Turning the ‘Tied’? 2014 Farm Bill and the Future of U.S. Food Aid

Jennifer Clapp

After years of delay, the U.S. Senate voted yesterday in favor of the 2014 Farm Bill, which passed easily in the House or Representatives last week. President Obama is widely expected to sign the bill into law. The bill’s provisions on food aid, though not as far reaching in the end as many had hoped for a year ago, are being hailed as a first step toward more major reform in the future. But newly emerging donors mimicking outdated U.S. food aid practices may muddy the reform efforts.

U.S. food aid policy has seen remarkably few major changes since it was initiated 60 years ago, in 1954. Donated food is still required to be primarily grown in the United States, and at least half must still be transported on U.S. flag ships. The United States also remains by far the largest donor of food aid on the global stage, carrying significant weight in setting food aid trends.

But in these past 60 years, the world has changed a great deal, making U.S. food aid policy arcane and outdated. NGOs such as Oxfam and others pushing for reform have emphasized these points.

A number of progressive aid groups welcomed the new provisions on food aid in the new Farm Bill legislation, especially the regularization of the 2008 pilot project on local and regional procurement (LRP) and its upgrade to a budget of $80 million per year. Although this increase keeps the LRP program as a small slice of the approximately $1.5 billion dollars that the United States spends on food aid each year, the “untying” of at least some food aid (elimination of requirements that the food be obtained from the donor country) allows for more flexible, efficient and effective assistance.

The food aid provisions in the current bill are still a far cry from what President Obama originally proposed a year ago, which included untying of up to 45% of U.S. food aid. Obama’s earlier proposal was defeated last June in the face of intense lobbying from interests that benefit from tied aid. The vote, however, was incredibly close, which NGOs fighting for reform see as an optimistic sign for the future.

Attempts to untie U.S. food aid date back more than 15 years to the George W. Bush era. Ironically, agribusiness and the handful of reform-resistant NGOs are not linked with the stalling of the untying proposal this time, as they have been in the past. Rather, the U.S. shipping lobby deserves the bulk of the blame for sinking it this time around. The lobby’s arguments for keeping aid tied (the number of jobs it would support, the significance to the U.S. military of keeping U.S. ships on the seas) are stale and unfounded, but they still swayed Congress.

According to Public Integrity, the shipping lobby provided significant campaign contributions in the.2012.cycle to a number of members of Congress. The vote among those politicians who received more than $10,000 from shipping groups was 7 to 1 against reforming food aid. Clearly, money talks.

As I’ve argued elsewhere, regardless of how powerful the rationale for reform, the institutional set up in the United States, along with powerful interests with access to those institutions, make policy reform in the US particularly difficult. The conditions for substantial reform looked promising a year ago, before politics got in the way.

This political context makes the few concessions in the current bill seem huge. And maybe they are the best we could have hoped for. As noted above, reforms to US food aid policy over the years have been minor compared to the massive shifts in both the US and abroad that shape the broader food aid landscape.

The United States no longer holds massive surpluses that it is trying to offload abroad in order to bolster grain prices and incomes for its own farmers. Now it purchases grain from multinational grain companies for its food aid, and the grain it does buy makes up less than 1% of farmer incomes. The inefficiencies of shipping food half way around the world are just not worth it anymore for the benefit it brings to domestic farmers. Cargill and the National Farmers Union both support reforms.

Food aid needs around the world have also changed. Today, most food aid is directed toward emergencies, not long-term development programs. Delivery times with LRP are much faster.

Shipping food aid on U.S. carriers is also no longer needed for military purposes. The Cold War is over, and even the Pentagon confirmed that removing Cargo Preference rules that require food aid to be transported on U.S. ships would not harm military goals.

And finally, the other traditional food aid donors have untied their food aid. The European Union, Canada, and Australia all took bold measures to untie their aid over the past 20 years. The United States is the odd country out in this mix of traditional donors by continuing with its tied aid policies.

Paradoxically, other changes that have occurred in recent years may reduce pressure on the United States to reform its food aid policies further. The current mix of donors is one of them. The US, the European Union, Canada, and Japan were the primary donors in the past. Today, China and Brazil have emerged as major donors and as a recent WFP report shows, together their contributions are nearly equal to the EU in terms of the volume of food aid they provide, and are on par with donations from Canada and Japan.

What is interesting about these new donors is that their food aid contributions are nearly 100% direct transfer (tied to purchases in the donor country, or tied aid), surpassing the percentage of U.S. direct transfers. Other emerging developing country donors, such as India, also mainly give direct transfer food aid.

The arrival on the scene of these new donors means that on the global stage, the United States no longer stands out as unusual with its tied aid policy. In 2012, the percentage of direct transfer food aid increased to 62% after declining for a number of years, and the amount procured locally and regionally decreased. Even Japan has increased the degree to which it ties its food aid over the past decade.

With these trends, the future may bring more tied food aid, rather than less. If so, we are likely to return to the familiar problems of inefficiency and lack of effectiveness that NGOs have worked so hard to root out. That would be a shame. But politics doesn’t always respect common sense and efficiency.