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U.S. International Food Aid Programs: Background and Issues

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International Food Aid Programs: Background and Issues Melissa D. Ho Analyst in Agricultural Policy Charles E. Hanrahan Senior Specialist in Agricultural Policy February 3, 2010January 9, 2013 Congressional Research Service 7-5700 www.crs.gov R41072 CRS Report for Congress Prepared for Members and Committees of Congress International Food Aid Programs: Background and Issues Summary For over 55 yearsalmost six decades, the United States has played a leading role in global efforts to alleviate hunger hunger and malnutrition and to enhance world food security through international food aid activities. The development and implementation of a U.S. global food security initiative, and commitments made by global leaders to support agricultural development, have increased Congress’s focus on U.S. international food aid programs. The primary the sale on concessional terms or donation of U.S. agricultural commodities. The objectives for foreign food aid include providing emergency and humanitarian assistance in response to natural or manmade disasters, and promoting agricultural development and food security. The United States provides food aid for emergency food relief and to support development projects. The 2008 farm bill, the Food, Conservation, and Energy Act of 2008 (P.L. 110-246), authorizesauthorized through FY2012 and amendsamended international food aid programs. These programs are primarily funded through the U.S. Department of Agriculture (USDA) and are administered administered either by USDA’s Foreign Agricultural Service (FAS) or by the U.S. Agency for International Development (USAID). Federal foreign food aid is distributed primarily through five Development (USAID). U.S. international food aid has been distributed mainly through five program authorities: the Food for Peace Act (P.L. 480), which includes four primary programs; Section 416(b) of the Agricultural Act of 1949; the Food for Progress Act of 1985; the McGovern-Dole International Food for Education and Child Nutrition Program; and the Local and Regional Procurement Pilot Project, which is a newly created pilot in the 2008 farm bill which ended in FY2012. In addition, the 2008 farm bill also reauthorizesreauthorized the Bill Emerson Humanitarian Trust (BEHT), a reserve of commodities and cash for for use in the Food for Peace programs to meet unanticipated food aid needs. The 112th Congress extended the 2008 farm bill, including its international food aid provisions and food aid funding levels in effect during FY2012, through September 30, 2013, as part of the “fiscal cliff” legislation (P.L. 112-240). food aid needs. Average annual spending on international food aid programs over the past decade is FY2002-FY2011 was approximately $2.2 billion, with Food for Peace Title II activities comprising the largest portion portion of the total budget (about 50%-90% of the total food aid budget annually over the past decade). In total annual food aid budgets). In recent years, the volume of Title II emergency food aid has exceeded the amount of nonemergency or non-emergency or development food aid. The 2008 farm bill provides for a “safe box” for funding of non-emergency nonemergency development assistance projects under Title II, which begins atranged from $375 million in FY2009 and goes up to $450 million in FY2012, though this requirement can be waived by the Secretary of Agriculture if President if certain criteria are met. The 2008 farm bill also maintainsmaintained funding for the McGovern-Dole International Food for Education and Child Nutrition program on a discretionary basis, and authorizes authorized $60 million for athe four-year local and regional procurement pilot project to be implemented in developing countries in order to expedite the provision of food aid to vulnerable populations affected by food crises and disasters. Issues for Congress related to food aid include improving aid effectiveness; developing “demanddriven” strategies that take into account the recipient country’s needs and strategic plans for food security; determining the best form for providing food aid and assistance, whether in the form of cash or commodities (e.g. deciding whether to allow the practice of monetization and determining how best to implement an effective local and regional procurement strategy); and determining the cost-effectiveness of U.S. cargo preferences vulnerable populations affected by food crises and disasters. Separately authorized and funded is USAID’s Emergency Food Security Assistance Program, which uses International Disaster Assistance funds to provide cash-based food security assistance (local/regional procurement, cash vouchers, or cash transfers) for emergency relief. Several food aid issues emerged as the 112th Congress debated a new farm bill, including ensuring the nutritional quality and safety of food aid provided; assessing the role of monetization (selling food aid commodities in recipient countries to finance development projects); determining the effectiveness and appropriateness of local and regional procurement of food aid; and determining the cost-effectiveness of U.S. cargo preference for delivering U.S. food aid. Congressional Research Service International Food Aid Programs: Background and Issues Contents Background ...................................................................................................................................... 1 Food Aid Programs .....1 Program Descriptions..................................................................................................................... 2 Food for Peace Act (P.L. 480).................................................................................................... 2 Title I, Economic Assistance and Food Security2 Title I, Trade and Development Assistance ...................................................................... 3 Title II, Emergency and DevelopmentPrivate Assistance ......................................................................... 3 Title III, Food for Development .......................................................................................... 5 Title V, Farmer-to-Farmer .............Program (FtF) ..................................................................................6 5 Section 416(b) ........................................................................................................................... 6 Food for Progress (FFP) ............................................................................................................ 6 McGovern-Dole International Food for Education and Child Nutrition Program .................... 7 Local and Regional Procurement Pilot Project (LRPP) ..........................................................8.. 7 The Bill Emerson Humanitarian Trust (BEHT) ........................................................................ 8 Emergency Food Security Program (EFSP) .............................................................................. 8 Funding of Food Aid ...................................................................................................................9... 10 The Administration’s FY2011FY2013 Budget Proposal ...................................................................... 10 FY2013 10 FY2010 Agricultural Appropriations ..........and the FY2013 Continuing Resolution ........................ 11 FY2013 Funding for the Emergency Food Security Program ................................................. 1112 Issues for Congress ........................................................................................................................ 13 Food Aid Quality . 12 Aid Effectiveness ................................................................................................................ 12 Demand-Driven Aid Strategies .... 13 Monetization .................................................................................................... 13 Cash vs. Commodities........................ 14 Local or Regional Procurement (LRP) .................................................................................... 13 Monetization15 Cargo Preference .................................................................................................................... 13 Local or Regional Procurement . 17 2012 Farm Bill Food Aid Proposals ........................................................................................... 14 Cargo Preference.... 18 Figures Figure 1. Allocation of Food for Peace Title II Commodities to Emergency and Nonemergency Programs, FY1992-FY2010 ................................................................................ 4 Figure 2. FY2011 Emergency Food Security Program Breakdown ....................................... 16 Figures Figure 1. Distribution of P.L. 480 Title II Funds, FY1992-FY2009 ......... 9 Tables Table 1. U.S. International Food Assistance Programs ....................................................................5 Tables 1 Table 1. U.S. International Food Assistance Programs 2. FY2010-FY2011 EFSP Program Details .........................................................................2 10 Table 2. USDA3. International Food Aid Program Level, FY2000-FY2010 Levels, FY2002-FY2013 (Req.) .................................. 11 Table 4. Status of FY2013 Food Aid Appropriations.................................................................. 10... 12 Contacts Author Contact Information ........................................................................................................... 19 Acknowledgments ............................................................................................................ 16............. 19 Congressional Research Service International Food Aid Programs: Background and Issues Background For over 55 yearsalmost six decades, the United States has played a leading role in global efforts to alleviate hunger hunger and malnutrition and to enhance world food security through international food aid activities. The United States provides food aid for emergency food relief and to support development projects. The recent development of a U.S. global food security initiative by the Obama Administration, along with commitments made by global leaders to support agricultural development, have increased Congress’s focus on U.S. international food aid programs. 1 USDA contributes to these efforts by carrying out a variety of food aid and assistance programs that aim to support economic growth and development in recipient countries. The U.S. government provides food assistancethe provision of international food aid. U.S. food aid programs, authorized in periodic farm bills, provide U.S. commodities for emergency food relief and to support development projects. The U.S. government has provided food aid primarily through five program authorities: • • • • • Food for Peace Act (historically referred to as P.L. 480);1 P.L. 480);2 • Section 416(b) of the Agricultural Act of 1949; • Food for Progress Act of 1985; • McGovern-Dole International Food for Education and Child Nutrition Program; and • Local and Regional Procurement Pilot Project. The 2008 farm bill (P.L. 110-246, the Food, Conservation, and Energy Act of 2008 (P.L. 110-246), authorizes through FY2012 and amends international food aid programs funded by the U.S. Department of Agriculture (USDA).3 These) authorized these international food aid programs through FY2012.2 P.L. 112-240, the “fiscal cliff” legislation, extends these food aid programs through the end of FY2013 at funding levels as of the end of FY2012. Food aid programs are administered either by USDA’s Foreign Agricultural Service (FAS) or by the U.S. Agency for International Development (USAID).4 In addition, the 2008 farm bill also reauthorizesreauthorized the Bill Emerson Humanitarian Trust (BEHT), a reserve of commodities and cash for use in the Food for Peace programs to meet unanticipated food aid needs.53 Table 1 lists the year each international food assistance program was enacted, and the agency responsible for implementing each program. Table 1. U.S. International Food Assistance Programs Program Food for Peace Act, Title 1 Economic Assistance and Food Security Food for Peace Act, Title II Emergency and Private Assistance Food for Peace Act, Title III Food for Development Food for Peace Act, Title V Farmer-to-Farmer Section 416(b) Food for Progress Year Began Implementing Agency 1954 FAS 1954 USAID 1990 USAID 1985 USAID 1949 FAS 1985 FAS 1 The original name of P.L.program was officially authorized, and the managing agency for each of the U.S. foreign food aid programs. 1 For more about the U.S. Global Food Security Initiative, see CRS Report R40945, The U.S. Global Food Security Initiative: Issues for Congress, by Charles E. Hanrahan and Melissa D. Ho. 2 The original name of P.L. 480 was the Agricultural Trade Development and Assistance Act of 1954 (P.L. 83-480). In 1961, President John F. Kennedy renamed it the “Food for Peace Act.” Congress officially changed the name to Food for Peace Act in the 2008 farm bill (P.L. 110-246). 3 For specific2 For detailed information about international food aid provisions in the Food, Conservation and Energy Act of 2008, see CRS Report RS22900, International Food Aid Provisions of the 2008 Farm Bill, by Charles E. Hanrahan; for more general information about farm bill provisions, see CRS Report RL34696, The 2008 Farm Bill: Major Provisions and Legislative Action, coordinated by Renée Johnson. 4 An overview of the Foreign Agricultural Service is available at http://www.fas.usda.gov/aboutfas.asp; an overview of the U.S. Agency for International Development is available at http://www.usaid.gov/our_work/. 5 The Bill Emerson Humanitarian Trust was originally authorized by the Agricultural Act of 1980 (P.L. 96-494) as the Food Security Wheat Reserve, but was later reauthorized and renamed by the Africa Seeds of Hope Act of 1989 (P.L. 105-385). Congressional Research Service 1 International Food Aid Programs: Background and Issues Table 1. U.S. International Food Assistance Programs Program Year Began Managing Agency 1954 FAS 1954 USAID 1990 USAID P.L 480, Title V Farmer-to-Farmer Section 416(b) 1985 USAID 1949 FAS Food for Progress 1985 FAS McGovern-Dole IFECN 2003 FAS Local & Regional Procurement Pilot Program 2008 FAS Bill Emerson Humanitarian Trust 1980 FAS P.L. 480, Title 1 Trade & Econ Development Asst P.L. 480, Title II Emergency & Development Asst P.L. 480, Title III Food for Development Source: CRS. Program Descriptions Food for Peace Act (P.L. 480)6 The Food for Peace Act (FPA), commonly referred to as P.L. 480, is the primary legislative vehicle that authorizes foreign food assistance. Over the past decade, FPA typically accounts for 50%-90% of USDA’s total annual international food aid budget. FPA food aid has several stated objectives, including improving global food security and nutrition; promoting sustainable agricultural development; expanding international trade for U.S. commodities; and fostering private sector and market development. FPA is comprised of four primary programs, which are each listed under a different title and have different objectives. The FPA components include • Trade and Economic Development Assistance, Title I, which makes available long-term, low-interest loans or grants to developing countries and private entities for their purchase of U.S. agricultural commodities to support specific projects; • Emergency and Development Assistance, Title II, which provides for the donation of U.S. agricultural commodities to meet emergency and nonemergency food needs; • Food for Development, Title III, which makes government-to-government grants available to support long term growth in the least developed countries; and • Farmer-to-Farmer, Title V, which offers technical assistance to farmers, farm organizations, and agribusinesses in developing and transitional countries. 7 6 Additional information on Food for Peace Act (P.L. 480) food aid is available at http://www.fas.usda.gov/foodaid.asp. 7 The FtF Program began in 1985 with congressional authorization of the Agricultural Development and Trade Act. Congressional Research Service 2 International Food Aid Programs: Background and Issues Title I of the Food for Peace Act is administered by USDA, while Titles II, III, and V are administered by USAID. 8 Over the past ten years, Title II has become the primary source of U.S. food aid shipments. In the early years of P.L. 480, Title I funding typically dwarfed that of other programs, but since 1980 it has declined by more than 90% in inflation-adjusted terms. At the same time, emergency and development food aid under Title II has increased significantly since the early 1990s, when strengthening global food security was made a formal objective of American food aid. Beginning with FY2006, USDA has not requested funding for Title I food aid. Title III has also been inactive in recent years. A Food Aid Consultative Group (FACG) advises the USAID Administrator on food aid policy and regulations, especially related to Title II of P.L. 480. The 2008 farm bill extends the authority of the FACG to 2012, and requires that a representative of the maritime transportation sector be included in the group, which currently consists of the USAID Administrator, the Under Secretary of Agriculture for Farm and Foreign Agricultural Services, the Inspector General of Agriculture for Farm and Foreign Agricultural Services, the Inspector General for USAID, a representative of each PVO and cooperative participating in FPA programs, representatives from African, Asian, and Latin-American indigenous NGOs determined appropriate by the Administrator, and representatives from agricultural producer groups in the United States. Title I, Trade and Development Assistance The Trade and Economic Development Assistance program, Title I, provides for sales on credit or grant terms of U.S. agricultural commodities to developing country governments and (in rare instances) to private entities. Loan agreements under the Title I credit program may provide for repayment terms of up to 30 years with a grace period of up to five years. Donations of Title I commodities can also be made through Food for Progress grant agreements. No funding for Title I credit sales and grants has been appropriated since FY2006. Title II, Emergency and Development Assistance The Emergency and Development Assistance program, Title II, provides for donation of U.S. agricultural commodities and humanitarian assistance to meet emergency and non-emergency food needs in other countries. Food aid provided under Title II is primarily targeted to vulnerable populations in foreign countries in response to malnutrition, famine, natural disaster, civil strife, and other extraordinary relief requirements. Title II food aid can also be used to meet economic development needs that address food security (e.g., non-emergency assistance). Emergency assistance is provided primarily through intergovernmental organizations, particularly the World Food Programme (WFP) and private voluntary organizations (PVOs), although commodities may be used in government-to-government programs. Non-emergency assistance may be provided through PVOs, cooperatives, and intergovernmental organizations. Commodities requested may be furnished from the inventory of USDA’s Commodity Credit Corporation (CCC) acquired under price support programs or purchased from private stocks.9 The CCC also finances 8 Funding for the FPA is made available to USDA FAS through annual agricultural appropriations bills, but the funds to carry out Title II, III, and V activities are transferred from USDA FAS to USAID, the agency that actually administers the programs. 9 The Commodity Credit Corporation is a U.S. government-owned and -operated corporation, created in 1933, with broad powers to support farm income and prices and to assist in the export of U.S. agricultural products. The CCC finances USDA’s domestic price and income support programs and its export programs using its permanent authority to (continued...) Congressional Research Service 3 International Food Aid Programs: Background and Issues transportation costs, including both ocean freight and overland transport costs when appropriate. The CCC may also pay for storage and distribution costs for commodities, including prepositioned commodities, made available to meet urgent or extraordinary relief requirements. Depending on the agreement, commodities provided under the program may be sold in the recipient country and the proceeds used to support predetermined agricultural, economic, or infrastructure development projects, a practice known as “monetization.”10 For a discussion of congressional issues related to monetization, see the section “Monetization.” The 2008 farm bill sets the annual authorization level for Title II at $2.5 billion. This level of funding would be $500 million more annually than was provided for Title II under the 2002 farm bill each fiscal year through a combination of regular and supplemental appropriations. But as this authorization is discretionary, it is up to annual appropriations bills to set the amount of annual Title II funding, which over the past decade has ranged from about $1.1 billion (in 2001) to $2.1 billion (in 2005). The 2008 farm bill mandates that Title II commodity donations provide an annual minimum tonnage level of 2.5 million metric tons (mmt), of which 1.875 mmt (or about 75%) is to be channeled as non-emergency (development) assistance through the eligible organizations. This mandate, which has rarely been met, can be waived by the USAID Administrator, who can make the determination that there is a greater emergency need, and/or that the mandated volume of commodities cannot be used effectively in nonemergency situations. In recent years, the volume of Title II emergency food aid has far exceeded the amount of non-emergency or development food aid (see Figure 1). The 2008 farm bill provides for a “safe box” for funding of non-emergency development assistance projects under Title II. The aim of the safe box is to provide assurances to the implementing organizations (PVOs, coops, intergovernmental organizations) of a given level of funds with which to carry out development projects. The safe box funding level begins at $375 million in FY2009 and ends in FY2012 at $450 million. The mandated funding level can be waived if three criteria are satisfied: (1) the President determines that an extraordinary food emergency exists; (2) resources from the Bill Emerson Humanitarian Trust (see below) have been exhausted; and (3) the President has submitted a request for additional appropriations to Congress equal to the reduction in safe box and Emerson Trust levels. The 2008 farm bill also authorizes the use of up to $22 million annually for the monitoring and assessment of non-emergency food aid programs. This provision is a response to criticism that monitoring of such programs by USAID has been inadequate due to such factors as limited staff, competitive priorities, and legal restrictions. The USAID Administrator can use these funds to employ contractors as non-emergency food aid monitors. (...continued) borrow up to $30 billion at any one time from the U.S. Treasury. 10 In United States agricultural policy, “monetization” is a P.L. 480 provision (Section 203) first included in the Food Security Act of 1985 (P.L. 99-198) that allows private voluntary organizations and cooperatives to sell a percentage of donated P.L. 480 commodities in the recipient country or in countries in the same region. Under Section 203, private voluntary organizations or cooperatives are permitted to sell (i.e., monetize) for local currencies or dollars an amount of commodities equal to not less than 15% of the total amount of commodities distributed in any fiscal year in a country. The currency generated by these sales can then be used to finance internal transportation, storage, or distribution of commodities; to implement development projects; or to invest and with the interest earned used to finance distribution costs or projects. Congressional Research Service 4 International Food Aid Programs: Background and Issues Figure 1. Distribution of P.L. 480 Title II Funds, FY1992-FY2009 1.00 Percentage 0.80 0.60 Non-Emergency Emergency 0.40 0.20 19 9 19 2 9 19 3 9 19 4 9 19 5 9 19 6 9 19 7 9 19 8 9 20 9 0 20 0 0 20 1 0 20 2 0 20 3 0 20 4 0 20 5 0 20 6 0 20 7 0 20 8 09 0.00 Source: USAID Congressional Budget Justification, various years. Note: Data compiled by Carol Canada, CRS-KSG. In addition, the 2008 farm bill also increases the amount of Title II funding available annually from $3 million to $8 million for stockpiling and rapid transportation, delivery, and distribution of shelf-stable, prepackaged foods. Shelf-stable foods are developed under a cost-sharing arrangement that gives preference to organizations that provide additional funds for developing these products. The new bill also reauthorizes pre-positioning of commodities overseas and increases. 3 The Bill Emerson Humanitarian Trust was originally authorized by the Agricultural Act of 1980 (P.L. 96-494) as the Food Security Wheat Reserve, but was later reauthorized and renamed by the Africa Seeds of Hope Act of 1989 (P.L. 105-385). Congressional Research Service 1 International Food Aid Programs: Background and Issues Year Began Implementing Agency McGovern-Dole IFECN 2003 FAS Local & Regional Procurement Pilot Program 2008 FAS Bill Emerson Humanitarian Trust 1980 FAS Program Source: CRS. Food Aid Programs Food for Peace Act (P.L. 480)4 The Food for Peace Act (FPA), historically referred to as P.L. 480, is the main legislative vehicle that authorizes foreign food assistance. Over the decade 2002-2011, FPA typically accounted for 50%-90% of total annual international food aid spending. FPA food aid has several stated objectives, including combating world hunger and malnutrition and their causes; promoting sustainable agricultural development; expanding international trade; fostering private sector and market development; and preventing conflicts. FPA is comprised of four primary programs, which are each listed under a different title and have different objectives. The FPA components include • • • • Title I, Economic Assistance and Food Security, which makes available longterm, low-interest loans to developing countries and private entities for their purchase of U.S. agricultural commodities to support specific projects; Title II, Emergency and Private Assistance, which provides for the donation of U.S. agricultural commodities to meet emergency and non-emergency food needs; Title III, Food for Development, which makes government-to-government grants available to support long term growth in the least developed countries; and Title V, Farmer-to-Farmer Program, which finances short-term volunteer technical assistance to farmers, farm organizations, and agribusinesses in developing and transitional countries. Over the past ten years, Title II has become the largest vehicle for U.S. food aid shipments. In the early years of P.L. 480, Title I funding typically dwarfed that of other programs, but since 1980 it has declined by more than 90%. At the same time, emergency and development food aid under Title II has increased significantly since 1990, when strengthening global food security was made a formal objective of American food aid in the 1990 farm bill. Starting in FY2006, Administrations have not requested funding for any new Title I food aid programs. Title III has been inactive since FY2002. Title I of the Food for Peace Act is administered by USDA, while Titles II, III, and V are administered by USAID. Funding for Food for Peace Act programs is authorized in annual Agriculture appropriations bills. Food aid funding currently is authorized in a continuing resolution which expires on March 27, 2013.5 4 Additional information on Food for Peace Act (P.L. 480) food aid is available at http://www.fas.usda.gov/foodaid.asp. 5 P.L. 112-175, Sept. 28, 2012. Congressional Research Service 2 International Food Aid Programs: Background and Issues A Food Aid Consultative Group (FACG) advises the USAID Administrator on food aid policy and regulations, especially related to Title II of P.L. 480. The 2008 farm bill, in addition to reauthorizing the FACG, added a representative of the maritime transportation sector to the group. In addition to the maritime sector representative, the FACG membership consists of the USAID Administrator, the Under Secretary of Agriculture for Farm and Foreign Agricultural Services, the Inspector General for USAID, a representative of each private voluntary organization (PVO) and cooperative participating in FPA programs, representatives from African, Asian, and LatinAmerican indigenous nongovernmental organizations (NGOs) as determined appropriate by the Administrator of USAID, and representatives from agricultural producer groups in the United States. Title I, Economic Assistance and Food Security Title I, Economic Assistance and Food Security, provides for sales on credit terms of U.S. agricultural commodities to developing country governments and to private entities for U.S. dollars or for local currencies. Loan agreements under the Title I credit program may provide for repayment terms of up to 30 years with a grace period of up to five years. Donations of Title I commodities can also be made through Food for Progress grant agreements. No new funding for Title I credit sales and grants has been appropriated since FY2006, although some funding has been provided to administer previously entered into Title I program agreements. Title II, Emergency and Private Assistance Title II, Emergency and Private Assistance, provides for donations of U.S. agricultural commodities to meet emergency and non-emergency food needs in foreign countries. Food aid provided under Title II is primarily targeted to vulnerable populations in response to malnutrition, famine, natural disaster, civil strife, and other extraordinary relief requirements. Title II food aid is also used to meet non-emergency economic development needs that address food security. Emergency assistance is provided through intergovernmental organizations, particularly the United Nations World Food Programme (WFP) and PVOs, although commodities may be used in government-to-government programs. Non-emergency assistance may be provided through PVOs, cooperatives, and intergovernmental organizations. Commodities requested may be furnished from the inventory of USDA’s Commodity Credit Corporation (CCC), if available, or purchased in the market.6 The CCC also finances transportation costs, including both ocean freight and overland transport costs when appropriate. The CCC may also pay for storage and distribution costs for commodities, including pre-positioned commodities, made available to meet urgent or extraordinary relief requirements. Depending on the agreement, commodities provided under the program may be sold in the recipient country and the proceeds used to support development projects, a practice known as “monetization.”7 6 The Commodity Credit Corporation is a U.S. government-owned and -operated corporation, created in 1933, with broad powers to support farm income and prices and to assist in the export of U.S. agricultural products. The CCC finances USDA’s domestic price and income support programs and its export programs using its permanent authority to borrow up to $30 billion at any one time from the U.S. Treasury. 7 Authorization for monetization was first included in the Food Security Act of 1985 (P.L. 99-198). Under Section 203 of that statute, PVOs or cooperatives are permitted to sell (i.e., monetize) for local currencies or dollars an amount of commodities equal to not less than 15% of the total amount of commodities distributed under Title II in any fiscal year. The currency generated by these sales can then be used to finance internal transportation, storage, or distribution of commodities; to implement development projects; or to invest and with the interest earned used to finance distribution costs or projects. Congressional Research Service 3 International Food Aid Programs: Background and Issues The 2008 farm bill set the annual authorization level for Title II at $2.5 billion. This level of funding was $500 million more than the annual authorization for Title II under the 2002 farm bill. As this authorization is discretionary, it is up to annual appropriations bills to set the amount of annual Title II funding, which over the five-year life of the 2008 farm bill has averaged $1.8 billion annually. The 2008 farm bill mandated that Title II commodity donations provide an annual minimum tonnage level of 2.5 million metric tons (mmt), of which 1.875 mmt (75%) is to be channeled as non-emergency (development) assistance through the eligible organizations. This mandate can be waived by the USAID Administrator, who can make the determination that there is a greater emergency need, and/or that the mandated volume of commodities cannot be used effectively in nonemergency situations. In recent years, the volume of Title II emergency food aid has far exceeded the amount of non-emergency or development food aid (see Figure 1). Figure 1. Allocation of Food for Peace Title II Commodities to Emergency and Nonemergency Programs, FY1992-FY2010 (percent) 1.00 Non-emergency Emergency 0.80 Percentage 0.60 0.40 0.20 0.00 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: USAID congressional budget justification, various years. Note: Data compiled by Carol Canada, CRS-KSG. The 2008 farm bill included a “safe box” for funding of non-emergency development assistance projects under Title II. The aim of the safe box is to provide assurances to the implementing organizations (PVOs, cooperatives, intergovernmental organizations) of a given level of funds with which to carry out development projects. The safe box funding level ranged from $375 million in FY2009 to $450 million in FY2012. The mandated funding level can be waived if three criteria are satisfied: (1) the President determines that an extraordinary food emergency exists; (2) resources from the Bill Emerson Humanitarian Trust (described below) have been exhausted; and Congressional Research Service 4 International Food Aid Programs: Background and Issues (3) the President has submitted a request for additional appropriations to Congress equal to the reduction in safe box and Emerson Trust levels. The 2008 farm bill also authorized the use of up to $22 million annually for the monitoring and assessment of non-emergency food aid programs. This provision is a response to criticism that monitoring of such programs by USAID has been inadequate due to such factors as limited staff, competitive priorities, and legal restrictions. This provision authorized the USAID Administrator to employ contractors as non-emergency food aid monitors. In addition, the 2008 farm bill also increased the amount of Title II funding available annually from $3 million to $8 million for stockpiling and rapid transportation, delivery, and distribution of shelf-stable, prepackaged foods. Shelf-stable foods are developed under a cost-sharing arrangement that gives preference to organizations that provide additional funds for developing these products. The 2008 farm bill also reauthorized pre-positioning of commodities overseas and increased the funding for pre-positioning to $10 million annually from $2 million annually. USAID maintains that pre-positioning (at various sites in the United States and around the world) enables it to respond more rapidly to emergency food needs. Critics say, however, that the costeffectiveness of pre-positioning has not been evaluated. Title III, Food for Development Title III, Food for Development, provides for government-to-government grants to support longterm economic development in the least developed countries. Under this program, donated commodities arecan be sold in the recipient countries (i.e., monetized) and the revenue generated is used used to support programs that promote economic development and food security, including development of agricultural markets, school feeding programs, nutrition programs, and infrastructure programs. The costs of procurement, processing, and transportation are also paid for by the U.S. government under Title III. No funding request has been made for Title III activities since FY2002. Congressional Research Service 5 International Food Aid Programs: Background and Issues Title V, Farmer-to-Farmer Program (FtF) The Farmer-to-Farmer program (FtF), first authorized in the 1985 farm bill, has been reauthorized in in subsequent farm bills, including the 2008 farm bill.118 The FtF program does not provide commodity food aid per se, but instead provides technical assistance to farmers, farm organizations, and agribusinesses in developing and transitional countries. The program mobilizes the expertise of volunteers from U.S. farms, land grant universities, cooperatives, private agribusinesses, and nonprofit organizations to carry out short-term projects overseas. The 2008 farm bill provides provides minimum funding for FtF atthe program of the greater of $10 million or 0.5% of the funds made available to Food for Peace Act programs, and was in the range of $10-$12 million annually from FY2000 to FY2008. The program was funded at $12.5 million in FY2009. Special emphasis is given to FtF activities in the Caribbean Basin and sub-Saharan Africa. FtF funding under the 2002 farm bill was $10 million annually. Section 416(b)12 available to Food for Peace Act programs for each year from FY2008 through FY2012. Special emphasis is given to activities in the Caribbean Basin and sub-Saharan Africa. 8 The 2008 farm bill designated this program as the “John Ogonowski and Doug Bereuter Farmer-to-Farmer Program” in honor of one of the pilots killed September 11, 2001, who was also a participant in the program, and of former Representative Bereuter, a supporter of the program. Congressional Research Service 5 International Food Aid Programs: Background and Issues Section 416(b)9 The Section 416(b) program, which is permanently authorized by the Agricultural Act of 1949, provides for the overseas donation of surplus agricultural commodities owned by the CCC. The program is administered by USDA and ishas been a highly variable component of food aid because it is entirely dependent on the availability of surplus commodities in CCC inventories. Section 416(b) donations may not reduce the amounts of commodities that traditionally are donated to domestic domestic feeding programs or agencies, and may not disrupt normal commercial sales. The commodities are made available for donation through agreements with foreign governments, PVOs, cooperatives, and intergovernmental organizations. Depending on the agreement, the commodities donated under Section 416(b) may be sold in the recipient country and the proceeds used to support agricultural, economic, or infrastructure development programs. The Section 416(b) program is currently inactive due tohas been inactive since FY2007 because of the unavailability of CCC-owned stocks. Food for Progress (FFP)1310 The Food for Progress (FFP) program, was authorized by the Food for Progress Act of 1985 within the 1985 farm bill (P.L. 99-198), provides for the donation or credit sale of U.S. commodities to developing countries and emerging democracies to strengthen free enterprise development in the agricultural sector. FFP focuses especially on private sector development of agricultural infrastructure, such as improved agricultural production practices, marketing systems, farmer training, agro-processing, and agribusiness development. 11 The 2008 farm bill designated this program as the “John Ogonowski and Doug Bereuter Farmer-to-Farmer Program” in honor of one of the pilots killed September 11, 2001, who was also a participant in the program, and of former Congressman Bereuter, who initially sponsored the program. 12 Additional information on Section 416(b) is available at http://www.fas.usda.gov/excredits/FoodAid/416b/ section416b.asp. 13 Additional information on the Food for Progress program is available at http://www.fas.usda.gov/excredits/FoodAid/ FFP/foodforprogess.asp. Congressional Research Service 6 International Food Aid Programs: Background and Issues FFP authorizes the CCC to finance the sale and exportation of in the Food for Progress Act of 1985 and is administered by the Foreign Agricultural Service. The program authorizes the CCC to carry out the sale and export of U.S. agricultural commodities on credit terms, or on a grant basis, to developing countries that have demonstrated commitments to introduce or expand free enterprise elements into their agricultural economies. Commodities are provided under the authority of P.L. 480, Title I, or Section 416(b). Under certain conditions, CCC may also purchase commodities not currently held by CCC. For commodities furnished on a grant basis, the CCC may pay, in addition to acquisition costs and ocean transportation, related commodity and delivery charges. To date, all food aid under this program has been by donation. The 2008 farm bill requires terms or on a grant basis, using either CCC financing or Title I funds. The program is intended to assist developing countries and emerging democracies to strengthen free enterprise development in the agricultural sector. FFP focuses especially on private sector development of agricultural infrastructure, such as improved agricultural production practices, marketing systems, farmer training, agro-processing, and agribusiness development. The 2008 farm bill required that a minimum of 400,000 metric tons of commodities be provided in the FFP program. The implementing organizations request commodities and USDA purchases those commodities from the U.S. market. USDA donates the commodities to the implementing organizations and pays for the freight to move the commodity to the recipient country. The program is limited by statute to pay no more than $40 million annually for freight costs. Organizations eligible to carry out FFP programs include private voluntary organizations (PVOs), governments, PVOs, cooperatives, and intergovernmental organizations, such as the World Food Programme (WFP). In FY2009, USDAFY2011, FFP provided over 280more than 240,000 metric tons of U.S. commodities (including wheat, wheat flour, soybeanrice, soybeans, soybean meal and oil, and corn) with an estimated value of over $200 million to PVOs and foreign governments that were implementing agricultural and rural development projects in developing countries.$162 million to implementing partners in nine developing countries. 9 Additional information on Section 416(b) is available at http://www.fas.usda.gov/excredits/FoodAid/416b/ section416b.asp. 10 Additional information on the Food for Progress program is available at http://www.fas.usda.gov/excredits/foodaid/ ffp/foodforprogress.asp. Congressional Research Service 6 International Food Aid Programs: Background and Issues McGovern-Dole International Food for Education and Child Nutrition Program14Program11 The McGovern-Dole program was authorized byin the 2002 farm bill (P.L. 107-171), the Farm Security and Rural Investment Act of 2002, and is administered by USDA’s Foreign Agricultural Service (FAS). 15.12 The program uses commodities and financial and technical assistance to carry out out school feeding programs and maternal, infant, and child nutrition programs in foreign countries. The 2008 farm bill reauthorizesreauthorized the program through FY2012 and establishes the U.S. Department of Agriculture as the established USDA as the permanent home for the program. The commodities used in the program are made available for donation through agreements with private voluntary organizations (PVOs)PVOs, cooperatives, intergovernmental organizations, and foreign governments. Commodities may be donated for direct feeding or, in limited situations, for local sale to generate proceeds to support school feeding and nutrition projects. Priority countries under the McGovern-Dole program must demonstrate sufficient need for improving domestic nutrition, literacy, and food security. The 2008 farm bill maintainsmaintained funding for McGovern-Dole on a discretionary basis. The enacted FY2010FY2011 appropriation provides $209.5199 million for the McGovern-Dole International Food for Education and Child Nutrition Program Grants. It also expandsexpanded the McGovern-Dole program by more than doubling the program from the level enacted in FY2009. The additional resources build built upon an existing expansion in programming, which was included as a one-time 14 Additional information the McGovern-Dole program is available at http://www.fas.usda.gov/excredits/FoodAid/FFE/ FFE.asp. 15 This program is named in honor of Ambassador and former Senator George McGovern and former Senator Robert Dole for their efforts to encourage a global commitment to school feeding and child nutrition. Congressional Research Service 7 International Food Aid Programs: Background and Issues authorization in authorization in the 2008 farm bill, of $84 million of CCC funding to the program in FY2009. The enacted appropriation also includesincluded an appropriation to the Secretary of $10 million to conduct pilot projects to develop and field-test new and improved micronutrient-fortified products to improve the nutrition of populations served through the McGovern-Dole program. Local and Regional Procurement Pilot Project (LRPP)16 13 The Local and Regional Procurement Pilot Project (LRPP) is authorized as a five-year pilot program under the 2008 farm bill. The bill directs the Secretary of Agriculture to implement the pilot in developing countries and providesprovided CCC funding totaling $60 million for FY2009 through FY2012.1714 Under the program, grants arewere provided to private voluntary organizations, PVOs, cooperatives, and the WFP, which to undertake the procurement activities. The primary purpose of the LRPP iswas to expedite the provision of food aid to vulnerable populations affected by food crises and disasters. A secondary purpose iswas to provide development assistance that will enhance the food consumption security of such populations. The pilot program hashad four phases: 1. Conduct a study of prior experience of others with local and regional purchase initiatives (FY2008-FY2009). 2. Develop guidelines (FY2009). 11 Additional information the McGovern-Dole program is available at http://www.fas.usda.gov/excredits/FoodAid/FFE/ FFE.asp. 12 This program is named in honor of former ambassador and former Senator George McGovern and former Senator Robert Dole for their efforts to encourage a global commitment to school feeding and child nutrition. 13 Additional information about the USDA’s Local and Regional Procurement Project is available at http://www.fas.usda.gov/excredits/FoodAid/LRP/LRP.asp. 14 Funding will be made available as follows: $5 million in FY2009; $25 million in FY2010; $25 million in FY2011; and $5 million in FY2012. Congressional Research Service 7 International Food Aid Programs: Background and Issues 3. Implement field-based projects (FY2009-FY2011). 4. Conduct an independent evaluation (FY2012). FAS has carried out athe mandated study on the prior experience of other donor countries, PVOs, and and the WFP with local and regional procurement, and submitted a report to Congress in January 2009.1815 The agency released interim guidelines in September 200919 and is now preparing final guidelines that will govern operation of the pilot program, which is authorized through 2012. Consistent with provisions of the 2008 farm bill, the budget provides $5 million for the pilot program in FY2009 and $25 million for FY20102009.16 Pilot field based projects have been completed. Results of the independent evaluation of the pilot program have not been published. For background and discussion about issues related to local and regional procurement, see CRS Report R40759, Local and Regional Procurement for U.S. International Emergency Food Aid, by Charles E. Hanrahan. The Bill Emerson Humanitarian Trust (BEHT)2017 The Bill Emerson Humanitarian Trust (BEHT) is a reserve of U.S. commodities and cash authorized under the Africa: Seeds of Hope Act of 1998 (P.L. 105-385). The trust is not a food aid 16 Additional information about the USDA’s Local and Regional Procurement Project is available at http://www.fas.usda.gov/excredits/FoodAid/LRP/LRP.asp. 17 Funding will be made available as follows: $5 million in FY2009; $25 million in FY2010; $25 million in FY2011; and $5 million in FY2012. 18 A copy of the study report, which USDA released to Congress in January 2009, is available at http://www.fas.usda.gov/excredits/FoodAid/LRP/USDALRPStudy.pdf. 19 Interim guidelines are available at http://www.fas.usda.gov/excredits/FoodAid/LRP/Interim_PPP_Guidelines.pdf. 20 Additional information on the Emerson Trust is available at http://www.fas.usda.gov/excredits/FoodAid/ emersontrust.asp. Congressional Research Service 8 International Food Aid Programs: Background and Issues program per se, but rather a food reserve (primarily for P.L. 480 programs) program per se, but rather a food reserve that can be used to meet unanticipated humanitarian food aid needs in developing countries or when U.S. domestic supplies run short. The trust replaced the Food Security Commodity Reserve established in the 1996 farm bill and its predecessor, the Food Security Wheat Reserve, originally authorized by the Agricultural Trade Act of 1980. The 2008 farm bill reauthorized the BEHT to 2012 through FY2012. The program is administered under the authority of the Secretary of Agriculture. Since 1980, the only commodity held in reserve has been wheat. The 2008 farm bill removed the previous 4 million ton cap on commodities that can be held in the trust, and provides the Secretary with the ability to exchange commodities in the trust for cash, provided the sale does not disrupt markets. It also allows the Secretary to invest the funds from the trust in low-risk, short-term securities or instruments so as to maximize its value. During 2008, USDA sold the remaining wheat in the trust (about 915,000 MT) so that currently the BEHT holds only cash (about $315 million in FY2012). The . The cash can be used to finance activities or purchase commodities as needed commodities to meet emergency food needs when FPA Title II funds are not available. USDA’s Commodity Credit Corporation (CCC) may be reimbursed for the value of U.S. commodities released from the Emerson Trust from either P.L. 480 appropriations or direct appropriations for reimbursement. The CCC may then use that reimbursement to replenish commodities released. Direct appropriations may also be used for replenishment. Reimbursement Reimbursement to the CCC for ocean freight and related non-commodity costs occurs through the regular USDA appropriations process. Appropriators have limited the amount of reimbursement for P.L. 480 activities. Funding of Food Aid Some of USDA’s international activities (the Food for Peace Act, the McGovern-Dole Food for Education program, and the operations of the FAS itself) are funded through annual agricultural appropriations acts. Other foreign food aid programs are funded through the borrowing authority of the Commodity Credit Corporation (CCC). Congress can and does occasionally exercise limits to spending on these mandatory programs through annual appropriations acts. Table 2 provides program levels for USDA-funded international food aid programs for FY2000FY2010. Average annual spending on international food aid programs over the past decade (not including FAS) is approximately $2.2 billion, with Food for Peace activities comprising the largest portion of the total budget (ranging from 50%-90% of the total budget in a given year). The policy objectives of foreign food aid include providing emergency and humanitarian assistance in response to natural or manmade disasters, and promoting agricultural development and food security. The United States provides food aid for emergency relief and to support development projects. As shown above in Figure 1, increased allocations of U.S. food aid for emergency relief, particularly in recent years, have reduced the amount of food aid available for development projects. Congressional Research Service 9 International Food Aid Programs: Background and Issues Table 2. USDA International Food Aid Program Level, FY2000-FY2010 ($ millions) 2010 (est.) Program 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Food for Peace (P.L. 480)a 1,293 1,086 1,095 1,960 1,809 2,115 1,829 1,787 2,061 2,321 1,690 Section 416(b)b 504 1103 773 213 19 76 20 0 0 0 0 Food for Progressc 108 104 126 137 138 122 131 147 220 216 148 McGovern-Dole IFECNd — — — 100 50 90 96 99 99 100 210 Local & Regional Procurement Pilote — — — — — — — — 0 5 25 1,905 2,293 1,994 2,410 2,016 2,403 2,076 2,033 2,380 2,642 2,073 TOTAL Source: USDA, Annual Budget Summary, various years. These data are program levels (i.e., the value of goods and services provided in a fiscal year). They include for the discretionary programs (P.L. 480, Food for Education, and the Foreign Agricultural Service), in addition to regular, annually appropriated funds, emergency supplemental appropriations, carry-over from one fiscal year to another, transfers from other USDA agencies, transfers between programs, and reimbursements from other agencies. a. For P.L. 480, the FY2002 estimate includes $175 million from the Emerson Trust; FY2003 estimate includes $1.326 billion for regular FY2003 appropriations, $248 million for Title II emergency assistance (after applying the across-the-board rescission of 0.65%), and $369 million in the Emergency Wartime Supplemental Appropriations Act of 2003 (P.L. 108-11); FY2005 estimate includes $377 million from the Emerson Trust; FY2007 Title II program level includes a supplemental appropriation of $450 million; and FY2009 Title II includes a regular appropriation of $1.226 billion, plus two supplemental appropriations of $395 million (P.L. 110-252) and $700 million (P.L. 111-32). b. Includes value of commodities, ocean freight and transportation, and transfers to other programs. c. Includes only CCC purchases of commodities for FFP. P.L. 480 Title I funds allocated to FFP are included in P.L. 480. d. 480 activities. Emergency Food Security Program (EFSP) USAID initiated the Emergency Food Security Program (EFSP) as a complement to the Food for Peace Title II emergency food aid program.18 USAID uses funds from its International Disaster 15 A copy of the study report, which USDA released to Congress in January 2009, is available at http://www.fas.usda.gov/excredits/FoodAid/LRP/USDALRPStudy.pdf. 16 Interim guidelines are available at http://www.fas.usda.gov/excredits/FoodAid/LRP/Interim_PPP_Guidelines.pdf. 17 Bill Emerson, a Member of Congress from Missouri, was the Ranking Member of the House Select Committee on Hunger. Additional information on the Emerson Trust is available at http://www.fas.usda.gov/excredits/FoodAid/ emersontrust.asp. 18 This discussion of USAID’s Emergency Food Security Program is based on USAID’s Annual Program Statement for International Emergency Food Assistance, issued April. 15, 2011, viewed at http://transition.usaid.gov/our_work/ humanitarian_assistance/ffp/fy11.iefsp.annstatement.pdf. Congressional Research Service 8 International Food Aid Programs: Background and Issues Assistance (IDA) account, authorized under the Foreign Assistance Act of 1961, to finance EFSP activities. Up to $300 million in IDA funds have been made available for the EFSP for each fiscal year from FY2010 through FY2012. Implementing partners include U.S. and foreign NGOs, cooperatives, and intergovernmental organizations. No EFSP funds have been provided via developing country governments. EFSP uses IDA funds to finance three kinds of emergency food security assistance: • • • Local and Regional Procurement (LRP). Funds are used to purchase food commodities within the disaster-affected country or from a nearby country for distribution in the disaster-affected country. Cash Transfers. Cash is provided to disaster-affected people for use in purchasing essential food items to meet their food security needs. Cash transfers can take the form of a physical payment or an electronic transfer through mobile providers or financial institutions. Food Vouchers. Local food vendors supply specific essential food items to beneficiaries through paper or electronic food vouchers. According to USAID, it uses EFSP funds when U.S.-purchased Food for Peace Title II food aid cannot arrive fast enough to respond to an emergency or when local procurement, cash transfers or food voucher programs may be more appropriate than U.S. in-kind food aid due to local market conditions (Figure 2, Table 2). Figure 2. FY2011 Emergency Food Security Program Breakdown (percent of total FY2011 spending of $232 million) Transport Costs 6% Cash Transfer 12% Food Voucher 9% LRP 73% Source: USAID Emergency Food Security Program Fact Sheet, available at http://transition.usaid.gov/our_work/ humanitarian_assistance/ffp/fy11.efsp.ofs.pdf. Congressional Research Service 9 International Food Aid Programs: Background and Issues Table 2. FY2010-FY2011 EFSP Program Details FY2010 Program Value ($mil) Metric Tons of Food Delivered Programs Funded Countries Receiving Assistance Beneficiaries Assisted FY2011 $244.3 $232.0 278,870 191,616 17 30 8 21 15,477,108 19,706,137 Source: USAID Emergency Food Security Program Fact Sheet available at http://transition.usaid.gov/our_work/ humanitarian_assistance/ffp/fy11.efsp.ofs.pdf. Funding of Food Aid Some of USDA’s international activities (Food for Peace Act, McGovern-Dole Food for Education program, and the operations of the FAS itself) are funded through annual Agriculture appropriations acts. Funding for other foreign food aid programs (e.g., Food for Progress, Bill Emerson Humanitarian Trust) is authorized in farm bills and financed through the borrowing authority of USDA’s Commodity Credit Corporation (CCC). Congress has occasionally applied limits to spending on these mandatory programs in annual appropriations acts. Funding for the Emergency Food Security Program (EFSP) is included in USAID’s International Disaster Assistance (IDA) account, which is authorized in annual State department and foreign operations appropriations. Table 3 provides program levels for USDA-funded international food aid programs for FY2002FY2013 (requested). Average annual spending on international food aid programs over 2002-2011 (not including FAS) was approximately $1.8 billion, with Food for Peace activities comprising the largest component. The Administration’s FY2013 Budget Proposal19 The Administration’s FY2013 budget request for agriculture includes $1.4 billion for Food for Peace Title II emergency and nonemergency assistance. The 2013 budget proposes $184 million for the McGovern-Dole International Education and Child Nutrition program, the same level provided in FY2012. Food for Peace Title II and the McGovern-Dole program are subject to annual appropriations. Two other food aid programs are funded through the borrowing authority of the CCC. USDA estimates that $170 million of CCC funds would be expended for the Food for Progress program in FY2013. Authorization of funding for the 2008 farm bill Local and Regional Commodity Procurement Pilot Program expired at the end of FY2012. The President’s budget does not request any funding for this program in FY2013, and does not anticipate that funds of the Bill Emerson Trust will be used in FY2013. No assistance under the trust was provided in FY2012. However, the assets of the trust can be released any time that the Administrator of USAID determines that Food for Peace Title II funding for emergency needs is inadequate to meet those needs in any fiscal year. The trust currently holds about $311 million in cash and no commodities. 19 For more information about the President’s FY2013 budget request, see CRS Report R42596, Agriculture and Related Agencies: FY2013 Appropriations, by Jim Monke. Congressional Research Service 10 International Food Aid Programs: Background and Issues Table 3. International Food Aid Program Levels, FY2002-FY2013 (Req.) ($ millions) Program 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 (est.) 2013 (req.) Food for Peace (Title II)a 1,095 1,960 1,809 2,115 1,829 1,787 2,061 2,321 1,690 1,497 1,466 1,400 Section 416(b)b 773 213 19 76 20 0 0 0 0 0 0 0 Food for Progressc 126 137 138 122 131 147 220 216 148 162 170 170 McGovernDole IFECNd — 100 50 90 96 99 99 100 210 199 184 184 Local & Regional Procurement Pilote — — — — — — 0 5 25 23 5 0 1,994 2,410 2,016 2,403 2,076 2,033 2,380 2,642 2,073 1,881 1,825 1,754 TOTAL Source: USDA, Annual Budget Summary, various years. These data are program levels (i.e., the value of goods and services provided in a fiscal year). They include for the discretionary programs (Food for Peace Title II and McGovern-Dole Food for Education), in addition to regular, annually appropriated funds, emergency supplemental appropriations, carry-over from one fiscal year to another, transfers from other USDA agencies, transfers between programs, and reimbursements from other agencies. a. For P.L. 480, the FY2002 figures includes $175 million from the Emerson Trust; FY2003 figures includes $1.326 billion for regular FY2003 appropriations, $248 million for Title II emergency assistance (after applying the across-the-board rescission of 0.65%), and $369 million in the Emergency Wartime Supplemental Appropriations Act of 2003 (P.L. 108-11); FY2005 numbers includes $377 million from the Emerson Trust; FY2007 Title II program level includes a supplemental appropriation of $450 million; and FY2009 Title II includes a regular appropriation of $1.226 billion, plus two supplemental appropriations of $395 million (P.L. 110-252) and $700 million (P.L. 111-32). b. Includes value of commodities, ocean freight and transportation, and transfers to other programs. c. Includes only CCC purchases of commodities for FFP. Food for Peace (P.L. 480 ) Title I funds allocated to FFP are included in Food for Peace. d. The McGovern-Dole International Food for Education and Child Nutrition Program was authorized in the 2002 farm bill. FY2003 funds were from the CCC; funds were first appropriated to the program directly in the FY2004 appropriations bill (P.L. 108-199). For FY2002, $112 million of assistance was provided for food for education activities under the Global Food for Education program, which was a precursor to the McGovern-Dole program. e. e. These are the levels authorized in the 2008 farm bill for the Local and Regional Procurement Pilot Program, which may differ from the amount actually used by the program. The Administration’s FY2011 Budget Proposal21 President Obama made strong commitments to global agricultural development and food security at the G8 Summit in L’Aquila, Italy, in July 2009, and later reconfirmed these commitments at the G20 meeting in Pittsburgh in September 2009.22 The G8 summit leaders and other countries and 21 For more about agricultural appropriations for FY2010, see CRS Report R40721, Agriculture and Related Agencies: FY2010 Appropriations, coordinated by Jim Monke. 22 The G8 countries are Canada, France, Germany, Italy, Japan, Russia, the United Kingdom, and the United States. The G20 countries include the G8 and Argentina, Australia, Brazil, China, India, Indonesia, Mexico, Saudi Arabia, (continued...) Congressional Research Service 10 International Food Aid Programs: Background and Issues institutions in attendance announced the launch of a new international fund called the Global Partnership for Agriculture and Food Security. The Global Partnership will be administered by the World Bank and has the goal of mobilizing $20 billion over three years to finance initiatives that will “free mankind from hunger and poverty.”23 In addition, the Obama Administration is also rolling out its own Global Hunger and Food Security Initiative (GHFSI), which is being led and coordinated by the State Department. 24 The Administration’s FY2011 request includes $1.8 billion for the GHFSI and an additional $4.2 billion for humanitarian and emergency assistance. The FY2011 request of $1.8 billion in the foreign affairs budget for the GHFSI represents an overall increase of 98% over the enacted FY2010 level, and specifically includes $1.15 billion for agriculture and $200 million for nutrition programs at the State Department and USAID, an increase over enacted FY2010 levels of 42% and 167%, respectively. The GHFSI request also includes $408 million for multilateral partnerships—for example, the Global Partnership at the World Bank—which would constitute new funding coming from the U.S. Department of Treasury for food security purposes. The Administration’s FY2011 request of $4.2 billion for humanitarian and emergency assistance includes $1.69 billion for Food for Peace (P.L. 480) Title II grant programs, which is similar to the levels enacted in FY2010. The remaining $2.51 billion has been requested in the foreign operations budget to provide for migration, refugee, and international disaster assistance (not necessarily directly related to food aid). The President’s FY2011 request also includes $209.5 million for the McGovern-Dole International Food for Education Program, which is similar to the amount enacted in FY2010. FY2010 Agricultural Appropriations The enacted FY2010 agriculture appropriations bill (P.L. 111-80) provides almost $2.1 billion for USDA’s international food aid activities (not including FAS expenditures). The enacted appropriation also provides $180.4 million for the Foreign Agricultural Service, almost $15 million more than enacted in FY2009. The additional funds will allow FAS to strengthen its overseas presence, and will also go toward upgrading and rebuilding FAS’s information technology infrastructure. Food for Peace (P.L. 480) Title II humanitarian food aid, which is by far the largest component of international food aid expenditures, is appropriated $1.69 billion, which is $464 million, or about 38%, over the regular FY2009 appropriation, though considerably less than the total $2.3 billion appropriated if supplemental appropriations are considered.25 The increased funding provided in the FY2010 appropriations is intended to reduce the need for future emergency supplemental (...continued) South Africa, South Korea, and Turkey. The European Union also is a member of the G20. 23 L’Aquila Joint Statement on Global Food Security, July 10, 2009, at http://www.g8italia2009.it/static/G8_Allegato/ LAquila_Joint_Statement_on_Global_Food_Security%5B1%5D,0.pdf. 24 U.S. Department of State, Bureau of Public Affairs, Global Hunger and Food Security Initiative: Consultation Document, at http://www.state.gov/s/globalfoodsecurity/129952.htm. 25 In addition to the regular appropriation, Food for Peace received an additional $1.095 billion in two separate FY2009 emergency supplemental acts ($395 million from P.L. 110-252; $700 million from P.L. 111-32), so that the total amount enacted to FPA in FY2009 was over $2.3 billion. Congressional Research Service 11 International Food Aid Programs: Background and Issues funding and reflects the fact that the global need for food assistance has increased substantially in recent years. No funding was made available for Title I or Title III program activities. Unlike in the previous Administration, the Obama FY2010 budget request did not propose to allow the Administrator of USAID to use up to 25% of Food for Peace Title II funds for local or regional purchases of commodities (i.e., non-U.S. commodities) to address international food crises. Congress has rejected this request over the past few years. Instead, the President’s FY2010 foreign affairs budget called for $300 million to be allocated to USAID’s International Disaster Assistance (IDA) program to be used for local and regional procurement, and for the financing of cash transfers and cash vouchers to meet food security objectives. The final Foreign Operations appropriations bill, folded into a consolidated measure (H.R. 3288, P.L. 111-117) discussed local and regional purchase of food aid commodities under the heading of International Disaster Assistance. The conference report (H.Rept. 111-366) stipulates that “a significant portion of the funds available under this heading ($845 million) will support food assistance in fiscal 2010 and will be in addition to the $1.169 billion designated in this Act for food security and agricultural development.” The enacted FY2010 appropriations bill also provides $209.5 million for the McGovern-Dole International Food for Education and Child Nutrition Program Grants. This amount represents a major expansion in appropriated funding for the program and is more than double the FY2009 enacted level. The additional resources would build upon an existing expansion in programming, which was included as a one-time authorization in the 2008 farm bill, of $84 million of CCC funding to the program in FY2009. Issues for Congress Aid Effectiveness Food aid has been essential for saving lives around the world, especially during a crisis or natural disaster; but its value in longer-term development has been controversial. Many development experts believe that the mobilization of food aid to the most vulnerable populations is critical for combating global hunger and malnutrition. Many also believe that regions such as sub-Saharan Africa continue to need foreign assistance to help break the cycle of poverty, which they believe is a prerequisite for enabling more agricultural productivity and economic development.26 At the same time, critics of foreign aid, especially food aid, claim that many well-intentioned foreign aid policies and trillions of dollars spent on foreign aid have done little to help developing countries prosper, especially in Africa—for example, in the 1970s less than 10% of sub-Saharan Africa’s population lived in dire poverty, while today over 70% of sub-Saharan Africa lives on less than US$2 a day. Critics claim that no country has meaningfully reduced poverty and spurred significant and sustainable levels of economic growth by relying on aid.27 They also contend that 26 Proponents of aid include Jeffrey Sachs, author The End of Poverty (Penguin Press, 2005), and Paul Collier, author of The Bottom Billion: Why the Poorest Countries Are Failing and What Can Be Done About It (Oxford University Press, 2007), among others. 27 Critics of foreign aid include William Easterly, author of The White Man’s Burden: Why the West’s Efforts to Aid the Rest Have Done So Much Ill and So Little Good (Penguin Press HC, 2006), and Dambisa Moyo, author of Dead Aid: Why Aid Is Not Working and How There Is Another Way for Africa (Farrar, Straus and Giroux, 2009), among others. Congressional Research Service 12 International Food Aid Programs: Background and Issues aid often results in unintended consequences that can have detrimental effects on the local economy. Other critics believe that if aid is open-ended, African governments will have no incentive to look for other, more self-sufficient ways of financing their development. These critics claim that foreign aid can encourage corruption, create dependency, fuel inflation, create debt burdens and disenfranchise Africans from the rest of the world. In response to many assertions about the pros and cons of foreign aid, external, independent watchdog entities have been created that attempt to provide a transparent and unbiased review of poverty reduction and development assistance. Several organizations look at what various nations have donated, how and where funds have been spent, and other issues.28 Considerable controversy exists among the donor and NGO community over the merits of using food aid as a long-term tool to promote general development objectives. The WFP and some NGOs have used food commodities directly in programs that focus on building human capital in the form of nutrition, health, and education. Some argue that the incentive mechanisms established to participate in the program may be as important as the direct impact of food itself, and can have implications for the sustainability and efficacy of the development project over the long term. Demand-Driven Aid Strategies Many development experts argue that in order for any food assistance program to be effective, there must be “buy-in” and support from the country and local partners. Many donors and implementing partners talk about the need to have a “demand-driven” poverty alleviation strategy that includes plans for dealing with emergency assistance needs as well as longer-term agricultural and economic development. Some argue that, much of the time, the type and timing of food aid donations are driven more by the donor’s domestic agenda and situation, rather than responding to the recipient’s actual need or requests. At the same time, donors are not entirely comfortable with countries taking full ownership of food aid programs. Many major donors and implementing organizations such as the World Bank and the WFP believe that entirely country-owned and -managed programs are liable to political “targeting” of food resources, to corruption of the process and diversion of the resources, and to day-to-day interference in program logistics and delivery mechanisms. Cash vs. Commodities Monetization The monetization (selling in local markets) of food aid commodities is a controversial issue. As mentioned above, Food for Peace Act programs permit the Administrator of USAID to allow private voluntary organizations and cooperatives to sell donated P.L. 480 commodities in the recipient country or in countries in the same region, in an amount not less than 15% of the aggregate amounts of all commodities distributed under Title II non-emergency programs for each fiscal year. The funds generated by these sales can then be used to finance internal 28 For example, see Realty of Aid website at http://www.realityofaid.org/. Congressional Research Service 13 International Food Aid Programs: Background and Issues transportation, storage, or distribution of commodities; or to implement development projects; or can be invested, and the interest earned can be used to finance distribution costs or projects. Many organizations that rely on sales of U.S. food aid commodities to finance development projects support monetization as their major source of development finance. Some private voluntary organizations such as CARE International, however, have begun to question the use of monetization as a source of funds, as some critics of the practice argue that it stymies the development of local agricultural markets and hurts economic development in the longer term.29 In the summer of 2007, CARE, which had been a major supporter of monetization in the past, announced that it would transition away from the practice of monetization and refuse food commodity donations worth tens of millions of dollars. According to CARE, monetization is management-intensive and costly and fraught with legal and financial risks. In addition, CARE viewed monetization as economically inefficient. As CARE notes in its food policy paper, “Purchasing food in the U.S., shipping it overseas, and then selling it to generate funds for food security programs is far less cost-effective than the logical alternative—simply providing cash to fund food security programs.” Finally, echoing criticisms of food aid heard in WTO Doha Round negotiations, CARE notes that when monetization involves open-market sale of commodities to generate cash, which is almost always the case, it inevitability causes commercial displacement. As such, it can be harmful to traders and local farmers and undermine the development of local markets, and can be detrimental to longer-term food security objectives. Catholic Relief Services (CRS) has taken a similar position with respect to monetization, but has not yet decided to transition away from the practice completely.30 Local or Regional Procurement The U.S. food aid program is often criticized as an inefficient way to meet the objectives of relieving emergency food needs or fostering economic and agricultural development in receiving countries. Critics, including the Administration, point to delayed arrivals of up to four months when U.S. commodities are shipped in response to emergency situations. Moreover, ocean transportation costs can be high. A recent study by the Government Accountability Office (GAO) concluded that between 2001 and 2008, WFP food aid obtained by local procurement reduced costs and improved timeliness of delivery, relative to similar food aid that USAID purchased and shipped from the United States to the same countries.31 In FY2006, USAID estimated that almost half of its food aid allocations went to paying the cost of transportation (ocean transport and internal shipping costs).32 Ocean freight rates vary from year to year, but paying such costs is one reason that both USDA and USAID have in various budget requests proposed the allocation of some portion of funds available to Title II emergency programs to purchase commodities in areas near the emergency. The Administration argues that with local or regional purchase, not only 29 See White Paper on Food Aid Policy, CARE USA, June 6, 2006, at http://www.care.org/newsroom/articles/2005/12/ food_aid_whitepaper.pdf. 30 See Catholic Relief Services, Food Aid and Food Security, at http://crs.org/public-policy/food_aid.cfm. 31 GAO concluded that local procurement was less costly in sub-Saharan Africa and Asia by 34% and 29%, respectively, and reduced aid delivery time by over 100 days for many countries in sub-Saharan Africa. See U.S. Government Accountability Office, Local and Regional Procurement Can Enhance the Efficiency of U.S. Food Aid, But Many Challenges May Constrain Its Implementation, GAO-09-570, May 2009, http://www.gao.gov/new.items/ d09570.pdf. 32 See USAID FY2006 Congressional Budget Justification at http://www.usaid.gov/policy/budget/cbj2006/pdf/ fy2006summtabs6_PL480TitleII.pdf. Congressional Research Service 14 International Food Aid Programs: Background and Issues could more food be purchased at lower prices, but the food could be delivered more rapidly. Congressional and other critics of local purchase maintain that allowing non-U.S. commodities to be purchased with U.S. funds would result in undermining the coalition of commodity groups, private voluntary organizations, and shippers that support the program, and in reductions in U.S. food aid. 33 Critics of local or regional procurement also argue that buying locally or regionally could result in price spikes that would make it difficult for poor people to buy the supplies they need on local markets. Some also argue that the reliability and quality of food supplies could not be guaranteed with local or regional procurement. In 2008, the Bush Administration proposed that Congress provide legislative authorization in the farm bill to use up to 25% of funds available annually to P.L. 480, Title II, to procure food from selected developing countries near the site of a crisis. The Administration justified this proposal on the grounds that the U.S. response to food emergencies would be more efficient and costeffective if commodities could be procured locally. The Administration’s farm bill document noted instances in which the U.S. food aid response to emergencies would have been enhanced with this kind of authority: Iraq in 2003, the Asian tsunami in 2004, Southern and West Africa in 2005, and East Africa in 2006. As if anticipating the same congressional antipathy expressed in regard to this idea in past budget requests, the Administration was careful to note that “U.S. grown food will continue to play the primary role and will be the first choice in meeting global needs.” Local and regional purchases would be made only where the speed of the arrival of food aid is essential, according to USDA. The 2008 farm bill (P.L. 110-246) includes a scaled-down version of the Bush Administration’s proposal for legislative authority to use up to $300 million of appropriated P.L. 480 Title II funds for local or regional purchase and distribution of food to assist people threatened by a food security crisis. The farm bill provides that a pilot project be conducted by the Secretary of Agriculture with a total of $60 million in mandatory funding (not from P.L. 480 appropriations) during FY2009-FY2012 (see section on “Local and Regional Procurement Pilot Project (LRPP)”). The Obama Administration did not make a similar request in its FY2010 budget request, but did request International Disaster Assistance funds for local and regional purchase activities in the Foreign Operations budget. Since 2002, appropriations for Title II of the Food for Peace Act have averaged $2 billion annually, none of which can be used to purchase foreign-grown food. However, from 2001 to 2008, through programs funded under a different authority, the Foreign Assistance Act, the U.S. government provided approximately $220 million in total cash contributions to WFP that were used to purchase foreign-grown commodities. In addition, since July 2008, Congress has appropriated $50 million to USAID that can be used for LRP in addition to $75 million that the Administration allocated for LRP in International Disaster Assistance funding; and the 2009 Omnibus Appropriations Act provided another $75 million in development assistance funding to USAID for global food security, including LRP and distribution of food. Also, as discussed below, the Cargo Preference Act of 1954 (as amended) requires up to 75% of the gross tonnage of all U.S.-funded food aid to be transported on U.S.-flag vessels. There is disagreement among USAID, USDA, and the Department of Transportation (which enforces the act) on how to interpret and implement certain requirements of cargo preference, such as the agency responsible for determining availability of U.S.-flag vessels. If these requirements remain ambiguous, U.S. agencies’ use of LRP could be constrained. 33 See H.Rept. 109-255 on H.R. 2744, the FY2006 Agriculture appropriations measure. Congressional Research Service 15 International Food Aid Programs: Background and Issues Cargo Preference Related to the question of cost-effectiveness of providing U.S. commodities as food aid is the cargo preference issue. The Cargo Preference Act, P.L. 83-644 (August 26, 1954), as amended, contains permanent legislation concerning the transportation of waterborne cargoes in U.S.-flag vessels. The act requires that 75% of the volume of U.S. agricultural commodities financed under P.L. 480 and other concessional financing arrangements be shipped on U.S.-flagged vessels. Maritime interests generally support cargo preference, but opponents argue that it increases the costs of shipping U.S. commodities to poor countries and potentially reduces the volume of food aid provided. A GAO report found that shipments of food aid on U.S.-flag vessels did little to meet the law’s objective of helping to maintain a U.S. merchant marine and that cargo preference requirements adversely affect operations of the food aid programs, chiefly by raising the cost of ocean transportation and reducing the volume of commodities that can be shipped. 34 Author Contact Information Melissa D. Ho Analyst in Agricultural Policy mho@crs.loc.gov, 7-5342 Charles E. Hanrahan Senior Specialist in Agricultural Policy chanrahan@crs.loc.gov, 7-7235 34 See General Accountability Office, Cargo Preference Requirements: Objectives Not Met When Applied to Food Aid Programs, September 29, 1994, available at http://archive.gao.gov/t2pbat2/152624.pdf. Congressional Research Service 16FY2013 Agricultural Appropriations and the FY2013 Continuing Resolution Neither chamber in the 112th Congress voted on an FY2013 appropriations bill for Agriculture. However, both House and Senate appropriations committees have reported bills that include appropriations for international food aid programs.20 The House committee-reported bill (H.R. 20 H.Rept. 112-542, Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Bill, 2013, June 20, 2012; S.Rept. 112-163, Agriculture, Rural Development, Food and Drug (continued...) Congressional Research Service 11 International Food Aid Programs: Background and Issues 5973) provided an appropriation of $1.150 billion for Food for Peace Title II, more than $250 million less than requested by the Administration. Noting that both the Government Accountability Office (GAO) and USAID’s Inspector General have found inefficiencies in the monetization of food aid by PVOs, cooperatives, and nongovernmental organizations, the House committee instructs USDA and USAID to provide a report with 90 days of enactment to explain how they evaluate the financial controls and performance of NGOs and PVOs that receive Food for Peace funds. For the McGovern-Dole Program, the House committee-reported bill provided $180.3 million, $3.7 million less than requested in the President’s budget. Table 4. Status of FY2013 Food Aid Appropriations $billion Food for Peace Title II McGovernDole Total FY2012 (est.) Budget Request H.R. 5973 S. 2375 1.466 1.400 1.150 1.466 .184 .184 .180 .184 1.650 1.584 1.330 1.650 Source: H.Rept. 112-542, to accompany H.R. 5973; S.Rept. 112-163, to accompany S. 2375. Notes: USDA food aid programs are authorized in farm bills and are not subject to annual appropriations. The Senate committee-reported Agriculture appropriations bill (S. 2375) provides $1.466 billion for Food for Peace Title II programs, $66 million more than requested in the Administration’s budget proposal. S. 2375 provides $184 million for the McGovern-Dole program, the amount requested by the Administration. The FY2013 continuing resolution (CR), P.L. 112-175, enacted September 28, 2012, leaves funding for food aid programs at their FY2012 level through March 2013. FY2013 Funding for the Emergency Food Security Program The Administration proposed that up to $366 million of a requested $960 million for International Disaster Assistance (IDA) in FY2013 be allocated to the EFSP. Authorization of appropriations for IDA is included in the annual State and Foreign Operations appropriations bill. The House Appropriations Committee-approved State-Foreign Operations FY2013 funding bill (H.R. 5857/H.Rept. 112-494) provided $723 million for IDA. The Senate Appropriations Committee bill (S. 3241/S.Rept. 112-172) provided $1,250 million for IDA. While the Senate bill provides USAID with flexibility in meeting its requested amount for EFSP, the lower amount provided for IDA in the House bill would constrain USAID’s ability to provide emergency food security assistance in FY2013. The FY2013 CR leaves funding for IDA (and EFSP) at the level of FY2012 spending (up to $300 million for the fiscal year) through March 2013. (...continued) Administration, and Related Agencies Appropriations Bill, 2013, April 26, 2012. Congressional Research Service 12 International Food Aid Programs: Background and Issues Issues for Congress Food Aid Quality Concerns about the nutritional quality and safety of food aid have been raised in recent analyses of U.S. food aid programs.21 These studies point to reduced food aid budgets, high and volatile food prices, and frequent and protracted humanitarian emergencies as factors underlying a need for greater attention to the nutritional content of U.S. food aid.22 Historically, most U.S. food aid has been delivered in the form of general rations composed of unfortified grains and legumes (wheat, corn, sorghum, rice soy, beans, peas, lentils, and vegetable oils). Estimates are that about 25% of the volume of U.S. food aid is in the form of fortified blended foods (FBFs).23 Advances in food and nutritional sciences in recent years, including the development of improved product formulations and new products, have enhanced the capacity of food aid providers to deliver more nutritious foods to target groups such as children or lactating mothers or HIV-positive individuals. Not only have new FBF formulations been created, but also new products such as ready to use therapeutic foods (RUTFs), including lipid-based products, have been developed.24 GAO’s 2011 report notes two significant challenges in delivering more nutritional products to food aid recipients. One is that specialized food products are generally more expensive than food rations used in general distribution feeding program. According to GAO, a typical ration consisting of rice, cornmeal, wheat or sorghum can range in cost from $0.02 per day for a 6month old child to $0.09 per day for a 2-year old child. A daily ration of FBFs which includes additional fortification can cost between $0.06 and $0.12 per day, depending on the size of the ration. Within a fixed budget, GAO notes, providing more expensive specialized products would reduce the number of people fed. A second challenge, according to GAO, is that U.S. food aid agencies poorly target the specialized food aid products provided. In this connection, GAO notes that USAID provides implementing partners with limited guidance on how to target more nutritious foods to ensure they reach intended recipients. 21 U.S. Government Accountability Office (GAO), International Food Assistance: Better Nutrition and Quality Control Can Further Improve U.S. Food Aid, GAO-11-491, May 2011, viewed at http://gao.gov/assets/320/318210.pdf; and Patrick Webb et al., Improving the Nutritional Quality of U.S. Food Aid: Recommendations for Changes to Products and Programs: report to the U.S. Agency for International Development, prepared by Tufts University, Friedman School of Nutrition and Policy, 2011, viewed at http://nutrition.tufts.edu/documents/ ImprovingtheNutritionalQuality.pdf. 22 In addition to nutritional aspects of food aid, food aid quality also concerns food safety, sensory aspects such as taste, smell and texture, and convenience, such as ease of cooking. 23 FBFs are foods that are complementary to typical rations of grains and legumes. They contain both calories and proteins and are fortified with essential micronutrients. FBFs are usually pre-cooked and are designed for use in programs where older infants and young children are being fed. For detailed information on FBFs, see World Food Programme, Food Quality Control, Food Specifications: Blended Food Products, viewed at http://foodquality.wfp.org/ FoodSpecifications/BlendedFoodsFortified/tabid/105/Default.aspx. 24 Therapeutic foods are foods designed for specific, usually nutritional, therapeutic purposes as a form of dietary supplement. Therapeutic foods are used for emergency feeding of malnourished children or to supplement the diets of persons with special nutritional requirements, such as the elderly or HIV patients. Lipid-based products, like peanut butter-based Plumpy’Nut or Plumpy’Doz, are RUTFs used widely in child feeding programs. Congressional Research Service 13 International Food Aid Programs: Background and Issues GAO recommends that USAID and USDA issue guidance to implementing partners on addressing nutritional deficiencies, especially during protracted emergencies, and evaluate the performance and cost effectiveness of specialized food products. The Tufts report to USAID suggests, among other recommendations, that the agency should adopt new specifications for FBFs and explore the use of new products such as new lipid-based products; provide new program guidance to implementing partners; and convene an interagency food aid committee to provide technical guidance about specialized products and to interface with industry and implementing partners. Monetization Monetization (selling in local or regional markets) of food aid commodities is a controversial issue. As mentioned above, food aid legislation allows PVOs and cooperatives to sell donated P.L. 480 commodities in the recipient country or in countries in the same region, in an amount not less than 15% of the aggregate amounts of all commodities distributed under Title II non-emergency programs for each fiscal year. The funds generated by these sales can then be used to finance internal transportation, storage, or distribution of commodities; or to implement development projects; or can be invested, and the interest earned can be used to finance distribution costs or projects. Many organizations that rely on sales of U.S. food aid commodities to finance development projects support monetization as their major source of development finance. A large PVO, CARE International, however, has questioned the use of monetization as a source of funds, as some critics of the practice argue that it stymies the development of local agricultural markets and hurts economic development in the longer term.25 In the summer of 2007, CARE, which had been a major supporter of monetization in the past, announced that it would transition away from the practice of monetization and refuse food commodity donations worth tens of millions of dollars. According to CARE, monetization is management-intensive and costly and fraught with legal and financial risks. In addition, CARE viewed monetization as economically inefficient. As CARE notes in its food policy paper, “Purchasing food in the U.S., shipping it overseas, and then selling it to generate funds for food security programs is far less cost-effective than the logical alternative—simply providing cash to fund food security programs.” Finally, echoing criticisms of food aid heard in WTO Doha Round negotiations, CARE notes that when monetization involves open-market sale of commodities to generate cash, which is almost always the case, it inevitability causes commercial displacement. As such, it can be harmful to traders and local farmers and undermine the development of local markets, and can be detrimental to longer-term food security objectives. Catholic Relief Services has taken a similar position with respect to monetization, but has not yet decided to transition away from the practice completely. According to a recent policy declaration, Catholic Relief Services recognizes that selling commodities (monetization) is an inefficient method of obtaining funding.26 As a consequence, the organization states, it sells commodities only when it has determined that there are no alternative methods of funding and that the sale of the commodities will have no negative impacts on local markets and local production. Catholic Relief Services says that its policy is to seek to replace monetization with cash funding to cover program costs. 25 See White Paper on Food Aid Policy, CARE USA, June 6, 2006, at http://www.care.org/newsroom/articles/2005/12/ food_aid_whitepaper.pdf. 26 See Catholic Relief Services, The International U.S. Food Aid Program, viewed at http://crs.org/public-policy/pl480-title-ii.cfm. Congressional Research Service 14 International Food Aid Programs: Background and Issues Program assessments by GAO have documented some of the inefficiencies associated with monetization. For example, a 2011 GAO study supports the claim that monetized food aid has the potential to displace commercial trade in recipient countries. Despite legislation that imposes assessments of a country’s usual marketing requirements (UMRs) and analyses (Bellmon analyses) of the impact of food aid on local markets,27 GAO and others report that there nevertheless is significant evidence of negative effects on local markets.28 Using data from 20082011, GAO found that in more than a quarter of countries reviewed, monetized food aid comprised more than 25% of the commercial import volume of specific commodities in recipient countries. In half of these cases, the volume of monetized food exceeded reported commercial imports of the particular commodity by over 100%. GAO also has reported that the average “cost recovery” (the difference between the amount of appropriated funds used to purchase the commodities and the proceeds available for development projects from monetization) ranges from 58% to 76% in USDA- and USAID-sponsored projects, respectively. On the other hand, some research has found that targeted monetization, as opposed to open market sales to generate cash, can be used as a means to develop capacity of smaller traders to participate in markets, increasing competition and /or combatting price volatility.29 A survey of U.S. and other food aid programs over a 50-year period suggests, however, that examples of targeted monetization, as opposed to open market sales to generate cash, are few.30 A recent report, commissioned by the Alliance for Global Food Security,31 evaluated food aid monetization cases in five developing countries.32 The purpose of the study was to determine whether and how monetization adds value and creates benefits besides generating funds for conducting development activities. The evaluation’s conclusion is that “monetization can lead to benefits beyond those that would be created via direct program funding by addressing credit, hard currency, small volume, and other constraints to buying on the international market, thereby creating business opportunities and increasing the availability of the commodity in the recipient country.”33 Local or Regional Procurement (LRP) The U.S. food aid program is often criticized as an inefficient way to meet the objectives of relieving emergency food needs or fostering economic and agricultural development in receiving 27 UMR analyses are undertaken to ensure that U.S. food aid commodities will not affect world commodity prices and/or disrupt commercial trade; Bellmon analyses are used to determine if U.S. food aid shipments will interfere with recipient country production or marketing and if there is adequate storage available in the recipient country. 28 GAO, International Food Assistance: Funding Development Projects through the Purchase, Shipment and Sale of U.S. Commodities is Inefficient and Can Cause Adverse Market Impacts, GAO-11-636, June 2011; and C. B. Barrett and Daniel G. Maxwell, Food Aid after Fifty Years: Recasting Its Role, London and New York: Routledge, 2005, pp. 133-138. 29 See A. Abdulai, C. B. Barrett, and P. Hazell, “Food Aid for Market Development in Sub-Saharan Africa,” DSGD Working Paper No. 5, International Food Policy Research Institute, viewed at http://wwww.ifpri.org/sites/default/files/ publications/dsgdp05.pdf. 30 GAO and Barrett and Maxwell, op. cit. 31 The Alliance for Global Food Security consists of 14 PVOs, cooperatives, and a hunger advocacy group who are involved in U.S. food assistance programs. The organizations are listed at http://foodaid.org/about/. 32 Informa Economics, The Value of Food Aid Monetization: Benefits, Risks and Best Practices, prepared for the Alliance for Global Food Security, November 2012, viewed at http://foodaid.org/news/wp-content/uploads/2012/11/ Informa-Economics-Study-Value-of-Food-Aid-Monetization-November-2012.pdf. 33 Ibid., p. 2. Congressional Research Service 15 International Food Aid Programs: Background and Issues countries. Critics point to delayed arrivals of up to four months or more when U.S. commodities are shipped in response to emergency situations. Moreover, ocean transportation costs can be high. A recent GAO report concluded that between 2001 and 2008, WFP food aid obtained by local procurement reduced costs and improved timeliness of delivery, relative to similar food aid that USAID purchased and shipped from the United States to the same countries.34 In FY2006, USAID estimated that almost half of its food aid allocations went to paying the cost of transportation (ocean transport and internal shipping costs).35 Ocean freight rates vary from year to year, but paying such costs is one reason that both USDA and USAID in various budget requests proposed the allocation of some portion of funds available to Title II emergency programs to purchase commodities in areas near the emergency. The Administration argues that with local or regional purchase, not only could more food be purchased at lower prices, but the food could be delivered more rapidly. Congressional and other critics of local purchase maintain that allowing non-U.S. commodities to be purchased with U.S. funds would result in undermining the coalition of commodity groups, PVOs, and shippers that support the program, and in reductions in U.S. food aid.36 Critics of local or regional procurement also argue that buying locally or regionally could result in price spikes that would make it difficult for poor people to buy the supplies they need on local markets. Some also argue that the reliability and quality of food supplies could not be guaranteed with local or regional procurement. In 2008, the Bush Administration proposed that Congress provide legislative authorization in the farm bill to use up to 25% of funds available annually to P.L. 480, Title II, to procure food from selected developing countries near the site of a crisis. The Administration justified this proposal on the grounds that the U.S. response to food emergencies would be more efficient and costeffective if commodities could be procured locally. The Administration’s budget request cited instances in which the U.S. food aid response to emergencies would have been enhanced with this kind of authority, particularly for Iraq in 2003, the Asian tsunami in 2004, Southern and West Africa in 2005, and East Africa in 2006. As if anticipating the same congressional antipathy expressed in regard to this idea in past budget requests, the Administration was careful to note that “U.S. grown food will continue to play the primary role and will be the first choice in meeting global needs.” Local and regional purchases would be made only where the speed of the arrival of food aid is essential, according to USDA. The 2008 farm bill (P.L. 110-246) included a scaled-down version of the Bush Administration’s proposal for legislative authority to use up to $300 million of appropriated P.L. 480 Title II funds for local or regional purchase of emergency food aid. The farm bill provided that a pilot project be conducted by the Secretary of Agriculture with a total of $60 million in mandatory funding (not from P.L. 480 appropriations) during FY2009-FY2012 (see “Local and Regional Procurement Pilot Project (LRPP)” above). Since 2002, appropriations for Title II of the Food for Peace Act have averaged $2 billion annually, none of which could be used to purchase foreign-grown food. However, from 2001 to 2008, through programs funded under a different authority, the Foreign Assistance Act, the U.S. 34 GAO concluded that local procurement was less costly in sub-Saharan Africa and Asia by 34% and 29%, respectively, and reduced aid delivery time by over 100 days for many countries in sub-Saharan Africa. See U.S. Government Accountability Office, Local and Regional Procurement Can Enhance the Efficiency of U.S. Food Aid, But Many Challenges May Constrain Its Implementation, GAO-09-570, May 2009, http://www.gao.gov/new.items/ d09570.pdf. 35 See USAID FY2006 Congressional Budget Justification at http://www.usaid.gov/policy/budget/cbj2006/pdf/ fy2006summtabs6_PL480TitleII.pdf. 36 See H.Rept. 109-255 on H.R. 2744, the FY2006 Agriculture appropriations act. Congressional Research Service 16 International Food Aid Programs: Background and Issues government provided approximately $220 million in total cash contributions to WFP that were used to purchase foreign-grown commodities. In addition, in supplemental appropriations for FY2008 and FY2009, Congress provided USAID with $125 million for LRP. Recent evaluations of LRP projects confirm that LRP can lower the costs of providing food aid in emergency situations and improves the timeliness of assistance in most settings.37 While establishing that LRP is a useful tool for responding to humanitarian needs, evaluations of U.S. and other LRP projects suggest that it is not a one-size fits all substitute for other forms of assistance. Further, while there are clear advantages of LRP over in-kind food aid in many situations, these evaluations maintain that such procurement should be accompanied by careful assessment and monitoring to ensure that concerns about food quality, local market disruption, and assuredness of supply are addressed. Cargo Preference The cargo preference issue also is related to the question of the cost-effectiveness of providing U.S. commodities as food aid. Ocean transport of government-generated shipments is governed by the Cargo Preference Act, P.L. 83-644 (August 26, 1954). This act contains permanent legislation concerning the transportation of waterborne cargoes in U.S.-flag vessels. An amendment to the act in 1985 increased from 50% to 75% the volume of U.S. agricultural commodities financed under U.S. food aid programs that must be shipped on U.S.-flag vessels. The Commodity Credit Corporation pays the additional freight charges and the Maritime Administration (MARAD) of the Department of Transportation reimburses the CCC for the “excess” ocean freight costs incurred by complying with the additional 25% requirement. Excess costs are incurred because freight rates on U.S.-flag vessels are generally higher than on foreign commercial ships. Among the law’s objectives are to ensure the retention of military-capable commercial U.S.-flag vessels and to maintain employment for American maritime workers. Maritime interests generally support cargo preference, but critics argue that it increases the costs of shipping U.S. commodities to poor countries and potentially reduces the volume of food aid provided. A 1994 GAO report found that shipments of food aid on U.S.-flag vessels did little to meet the law’s objective of helping to maintain a U.S. merchant marine and those cargo preference requirements adversely affected operations of the food aid programs, chiefly by raising the cost of ocean transportation and reducing the volume of commodities that can be shipped.38 An analysis in 2010 of the effects of cargo preference requirements on food aid programs found that they did not succeed in meeting the law’s objectives of maintaining a U.S. merchant marine 37 Fisher, J. L. “USDA Local and Regional Procurement Pilot Project: Updates and Next Steps,” presentation to the LRP Learning Alliance Lessons Learned Workshop, September 19-22, 2011, Nairobi, Kenya, viewed at https://sites.google.com/site/lrplearningalliance/usda-lrp-learning-event-september-2011-nairobi/ USDA_Slides_for_Learning_Alliance_Workshop%28FINAL%29.ppt?attredirects=0&d=1; Erin C. Lentz, Simone Passarelli, Christopher B. Barrett, “The Timeliness and Cost-Effectiveness of the Local and Regional Procurement of Food Aid,” February 2012, viewed at http://dyson.cornell.edu/faculty_sites/cbb2/Papers/ LRP%20Ch%202%20Lentz%20et%20al%20Jan%2011%202012%20(1).pdf ; Erin C. Lentz, Christopher B. Barrett and Miguel I. Gómez , “The Impacts of Local and Regional Procurement of US Food Aid: Learning Alliance Synthesis Report,” viewed at http://dyson.cornell.edu/faculty_sites/cbb2/Papers/ LRP%20Ch%202%20Lentz%20et%20al%20Jan%2011%202012%20(1).pdf. 38 GAO, Cargo Preference Requirements: Objectives Not Met When Applied to Food Aid Programs, September 29, 1994, available at http://archive.gao.gov/t2pbat2/152624.pdf. Congressional Research Service 17 International Food Aid Programs: Background and Issues and that eliminating cargo preference could enable an increase in food aid commodities provided.39 The recently enacted Moving Ahead for Progress in the 21st Century Act (MAP-21, H.R. 4348, P.L. 112-141), which, among other things, reauthorizes the Highway Trust Fund, repeals the 1985 amendment to the cargo preference act, thus reducing the volume of food aid commodities that must be shipped on U.S. flag-vessels from 75% to 50%. Enacted as a cost-saving measure, the repeal, according to CBO estimates, would result in deficit reductions of $108 million annually or $540 million over the period 2012-2017.40 While U.S. food aid agencies (USDA and USAID) would likely spend less on shipping food aid commodities, the effect of the repeal on the volume of U.S. commodities provided as food aid would be sensitive to fluctuating commodity prices and commercial ocean freight rates. Legislation was introduced in the House (H.R. 6170) in the 112th Congress to repeal the reduction in the cargo preference requirement and to reinstate the provision requiring that 75% of U.S. food aid be shipped on U.S.-flag vessels. 2012 Farm Bill Food Aid Proposals International food aid programs are authorized in farm bills (with the exception of the Emergency Food Security Program, which is authorized in the Foreign Assistance Act of 1961, as amended).41 The 112th Congress did not complete action on a 2012 farm bill to replace the expired 2008 farm bill (P.L. 110-240). Instead, Congress extended the 2012 farm bill, including its food aid provisions, until September 30, 2013.42 Both the House committee-reported and the Senatepassed bills included food aid provisions. These provisions will likely serve as a starting point in formulating food aid provisions as the farm bill is debated in the 113th Congress. The Senate approved its version of the 2012 omnibus farm bill (S. 3240, the Agriculture Reform, Food, and Jobs Act of 2012) by a vote of 64-35 on June 21, 2012. Subsequently, the House Agriculture Committee conducted markup of its own version of the farm bill (H.R. 6083, the Federal Agriculture Reform and Risk Management Act of 2012) on July 11, 2012, and approved the amended bill by a vote of 35-11. No House floor action on H.R. 6083 was scheduled during the 112th Congress. Title III of both versions of the 2012 farm bill farm bill deals with statutes concerning U.S. international food aid. Both S. 3240 and H.R. 6083 would have reauthorized funding for all of USDA’s international food aid programs, including the largest, Food for Peace Title II (emergency and nonemergency food aid). Both bills contained amendments to current food aid law that place greater emphasis on improving the quality of food aid products (i.e., enhancing their nutritional quality). The Senate bill would have placed new restrictions on the practice of monetization, or selling U.S. food aid commodities in recipient countries to raise cash to finance development projects. In 39 Elizabeth R. Bageant, Christopher B. Barrett, and Erin Lentz, “Food Aid and Agricultural Cargo Preference,” Policy Brief, Cornell University, Charles H. Dyson School of Applied Economics and Management, November 2010, viewed at http://dyson.cornell.edu/faculty_sites/cbb2/Papers/ACP_-_policy_brief_Nov_2010_Final.pdf. 40 Congressional Budget Office, Cost estimate of H.R. 4348, MAP-21, June 29, 2012, viewed at http://cbo.gov/sites/ default/files/cbofiles/attachments/hr4348conference.pdf. Cost savings result from a reduction in the reimbursement the Maritime Administration (MARAD) makes to the CCC for costs due to higher freight rates on U.S.-flag vessels. 41 P.L. 87-195. 42 H.R. 8, signed by the President on January 2, 2013; a P.L. number has not yet been assigned to this act. Congressional Research Service 18 International Food Aid Programs: Background and Issues this regard, S. 3240 required implementing partners such as U.S. PVOs or cooperatives to recover 70% of the U.S. commodity procurement and shipping costs. The Senate bill would have repealed the specified dollar amounts for nonemergency food aid required in current law (the “safe box”). In place of the safe box, S. 3240 provided that nonemergency food aid be not less than 20% nor more than 30% of funds made available to carry out the program, subject to the requirement that a minimum of $275 million be provided for nonemergency food aid. The House bill placed no limits on the practice of monetization, other than new reporting requirements, and fixed the amount of “safe box” nonemergency assistance at $400 million annually. The Senate version of the farm bill would have created a new local and regional purchase program in place of the LRPP, with funding authorized at $40 million annually over the duration of the farm bill. The House-reported bill did not include an LRP program. A detailed comparison of Senate and House versions of Title III is contained in CRS Report R42552, The 2012 Farm Bill: A Comparison of Senate-Passed S. 3240 and the House Agriculture Committee’s H.R. 6083 with Current Law. Author Contact Information Charles E. Hanrahan Senior Specialist in Agricultural Policy chanrahan@crs.loc.gov, 7-7235 Acknowledgments Melissa D. Ho, formerly with CRS, co-authored an earlier version of this report. Congressional Research Service 19