Rep. Ed Royce, R-Calif., chairman of the U.S. House Committee on Foreign Affairs, said Wednesday in a hearing the requirement that half of U.S. food aid be move on U.S.-flag vessels is an ”impediment to an effective, efficient program.
“Decades ago, this cargo preference was seen as a way to ensure a reserve of ships and crew for the U.S. Navy in times of war. But by restricting competition to the few U.S.-flagged ships still sailing—the majority of which do not meet the Maritime Administration’s age-based criterion—cargo preference adds $140 million in transportation costs each year,” Royce said during an opening statement on a hearing about modernizing U.S. international food aid.
On Monday, the Senate, by a vote 66-27, passed a new farm bill that the New York Times
said rejected the Obama administration's call for “overhauling the $1.4 billion program to allow the government to buy food locally in less developed countries, instead of buying food in the United States and shipping it overseas. The Senate rejected the proposal but increased spending for buying food abroad to $60 million from $40 million.”
In contrast to the bipartisan support for the farm bill in the Senate, passage in the House is expected to be much more challenging.
Both Royce and the ranking member of the committee, Eliot Engel, D-N.Y., said they support food aid reform.
Engel said by allowing the U.S. Agency for International Development to purchase food closer to where it's needed, transport costs could be reduced and aid could get to recipients more quickly. “Hunger pains should not be subject to shipping schedules,” he said.
Royce complained the current system of cargo preference delays deliveries by months and claimed “on average, only about two to four four U.S.-flag carriers place bids per food shipment, making the system prone to manipulation.
“Due to a complex set of holding companies, most of these ‘American’ vessels are foreign-owned. As one witness will testify today, in the past decade, 50 percent of the food aid budget has been eaten up by transportation costs," he added.
“Today, the U.S.-flagged requirement simply serves the interests of a handful of companies. In fact, the Pentagon has determined that an easing of cargo preference requirements would have no tangible effect upon U.S. maritime security,” Royce said.
But a bipartisan group of congressmen have voiced support for existing food aid programs and shipping aid on U.S. vessels.
In a statement last month, Reps. Elijah E. Cummings, D-Md., Duncan Hunter, R-Calif., and Nick J. Rahall II, D-W.Va., said the program utilizes “the most proven method for cost-effective delivery of food aid to hungry populations abroad.
They said the Obama administration’s proposal for local purchase “is unproven on a large scale and could not be implemented with the same levels of accountability and transparency that characterize our existing food aid programs.”
The lawmakers also complained “supporters of these changes mischaracterize the importance of the U.S. merchant marine and the essential policy nexus between it and food aid programs. Since 1936, U.S. law has held “that the United States shall have a merchant marine sufficient to carry... a substantial portion of the water-borne export and import foreign commerce of the United States and... capable of serving as a naval and military auxiliary in time of war or national emergency.”
At yesterday’s hearing Andrew S. Natsios, a professor at Texas A&M University, a former senior manager at USAID and vice president of the charity World Vision, testified at the hearing that “because of the Cargo Preference Act of 1954, 55 percent of food aid must be shipped on US flag-carriers, of which there are only currently 13 qualified firms. This greatly increases the costs of shipping these commodities by limiting the number of companies able to bid on the shipping contracts.”
He said Chris Barrett, a professor at Cornell University, has estimated shipments on U.S.-flag carriers cost 80 percent more than identical shipments placed on foreign-flag carriers.
Natsios said the Food for Peace program has spent 49 percent of its budget on transportation and handling costs and only 40 percent on actual commodities. (Ocean freight accounts for 17.65 percent of the cost; inland freight, 7.46 percent; and internal transport storage and handling, 24.38 percent, according to figures cited by Natsios.)
“In addition, prices are driven up even further by a requirement that much of the nonemergency tonnage be fortified, bagged, or processed, increasing the handling of the commodities and, therefore, the amount that can be charged by the shipping companies. No other industry benefits more from current U.S. food aid policy than the U.S.-flagged shipping industry, which is probably why they are the strongest opponents to reform,” he testified. - Chris Dupin