Since the proposed changes to the US system of food aid, many have voiced concerns about the shift away from domestic agriculture and towards local food supplies in developing countries. But how will food aid reform affect US shipping and agriculture?

Devex journalist, John Alliage Morales, reports after the US Agency for International Development (USAID) Administrator Rajiv Shah testified before the Senate Appropriations Subcommittee on State and Foreign Operations held May 7, 2013. Shah defended President Obama’s proposal to reform the $1.5 million US Food Aid Program: it would only affect about 300 employees in the shipping industry and 0.2 percent of American agricultural exports.

The six-decade old food aid program was designed primarily to help American farmers by purchasing their surplus, and American shipping companies by requiring at least 75 percent of the goods to be transported to countries in need on U.S.-flagged vessels.

Under Obama’s proposal for fiscal year 2014, the government would still buy food from farmers, but only up to 55 percent of the total, allowing the USAID to source the remaining 45 percent from local or regional markets closer to the crisis areas. USAID estimates that the $1.8-billion new program could reach an additional four million people simply by freeing up money spent on shipping and other costs.

Responding to queries from senators on the reform’s impact to local agriculture, Shah said: “We think the net change would be close to 0.2 percent of total value of U.S. agriculture export.”

“There are other sources of market demand,” added the USAID chief, who stressed that it is “inaccurate” to say that no one will buy the agricultural produce that would no longer be purchased by the government.

Ten years ago, USAID bought and shipped 5.5 million metric tons of food, but today this figure is down to 1.8 million metric tons. In addition, shipping costs have tripled over the same period of time, eating away about 25 percent of the budget, which could have been used to buy more food.

Shah noted that if the reform is approved by Congress, only about eight to ten ships or about 300 employees of the shipping industry will no longer benefit from the food aid program. That accounts for 0.2 percent of the total 15,000 workers in the American maritime shipping sector, he added.

“Of course, we expect that those ships will have other business activities, some of which will come from Department of Defense, some of which will come from elsewhere that they can pursue,” the official said.

– Maria Caluag

Source: Devex
Photo: US News