Cutting International Food Aid

The three USDA programs cost more than two billion dollars a year and aim at tackling hunger and promoting growth in poor countries. Those are noble goals, but the programs suffer from serious practical flaws. US food aid can undermine agriculture in recipient countries and exacerbate conflicts in strife-torn regions.

Even in situations where food aid can reduce hunger, shipping US food abroad is an expensive way to help poor countries, particularly because of cargo preference rules requiring the use of US-flagged ships. It is also usually slower to ship US food to needy countries than to procure it locally near aid recipients.

As Congress tackles a major farm bill in coming months, it should consider repealing USDA’s food aid programs. Aside from being inefficient and potentially harmful, the programs overlap the activities of the US Agency for International Development (USAID). Given the need to reduce federal deficits, USDA’s food aid programs are a good target for budget reduction.

The USDA’s foreign food aid programs provide emergency aid in crises and non-emergency aid for development. The programs generally ship US food abroad and distribute it to recipients. But some of the funding goes toward buying food abroad near the area where it will be delivered, and some of it goes toward shipping US food abroad and reselling it in foreign markets to raise cash for projects, which is called monetization.

Here are some program details:

• Food for Peace. Enacted in 1954, this program was aimed at feeding poor nations while disposing of excess US crop production stimulated by federal subsidies. Food for Peace (also called P.L. 480) is administered by USAID but is funded in USDA’s budget. About four-fifths of the aid is for emergencies and one-fifth for non-emergency programs.¹ Outlays were $2.28 billion in 2022.²
• Food for Progress. Enacted in 1985, this program funds development activities, including helping countries improve their infrastructure and agriculture. The program uses monetization, which means shipping US food abroad and selling it in foreign markets. The program is run by the USDA; outlays were $127 million in 2022.³
• McGovern-Dole. Enacted in 2002, this program donates food to schoolchildren and other groups in poor countries, while also helping countries expand their government food programs. Up to 10 percent of funding can be spent on purchasing food in foreign markets, which is called “local and regional procurement” (LRP). The program is run by the USDA; outlays were $193 million in 2022.⁴

The US foods purchased for these programs include wheat, sorghum, rice, corn, soybeans, and vegetable oil. Africa is the largest recipient region. The programs rely on nongovernment and international organizations for implementation.

Donating US farm products to poor countries facing hunger seems like a good humanitarian idea and doing so likely reduces some hunger in the short term, but there are downsides that offset those benefits. In an overview of foreign food aid, the Congressional Research Service (CRS) noted, “US reliance on in-kind [food] aid is controversial due to its potential to disrupt international and local markets and because it typically costs more than market-based assistance.”⁵ Congress should consider these and other downsides to USDA’s food aid programs.

When the US government donates farm products to poor countries, it can undercut local farmers abroad and thus undermine the ability of poor countries to feed themselves. Foreign aid experts have long warned about this problem, but US policies have lagged reforms in other donor countries. CRS notes, “Many other major donors—such as Canada, the United Kingdom, and the European Union—have converted primarily to cash-based assistance” from in-kind food aid.⁶

In recent years, the McGovern-Dole program has given thousands of metric tons of rice to Laos.⁷ But Laos is a substantial producer of rice—indeed a net exporter—and the US donation was small compared to the total Laos production.⁸ Using US taxpayer funds to ship rice across the ocean to potentially displace some of Laos’s production does not make economic sense.

A 2017 study examined 118 countries that received US food aid over 45 years to see if the aid affected local food production. It found that “doubling US food aid reduces cereal-grain production by 1.5%” in recipient countries, and that the “disincentive effect of food aid on production is particularly significant for sub-Saharan African countries, low-income countries, and regular recipients of US food aid.”⁹

Aid agencies and their partners are supposed to analyze whether food aid projects will disrupt local agriculture markets, but the Government Accountability Office (GAO) found that the agencies “did not consistently document that US commodities would not negatively affect recipient countries’ production or markets.”¹⁰

It is counterproductive to provide foreign aid in ways that interfere with poor countries’ efforts to achieve market-based growth. Thus, providing free commodities that may undermine farmers in recipient countries is not a good long-term aid strategy.

Armed conflicts around the world create demand for humanitarian aid. However, some experts argue that food aid can fuel or sustain conflicts, and thus can do more harm than good in some situations. Food aid can reduce political pressure for warring factions to reach settlements, and it can be seized by combatants and resold to buy weapons or other assets to prolong conflicts.

In a statistical study covering the years 1971 to 2006 across 125 countries, Nathan Nunn and Nancy Qian found that “an increase in US food aid increases the incidence and duration of civil conflicts.”¹¹ Nunn and Qian explain, “Because food aid is regularly transported across vast geographic territories, it is a particularly attractive target for armed factions.”¹² Furthermore, “Governments that receive aid often target it to specific populations, excluding opposition groups or populations in potentially rebellious regions. This has been noted to increase hostilities and promote conflict.”¹³

The food-fuels-conflict idea is one reason experts are exploring alternatives to food aid. A 2022 study on humanitarian aid to war-torn Yemen, for example, found that food aid has been looted by the various factions and used as a tool to reward loyalists on each side.¹⁴ The author argues that aid in the form of digital payments or vouchers is less costly, harder to steal, and easier to track and audit.

Each crisis is unique, so if the US government is to provide foreign aid, it needs to use the right tools in each situation. The problem with the USDA’s aid programs is that they are rigidly based on shipping US-sourced food that can be hijacked by warring parties and used to extend conflicts, which can be a counterproductive way to help troubled countries.

Even in crises where US food aid may be helpful, the lengthy amount of time needed for delivery reduces its usefulness. US food aid shipments typically take four to six months to reach destinations abroad.¹⁵ USAID pre-positions some food abroad for emergencies, but that approach is expensive and subject to problems such as theft, infestation, and spoilage.

A better approach is usually local and regional procurement (LRP) in markets near where food is needed. But only a small share of US food aid uses this approach. Many policymakers have been swayed by US farm and shipping interests who favor US-sourced food for foreign aid.

LRP is usually less expensive than shipping US food and can reach destinations months earlier.¹⁶ One study found that compared to shipping US food, “Procuring food locally or distributing cash or vouchers results in a time savings of nearly 14 weeks, a 62 percent gain.”¹⁷ The study also found that procuring grains locally was less expensive than shipping from the United States.

The GAO found that US-sourced food aid typically costs 25 percent more than LRP.¹⁸ The agency noted, “Buying food close to where hungry people live has advantages over buying food in the United States and shipping it overseas: It can be much more cost effective and allow for more timely assistance.… This practice can also have the added benefit of supporting the local or regional agricultural sector, rather than undercutting it with imported food.”¹⁹

The George W. Bush and Barack Obama administrations favored expanding the LRP approach instead of shipping US food. The Donald Trump administration proposed repealing all three USDA food aid programs and noted, “Procuring food near crises can save up to two months or more on delivery time and can significantly reduce the costs of food aid.”²⁰

The Organisation for Economic Co-operation and Development came to similar conclusions. In a 2006 study on international food aid, the agency found that “food aid in-kind carries substantial efficiency costs, conservatively estimated as at least 30% on average. In contrast, most local purchases or regionally sourced imports are relatively efficient ways of providing food aid.”²¹

US foreign aid leaders have argued for flexibility in aid rather than tying it to US food production. In recent testi­mony to the Senate, USAID’s Sarah Charles called for making US-sourced commodities “a programming option, rather than a requirement” for development aid.²²

Charles pointed to a 2021 project in Haiti where US food aid was counterproductive. USAID found that “in-kind imports distort local markets and would be antithetical to the program’s goal to build resilience amongst farmers. [Haitian] Partners were also concerned about the lack of warehousing and storage capacity, potential displacement of local production and trade.”²³ During program implementation, “escalating insecurity exacerbated challenges … Due to port closures, commodities sat in the port, uncollected for upwards of 3 months, collecting fees and leading to large-scale commodity loss. Additionally, all activities had to be paused in October, following protests that resulted in the looting of commodities from partner warehouses.”²⁴

Because of their historical ties to farming, USDA’s foreign aid programs do not provide the flexibility needed for aid administrators to tackle projects with the best strategies. This is another reason to end the USDA programs and consolidate foreign aid within USAID.

While we propose eliminating USDA’s role in foreign aid, US-shipped food may make sense for some USAID projects. Accordingly, Congress should increase the efficiency of such food aid by repealing the Cargo Preference Act of 1954.

The act requires that at least half the tonnage of government-impelled cargo—including food aid—be shipped on US-flagged vessels. Food for Peace, Food for Progress, and McGovern-Dole must abide by these rules. Competition is limited among US-flagged vessels, and they are about three times more expensive to operate than their foreign-flagged counterparts.²⁵

According to economist Vincent Smith and Senator Jim Risch (R‑ID), the “overwhelming majority” of US food aid is transported on dry-bulk ships.²⁶ There are only four such ships in the US merchant fleet, three of which are owned by a single company.²⁷ The GAO has pointed to the “very small pool” of US-flagged vessels eligible to transport food aid, which “limits agencies’ selection and flexibility, and leads to inefficient choices of trade.”²⁸ By mandating the use of expensive US ships, cargo preference rules result in higher taxpayer costs for aid programs.

Estimates of the higher costs vary. The GAO found that cargo preference rules increase shipping costs of food aid by an average of 31 percent.²⁹ One academic study found that “cargo preference requirements increase real ocean transportation costs per metric ton by 68 percent for packaged goods shipments and 101 percent for bulk goods shipments.”³⁰ A USAID spokesperson at a 2019 hearing said that US-flagged ships are “twice as expensive as normal vessels from other countries.”³¹

Cargo preference rules are defended as a way to ensure that US merchant ships will be available to transport equipment and supplies for the military during wars. The US Maritime Administration asserts that “the reservation of certain cargoes to US-flag ships is necessary for our na­tional defense.”³² However, while there is a real need for the US military to have access to sealift capacity, cargo preference laws are not an effective approach.

Of the four dry-bulk ships in the US fleet, none are designated as “militarily useful.”³³ The ships also provide no benefit to the US industrial base, as they are foreign-built and utilize foreign shipyards for repairs and maintenance.³⁴ To the extent the vessels provide any national security value, it is in employing mariners who can crew US sealift ships during wars. Even the Department of Defense has concluded in the past that cargo preference is not a cost-effective means of providing such crews.³⁵

Government reports have long raised doubts about the use of cargo preference to support the US merchant fleet. Regarding an earlier cargo preference law, for example, a 1950 government report concluded that no matter the desired size or composition of the US fleet, cargo preference is a “highly undesirable means of achieving it” and a “concealed subsidy, and thus not subject to the scrutiny and supervision” given to other programs.³⁶

In those situations when donating US food to poor countries makes sense, the government can reduce costs—while not affecting national security—by repealing cargo preference rules.

Under the Food for Progress program, “USDA donates US agricultural commodities to international organizations, NGOs, foreign governments, or private entities, which can then distribute the commodities to beneficiaries or monetize the commodities by selling them locally to raise funds for development projects.”³⁷

Rather than, say, paying directly for an education program in a poor country, monetization involves using taxpayer funds to buy US food such as wheat, shipping it abroad, and selling it at a loss to raise cash for projects. Shipping and selling at a loss wastes 30 percent of taxpayer funds compared to just paying for aid projects with cash.³⁸

The monetization process can also undermine foreign farmers. One GAO study found that “funding development projects through the purchase, shipment, and sale of US commodities is inefficient and can cause adverse market impacts.”³⁹ Another GAO study found that monetization “can actually hurt the domestic agricultural markets in developing countries that are already challenged in meeting the food needs of their people.”⁴⁰ Food for Progress and its roundabout funding process should be repealed.

As the federal government has grown larger, wasteful bureaucratic overlap has increased. President George W. Bush found shortcomings with US foreign aid agencies, but rather than fixing them, he pushed for the creation of the Millennium Challenge Corporation to provide aid in a new way.⁴¹ Currently, more than 20 federal agencies are involved in foreign aid.⁴²

The USDA and USAID are two of the overlapping aid agencies. The GAO found, for example, that “both USAID and USDA were implementing nonemergency food aid programs in Guatemala and Uganda in fiscal year 2011, and we found that these programs shared common geographic focus areas, activities, and implementing partners.”⁴³ In addition to USDA and USAID, there are about eight federal agencies providing aid to Guatemala and about six providing aid to Uganda.⁴⁴

There is so much sprawl within international food and hunger policy that the government created a superstructure to coordinate it, the Global Food Security Strategy (GFSS). The GAO reports that USAID “leads the global coordination of efforts conducted by itself and 11 other US agencies—collectively known as the GFSS Interagency—to implement the strategy. According to the GFSS, increased interagency engagement is intended to build effective coordination.”⁴⁵

Congress should consolidate foreign aid, and a good first step would be to eliminate USDA’s food aid programs. Rather than “coordination” by adding a new layer of bureaucracy—the GFSS—policymakers should cut low-value programs and consolidate foreign aid within USAID.

Congress should repeal USDA’s food aid programs, but a broader issue is whether Congress should spend taxpayer money on foreign aid and global hunger projects at all. Decades of experience have shown that poor countries can boost incomes and reduce hunger without foreign aid by adopting sound domestic policies.⁴⁶

What are those sound policies? Strengthening property rights and the rule of law, opening markets, adopting stable currencies, and removing barriers to entrepreneurship. There is a strong correlation across countries between prosperity and these policies, which can be called eco­nomic freedom. The average per capita income of the least-free quartile of countries in the world is $6,324 compared to the most-free quartile at $48,569.⁴⁷

There is also a correlation between economic freedom and reduced undernourishment (the United Nations term for hunger).⁴⁸ The average share of populations undernourished in the least-free quartile of countries is 20 percent compared to the most-free quartile at just 3 percent. To reduce hunger, poor nations should free their economies, and many nations have. Despite a recent reversal due to conflicts and the COVID-19 pandemic, global hunger has plunged over the past half-century as more countries have adopted market-based economic policies.⁴⁹

Congress should end USDA’s involvement in foreign aid and reduce bureaucracy by consolidating aid activities in USAID. Food for Peace, Food for Progress, and McGovern-Dole should be repealed. That would save taxpayer money, reduce duplication, and reduce many of the harmful consequences food aid projects can unintentionally create in poor countries.

In some crises, shipping US food may make sense but would be more efficient without cargo preference rules. Congress should repeal those rules and provide USAID with the discretion to use the best aid strategy in each situation. Congress should also more broadly reconsider the federal role in foreign aid, given that countries can raise incomes and reduce hunger themselves by following sound economic policies.