Can the story on US food aid get any worse?

Hundreds of thousands of malnourished children are receiving poor quality and even harmful food aid because of the slow introduction of more nutritious alternatives, a medical charity has warned. The US is continuing to donate directly to relief agencies fortified flour mixes of corn and wheat with soya that do not meet international standards agreed in the 1960s...

...older corn-soy blend (CSB) pre-mixed foods donated by the US contained insufficient micronutrients, anti-nutrients that interfered with child absorption, no dairy proteins that were important for growth, and were bulky, limiting intake by young children with small stomachs.

see the full story in the FT.

US food aid policies create 561 jobs in Kansas, risk millions of lives around the world

I read recently the First Law of Policy Economics: Every inefficiency is someone’s income. US food aid policy is definitely no exception, and it is riddled with inefficiencies.

Exhibit A: This invitation from a coalition of big US shipping interests to an event in Washington today. At this event, USA Maritime will have tried to convince lawmakers and their staff that ancient and outdated US food aid legislation, which requires virtually all US food aid to be bought in-kind from the US, processed and bagged in the US, and shipped on US-flag ships to even the most far-flung destinations, should not be altered.

Let us leave aside for a moment that the report recommending favorable policies for the US shipping industry was bought and paid for by the US shipping industry and may not be the most objective or trustworthy source on the subject.

The main thrust of the shipping industry’s argument is that handling, processing and shipping food aid creates US jobs—13,127 of them to be exact—and boosts US industry, leading to this actual headline: “Food For Peace Program Produces More Than 870 Iowa Jobs.” If these policies were removed, they argue, it would be less profitable to operate a ship under the US flag, the US-flag fleet would shrink, and American jobs would be lost.

“Did you know,” reads the invitation, “that these programs have positive economic consequences for our economy at home?” The report tries to quantify one benefit of current US food aid policies, but (obviously) does not discuss the considerable costs of these policies to US tax payers, to the US’s reputation and credibility abroad, and most importantly to programs’ intended recipients—the millions of hungry and malnourished people fed by the world’s largest food aid donor every year.

The shipping industry’s arguments don’t hold water for many reasons. Here are two of the big ones:

First, assuming that you did want to subsidize the US Maritime industry, US food aid policies that create an overpriced, uncompetitive oligopoly are NOT a good way to do it. There are much cleaner, simpler and more effective ways to support US Maritime, such as direct payments to vessel owners. There is no reason to bundle shipping subsidies in with humanitarian aid other than the deeply cynical logic that it’s easier to rally public and Congressional support around money for starving children than around padding to the bottom line of multinational shipping conglomerates.

Second, current US food aid policies are NOT an effective or efficient way for the US to achieve what should rightly be the primary objective for food aid. According to the government’s own accountability office, buying food locally in sub-Saharan Africa (which is where the majority of US food aid goes) costs 34 percent less than shipping it from the US, AND gets there on average more than 100 days more quickly, AND is more likely to be the kind of food people are used to eating. I am not arguing that cash aid is ALWAYS better than food aid, only that any reasonable food aid policy would allow aid agencies the flexibility to determine what kind of assistance works best in each situation.

Despite resistance from all three sides of the iron triangle holding this legislation in place, innovators have managed to break loose about $400 million for pilot and supplemental programs over the last two years to buy food locally or regionally. This is still a small sum compared to the roughly $2 billion that the US spends annually, but it is progress.

With today’s lame report, the big shipping companies behind USA Maritime are asking us to value a few thousand American jobs in a declining and uncompetitive industry over America's humanitarian reputation abroad AND the lives of the millions more people around the world who would benefit from reform to US food aid policy.

Do we even have to say it? This is NOT a fair trade.

What don’t make sense in trade don’t make sense in aid

Common sense principles in international trade are surprisingly useful for aid as well. Here's a list of overall principles that help explain some of the most discussed aid dos and don’ts on this and other blogs. 1) Don’t trade low value items with huge transport costs. No exporter or importer in their right mind would ship bulky low-value items large distances, which is why things like construction materials are often locally-sourced. Aid examples: Nobody wants your old shoes, 1 million shirts. 2) Don’t send coals to Newcastle. Nobody exports food to a food-abundant region. Well nobody but US food aid, which ships food from Nebraska to the Horn of Africa, when there is plenty of food already in the region (it’s just badly distributed inside the region, which is what wise food aid could correct). 3) Don’t do dumping; it is illegal. Exporters are not supposed to charge a much lower price abroad than they do domestically, driving local producers out of business – that’s called dumping, and it’s illegal under WTO rules. Wait, unless the dumper is USAID and it's called food aid. Actually, US food aid violates all of these first three principles. 4) Do export goods intensive in abundant resources; don’t export goods intensive in scarce resources. Many aid projects designed to promote poor country exports in a promising product violate this rule when they make the project dependent on the scarce and expensive resource called International Expertise. Small-scale handicraft projects heavily dependent on foreign experts are particularly gross violators.

Actually, ANY aid project should be designed to maximize use of abundant resources and minimize use of scarce resources. This is one of the defects of the Millennium Village approach – it’s intensive in the use of expensive foreign expertise, and so is not scalable.

5) The most gains from trade come when something is cheap in the exporting country and expensive in the importing country. Thank goodness the US does not try to grow its own bananas at some enormous expense, when they are cheaply bought from Central America and Colombia. Antibiotics can be cheaply made in rich countries but would be very expensive to produce in African countries, which is why aid projects that provide antibiotics cheaply make a lot of sense (actually private trade in antibiotics happens for the same reason, but doesn’t reach the poorest of the poor). Antiretroviral drugs, unfortunately, are expensive in the exporting country, so they are not as good an aid deal as antibiotics.

Yes, Cash is Best. Now when will USAID follow its own advice?

These two posters are finalists in a student contest to create public service announcements that tell Americans why giving cash in emergencies is better than giving goods like food, bottled water, or used clothes. (Hat tip to Saundra Schimmelpfennig).

The contest guidelines, provided by the Center for International Disaster Information (CIDI), are very clear on why they require entrants to focus on the simple message that giving money is the best way to help. They give three reasons, with which many Aid Watch readers are already familiar:

1) Financial contributions are easily convertible to meet the international disaster victims' specific and immediate needs;

2) Cash donations are more efficient, allowing purchases to be made at a bulk discount, at a lower transportation cost…

3) Cash donations go directly to the disaster site, allowing for exact purchases of what is needed most urgently and stimulating local economies. Other donations, such as products/goods, take time and money to transport, rarely meet victims' urgent needs, often interfere with professional relief efforts and frequently clash with cultural norms.

The videos and posters from the student finalists are here. The winners, announced tomorrow, get a cash prize and will have their work featured in CIDI’s national public education campaign. Now in its fifth year focusing on the very same message, the contest is funded by USAID, a fact which should also be obvious from the USAID logo on every entry.

The US is globally one of the worst offenders of aid tying, whereby US aid is “tied” to the purchase of American goods and services (a useful primer is here). While the percentage of aid that the US reports as tied is now falling thanks to improvements in reporting procedures as well as increases in implicitly untied programming through the Millennium Challenge Corporation and PEPFAR, the US still ranked a sad 19th out of 23 rich country donors in 2008, losing to even Italy, and edging out only Spain, Greece, Korea and Portugal.

In particular, American legislation requires that most US food aid be bought in the US, processed and packed by US firms, and shipped on US-registered vessels. As a result, only about 40 percent of the money that the US spends on food aid actually goes to buying food, and that food is often tragically slow to arrive. When proposals to change these archaic laws have come before the US Congress, they have largely been shouted down or diluted. Canada successfully shifted to a cash-only system in 2008; the US could and should do the same.

As the smart giving movement gains steam among individual donors, aren't we ready to end these wasteful practices institutionalized in US law and carried out by the world's largest bilateral aid agency? Only then would USAID finally be able to follow its own good advice: Cash is best.

New UN report says Somali food aid failing to reach the poor (NYT)

Rather than reaching the needy, up to half of Somalia’s food aid ends up in the pockets of radical militants, corrupt bureaucrats and local businessmen, and local UN staff, according to an article in yesterday's New York Times on the findings of a new UN report.

The report, which has not yet been made public but was shown to The New York Times by diplomats, outlines a host of problems so grave that it recommends that Secretary General Ban Ki-moon open an independent investigation into the World Food Program’s Somalia operations. It suggests that the program rebuild the food distribution system — which serves at least 2.5 million people and whose aid was worth about $485 million in 2009 — from scratch to break what it describes as a corrupt cartel of Somali distributors.

In addition to the diversion of food aid, regional Somali authorities are collaborating with pirates who hijack ships along the lawless coast, the report says, and Somali government ministers have auctioned off diplomatic visas for trips to Europe to the highest bidders, some of whom may have been pirates or insurgents.

The report will be presented to the Security Council on Tuesday. Early analysis from the UN Dispatch uses the findings to discuss the tension between development and diplomacy objectives (What Happens When Political and Humanitarian Goals Collide?).

UPDATE: The WFP has now declared that it will no longer channel food aid through the three Somali businessmen who have until now been receiving 80 percent ($200 million dollars worth) of WFP transportation contracts, and who are suspected of ties to Islamist insurgents.

For background on US policy in Somalia and recent tensions between the US and the UN there: See the War and Peace blog which argued last month that there is no way to aid Somalia without some part of the assistance flowing to Islamist groups, and asks why the US buys out radical groups in Iraq and Afghanistan but wants to cut them out in Somalia.  A new CFR report argues that the US should step back politically while continuing to channel humanitarian relief and development aid through local authorities, despite the risk of that aid being diverted.