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Unsung Hero Resurrects US Tied Aid Reporting

Official US aid policy is to slow down emergency aid as much as possible when people are dying.

Well, they probably wouldn’t put it like that, but that is the consequence of a practice known as aid tying, whereby US aid must be spent on products from US companies. For emergency food aid, this causes huge delays in food shipments as the food has to come from the American Midwest rather than from easily available sources close to the emergency site. Bloomberg.com reported in December 2008 on the six-month journey of a bag of dried peas from Nebraska to Ethiopia, while in Ethiopia a grandfather watched seven of his grandchildren starve to death, victims of a famine foreseen for months.

Everyone from aid cheerleaders to aid skeptics decries aid tying. The US was reputed to be one of the worst offenders, but we didn’t know for sure, because the US government brazenly stopped publicly reporting how much of its aid was tied back in 1996 (unlike all other rich country donors). In 1996, when the US stopped reporting complete tied aid statistics to the OECD, 28 percent of its aid was untied, while the donor country average was 71 percent.

But now for some good news. USAID has finally restarted gathering and reporting data on how much US foreign assistance is tied. As far as Aid Watch can find out, this did not reflect any change in official policy at the top. One working level USAID staffer simply took the initiative on their own to do the right thing and report aid tying (apparently there are Searchers and not only Planners at USAID). Transparency is the first step to accountability for aid. Alas, incentives for transparency are weak (as far as we can tell, Aid Watch is the first to notice the end of the 9-year hiatus in US aid tying reporting).

The USAID official responsible for this change in 2006, who preferred to remain anonymous in our blog, said that the general trend in the US is towards less tied aid across the board, citing new programs under the MCC, HIV/AIDS activities, and aid to sub-Saharan Africa which are not subject to tied aid requirements. The new statistics now show 69 percent of US aid to be untied (as of 2007), compared to an average for all OECD donors of 85 percent.

“I developed a methodology for the identification of tying status based on solicitation notices, blanket untying, and other factors,” the USAID official said in an email message. Calling for a more transparent form of reporting for all donor countries, he said that reporting from other donors is at times “not supported by actual open bidding at the prime contractor level…so I wanted to perform the identification as correctly as possible.”

Hopefully, more transparency will lead to more accountability for reaching the poor. As recently as 2003 a document on the USAID website shamelessly stated: “The principal beneficiary of America’s foreign assistance programs has always been the United States. Close to 80 percent of USAID’s contracts and grants go directly to American firms” (source). As the international campaign for untying aid has gathered force, such self-interest has become less acceptable (the 2003 document is no longer on the USAID web site.)

There is still a ways to go. Virtually all US food aid is still required to be produced and packaged right here in the US (according to the original text of the mammoth, much-amended and much-maligned Foreign Assistance Act of 1961—that’s PL 87-195 Sec 604(c) for anyone who wants to look it up).

Going back to even more dusty and remote legislation, it is the 1936 Merchant Marine Act that requires 75 percent of US food aid to be shipped on US-flag carriers. That’s money in the pocket of the US shipping industry, a blow to fair and free markets, and a failure for aid efficiency: a 2007 report by the GAO found that a major challenge continuing to hinder the efficiency of US food aid programs was “legal requirements that result in the awarding of food aid contracts to more expensive providers and contribute to delivery delays.”

In early 2008, with global food prices on the rise, the Bush administration tried to convince Congress to allow 25 percent of US food aid to be sourced locally—to allow aid agencies to buy food closer to where people need it and get it to them more quickly, cutting out the slow, cross-continental journey of the Nebraskan dried peas. But Congress quickly voted this down.

Last June, a remarkably diluted version of the Bush proposal was finally passed, creating a pilot program to “test” the results of local and regional food aid purchases. While the Bush plan would have allocated $300 million, this program is capped at $25 million per year (about 1 percent of the US food aid budget). An article in Business Week quoted former USAID administrator and Georgetown Professor Andrew Natsios’ reaction to this bill: “We don’t need a pilot like this. It works, we know it works.”

While the political coalition that funds international aid continues to prefer US shipping and farm interests over saving poor people’s lives, today we can count one small victory for aid transparency. In order to reform destructive aid practices, we need to know what those practices are. Thanks to the efforts of one unsung USAID staffer, we are a little bit closer to that goal.

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13 Comments

  1. Dave wrote:

    Has any research been done on what happens to local prices when food aid is purchased locally? My assumption would be that buying food locally makes food more expensively for all of the people in that area. Conversely importing food increases the supply and helps keep prices low.

    Any thoughts?

    Posted February 24, 2009 at 2:52 pm | Permalink
  2. Shannon wrote:

    One of the major problems with US food aid is that there is very little nutritional value in the food that is supplied: corn and wheat does not provide most of the nutrients that kids need, especially those who are acutely malnourished. Buying food locally, however, would enable the purchase of a wider range of foods with greater nutritional content, as well as cut down transportation costs and enable a more rapid response.

    Canadian CIDA untied all of its food aid last year, which is a good start. It would make sense for the US and other donor countries to follow suit.

    Posted February 24, 2009 at 3:22 pm | Permalink
  3. Jordan wrote:

    I wonder if there is any information and/or data regarding US aid provided to development agencies like the World Bank? Is there any reporting on the share of, let’s say, procurement from World Bank loans to US companies or interests?

    Posted February 24, 2009 at 4:21 pm | Permalink
  4. Moussa wrote:

    Dave:

    GREAT POINTS BUT I THINK IT IS A BIT INCOMPLETE AND I WOULD LIKE TO ADD SOME THOUGHTS.

    YOU SAID: My assumption would be that buying food locally makes food more expensively for all of the people in that area.

    THAT MIGHT BE TRUE IN THE SHORT RUN IF THERE ARE CONSTRAINTS TO PRODUCTION OR FOR GOOD THAT TAKE LONG TIME TO BE PRODUCED. BUT PRODUCERS WOULD IN GENERAL REACT TO THE HIGHER DEMAND (MORE PRODUCTION, ENTRY OF NEW PRODUCERS) AND THIS WILL LEAD TO MORE PRODUCTION AND MORE ECONOMIC ACTIVITIES.THE PRICES WILL RESTABILIZED.

    WE ALSO NEED TO KEEP IN MIND THAT THIS IS NOT JUST ABOUT FOOD. IT IS TONS OF OTHER GOODS AND SERVICES THAT CAN BOOST THE LOCAL AND NEIGHBOURING ECONOMIES AND THAT ARE AVALAIBLE AND/OR CAN BE PRODUCED QUICKLY.

    THEN YOU ADDED: Conversely importing food increases the supply and helps keep prices low.

    THE TRUE CONVERSE HERE IS NOT THAT THE PRICES WILL “STAY LOW”, BUT THEY WILL DECREASE FURTHER. THIS WOULD DRIVE THE PRODUCERS OUT OF BUSINESS AND EVENTUALLY DEPRESS THE ECONOMIC ACTIVITIES.

    OVERALL, I THINK TYING DOES NO GOOD TO THE LOCAL ECONOMY. IT HARMS IT.

    Posted February 24, 2009 at 6:50 pm | Permalink
  5. Mozza wrote:

    Good points.

    One US agency provides tied “aid” by definition: the US Trade and Development Agency. It’s as much, maybe more, about US trade than it is about development. I can’t imagine them giving up their tying.

    Jordan: The World Bank no longer accept tied trust funds.

    Posted February 24, 2009 at 9:04 pm | Permalink
  6. Tord Steiro wrote:

    The problem with imported food aid is three-sided:

    1. Injecting large amounts of imported food aid is depressing prices to producers, giving an incentive to produce less next season.

    2. Imported food aid is typically sufficiently delayed to miss the crisis (if there is any at all), hence the consquences of problem #1 will be exacerbated without reliefing the target group.

    3. Quite often, what we see in the West, through our media, as an urgen food crisis is nothing but a “normal” situation. In many places of the world, food shortages, particualrily seasonal food shortages, happens every year. Yes, that is a problem, but imported food aid depress local prices AND exacerbate already high risk in the market – driving local food producers out of business – which in turn makes the situation worse in the long run.

    And for you information, some people actually do write quite carefully about these issues, taking them seriously: http://esthergarvi.com/2008/11/27/swedish-television-criticizes-bbc-niger-2005-report/

    Posted February 25, 2009 at 3:38 am | Permalink
  7. Jeff Barnes wrote:

    It will be interesting to see what happens to tied aid under the Obama administration. I am not surprised that the USAID website bragged about foreign aid benefitting US firms. That is a message that plays well to Congress which is USAID’s primary patron. That argument has been used to justify aid going back to the Marshall Plan. Now that everyone is concerned about creating or preserving jobs in the US, it will be interesting to see whether more restrictions and earmarks are placed on aid to drive the percentage of tied US aid up. Let’s hope the dedicated USAID staffer keep providing the data long enough to make a comparison.

    Posted February 25, 2009 at 11:42 pm | Permalink
  8. Alanna wrote:

    1) That’s a great Bloomberg article. The quotes from Andrew Natsios were a nice touch.

    2) I knew about the food aid ties to the farm lobby. The merchant marine connection is new to me but makes total sense. Thanks for bringing this to light.

    Posted February 27, 2009 at 3:10 am | Permalink
  9. Rafe Champion wrote:

    Aid tying was a feature of the Marshall Plan to “aid” western Europe after WW2. Some the the examples were really comical and worthy of comparison with the activities of Milo Minderbinder in “Catch 22″. Indeed a lot could have been learned from the Marshall Plan but Tyler Cowen’s study came too late and it was generally accepted that the plan was a success and worthy of emulation in other places. Cowen’s study is devastating revelation of the waste and corruption in the Marshall Plan, while Belguim and West Germany recovered due to sensible (market driven) policies before any aid arrived on the scene. For a summary and link to Cowen’s paper http://www.the-rathouse.com/2009/Marshall-Plan.html

    Posted February 27, 2009 at 7:04 am | Permalink
  10. Rafe Champion wrote:

    Nice criticism of “dead aid” to Africa by an African. http://www.nytimes.com/2009/02/22/magazine/22wwln-q4-t.html?_r=1&ref=magazine

    (From this prolific source of feeds

    http://erudito.livejournal.com/827165.html)

    Posted February 27, 2009 at 8:50 am | Permalink
  11. Laura wrote:

    Test posted 9:29 am

    Posted March 5, 2009 at 9:32 am | Permalink
  12. nick wrote:

    Where can one find this updated information on US aid tying?

    Posted March 5, 2009 at 1:44 pm | Permalink
  13. Ilyas uddin wrote:

    Request: Help Poor Pakistani People

    Ilyas.uddin, S/O, Mr. Riaz uddin Resident of Karachi, Pakistan is very much pleased to declare myself for devotion to the services of humanity. People of Pakistan like many other Asian and African countries pertain to the very basic needs and nature.

    Lack of proper residences, education, health, employment etc. has forced our people to live below the poorest level. No. doubt the country was established sixty two years ago, but unfortunately the land has always been neglected by self-interested rules that have never paid heed to the awful crying, sufferings of the masses.

    In real sense there is a lot to describe about poor and neglected people especially women who for fulfillment of the basic daily needs indulged themselves in various unlawful and unethical activities. Similarly the youngsters who are brought up in a polluted and dirty atmosphere keep themselves busy in looting, snatching and robbery etc.

    Under the sad circumstances I have decided to devote my life for the service and assistances of our robbed people for which in first phase I need money for getting myself registered, establishment of a proper venue/office and after then the forum will require an adequate amount for regular type of welfare society for helping the needy people for family maintenance, education, health, marriages etc.

    As such I request yourselves to provide financial support for which I undertake to use your fund in a very honestly and proper way.

    It is a matter of fact that our country especially the city of Karachi is a populous one where poor people from interior area are migrating and for those a huge sum of Amount is required on urgent basis.

    Thanks & Regards,

    Ilyas uddin

    Allied Bank Limited

    Sharah-E-Quaideen Branch, Karachi, Pakistan

    Ilyas uddin

    Bank A/c No. 0120022842

    Branch Code No. (0416)

    Swift Code No ABPAPKKA

    Pak Rupees

    Contact No. 0092-213-8447524

    Mobile No 00923463306923

    E-Mail Address ilyasuddin2009@gmail.com

    Posted August 28, 2009 at 5:30 am | Permalink
  • About Aid Watch

    The Aid Watch blog is a project of New York University's Development Research Institute (DRI). This blog is principally written by William Easterly, author of "The Elusive Quest for Growth: Economists' Adventures and Misadventures in the Tropics" and "The White Man's Burden: Why the West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good," and Professor of Economics at NYU. It is co-written by Laura Freschi and by occasional guest bloggers. Our work is based on the idea that more aid will reach the poor the more people are watching aid.

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