to be used as part of title II from 7
percent to 20 percent. It also expanded the types of expenses the cash
can be used to cover. These changes, together with an additional $35
million of title II funds made flexible by The Consolidated
Appropriations Act of 2014, combined to allow USAID to stop monetizing
commodities, except to meet the mandatory minimum of 15 percent
monetization that still remains in law.
3. Reforms would increase the level of flexibility USAID has to use
the most appropriate tool in the toolbox to respond to crises quickly
and effectively. These tools include cash transfers, food vouchers,
local and regional purchase of food (LRP), as well as in-kind food
commodities. Improving the United States ability to respond to
humanitarian emergencies and chronic food and nutrition insecurity with
all tools in the toolbox would help ensure the most appropriate
response for any given context based on a needs assessment and market
analysis. The incremental increases of flexibility in the 2014 Farm
Bill were very helpful but were insufficient to allow USAID to both
reduce the need to monetize commodities in development projects and to
respond more rapidly and most appropriately to humanitarian
emergencies.
If time is of the essence, which it commonly is in emergencies,
then buying food closer to where it is needed can save time and reduce
costs. The U.S. Department of Labor's pilot study on local and regional
procurement of food aid authorized in the 2008 Farm Bill found local
purchase of food to be 74 days, or over 2 months, faster than shipping
in-kind commodities from the United States (USDA Local and Regional
Food Aid Procurement Pilot Project Independent Evaluation Report,
December 2012). Other studies also reported LRP to be 25 percent less
expensive than delivering in-kind commodities and recipients to be more
satisfied with the locally purchased food they received (Learning
Alliance Synthesis Report, 2012). USAID finds that cash transfers and
food vouchers overall also save time and costs. As an implementer of
U.S. emergency and nonemergency food aid, Save the Children has found
that leveraging local markets can create durable solutions. By
incentivizing local farmers and working through the market to provide
goods and services, people are invested, opportunities avail
themselves, economic resilience is built and lives improve.
In-kind food commodities still play a critical role in U.S. food
aid, particularly in areas of acute food crises where markets have
failed. However, increasing the flexibility to use all response tools
will reduce risks, mitigate unintended consequences and help ensure the
most appropriate response to the type of crisis. The risks were summed
up in a recent report on U.S. Food Aid Programs released this month by
the Congressional Research Service, ``U.S. reliance on in-kind food aid
has become controversial for several reasons: it is slower and more
costly than cash transfers; it tends to cause commodity price
distortions and volatility in local markets where monetization . . .
occurs; it can impede commercial exports; and it has engendered
international concerns from key trade partners who contend that it is a
form of export subsidy and potentially conflicts with the intent of
international trade agreements.''
unlocking innovation and efficiency: e-transfer cash programming
The food aid reforms passed in the 5-year 2014 Farm Bill provided
over $103 million per year in additional flexibility to use cash-based
programming where appropriate. That increase is helping to drive new
innovations in delivering cash-programming via digital transactions
using various electronic platforms. Further increases to make title II
more flexible would not only be transformational in the lives of the
poor but also in the way development programs are delivered in the 21st
century.
Cash-based programming supports the needs of communities in crisis
through various means. These include food vouchers as well as multiple
forms of conditional and unconditional cash transfers, such as cash for
work or training programs. Cash-based programming has been an effective
and cost-efficient part of food and nutrition security programming for
several years. A recent 2015 GAO report affirmed this view by finding
that cash-based programming is an effective tool to deliver U.S. food
assistance and that this modality is an established and proven practice
in the international donor community (GAO-15-328).
Cash and vouchers are particularly useful in areas where it is too
dangerous, difficult, or costly to provide in-kind food commodities,
such as areas in conflict or that are too remote or inaccessible. Save
the Children also finds cash and vouchers to be strong delivery
modalities in areas where food markets are strong and where U.S.
assistance can strengthen the livelihoods and resilience of local
small-scale producers to withstand future shocks or stresses. Perhaps
most importantly, cash transfers provided to female participants are
known to empower women by increasing their ability to partake in
household decisions, mobilize resources, and have agency over various
aspects of their lives (IFPRI, Women's Empowerment Evidence Review,
2013). Evidence has long shown that increasing women's agency and
empowerment is critical to improving nutrition outcomes for their
children and themselves.
Due to technological developments around the world and changes in
connectivity, cash-based programming is currently in the midst of a
rapid revolution through the use of digital transactions in place of
paper. This new electronic approach could be transformational for
people's lives by expanding the number of platforms through which
financial services can be delivered to the poor and unbanked. It is
widely recognized that the cost barriers are too high for regular brick
and mortar banking companies to profitably provide financial services
to those at the base of the economic pyramid. Yet, increasing access to
financial services has long been identified as a key pathway out of
poverty by helping people expand their options, better manage risks,
create safety nets, and improve their health and education.
The mobile banking program in Kenya, M-PESA, is well known for
expanding the use of the mobile phone as a new platform to deliver
financial services including payments, transfers, insurance, savings,
and credit. Indeed, of the estimated 2.5 billion people in the world
that are unbanked and lack financial services to support their
livelihoods or protect their assets, more than 1 billion have access to
a mobile phone (Mobile Money for the Unbanked Programme, State of the
Industry, 2013). This is a statistic not lost on mobile phone companies
expanding operations in the developing world. But digital transactions
platforms can come in many forms, not just through phones. Digital
transfers are also being done through transactions companies via
plastic cards. Today, Save the Children is developing new, innovative
approaches for cash-based programming through both mobile banking and
electronic transfers, the benefits of which are likely to be
transformational to people's lives and livelihoods.
For example, Save the Children is currently in partnership with the
global technology and transactions company, MasterCard, to develop new,
innovative ways to deliver digital cash-based programs aimed at
improving food and nutrition security and strengthening the resilience
of people in Yemen. It is worthwhile to note that the partnership is
carried out between Save the Children and MasterCard's products
development department, as opposed to its philanthropy arm. The program
with MasterCard will reach approximately 9,000 households in three
districts over 3 years. It will focus on providing cash vouchers that
provide food in exchange for work rebuilding community assets such as
water canals, harvesting structures, terraces and roads. The rest of
the project focuses on improved infant and young child feeding
practices through participation in community-based groups, awareness
campaigns and skills training.
The traditional paper vouchers are time-intensive to distribute,
collect, and reconcile. The electronic voucher system saves time for
program participants to engage in livelihood activities, attend
trainings or provide family care instead of traveling to, and from,
central locations to collect monthly vouchers. To get the food,
participants go to any one of the many participating vendors and use
their electronic card and pin number. Small-scale vendors who redeem
the vouchers also save time and improve the accuracy of their records
by tracking payments electronically. As both the vendors and the
participants are become more accustomed to using electronic
transactions, it can open the way to using other electronic financial
services. Lastly, development practitioners save time by not having to
collect and reconcile the paperwork and instead are able to spend that
time on monitoring, impact analysis, and quality assurance. Use of the
new technology will also make strides in learning by having a detailed
track record of participants' transactions that made available through
MasterCard's global data repository.
support for food for peace program
U.S. food assistance programs under P.L. 480 Title II have served
as a foundation of global efforts to confront the challenge of global
hunger and malnutrition. The Food For Peace program maintains both
emergency programs that keep people alive, and developmental food
security programs that address the underlying sources of chronic hunger
and malnutrition.
To this day, the title II Food For Peace program remains the main
program in the U.S. Government laser-focused on creating pathways out
of poverty for the poorest, most vulnerable, most chronically food
insecure people. When provided at the right time, economic or food
assistance gives households the means to endure hard times while
remaining on a pathway out of poverty. It helps families avoid
difficult and consequential choices between eating a meal or selling
their most important asset, sending a child to school or going to the
doctor. The Food For Peace program is skilled at doing complex food and
nutrition security programming with multisectoral, interdisciplinary
approaches to get at immediate impacts and root causes. The experts at
Food For Peace have long recognized that addressing child malnutrition
is essential to breaking the cycle of poverty and hunger. As such the
program ensures that children get the right food at the right time,
particularly during the 1,000 day window between pregnancy and a
child's second birthday.
Through partnering with Food For Peace, Save the Children has built
a base of innovations in food production and consumption, water and
sanitation, social behavioral change, and local partnerships. The
lessons learned from our projects are shared through the Food For
Peace-funded Technical and Operational Performance Support (TOPS)
program, an open community of implementers sharing best practices in
food security and nutrition programming--all leading to greater results
in food and nutrition security.
For these reasons, Save the Children is dedicated to working with
Congress to support and maintain investments in U.S. food assistance.
In fiscal year 2016, we urge Congress to bring funding of the P.L. 480
Title II program up to at least to $1.75 billion in fiscal year 2016,
which still represents a decline from previous years. At the same time,
we look forward to working with Congress and the administration to find
a pathway forward that maintains the strong level of support title II
currently enjoys and achieves reforms that increase the numbers of
children reached and the speed and flexibility of the program to
appropriately respond to disasters and crises around the world.
ANNEX 1
In April 2013, Save the Children worked with CARE USA, Catholic
Relief Services, Mercy Corps, and World Vision to draft a set of
principles around food aid reform that still hold firm today. These
principles were also endorsed by the following organizations:
InterAction, Alliance for Global Food Security, Concern Worldwide US,
Helen Keller International, International Relief & Development,
International Rescue Committee, Land O'Lakes International Development,
Lutheran World Relief, Mercy-USA for Aid and Development, Partners for
Development, Relief International, World Food Program USA, World Renew.
Principle #1: Reforms should protect the core focus and effective
elements of existing food assistance programs. U.S. food assistance
programs are unique in their focus on hunger and malnutrition among the
poorest and most vulnerable populations. Emergency programs respond to
urgent needs while developmental programs strengthen the resiliency of
people facing chronic food insecurity, and employ a community-based
multisector approach that addresses agricultural productivity,
nutrition, and livelihoods. These programs provide a stable multiyear
commitment of support that is critical to achieving lasting results.
Reforms should not alter or undermine these important elements of the
current system.
Principle #2: Reforms should increase the number of people helped.
In 2012, U.S. food assistance reached 46 million people. Yet since 2000
the amount of U.S. food assistance has declined by more than half,
primarily due to decreases in funding and higher commodity,
transportation, and distribution costs. Reforms should seek to offset
this decline by increasing the number of people served in both
emergency and developmental food assistance programs, and should not be
used simply to justify funding cuts. Every effort should be made to
reinvest savings achieved through reform into both programs.
Principle #3: Reforms should increase the flexibility of food
assistance programs. Allowing significantly more flexible use of tools
such as cash transfers, food vouchers, and local and regional
procurement, alongside provision of U.S. commodities and direct program
funding, would provide a variety of program and resource options to
help ensure the most appropriate response in each context. Such
flexibility would improve program efficiency and impact and increase
the number of people reached.
Principle #4: Reforms to food assistance programs should be made in
an open, transparent, and inclusive process. As both implementers and
advocates, the nonprofit and civil society communities are major
partners and supporters of food assistance programs. We bring important
perspectives on how to maximize program effectiveness and reach, as
well as wide grassroots networks that provide public support for these
programs. Civil society engagement is crucial to the effectiveness and
political viability of the reform process and to the future success of
these programs in meeting the needs of poor people.
______
Written Statement of Dr. Carolyn Woo, President and Chief Executive
Officer of Catholic Relief Services
Thank you Chairman Corker and Ranking Member Cardin for receiving
this testimony on behalf of Catholic Relief Services (CRS) and for
holding this hearing examining ways in which food aid programs can be
improved.
Catholic Relief Services is the international relief and
development agency of the U.S. Conference of Catholic Bishops. Our work
reaches millions of poor and vulnerable people in nearly 90 countries.
CRS works with people and communities based on need, without regard to
race, creed, or nationality. CRS often partners with institutions of
the Catholic Church and other local civil society groups in the
implementation of programs, which from our experience is essential to
understanding the needs of the communities we work with, and ultimately
the long-term success of our work.
Catholic Relief Services is one of the largest implementers of
international food aid programs, including the Food for Peace program.
CRS implements both emergency and nonemergency development programs
through Food for Peace. We offer this testimony from the perspective of
an implementer.
food aid reform efforts
For many years, Catholic Relief Services has been one of the
leading voices for reforms to U.S. international food aid. Today, our
main reform objectives are, to the extent possible: (1) minimize and
eliminate if possible the need to monetize food aid resources; (2)
minimize the impacts that cargo preference laws have on food aid
programs; and (3) maximize the discretion that implementers have in
choosing whether to use U.S. commodities, locally produced/purchased
commodities, vouchers, or cash transfers in the implementation of
programs. We actively championed these kinds of reforms in both the
2008 and 2014 Farm Bills and for several years in the annual
appropriations process.
Over this time, we believe there have been incremental but
important improvements to the food aid system. Thanks to the work of
the Agriculture Committees and Appropriators, we have seen changes in
the recent Farm Bill and in recent Agriculture Appropriations bills
that allowed for the reduction of monetization in Food for Peace
programming. In the Farm Bill we also saw the establishment of a
permanent Local and Regional Procurement (LRP) program under the
auspices of the U.S. Department of Agriculture. We have also seen a
steady increase in funding for the Emergency Food Security Program
(EFSP) that provides resources for local purchase, vouchers, and cash
transfers during emergencies, which the administration has championed
and State and Foreign Operations Appropriators have supported.
In addition to these efforts, we think more can be done to reform
how the food aid system works in the areas of monetization, cargo
preference, and discretion in the tools used in programs.
monetization
As noted earlier, Catholic Relief Services seeks to minimize, and
eliminate if possible, the need to monetize food aid resources.
Monetization is the process of shipping U.S. commodities overseas, to
be sold abroad to raise funds to cover nonfood program costs. Usually
the markets in which these goods must be sold cannot bear the full cost
of purchasing U.S. commodities and delivering them there, thus most
sales are at a loss. The Government Accountability Office has looked at
this and has concluded that monetization is an inefficient means of
raising funds to cover nonfood program costs, noting that Food for
Peace monetization on average achieved 76 percent cost recovery--that
is, the sale of commodities netted only 76 percent of the cost to buy
and transport the food in the first place.\1\ Our own experience
closely resembles these results.
Catholic Relief Services acknowledges that substantial progress
toward reducing monetization within Food for Peace was made in the 2014
Farm Bill, and thanks to these reforms CRS is not monetizing in any of
the Food for Peace programs we are currently implementing. However, we
note that the Farm Bill maintained a requirement that at least 15
percent of Food for Peace development program resources have to be used
toward monetization. This enduring 15 percent requirement could force
our programs in the future to monetize again. We ask Congress to
consider measures that would eliminate the requirement to monetize in
Food for Peace programs altogether. We also ask Congress to provide
additional direct funding to development programs sufficient to cover
program expenses so that monetization need not be used in these
programs.
cargo preference
Catholic Relief Services also seeks to minimize the impact that
cargo preference laws have on food aid programs. Cargo preference is
the policy that requires the shipping of U.S. impelled cargo, in this
case food aid, on U.S.-flagged vessels. The basis for this requirement
is to help maintain private, sealift capacity--in terms of both cargo
vessels and U.S. crews--in order to transport military supplies should
it be required. While there is debate over whether cargo preference is
an effective way of achieving this objective, we can tell you that as
an implementer of food aid programs that the cargo preference law, and
the ways in which the law has been applied to food aid, leads to higher
than necessary transportation costs for food aid programs, reducing the
amount of food commodities that can be bought and thus the number of
people served by food aid programs.
The reason that the mandatory use of U.S.-flagged cargo vessels to
deliver food aid drives up transportation costs is that U.S.-flagged
vessels are substantially more expensive than other available vessels.
According to a study commissioned by the Maritime Administration, U.S.-
flagged vessels cost 2.7 times more to operate than vessels flagged in
other countries.\2\ Our own experience in the price differential
between U.S. and other vessels matches well this assessment. As such,
we would prefer that cargo preference laws not apply to any of the food
aid programs--Food for Peace, Food for Education, or Food for Progress.
If this is not possible, we ask that Congress consider making changes
in how cargo preference laws are applied that will reduce the burden
placed on budgets of these food aid programs, close loopholes that
allow U.S. carriers to manipulate regulations for their economic
benefit, and improve transparency.
Current cargo preference law applicable to food aid programs is
found in 46 USC 55305(b), and states that: ``at least 50 percent of the
gross tonnage of the . . . commodities (computed separately for dry
bulk carriers, dry cargo liners, and tankers) which may be transported
on ocean vessels is transported on privately-owned commercial vessels
of the United States, to the extent those vessels are available at fair
and reasonable rates for commercial vessels of the United States, in a
manner that will ensure a fair and reasonable participation of
commercial vessels of the United States in those cargoes by geographic
areas.''
We posit that current applications of this law also drive up costs
needlessly. For instance, the Maritime Administration, supported by the
Department of Justice, has determined ``that at least [50] percent of
agricultural commodities be shipped by U.S. flag vessels `computed
separately for dry bulk carriers, dry cargo liners and tankers'
requires that the U.S. vessels be divided into those three categories
and further, that the [50] percent minimum be computed separately for
each category of vessel.'' \3\ We have seen U.S. carriers use this
provision to force the rebidding of awards that were initially to less
expensive carriers (both U.S. and foreign) because the quota for the
vessel type they were offering had not been met. Additionally, the
reference to ``geographic areas'' has led to the requirement that food
aid programs meet the 50 percent quota by country.\4\ Under this
constraint, large programs that require multiple shipments in a year
can potentially make use of less expensive foreign flag carriers for
some of their commodity deliveries, but small country programs with
only one or two shipments in a year likely will have to use the more
expensive U.S. carriers for all their commodities in order to ensure
they meet the 50 percent minimum.
While we are champions of reforming how cargo preference law is
applied to food aid programs, we also recognize that U.S. merchant
mariners have been valuable partners in the fight against world hunger
since the inception of the Food for Peace program 60 years ago. Their
efforts and sacrifices in the delivery of U.S. food have helped to save
and improve countless lives around the globe. As an organization,
Catholic Relief Services has great respect and admiration for the men
and women who are part of the U.S. merchant marine and we would be glad
to have them continue their role in the fight against hunger. However,
we believe that achieving the objective of maintaining a U.S.-flagged
merchant fleet, and U.S. mariners to crew those vessels, should not
come at the expense of more efficient food aid programs. We encourage
Congress to consider measures to support merchant marines in ways that
do not place an undue burden on food aid funding but do allow for their
continued participation in the delivery of U.S. food aid.
Additionally, we note that at one time the Maritime Administration
published data concerning the tonnage of cargo that was shipped by type
of carrier (U.S./foreign flagged), per country. This provided a clear,
aggregate and public picture of the result of cargo preference
requirements. This data has not been published in several years and we
suggest that Congress consider requiring such reporting.
implementation tool discretion
In order to respond to varying local contexts, Catholic Relief
Services urges Congress to provide implementers as much discretion as
possible in whether they use U.S. commodities, locally produced/
purchased commodities, vouchers, or cash transfers in their programs.
CRS has had experience using all these modes of assistance--U.S.
commodities in current food aid programs, and the various Local and
Regional Procurement (LRP) modalities in ESFP programs and in the LRP
pilot program authorized in the 2008 Farm Bill. From this experience,
CRS believes that all these modalities of assistance can be valuable
tools in the fight against hunger, but which is the right tool depends
greatly on specific circumstances we cannot necessarily know in
advance. As such, providing implementers discretion will allow us to
evaluate the situation and utilize the most appropriate tool.
Following the implementation of LRP pilot program, Catholic Relief
Services and several other implementing organizations worked with
Cornell University to evaluate the impacts of their LRP programs.\5\
That study found that on average locally procured food, vouchers, and
cash resulted in a time savings of nearly 14 weeks compared with
shipping food from the United States. It also found cost savings in the
local purchase of unprocessed grains and some pulses, but that U.S.-
sourced processed foods and vegetable oils were less expensive than
local sources. Our understanding from this study, and continued
experience with each modality tells us that there are several factors
to consider in determining which mode of assistance is best suited for
a particular program. These factors include current market prices of
the various applicable commodities both in the United States and in the
country and region in which the program takes place, cost of overseas
transportation, distance from the coast and overall cost of in-land
transportation, availability of local food in the necessary quantity
and quality, the familiarity the target population has of the type of
food being made available, the ability to physically reach the target
population, and a host of other considerations.
Because of the many variables to consider it is difficult, if not
impossible, to say what the best mode of assistance is, nor can we
confidently predict how many more people will be served using one
option over another, without knowing the specific conditions in which
the food aid response will operate. What we can say is that in some
cases using U.S. commodities will be the best choice--because it's less
expensive, it can be provided in the necessary quality or quantities,
and/or buying locally will negatively impact local markets.
Alternatively, in some cases using an LRP modality will be the best
choice--because it's less expensive, can get to the target population
faster, is more amenable to local diets, and/or because bringing in
U.S. commodities would be disruptive to the local market. It should
also be noted that what is the best option at a particular point in
time may not necessarily be the best option at a later point in time
because one or more of the factors listed above has changed.
Given the dynamic circumstances in which food aid operates, food
aid programs should be responsive, nimble, and adaptable to current
conditions. Ideally, implementers would have complete discretion in how
food aid funding is used through the life of a program. Alternatively,
we recommend Congress consider making more resources available for LRP
purposes, whether through increased funding of EFSP or through changes
in Food for Peace that would allow for LRP modalities to be used, and
that they be available for programming alongside U.S. commodities
through the life of projects.
the success of food aid programs
This hearing is focused on ways in which food aid programs can be
made better, but it is important to keep in context that food aid
programs are currently highly successful, and this is especially true
of the Food for Peace program. As an implementer of both emergency and
development Food for Peace programs, we know firsthand how lives are
touched and saved by these programs. In your efforts to make these
programs better, we urge Congress to also preserve what makes them so
successful.
Generally, Food for Peace emergency programs provide victims of
civil conflict or natural disasters food rations to help get them
through the difficult times they face. While these programs are
typically designed to provide 6-12 months of response, in some cases
the emergency conditions are protracted indefinitely, as we are seeing
in the case of the Syrian refugee crises. The success of emergency
programs can be measured in the people who are fed, who wouldn't
otherwise have anything to eat. This is achieved through generous
funding by Congress--in recent appropriations cycles, over $1 billion
has been provided annually for emergency Food for Peace programs.
Food for Peace development programs also provide food to vulnerable
groups who might otherwise go hungry, but their primary focus is
building the capacity of beneficiaries to feed themselves. Development
projects cover a number of sectors--agriculture, nutrition, land
regeneration, water management, infrastructure improvements, and market
engagement--in order to put whole communities on a sustainable path
toward self-reliance. These are multiyear projects that give
implementers enough time to achieve real results, like revitalizing a
watershed or making a lasting impact on farmers' skill sets.
Development programs are awarded on a competitive basis, allowing the
best ideas and most successful implementers to carry out the work. And
funding for development programs cannot be redirected to other
purposes, giving beneficiaries the assurance that they will not be
abandoned midstream after the U.S. commitment is made to help them. The
success of these programs can be measured in the number of poor farmers
who realize the dignity of being able to provide for their families and
the ability of communities to withstand droughts and other disasters on
their own, without having to rely on emergency food aid to get them
through the challenges they face.
By these measures, we can say Food for Peace development programs
CRS has implemented have been highly successful. For instance,
Ethiopia's Productive Safety Net Program (PSNP), supported in part by a
development Food for Peace program, has helped small-farm families
weather the 2011 drought that hit the Horn of Africa, prompting Tom
Stall, USAID's Ethiopia Mission Director at the time to say ``you had a
drought that's as big as any in the last 20, 30 years--maybe bigger in
terms of Ethiopia--and yet there was no famine. So we've broken that
cycle.'' \6\ In Burkina Faso, on a visit to rural farmers 2 years after
a CRS-led development program had ended, then-USAID Assistant
Administrator Nancy Lindborg noted that ``farmers are continuing to
thrive on the proceeds of their dry season market gardens.'' \7\ And
the FY 2013 International Food Assistance Report reported that as a
result of the CRS-led development program in Malawi ``farmers in
program areas grew enough on their land to be able to sell pigeon peas
. . . for use in WFP's emergency response in other districts of the
country.'' \8\
Given the success that emergency and development Food for Peace
programs have had, we urge Congress to evaluate any reform proposals
not only by the ways they change Food for Peace, but also by the ways
in which they preserve those elements of Food for Peace that currently
work. These include the focus Food for Peace has had on prioritizing
assistance to the poorest and most vulnerable, the continuous learning
and sharing of best practices that Food for Peace encourages, the broad
political support that has maintained strong levels of funding for the
program over the years, and the dedicated, uninterrupted funding that
multiyear development programs need to save lives, move people out of
poverty, and reduce long-run emergency food assistance needs.
conclusion
Catholic Relief Services has been, and will continue to be a strong
supporter of reforms to the U.S. international food aid system. As a
Catholic organization, we are guided by Catholic Social Teaching that
calls us all to be good stewards of our resources and we believe the
changes we outlined above will improve how existing food aid resources
are used. Catholic Social Teaching also calls us to protect and promote
human life and dignity, by providing those in need with food in
emergency programs and by helping the poor and vulnerable break the
cycle of poverty and dependence through development programs. Catholic
Relief Services believes that any changes to food aid in the name of
reform must also preserve those elements of food aid that are
effective, or we risk undermining the great work already being done by
these programs.
----------------
End Notes
\1\ Government Accountability Office, ``Funding Development
Projects through the Purchase, Shipment, and Sale of U.S. Commodities
Is Inefficient and Can Cause Adverse Market Impacts,'' June 2012.
\2\ Maritime Administration, U.S. Dept. of Trans., ``Comparison of
U.S. and Foreign-Flag Operating Costs,'' Sept. 2011.
\3\ Maritime Administration, U.S. Dept. of Trans. ``Notice:
Procedures for Determining Vessel Service Categories for Purposes of
the Cargo Preference Act,'' Fed. Reg. Vol. 74, No. 177, Sept. 15, 2009
, p. 47309.
\4\ Government Accountability Office, ``Cargo Preference
Requirements: Objectives Not Significantly Advanced When Used in U.S.
Food Aid Programs,'' Sept. 1994.
\5\ Erin C. Lentz, Christopher B. Barrett and Miguel I. Gomez,
``The Impacts of Local and Regional Procurement of U.S. Food Aid:
Learning Alliance Synthesis Report,'' Final Report: A Multidimensional
Analysis of Local and Regional Procurement of U.S. Food Aid, January
2012.
\6\ Kelly Ramundo, ``Catching Ethiopians Before They Fall,'' USAID
Frontlines, May/June 2012.
\7\ Nancy Lindborg, ``Responding Early and Building Resilience in
the Sahel,'' Huffington Post, Mar. 3, 2012.
\8\ USDA/USAID International Food Assistance Report, Fiscal Year
2013.
______
Responses of Dr. Vincent Smith to Questions
Submitted by Senator David Perdue
Question. Coming to the Senate from the business sector, I
appreciate your recommendations for increasing the efficiency of U.S.
food aid to get more out of U.S. taxpayer dollars. I have heard from
other sectors that these reforms might impact their industry.
Could you please speak to the impact of food aid reforms on the
following sectors:
U.S. agriculture?
Answer. Any effects on the U.S. agriculture sector of the proposed
reform are likely to be positive but miniscule. The major bulk
commodities provided as food aid, such as wheat and corn, are traded on
global markets. Shifting to local and regional sourcing (as well as
abandoning cargo preference for food aid and the practice of
monetization) will increase the amount of funds available for
purchasing all food aid, including those commodities, with a positive
effect on global prices and, therefore, prices on local U.S. markets
that are clearly and unambiguously linked to the world markets for
those commodities.
For processed food aid commodities such as cooking oil and peanut
butter, complete flexibility in sourcing will still lead USAID and USDA
to source those commodities from the United States as, for these
commodities, currently and the near- and medium-term future, the United
States is almost certain to remain the low cost and most economically
efficient food aid source. Some small acre commodities such as peas and
lentils are also sometimes purchased for food aid. Very recent research
by Dr. Joseph Janzen at Montana State University finds that food aid
purchases of peas and lentils have no measurable impacts on the prices
at which those commodities are traded in local U.S. markets as these
are also globally traded commodities).
U.S. jobs in our ports?
Answer. A recent George Mason University study estimated that
shifting from mandatory sourcing in the United States for food aid
would result in the loss of about 175 jobs at U.S. ports if that was
all that was happening in those ports. However, they correctly point
out that product handling in those ports is growing at a rapid annual
rate because of the relatively rapid growth of trade in the U.S.
economy (both in terms of exports and imports). The increase in demand
for port workers (of all types) because of the expansion of total trade
will require many more workers than the jobs that would otherwise by
lost because of ending cargo preference for food aid. Thus no actual
person is likely to be laid off because of a shift to local sourcing
for food aid.
U.S. national security?
Answer. The independent studies (ones not sponsored by the Maritime
lobby) and various GAO reports that have examined this issue have
concluded that ending cargo preference will have minimal if any
substantive effects on the military preparedness of the United States
with respect to sealift capacity. The data show that about 70 percent
of the privately owned U.S.-flagged vessels used for food aid shipments
do not meet the Department of Defense criteria for vessels from the
privately owned maritime fleet that can be used for sealift (because
they are too old and/or are bulk carriers or tankers unsuited for
almost all sealift purposes without major refits). It would be much
cheaper for the U.S. Government to directly subsidize only those
vessels that meet DOD criteria rather than subsidize food aid shipments
carried on vessels that have no military value. The vessels that have
no value for the purposes of national security carry the majority of
food aid and are retained in service by private mercantile interests
(and 40 percent of which are, in the end, foreign owned through U.S.-
registered holding companies) because of the high shipping rates that
can be charged to the U.S. Government on food aid cargo preference
shipments.
U.S. shipping?
Answer. There will be very little effect on U.S. shipping. The DOD
estimate is that if cargo preference for food aid were ended and there
was no growth in other areas of cargo preference shipping (such as
intercoastal shipping) then between 350 and 475 jobs for sailors with
U.S. citizenship or permanent residence would be lost. However, there
is growth in those other areas and so it is unlikely that impacts will
be substantial. As indicated in the response to the issue of national
security, the main impact on U.S. shipping of food aid cargo preference
coupled with required U.S. sourcing of food aid is to enable U.S.-based
shipping companies (40 percent of which are owned by foreign
conglomerates) to keep old and inefficient ships in service.
Effectively, food aid cargo preference is a form of corporate welfare
that does nothing to enhance the competitiveness of U.S.-flag ships in
international shipping markets.
Question. I understand that USAID and USDA are implementing similar
nonemergency food aid programs in common geographic areas.
How are the two agencies increasing and improving program
coordination--
in Washington and in the field--in order to reduce overlap and
duplication with our limited resources for food assistance?
Answer. This is not my area of expertise. However, a recent GAO
report has indicated that there is a need for more effective
communication between the two agencies to achieve efficiency gains in
coordination. However, I would defer to Dr. Mercier's expertize with
respect to the issue of mission overlap between the two agencies. The
programs they manage do have clearly defined mandates that are distinct
and rarely target exactly the same problems.
Question. I understand that before I came to the Senate, last
year's Farm Bill included reforms to allow increased flexibility for
using a mix of U.S. commodities as well as locally and regionally
procured (LRP) commodities.
How much flexibility is currently allowed?
Answer. Under the 2014 Farm Bill provisions, the amount of funding
allowed for local and regional souring was increased from $40 million a
year (the amount allowed in the 2008 Farm Bill pilot program) to $80
million under the Food for Peace program, which is funded at a total of
about $1.3 billion. That is about 6.15 percent of the total.
Can you discuss the impact of this new flexibility on food
aid?
Answer. The data indicate that every dollar spent through local and
regional sourcing reduces the cost of delivering a ton of food to the
target populations by about 40 percent. The reason the Senate
Agricultural Committee strongly supported expansion of funding for
local and regional sourcing in 2014 was precisely because the pilot
program had been successful in enabling USAID to use efficient markets
efficiently.
______
Responses of Dr. Stephanie Mercier to Questions
Submitted by Senator David Perdue
Question. Coming to the Senate from the business sector, I
appreciate your recommendations for increasing the efficiency of U.S.
food aid to get more out of U.S. taxpayer dollars. I have heard from
other sectors that these reforms might impact their industry.
Could you please speak to the impact of food aid reforms on the
following sectors:
U.S. agriculture;
U.S. jobs in our ports;
U.S. national security; and
U.S. shipping?
Answer. Impact on U.S. agriculture: As I indicated in my written
testimony, in recent years, the value of U.S. commodities exported
under food aid programs accounts for less than 1 percent of total U.S.
agricultural exports.
The share of food aid in overall exports varies somewhat among the
commodity categories utilized for the programs, higher among certain
processed commodities such as vegetable oil or blended products such as
corn-soybean blend (CSB), and lower for bulk commodities such as corn
and wheat. It is the former types of food that are most likely to see
continued use if the Food for Peace program were to be provided with
additional flexibility, as highly processed commodities produced in the
United States were shown in the LRP pilot program to be more cost-
competitive with similar categories of domestically produced
commodities in developing countries. In addition, these products are
most commonly used for direct feeding purposes in emergency assistance
situations, which in many instances will require U.S.-sourced
commodities because of food shortages in the recipient country.
As to the bulk commodities, these commodities are heavily traded on
international markets, and any U.S. wheat or corn that is not sold for
food aid purposes will find an outlet somewhere else in the commercial
market. Although the commodity volumes in question are tiny as a share
of international trade, if those resources are used more efficiently to
purchase wheat or corn in developing country markets instead, to the
extent that there is any price impact from these changes it would be a
positive one, although likely modest at best.
Impact on U.S. port jobs: The data indicate that U.S. food aid
shipments amount to well less than 1 percent of annual activity in most
major U.S. ports. As described above, the commodities no longer shipped
as food aid will eventually find other markets, many of them overseas,
so the net impact on port activity from more extensive food aid reform
would likely be close to zero. In addition, overall U.S. port activity
across all categories of exports and imports has been climbing steadily
in recent years, so any net change would be a shrinking share of total
port business.
Impact on U.S. national security: USAID has estimated that the full
flexibility of the Food for Peace program could allow the Agency to
reach an additional 12 million beneficiaries annually as compared to
the current impact of the program. Fewer hungry and consequently
desperate people around the world with the expanded number of
beneficiaries having good reason to be grateful for U.S. assistance,
cannot be anything but a net positive for U.S. national security.
While the cargo preference program was nominally put into place to
ensure that the U.S. military would have access to ample sea-lift
capacity in the event of an emergency, the majority of U.S.-flagged
vessels that carry food aid under those rules do not qualify for the
Maritime Security Program and are not deemed to be militarily useful
under the program's criteria. A 1994 GAO report entitled ``Cargo
Preference Requirements: Objectives Not Significantly Advanced When
Used in U.S. Food Aid Program'' raised significant concerns about this
matter, as have other reports in recent years.
Impact on U.S. shipping: In general, U.S. export promotion programs
are put in place to help U.S. firms level the playing field with other
exporters in overseas markets. For example, the GSM-102 export credit
guarantee program operated by USDA is designed to offset the advantage
that European or Australian exporters receive by dint of their credit
costs being lower because they are backed by their respective
governments. In all other respects, U.S. agricultural exporters operate
as efficiently as possible so as to be able to compete with other
exporters on the open world markets for their commodities.
On the other hand, the cargo preference program essentially sets
aside market share for U.S.-flag vessels to carry U.S. food aid,
relieving them of the need to operate efficiently in that market so as
to compete for that business. For the vessels included in the Maritime
Security Program, data analyzed as part of a food aid project conducted
at George Mason University indicate that food aid shipments are only a
small part of their business, which could be easily replaced by
military cargo (also covered under cargo preference rules) or other
commercial cargo.
However, of the eight U.S.-flag vessels which carried the
equivalent in tonnage of at least two complete shiploads of U.S. food
aid between FY 2011-2013, it appears that none of them were registered
under the Maritime Security Program during that period. In fact, the
two companies which carried 62 percent of the U.S. food aid tonnage
shipped during this period under the preference program had no MSP
vessels carrying U.S. food aid at all. A 2011 study by the U.S.
Maritime Administration (MARAD) found that the average U.S.-flag
vessels had operating costs 2.7 times higher than comparable foreign-
flag vessels. A portion of the difference is due to more stringent wage
and environmental rules faced by U.S. carriers, but part of the
difference is due to the greater age and cost inefficiencies of the
vessels themselves.
The evidence suggests that in the absence of cargo preference
rules, which essentially creates a guaranteed market for the services
of these ships, these older non-MSP ships with their higher cost/
pricing structure could not be operated on a profitable basis if faced
with open competition. In a Department of Defense letter in 2013, it
was estimated that food aid reform could affect the jobs of up to 495
mariners, or less than 2 percent of members of the merchant marine as
classified in the Bureau of Labor Statistics data. However, since the
volume of goods carried in traffic between U.S. states has been
increasing steadily in recent years, it is likely that most of those
mariners could easily find new jobs on those ships.
Question. I understand that USAID and USDA are implementing similar
nonemergency food aid programs in common geographic areas.
How are the two agencies increasing and improving program
coordination--in Washington and in the field--in order to
reduce overlap and duplication with our limited resources for
food assistance?
Answer. In FY13, there were 8 countries in which both Food for
Peace nonemergency projects and Food for Progress projects were
underway, out of a total of 43 countries where projects were ongoing
under both programs. These countries were Bangladesh, Burkina Faso,
Ethiopia, Guatemala, Liberia, Malawi, Mali, Mauritania, Mozambique, and
Uganda. While both programs operate in each of these countries, they
often work in different parts of the countries targeting different
populations.
For example, there are two Food for Progress projects going on in
Uganda, one run by Mercy Corps and the other by the National
Cooperative Business Association (NCBA). Both of these projects are
operating in northern Uganda, which is still recovering from a decades-
long civil conflict with the group the Lord's Resistance Army (LRA),
which drove hundreds of thousands of Ugandans from their homes. There
is also a title II development project going on in Uganda, run by the
cooperative ACDI-VOCA. This project is targeted at the Karamoja region,
which is in the northeast corner of the country.
On the ground USG coordination and oversight of these programs run
by USDA and USAID is probably hampered by recent actions by FAS to
reduce the number of attache offices it operates overseas due to budget
pressures. Of the eight countries listed above, there are attache
offices in-country in only two of them: Guatemala and Ethiopia. In the
other six countries, there are at most locally employed staff working
on agricultural issues in the U.S. Embassy (i.e., not U.S. nationals);
otherwise agricultural issues are being monitored by FAS staff in a
neighboring country's capital, such as the FAS office in Nairobi,
Kenya, also has responsibility for agriculture in Uganda.
Nonetheless, the various U.S. Government agencies involved in
overseas development assistance are doing a much better job of
coordinating their activities than was the case just a few years ago.
With respect to Uganda again, there is an extensive set of documents
available on the USAID Web site which describes all the U.S. Government
activities currently being conducted in the Karamoja region and how
they are being integrated. Recognizing that coordination is a
challenge, the Global Food Security Act reported out of the House
Foreign Affairs Committee on April 23 seeks to create a stronger
interagency mechanism to ensure cooperation and a coherent approach
between U.S. agencies with programming or expertise in agriculture
development/food security.
Question. I understand that before I came to the Senate, last
year's farm bill included reforms to allow increased flexibility for
using a mix of U.S. commodities as well as locally and regionally
procured (LRP) commodities.
How much flexibility is currently allowed?
Can you discuss the impact of this new flexibility on food
aid?
Answer. The legislative authority for the Food for Peace program
has a specific section (section 202(e)) which allows implementing
partners to request a specified share of the resources they are
provided to undertake their projects as cash to cover nonfood expenses.
As established under the 2008 farm bill, the maximum percentage allowed
under the law was 13 percent. In the 2014 farm bill, that maximum was
raised to 20 percent, and the category of expenses that could be
covered with these resources was expanded. In effect, the share of
title II resources that can now be used flexibly was increased by 7
percentage points. Most of this increased flexibility was used to
provide PVO's operating nonemergency, development projects under title
II with the ability to forgo using monetization transactions (selling
U.S. commodities in local markets and use the proceeds to cover nonfood
expenses). This change eliminates the inefficiency of converting
commodities into cash which wasted at least 25 cents of every dollar
spent on U.S. food aid for these projects, allowing the PVO's to
actually reach an additional 600,000 people annually. Some monetization
still occurs under title II because the provision requiring minimum
monetization of at least 15 percent remains in law, but otherwise
monetization only occurs when it makes sense as part of the development
activity, not just to generate cash.
In addition, the 2014 farm bill established a new stand-alone
authority for USDA to run a local and regional procurement program
(LRP), authorized to spend up to $80 million annually. This authority
can be used to acquire local foods to complement U.S.-sourced
commodities used in school feeding programs under the McGovern-Dole
program, or to quickly respond to small-scale emergency situations.
This program received no appropriation for FY15 so is not currently
being operated, but the President's FY16 budget request did include $20
million for this new program.
______
Responses of David Ray to Questions
Submitted by Senator David Perdue
Question. Coming to the Senate from the business sector, I
appreciate your recommendations for increasing the efficiency of U.S.
food aid to get more out of U.S. taxpayer dollars. I have heard from
other sectors that these reforms might impact their industry. Could you
please speak to the impact of food aid reforms on the following
sectors:
U.S. Agriculture?
Answer. Food aid programs in recent years have accounted for less
than 1 percent of total U.S. agricultural exports. Therefore reforming
food aid will likely have minimal impact on U.S. agriculture as a
whole. It is also important to keep in mind that reforming food aid
does not mean entirely abandoning use of U.S. commodities, only
increasing flexibility to use the most cost efficient and appropriate
method according to the context. There is always be a need for U.S.
commodity in order to meet nutritional needs of specific target groups
(lactating women and children under 2 years of age), or when markets
cannot function and/or nutritionally appropriate food is not available.
Likewise, certain processed commodities will likely continue to be
primarily sourced from the United States, such as vegetable oil,
because it is more cost effective. Food aid makes up a negligible
amount of other bulk commodities that are already largely traded on the
international market, such as a wheat and corn. Procuring less of these
commodities for food aid purposes is unlikely to negative impacts and
additional market outlets will continue to make up the majority of the
market.
Again, it is worth noting that any commodity currently used for
food aid can still play a role in providing this assistance overseas.
Circumstances where food is not locally or regionally available, or
when it is more cost efficient and timely to use U.S. commodities, such
as some places in Latin America, will still involve U.S. agriculture.
Reform is unlikely to have negative impacts on U.S. agricultural
markets and will mean flexibility to provide more efficient and
lifesaving assistance worldwide.
U.S. Jobs in Our Ports?
Answer. U.S. food aid shipments make up a minimal amount of
activity in most major U.S. ports, less than 1 percent annually. Port
workers are often paid by the tonnage loaded, and flexible food aid
funding could increase cost-efficiency in the program, thus allowing
for more U.S.-made prepackaged goods to be purchased and then loaded by
dock workers. It is also critical to note the overall U.S. port
activity in both imports and exports has been steadily increasing in
recent years. Due to this increase, there is demand for mariners and
those involved in shipping food aid will likely have alternate shipping
opportunities.
U.S. National Security?
Answer. Reforming food aid can have a positive impact on U.S.
national security. USAID has estimated as many as 12 million more
beneficiaries can be reached annually if full flexibility is allowed
for Food for Peace. This additional reach is badly needed as ISIS and
other extremists continue to use food as an incentive and refugee
numbers continue to rise. More people reached by U.S. food aid means
less people desperate for food resources from other sources; this can
only help the U.S.'s standing in the world and ultimately national
security.
In terms of the cargo preference program, which meant to ensure the
U.S. military will have enough sea-lift capacity in times of emergency
through the Maritime Security Program, most U.S. flagged vessels
carrying food aid do not qualify. Independent studies and GAO reports
have found that because most vessels shipping food aid are not capable
of being used for military purpose, reforms to food aid will not
negatively impact the readiness of the U.S. military or national
security. It is also important to point out that programs, such as the
Department of Defense's Voluntary Intermodal Sealift Agreements (VISA)
provide the U.S. military with significant additional sea power through
Vessel Sharing Agreements (VSA) with both U.S. and non-U.S. flag ships.
The Maritime Security Program ships are generally only activated once
all preexisting VSAs and accelerated VSAs with both U.S. flag and
foreign flag ships have been exhausted.
U.S. Shipping?
Answer. The impact food aid reform will have on overall U.S.
shipping is minimal. Currently there are U.S. export promotion programs
helping U.S.-flag vessels to compete in the international market.
However, because food aid cargo preference limits market competition,
there are some U.S.-flag vessels carrying U.S. food aid that are able
to continuously operate despite significant inefficiency. A 2011 study
found that the average U.S.-flag vessel had an operating cost of 2.7
times higher than comparable foreign flag vessels, in large part
because of the vessels were older.
In terms of the Maritime Security Program very few ships actually
carrying food aid qualify for the program because of either the type of
ship, age, or other inefficiencies. In addition, the Jones Act provides
significant support to U.S. shipping as it requires that all goods
transported by water between U.S. ports must be carried on U.S.-flag
ships that are constructed in the United States, owned by U.S.
citizens, and crewed by U.S. citizens and U.S. permanent residents. In
addition, because of steadily increasing imports and exports across
categories, mariners currently or previously involved in food aid
shipments are not likely to be impacted by reforms. Additionally, it is
important to recognize while food aid reform is unlikely to
substantially impact the shipping industry, it will impact millions of
additional beneficiaries worldwide through providing lifesaving
assistance in a more cost and time efficient manner.
Question. I understand that USAID and USDA are implementing similar
nonemergency food aid programs in common geographic areas.
How are the two agencies increasing and improving program
coordination--in Washington and in the field--in order to
reduce overlap and duplication with our limited resources for
food assistance?
Answer. Although there are USAID and USDA programs overlapping in 8
countries, it is CARE's understanding that these programs work with
different populations in different areas. Budget constraints have meant
difficulties in program coordination and oversight, particularly in the
field. The Global Food Security Act (S. 1252/H.R. 1567), which focuses
not on food aid but on long-term food security programs, recognizes
issues in interagency coordination and provides mechanisms to further
cooperation and develop integrated approaches between these agencies
and their programs.
Question. I understand that before I came to the Senate, last
year's farm bill included reforms to allow increased flexibility for
using a mix of U.S. commodities as well as locally and regionally
procured (LRP) commodities.
How much flexibility is currently allowed?
Answer. PVOs are able to request a share of resources for project
implementation as cash through Section 202(e) of the legislative
authority for the Food for Peace program. The 2014 farm bill increased
the maximum percentage from 13 percent to 20 percent and expanded the
resources and activities covered by the account. In addition, the FY
2014 Omnibus provided an additional $35m on top of this 20-percent
increase for 202(e) activities. These funding increases and the
definition of expanded activities gives organizations implementing
nonemergency title II projects flexibility to use alternate methods,
such as local and regional procurement of food, and to forego
monetization to some extent.
Monetization is the practice of selling U.S. commodities on local
markets and using proceeds to fund development projects, however
approximately 25 cents on every dollar is lost in this transaction.
Monetization can also hurt local markets by flooding them with low
priced U.S. commodities, negatively impacting the very people targeted
by programs as beneficiaries. Current law requires 15 percent of title
II funds to be used for monetization. However, increased flexibility in
202(e) has been helpful in offsetting monetization allowing 600,000
additional beneficiaries to be reached annually. It is important to
note that the $35m in additional 202(e) funding provided through the
FY14 Omnibus was limited to 1 year, and as such monetization activities
are set to expand in future programs as this funding is no longer
available to offset monetized activities.
Can you discuss the impact of this new flexibility on food
aid?
Answer. The impact of this flexibility is more cost efficient food
aid for more beneficiaries, meaning additional lives saved and
community served with more appropriate and sustainable mechanisms.
Flexibility gives implementing PVOs the ability to use the most
appropriate form of food aid, whether U.S. commodities, locally and
regionally procuring foods, providing vouchers in functioning markets
or some combination, depending on the context. Flexibility also ensures
that U.S. food aid does not harm local markets through monetization,
and can actually help build markets and effectively end long term
dependence on food aid.
CARE's Kore Lavi program in Haiti program is an example of how
flexibility in a Food for Peace program being implemented is already
making positive impacts and sustainable outcomes. The program is
designed and run in coordination with the Haitian Government, functions
with high levels of oversight and accountability, and targets the
poorest 10 percent of Haiti's population. Electronic vouchers can be
used to buy staple foods, such as rice, and paper vouchers used to buy
fresh foods, such as fruit and vegetables. The program emphasizes
purchasing locally produced foods, helping to build the local market
and supporting livelihoods of those living in the communities. Kore
Lavi is in its second year, and so far the program has reached
approximately 125,000 chronically hungry individuals and has partnered
with 387 vendors, many of whom are women and other disenfranchised
populations.
Kore Lavi is an example of a Food for Peace funded program using a
combination of vouchers to purchase locally produced food, and in-kind
U.S. food aid to supply additional nutrition to pregnant and lactating
mothers.
Different communities have different needs, flexibility allows PVOs
to best meet the needs of the beneficiaries and make the best use of
tax payer dollars. The ability to not only provide food aid, but do it
in a way that builds the capacities of local partners and beneficiaries
links aid to resilient communities who are ultimately able to feed
themselves and is made possible through increased flexibilty.
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