Lifesaving Food Aid Hobbled by Special Interests

A 56-year old policy known as cargo preference cost US taxpayers an estimated $140 million for humanitarian food shipments, according to a new report released this week by Cornell University.  This measure drains critical funds from life-saving food shipment programs and is a waste of taxpayer dollars, according to Oxfam America and CARE.

Agricultural cargo preference (ACP) requirement is a little-known, but controversial, levy on humanitarian food shipments requiring US food aid to be delivered on US-flagged vessels.  Originally designed to maintain US essential sealift capability and to maintain jobs for American seafarers, the ACP is obsolete and does not achieve its goals.  At the same time, it drains funds from critical humanitarian programs and complicates emergency operations.  With the federal government struggling to cut spending, updating this inefficient policy provides an obvious opportunity for significant budget savings. It also helps to meet President Bush’s 2005 pledge to double aid to Africa and President Obama’s Feed the Future initiative.

“In today’s fiscal climate, we need to be as efficient and effective with our limited aid budget as possible,” said JoDee Winterhof, vice president of Policy Advocacy for CARE, an international humanitarian agency, reacting to the report. “This report points out a glaring inefficiency in the system that we have an opportunity to change. As implementers and distributors of food aid on the ground, CARE knows that improvements in policy mean an increased capacity for humanitarian response worldwide.”
 
Cargo preference was launched in 1954, and currently requires that 75 percent of U.S. food commodities be shipped on privately-owned, registered US-flag commercial vessels; essentially a buy-America policy for shipping.  But according to Food Aid and Cargo Preference, a comprehensive and peer-reviewed analysis of shipping data and shipping vessel ownership records, by restricting competition the ACP law actually cost US taxpayers a 46 percent markup on the market cost of ocean freight in 2006, the last full year records were available. That markup, $140 million, is equal to all the non-emergency food aid provided to Africa in that year. USAID absorbs a substantial portion of this cost, in turn lowering the available budget to support humanitarian relief and development.

“The United States is the biggest food aid donor in the world, but that generosity is undermined by outdated laws and regulations that delay delivery of emergency aid and raise the costs to taxpayers,” said Gawain Kripke, director of policy and research for Oxfam America. “This report is clear evidence that Congress should eliminate these restrictions and help make US food aid a better tool to save lives and rebuild livelihoods for poor people.”

Several factors contribute to the expense of the cargo preference policy. A byzantine system only allows competition within categories, meaning that there are few bidders and obscure rules.   The ACP is fundamentally failing in the goal to maintain the US wartime sea-lift capability since 70 percent of the vessels approved for cargo preference fail to meet the US Maritime Administration's age-based criterion for being militarily useful.

In addition, ACP does not really help US maritime industry; US-flag vessels aren’t necessarily owned by American companies. In fact, the report found that “40 percent of the food aid tonnage definitively linked to ultimate owners was hauled on vessels whose companies are ultimately owned by foreign corporations.”

The report suggests more efficient ways can be found to fulfill the cargo preference’s objectives, such as subsidizing only militarily useful US flag ships and eliminating an obscure provision that requires 25 percent of bagged food aid to be handled in the US Great Lakes port range.  Oxfam America and CARE support a broader reform that would eliminate or dramatically reduce ACP for the US humanitarian food aid program.

To view the full report, click here.