In 1954, the United States initiated its first official food aid program Public Law (PL) 480 or Food for Peace.[i] Food for Peace was institutionalized in the 1954 Trade Development and Assistance Act, which mandated the United States "to use its abundant agricultural productivity to promote the foreign policy of the U.S. by enhancing the food security of the developing world…; promote broad-based, equitable and sustainable development; expand international trade; develop and expand export markets."[ii]
Over the course of the twentieth century, however, this foreign policy instrument developed into a tool used by the U.S. agricultural community to protect their agricultural interests.[iii] Although enhancing food security is Food for Peace’s main objective, Food for Peace primarily benefits U.S. farmers and the larger agricultural industry, as well as American shipping companies that transport the commodities. Consequently, Food for Peace and U.S. food policies in general have recently received widespread criticism from scholars, nongovernmental organizations (NGOs), and policymakers. Subjects of debate include inefficient program operations, monetization, U.S. procurement and shipping, its effects on recipient countries’ agricultural sectors, and their continued dependency on foreign food assistance.
Under the guise of addressing food insecurity and malnutrition, recipient countries and donors have become involved in food aid practices. Food insecurity has been viewed as a problem of insufficient available food supply to feed a population, until Nobel prize-winning philosopher and economist Amartya Sen countered this in 1983 with his entitlement approach. Sen explained that “[i]n a market economy, a person can exchange what he owns for another collection of commodities…, through trading, or through production, or through a combination of the two.”[iv] Disruptions on production, trade, or exchange entitlements can thus hinder a person’s access to sufficient, nutritious food. Although food aid should address or prevent entitlement disruptions, the divergent practices amongst donors and contexts have led to mixed results.
In this article, I argue that current U.S. food aid programs do more harm than good; they represent a failure rooted in the characteristics of U.S. food aid policies. In order to demonstrate this point, I discuss the donor and recipient sides, and present evidence from Haiti and Guatemala, two major recipients of U.S. food aid. With an understanding that food aid is not “homogeneous in its form and purpose,” and can be divided in three broad categories (see Figure 1): “program, project, and emergency (humanitarian) food aid,”[v] this article focuses on program and project food aid or developmental and non-emergency aid, which can be referred to as U.S. Title II, non-emergency aid.
Overview of Food for Peace Programs
|Title I Economic Assistance and Food Security||Title II Emergency and Private Assistance Programs||Title III Food for Development|
|Administered by||U.S. Department of Agriculture (USDA)||U.S. Agency for International Development (USAID)||U.S. Agency for International Development (USAID)|
|Implemented by||Developing country governments||
||Developing country governments|
|Provides||Long-term loans to developing countries for the procurement of commodities||
||Donations of commodities to developing countries to support food security programs|
|Currently funded?||No||Yes (2.2 million metric tons of commodities, U.S.$ 1,9 billion total program costs in FY 2010)||It has not been funded since 1994|
Figure 1: Overview of Food for Peace Programs. Composed by the author.[vi]
International food aid has been a controversial topic for more than a decade as it is easily misused for purposes other than furthering humanitarian or development objectives.[vii] Since approximately 2007, debates increased with respect to the specificities of food aid and particularly the U.S. variant. Maxwell highlights the main topics of these unsettled debates: food aid and agricultural subsidies, where the food is sourced from, and the form in which food aid is provided (i.e. loans or grants).[viii]
It is important to contribute to these debates for several reasons. First, key donors, UN agencies, and NGOs have shifted from food aid to food assistance programs. These changes include the shift from in-kind donations to local and regional procurement, an increase in the use of cash transfers and vouchers, and more attention to social protection and hungry safety nets.[ix] Second, the effects of the 2007-2008 world food crisis have intensified the debates, as globally an estimated 870 million individuals remain chronically food insecure and undernourished.[x] Third, the topic of food aid effectiveness is relevant because of the current U.S. Farm Bill negotiations. The farm lobby, as well as commodity lobbies (nonfat dry milk, wheat, and rice exporters), can influence topics such as monetization and domestic procurement, which consequently affect aid characteristics and effectiveness. Although the last two administrations have adjusted food aid policies, the debates on improvements for U.S. international food aid policies remain unsettled.
Moreover, there is increasing awareness in academics as well as in policy-making and research institutions that agricultural sector development is crucial for overall (both rural and urban) development in developing and low-income countries. The World Bank 2008 World Development Report on Agriculture demonstrates that economic growth stemming from agriculture is “at least twice as effective in reducing poverty” as economic growth based on other activities.[xi] The report states “[t]oday, agriculture’s ability to generate income for the poor, particularly women, is more important for food security than its ability to increase local food supplies.”[xii] These facts, however, conflict with donors’ interests, as has been reflected during negotiations in the current World Trade Organization’s (WTO) Doha Development Round. In this context, agriculture remains a controversial topic as there is no consensus on the definition of food aid, the procurement of commodities, “the increasingly divergent practices amongst the main donors,” and the future of (food) aid.[xiii]
Haiti and Guatemala are chosen as case studies as both countries have structurally received large amounts of U.S. food aid, in absolute numbers as well as relative to other Latin American recipient countries. Figure 2 shows this large difference for non-emergency food.
Figure 2: U.S. food aid to Latin America 2000-2011.[xiv]
The existing body of literature consists of studies that investigate the impact of food aid through microeconomic and macroeconomic scopes, using different methodological frameworks and datasets. Awokuse points out that “due to the absence of consensus on the measurement of under-nourishment and food insecurity [and] the lack of data on detailed variables” these studies have been largely descriptive rather than empirical.[xv] In response to Awokuse’s call, this paper aims to contribute to a growing body of literature “on the effectiveness of food as a form of aid and its effects on recipients’ economies” through qualitative analysis, supporting the information with data from FAOSTAT (from the Food and Agricultural Organization or FAO) and INTERFAIS (World Food Program or WFP) databases whenever possible.[xvi]
Food for Peace has its origins in American concerns over trade promotion, surplus disposal, and geopolitical advantage.[xvii] Humanitarian motives were subordinated to these purposes. Yet, changes have occurred. While food aid remains donor-oriented rather than recipient-oriented, food aid now is framed in terms of improving the food security of vulnerable populations in recipient countries. This section focuses on monetization and procurement, topics that impact the agricultural producers in recipient countries most. Overall, this section overviews the politics behind food aid.
Monetization of U.S. In-kind Food Aid
Monetization refers to the sale of food commodities on the local market. The local currency is then used to finance development projects[xviii] and administrative costs.[xix] The food commodities are purchased from U.S. agribusinesses, predominantly shipped by U.S. carriers, and then sold by NGOs and Private Voluntary Organizations (PVOs) on the market in recipient countries.[xx] Monetization is somewhat unique to U.S food aid programs. Most donors “do not permit monetization to anything like the degree allowed- even encouraged- by the United States.”[xxi]
The monetization mechanism impacts markets and prices. Therefore, many have voiced concerns over the monetization of food aid (e.g. Barrett and Maxwell 2005; Barrett and Lentz 2009; Simmons 2009). Others deny the harmful effects of monetization (e.g. Informa economics 2012). The first group summarizes monetization as an “imperfect, but useful way to raise money.”[xxii] Because of costs and risks associated with monetization, as well as high shipping prices, “food is a terribly inefficient way to generate cash resources.”[xxiii] Moreover, since the food is sold on the open market, the commodities cannot be targeted, and “there is no guarantee that such food reaches the most vulnerable people.”[xxiv]
On the other hand, according to Barrett and Maxwell, NGOs often spend the funds generated by monetization in a productive manner.[xxv] The funds can be directed to “increase agricultural productivity, expansion of rural infrastructure, community management of natural resources,”[xxvi] or stimulate local agricultural production.[xxvii] In addition, monetization provides recipient countries with more—often nutritious—food, which can stabilize local prices and promote market development.[xxviii] The WFP has not taken sides in the food aid debate: “[t]he bottom line is, we welcome food.”[xxix]
Tied Aid and Local and Regional Procurement
With respect to food aid, tying refers to “the requirements that the food be obtained from the donor’s domestic markets,” either when given in-kind or through concessional loans, “and the use of transportation and distributional services of donor country contractors.”[xxx] In comparison to other donor countries, the U.S. “most consistently ties food aid to its domestic…producers”[xxxi], procuring 99 percent of the food commodities from American agricultural producers.[xxxii] This habit can be explained by the fact that Food for Peace was designed for the U.S. to use its abundant supply of agricultural produce.
Since roughly the 1980s, “the OECD has made a strong push… to reduce aid tying, and many donor countries have responded to this push.”[xxxiii] They now provide cash, or procure locally or regionally. However, the United States [and to a large extent Japan[xxxiv]] has not followed this trend. Proposals for local or regional procurement, thus sourcing commodities from nearby recipient countries, have met strong resistance from the “‘iron triangle’ of [U.S.] food aid: domestic food processors, maritime interest, and the NGO community.”[xxxv] The ‘iron triangle’ benefits from the current procurement regulations. For example, in the beginning of 2012, thirty-one agribusinesses and shipping groups wrote to the U.S. Congress that “U.S. food aid programmes not only further our humanitarian and security goals… but these programmes also provide stable jobs for hundreds of thousands of Americans.”[xxxvi] In other words, “[f]ood aid procurement regulations create effective market power that generates considerable economic gains for these constituencies.”[xxxvii] Consequently, the political influence of these groups is large, with lobbying expenses for some of these companies running up to approximately $100,000 a month[xxxviii] as they try to protect their interests in Congress.
The Politics of Food Aid
In short, “food aid has long been inextricable from donors’ geopolitical, agricultural trade, and promotion, and surplus disposal objectives.”[xxxix] It is precisely these domestic political benefits that trumped other U.S. food aid’s objectives, and particularly hindered improvements of these programs’ effectiveness in the reduction of food insecurity worldwide. Barrett and Maxwell make this point carefully, stating that while American food aid is not primarily about feeding the hungry, it also does not constitute an effective form of support for American farmers.[xl] Food aid in the U.S. is small in comparison to other components of domestic farm policy. Therefore, “it has proved too small to move markets in a way that generates any identifiable effect on farmgate prices.”[xli] The failure of food aid to meet its objectives has produced a large body of ‘recommendations and reforms’ literature.
U.S. Food Aid in Haiti
Haiti, a fragile state, continues to be dependent on foreign donors. However, among donors and recipients, contrasting and contradicting approaches to food security exist. While “Haiti’s donors [are] embracing a liberal trade-based approach, …[Haiti’s] farmers’ associations [are] advocating a ‘food sovereignty’ model.”[xlii] These opposing views have consequences for how to address and solve food insecurity in Haiti.
Staple crops are important for Haitian agricultural production and key for food security.[xliii] As shown in Figure 3, between 2001 and 2008 agricultural production for most crops has stabilized or declined, with the exception of roots and tubers. According to the 2010 USAID market analysis “[s]ome of these foods are substitutable to a certain extent… The degree of substitution depends on relative prices, preferences, and consumer economic status.”[xliv] Thus, non-domestic foods or food aid can replace locally produced crops under certain conditions.
Figure 3. Evolution of Agricultural Production in Haiti.[xlv]
Examples of Unintended Effects of U.S. Food Aid in Haiti
Although wheat and wheat flower are not produced domestically, they have been part of the Haitian diet for over 50 years.[xlvi] Between 2000 and 2011 the U.S. donated large amounts of wheat and flour,[xlvii] which as a result has lowered prices for locally produced staples such as rice and millet.[xlviii] Moreover, cheap commercial wheat imports and food aid are equally disruptive to Haitian smallholder farmers who produce banana, yams and cassava as flour replaces these crops in diets.[xlix] These cheap imports compete with locally produced, more expensive kinds of flour. As a result, smallholder farmers are pushed out of subsistence agriculture. Given that “agriculture is the country‘s main production sector…provides almost 60 percent of all employment and generates over a quarter of the GDP”[l] this trend prevents Haiti’s stagnated economy to further develop in an inclusive and sustainable manner. Moreover, “[w]heat has…been the only Title II commodity monetized since 1998,” and is thus sold by American NGOs on the Haitian market.[li] This practice does not improve food security levels to the extent that targeted programs could[lii], and it competes with regional trade within Haiti. Furthermore, NGOs often sell food aid immediately to avoid storage and transaction costs, not taking market prices into consideration. Thus, consumers benefit “at the expense of local farmers, who are often unable to compete with the prices at which food aid is sold.”[liii] This affects the sustainability of local food production, long-term food security, and leads to a dependency on food aid.
Also rice donations are a key topic in the food security debate in Haiti.[liv] This sensitivity can be explained because rice imports “have contributed directly to the collapse of the national rice industry: in 1998, Haiti produced 47 percent of the rice consumed, while in 2008, the figure had plummeted to 15 percent.”[lv] U.S. rice is more affordable than locally produced rice, and as a result imports have replaced local production. Cash donations, rather than direct distribution of U.S. rice, for example, could stimulate and expand local rice production. By law, however, the United States cannot fund practices that interfere with its export commodities, such as rice.[lvi] Figure 4 shows in-kind food aid. Although it can be argued that any kind of rice is better than no rice, this practice can be improved in order for it to be more beneficial to Haiti.[lvii]
Figure 4: Food aid deliveries by mode (direct transfers, local purchases and triangular transactions). The local purchase in 2008 consisted of wheat flour (47,000 tons).[lviii]
U.S. Food Aid in Guatemala
While Guatemala produced sufficient food to feed its population until the early 1990s, the opening of markets, structural adjustment policies, and declining investments in agriculture have weakened the food security system.[lix] Poverty, land availability, increasing food prices, and high population growth also contributed to food insecurity.[lx] As a domestic food consumption deficit country, Guatemala has received food aid from the United States since 1963.[lxi] Figure 5 highlights the increasing importance of food imports for Guatemala’s food supply, of which (both total and U.S.) food aid comprises only a small part. Nevertheless, U.S. food aid policy negatively impacts Guatemalan agriculture production. Oxfam estimates that “over the past ten years, the United States invested almost six times more in direct food aid than in creating conditions for the agricultural sector that enable Guatemalans to feed themselves.”[lxii] For an overview of U.S. donated commodities see Figure 6.
Figure 5: Guatemala’s food supply between 1961-2009. Composed by the author.[lxiii]
Figure 6: Distributed U.S. food aid to Guatemala between 2007-2011 in mega tons. CSB refers to corn soy blend.[lxiv]
Examples of Unintended Effects of U.S. Food Aid in Guatemala
The edible oil consumed in Guatemala is a mix of domestically produced palm oil, imported soybean and/or sunflower. Guatemala is a net importer of crude degummed soybean oil (CDSO), sourcing it from the United States, Argentina, and Brazil. As Figure 7 shows, between 2006 and 2010 food aid accounted for approximately 12 percent of CDSO imports. Currently, CDSO is the only monetized commodity, and has been monetized for about ten years. Monetized CDSO is purchased by one buyer, Omeca, a large oil processor that targets the higher, and thus urban, end of the market.[lxv]
In addition to the previously mentioned negative effects of monetization, households that do receive vegetable oil through food aid programs do no longer purchase oil or lard. Thus, in response to the donations, beneficiaries have adjusted their purchases, which impacts market traders.[lxvi] Furthermore, due to a lack of nutrition education with respect to Title II commodities that are not commonly consumed in a household, households primarily use the CDSO they receive for deep-frying foods, which is a health concern. Lastly, because CDSO is a high-value commodity, it could lead to market leakage as families with cash needs can sell or self-monetize the donated oil.[lxvii]
Figure 7: Guatemalan CDSO supply overview in metric tons between 2006-2010.[lxviii]
The United States also donates consistently high amounts of corn soy blend (CSB), a fortified cereal blend targeted to malnourished children. The donated CSB replaces market purchases of locally-produced fortified cereals of similar quality, such as Incaparina. This is problematic for various reasons. Incaparina is well-known across Guatemala, and households generally know how to prepare this commodity. Beneficiaries of CSB donations, however, require cooking demonstrations and recipe instructions. This poses an additional and unnecessary burden on PVOs that regulate these donations.[lxix] Moreover, warehouse managers responsible for storage upon the commodity’s arrival have reported concerns with the difficult storage of CSB.[lxx] Given the similarities between CSB and locally produced cereal blends, making products such as Incaparina more available and accessible appears to be an alternative to mitigate the effects of U.S. CSB donations.
Recommendations to the donor (U.S. Government)
- Prioritize agriculture and food security in food aid practices. Align food aid strategies with the recipient country’s national development plan.
- Work with recipient countries to develop and implement an inclusive monitoring and evaluation mechanism to assess the effectiveness of Food for Peace.
- Investigate whether the U.S. can focus on one kind of assistance (e.g. targeted in-kind food that takes the reality of local markets into consideration) while allowing other donors (such as the European Union, Brazil or Venezuela) to promote recipient countries’ agricultural production, e.g. through a cash or voucher system.
- Align food aid practices and trade policies. Reform agricultural export subsidies in order to ensure a price that recipient countries’ producers can reasonably compete with.
- Limit inefficient monetization as much as possible and allow for targeted monetization as little as necessary.
Recommendations to recipient countries (Haiti and Guatemala)
- Prioritize the agricultural sector in national development strategies with (the international community’s) resources and technical support for farmers.
- Prioritize and demand locally produced commodities to be used in food aid donations, especially when they are of similar quality or consumer preference.
- Improve targeting practices. This is one of the most important determinants on how effectively food aid meets food insecure households’ demands.
- Demand a mix of food aid and cash aid for food insecure households, taking into account the local context, food delivery, cash leakage rates, monetization, and targeting.
This article has shown that U.S. food aid affects agricultural production and can lead to distortions in recipient countries. In Haiti, donations lead to production disincentives, whereas in Guatemala market distortions are more visible. These effects are rooted in the characteristics of U.S. food aid policy. Although food aid enhances food security levels, monetization of in-kind food aid as well as tied aid delay food security improvements. More importantly, U.S. donations undermine the economies of recipient countries that depend heavily on local agriculture. These donations in particular fail to recognize the importance of the agricultural sector to stimulate economic, poverty reducing, growth in developing and food recipient countries. In order to achieve food security, barriers to accessibility must be overcome, both by increasing households’ incomes and improving the distribution of food.
As a result of the increasing awareness of the importance of agriculture donor countries have changed their food aid practices. Is it likely that the United States will change its food aid policies any time soon? Given the increasing pressure from the international community as well as the recent Farm Bill negotiations, it is expected that U.S. food aid policies will shift towards a more effective system. This, however, is a slow process due to domestic interests. Hence, the U.S. is still “lagging a little bit behind the curve of good practice in food aid.”[lxxii] Since the United States is one of the largest players in the food aid arena, this is particularly unfortunate. U.S. food policy unnecessarily feeds the dependency between recipient countries and the United States, as it hinders recipient countries’ food production and consequently discourages agriculture-based economic growth.