Tuesday, December 21, 2010

A U.S. Regulation that Hurts Foreign Aid

Jeffrey Sachs often harped about this.

Now Nicholas Kristoff pointed it out in his blog Global Food for Thought, alluding to an article in The Washington Post.  Our foreign assistance has a major string attached that makes it less effective.  Under regulations that were set up in the 1950s, a large share of shipments of US government aid must be sent on US flagships.

Here's an excerpt of the Post article explaining why this hampers our aid efforts.
Cargo preference was launched in 1954 alongside modern American food aid programs. By requiring the U.S. government to ship three-quarters of its international food aid on U.S. flag vessels, the policy was intended to maintain essential sealift capacity in wartime, safeguard maritime jobs for American sailors and avoid foreign domination of U.S. ocean commerce. But in a comprehensive - and, to date, the only peer-reviewed - analysis of available shipping data and shipping vessel ownership records, we found that cargo preference falls well short of these objectives. Our study of the shipping data and the fiscal 2006 food-aid shipment records - the only full year records were available - from the U.S. Agency for International Development found that by restricting competition, the policy costs U.S. taxpayers a 46 percent markup on the market cost of ocean freight.  Read full article 
It's not likely that this issue will be part of the foreign aid reform that we will consider next year as part of the Bread for the World Offering of Letters.  But it's one of those issues that needs to be part of the conversation.

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