DEHAI MAILING LIST ARCHIVE: [DEHAI] (IRIN): GLOBAL: Millions wasted on shipping food aid

[DEHAI] (IRIN): GLOBAL: Millions wasted on shipping food aid

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From: Berhane Habtemariam (Berhane.Habtemariam@gmx.de)
Date: Tue Jul 13 2010 - 15:12:22 EDT

GLOBAL: Millions wasted on shipping food aid

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Aid has many hidden costs

JOHANNESBURG, 13 July 2010 (IRIN) - US taxpayers spend about US$140 million
every year on non-emergency food aid in Africa, and roughly the same amount
to ship <http://www.irinnews.org/Report.aspx?ReportId=70066> food aid to
global destinations on US vessels; money that could have been used to feed
more people says a new study by researchers at Cornell University in the US.

The US Agency for International Development (USAID) has accounted for more
than half of the world's food aid every year for decades, but has been "the
last and slowest donor to reform its food aid policies", noted Christopher
Barrett, a leading food aid expert, and his colleagues, Elizabeth Bageant
and Erin Lentz.

Their study,
<http://ageconsearch.umn.edu/bitstream/61250/2/AAEA%202010%2010877.pdf> Food
Aid and Agricultural Cargo Preference, has come up with the numbers to back
a long-standing call for reforms, and goes a step further in showing that
the policy designed to "nurture" or subsidise the US shipping industry
"under the guise of humanitarian assistance" is not doing either
effectively.

Most donors <http://www.irinnews.org/report.aspx?ReportID=88666> have moved
towards cash transfers or vouchers to buy food, instead of providing food as
aid, but the paper points out that most countries only had agribusiness and
some NGO interests to contend with while reforming their food aid policy.

Reforms in the US have faced much tougher opposition from "a uniquely
effective lobby", referred to as the "iron triangle", comprising
agribusiness, the shipping sector and some NGOs.

Barrett and Daniel Maxwell, an associate professor at Tufts University,
Boston, in the US, who wrote at length about the "iron triangle" in their
2005 book, Food Aid After Fifty Years: Recasting Its Role, estimated that it
cost more than two dollars of US taxpayers' money to deliver one dollar's
worth of food procured as in-kind aid.

Little known shipping subsidy

Little has been written about the costs and effects of a policy called the
Agricultural Cargo Preference (ACP), which affects the shipping sector of
the "iron triangle", and USAID, the world's largest food aid programme.

The ACP requires that 75 percent of US food aid be shipped on privately
owned, US registered vessels, even if they do not offer the most competitive
rates. Some of these costs are reimbursed by the Department of
Transportation's Maritime Administration, but ultimately the US taxpayer
foots the entire bill.

The Cornell researchers used data available for every USAID food aid
shipment in 2006, when ACP cost US taxpayers $140 million, "The amount paid
above the regular cost of ocean freight on the competitive market," said
Barrett.

ACP was calculated by taking into account the costs of transporting the food
aid on competing foreign vessels plying the same waters, after deducting the
ACP costs borne by US Department of Agriculture food aid programmes, and
reimbursements.

The un-reimbursed cost of ACP to food aid agencies was almost the same as
what USAID spent on non-emergency food aid to Africa, which benefited 1.2
million people and was "widely deemed important to preventing food
emergencies". USAID declined to comment on the findings of the study, saying
the research "spoke for itself".

About 20 years ago the US Government Accountability Office (GAO), an
independent investigative arm of Congress, looked at the costs of shipping
food aid in US-flag vessels rather than using cheaper foreign ships, and
estimated that it cost $150 million each year. Another report in 1994 put
the cost as high as $200 million a year.

Failing shipping as well

The ACP was put in place to achieve four objectives: ensure that US vessels
remained seaworthy and prepared should a war break out; maintain skilled
jobs for American seafarers; maintain the financial viability of US ships;
protect US ocean commerce from foreign domination.

Barrett, Bageant and Lentz found that "contrary to its national security and
'buy American' objectives", ACP used vessels which were not useful to the
military, and most of the vessels used were ultimately owned by foreign
corporations.

They recommended that the US administration revisit the ACP, and suggested
separating security objectives from humanitarian ones, with direct support
for the Maritime Security Program.

But shipping industry says

The US shipping industry, which produced its own study -
<http://www.usamaritime.org/pdf/Economic_Impacts_of_Shipping_Food_Aid-April_
2010.pdf> Impacts on the US Economy of Shipping International Food Aid -
around the same time as the Cornell researchers, argues that eliminating the
ACP would shrink the US-flag merchant fleet by 15 percent to 30 percent,
with the loss of between 16,500 and 33,000 jobs.

Barrett said the shipping industry's study had used "very crude multipliers
not developed for this application, and seem to use the total ocean freight
costs, not the marginal cost of cargo preference, thereby assuming that
every maritime job would disappear. That's a highly questionable assumption
that they then inflate, using highly questionable multipliers".

The Cornell study's calculations showed that US taxpayers were paying a
subsidy of almost $100,000 every year per mariner on an ACP vessel shipping
food aid. "That's a pretty handsome subsidy," he commented.

"One would hope there would be some economic multiplier. The question is
whether that's the best use of those funds, if our objective is to generate
US jobs; and if the objective is to generate US jobs, why do so through a
humanitarian food aid programme, rather than focusing on generating jobs
directly?"