In the season of giving and charity, it may be appropriate to explore what the US does in the way of charitable donations to the world’s family of countries. After all, the food donations to needy countries are produced by farmers, and there are substantial taxpayer funds, farmers included, who pay for commodities to be donated and shipped abroad. Food aid is part of the Farm Bill trade title, so let’s shed some light on it.

The US has donated food to needy countries for many years, but came into prominence with humanitarian relief after World War II and became organized during the Eisenhower Administration’s PL-480 program. Most farmers have taken pride in those efforts, but with the world culture changing, complaints that it is unfair trade, and the high cost of the programs, the entire issue of food aid has come under greater scrutiny. Purdue agricultural economist Phillip Abbott’s Overview of Food Aid & the Farm Bill organizes food aid into three categories:
1) Emergency relief augments food supplies or rebuilds productive assets following natural disasters or political strife.
2) Project food aid funds a wide range of development projects implemented by foreign governments or private voluntary organizations (NGOs).
3) Program aid provides balance of payments support to recipient governments to cover food import costs as well as other foreign exchange needs.
Abbott says program and project aid are often “monetized” as donated food is sold in recipient countries and receipts fund broad development programs and emergency food aid is more likely to use food rather than cash donations.

Those types of aid are included in eight different federal programs, which have budgetary allocations that ranged from $0 to $803 million in 2006. The primary programs which are part of Public Law 480 observed their 50th anniversary in 2004, but were subjected to criticism because of multiple purposes that have changed over time.

One of the biggest challenges to food aid programs is the fact the 1985 and 1995 Farm Bills created policies that ensured the market would handle any production surpluses, instead of the Commodity Credit Corporation, which currently holds no surplus food products. Without surplus food being available for donation, critics rhetorically asked why such programs exist. This parallels the negotiations in the World Trade Organization at which the European Union has offered elimination of its export subsidy program that had shipped food to countries at substantially reduced prices. In turn the EU wanted the US to reciprocate by eliminating programs the EU thought were similar, although the US characterized them as outright donations. As part of the negotiations, several issues become dominant:
1) Cash donations are more easily handled than containers of food products.
2) When the donated commodity gets to its destination, should it be donated or sold?
3) Donated food displaces imports from commercial sources.
4) Food donations create a disincentive for recipient countries to produce their own food.
5) US food donations have to be shipped on US carriers, and freight charges are 40% of the budget.
6) Purchase of local food, or from nearby countries reduce transportation and handling costs.
The US is prohibited by trade agreements from using food aid as an export subsidy, but Abbott says the concern exists because donated food is less available when prices are high and needy countries are less able to purchase it, such as the current situation with many commodities. WTO negotiators have agreed that export subsidies are improper, donated food should not displace commercial purchases, and donors should give cash rather than food products. The US has rejected the concept of cash instead of food, and has said no cash would be forthcoming during natural emergencies, if the rule stands.

As the Congress rewrites the Farm Bill, several issues are noteworthy:
1) Food aid is part of the permanent 1949 legislation, but calls for donations to be made from surplus government stocks.
2) The last major overhaul of food aid programs was in the 1991 Farm Bill.
3) USDA is urging Congress to use some PL-480 funds for the purchase of local foods to assist people in a food aid crisis.

Abbott says food aid is a bargaining chip in the current WTO negotiations with respect to export competition, and any final agreement will contain changes from the current US policy on food aid. It is difficult for both the Congress and trade negotiators to settle upon the same solutions in two different arenas. While cash is a more efficient way of providing aid, but there are strong political interests calling for that cash to be used to buy US commodities. However that issue and the requirement for donations to be shipped on US carriers may take precedent over the most efficient help being provided to the needy.

Summary:
The US has a long and proud history of providing surplus food to needy countries, particularly in times of emergencies. But other nations see the action as displacing sales of their food to the needy, and the US no longer has stores of government owned food to donate. So, change is forcing new rules to be written for food aid donations in the World Trade Organization rules. While this comes at the same time as the Farm Bill and its trade title is being revised, there is no certainty for agreement on policy.