Farm Freeloaders in Foreign-Aid Food Fight
Shady disaster aid is a global phenomenon.
As the Hurricane Katrina recovery effort devolves into a succession of handshake deals and limited-competition contracts, at least one member of Congress—Rep. Bennie Thompson (D-Miss.)—appears surprised enough to comment. "FEMA and the others have put out these contracts in such a haphazard manner, I don't know how they can come up with anything that is accountable to the taxpayers," he told The New York Times. Thompson and others similarly concerned can take comfort, at least, in bureaucratic consistency: Disaster aid is a suspect billion-dollar business even when American cities aren't the ones underwater.
International disaster relief is an ugly sideshow in the preparations for a World Trade Organization meeting set for December—part II of the trade liberalization talks that accomplished precisely nothing in Cancun two years back. Last week at preliminary meetings in Paris, EU Trade Commissioner Peter Mandelson said the U.S., E.U. and Brazil were still a "long way" from a deal on subsidy-slashing. "The United States is ready to eliminate all tariffs, subsidies and other barriers to free flow of goods and services," President Bush explained days before, "as other nations do the same." Translation: You First.
The U.S. is asking the E.U. to drop its egregious $3 billion farm supports. But as Washington pours billions into reclaiming a city from a gulf, the E.U. wants major changes in the way the federal government responds to humanitarian crises outside its borders. At a cost of more than $1 billion, the U.S. carts overseas 7.5 million metric tons of food every year. For their trouble, U.S. taxpayers have earned the excoriation of the WTO, the EU, Oxfam, and aid organizations the world over—all of whom want the U.S. to stop sending free corn and wheat to Africa. U.S. Trade Representative Rob Portman has referred to this request, by turns, as "radical," "outrageous," and " harmful to our farmers and ranchers."
What's the WTO got against food aid? The organization has another word for sending developing countries free stuff: dumping. If that sounds a touch cynical, consider the circumstances under which the food aid program was developed in 1954. The U.S. was simultaneously experiencing a spike in agricultural production—notably wheat—and eager to solicit the goodwill of newly emerging states. Letting taxpayers buy and ship surplus carbohydrates evidently seemed like a good idea.
Fifty years later, according to Oxfam, food aid still rises with surplus production and falls when supply is tight. When a bumper crop threatens to destabilize prices, the feds sweep in to buy and give away. Having trouble hawking California raisins? Soybean oil? Corn? Wheat? Rice? There's an African village with your name on it.
The importance of food aid as an export outlet is nowhere near what it once was, but the business of disaster aid has given other industries an interest in maintaining the status quo. According to a July report by the Minnesota-based Institute for Agricultural and Trade Policy (IATP), it's the shipping industry—not agribusiness—that has emerged as the lobbying behemoth behind food aid. The U.S. requires that 75 percent of procurement, processing, bagging and shipping be handled by U.S. firms. Fully a third of the money taxpayers spend sending free food (typically bought at 11 percent over market price) goes straight to shipping costs.
In general, drowning a country in a product for which it might otherwise have a competitive advantage is not a particularly helpful way to foster development. A March Oxfam report notes that in 2002 and 2003, donors shipped 600,000 tons of food to Malawi, causing the prices of maize and rice to crash. Ten percent of food aid isn't even directed at countries with a hunger problem; instead, the food is given for the purpose of being sold and used to fund development projects. The practice, referred to as the "monetization of aid," has the potential to put local traders out of business in the name of building a school for their kids.
Food aid recipients are a mix of NGOs who sell food for funds, countries with genuine food shortages, states with which the U.S. wants to build alliances, and the odd wild card for whom the motivation to give free wheat is altogether unclear. (IATP quotes the USDA's economic research service: "Allocations to individual countries do not always correspond to levels of need."). China, for instance, received U.S. food aid from 2000 to 2002. During the same period, China donated food aid in the form of wheat, rice, corn, and oils to North Korea and Africa.
Oxfam, the E.U., and IATP want the U.S. to send cash in place of carbs, so less aid can be used to buy more food from local traders. The millions lost to shipping costs would disappear; the food would be cheaper, packaging and processing costs would plummet. Cash handouts in kleptocracies are inherently problematic, but food aid is easily converted to cash and just as vulnerable to corruption.
It's a fair question whether federal rather than private donations (or, given the bleak recent history of humanitarian aid, any donations) are a good idea to begin with, but almost anything is preferable to the current poverty attack plan: subsidizing U.S. farmers to produce surpluses to send to developing countries, suppressing Third World producers, who are already discouraged from delving into production thanks in part to…U.S. farm supports.
The WTO talks are tortured for a variety of reasons, among them the fact that there are no ready answers to the problems of global poverty. But while questions linger over what's fair, how to get there, and who should cut which subsidies first, some truths are too obvious for even multinational organizations to waste time fighting over. Corporate handouts under the guise of American generosity leave everyone, from Darfur to Washington to coastal Louisiana, considerably poorer.
