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SPEAKER 1: Up next, The US Agency for International Development's Food for Peace program is the focus of a Senate Foreign Relations hearing. We'll hear from the program's acting director, a representative from Catholic Relief Services, and an official from the Government Accountability Office. This runs about an hour and a half.
BOB CORKER: The Foreign Relations Committee will come to order. We are currently facing a historic humanitarian crisis with over 800 million people worldwide who are in need of food aid. The United States continues to be the world leader in providing more than a third of all emergency food aid, over $2 billion annually. Sadly, despite our generosity, there are shortfalls from what is needed due to other donor nations not fully meeting the challenge.
In next year's Farm Bill deliberations, we have an opportunity to do more without having to spend more money. A little over half of our food aid is provided through the Farm Bill, saddling our Food for Peace program with US commodity and cargo preference requirements. The Farm Bill requires aid to be sourced almost entirely from US farmers, half of which must be shipped on US flagged vessels, according to cargo preference rules.
These restrictions result in spending as little as $0.35 to $0.40 on $1 on food. Let me say this one more time. Because of these utterly ridiculous requirements, only $0.35 to $0.40 of each dollar is actually used to provide food to people who are starving. If we relax the commodity preference to match the needs overseas, the overhead costs would drop dramatically. US farmers would still play a vital role in the program. And we would free up over $300 million in taxes to be used to feed up to nine and 1/2 million more starving people each year.
One of the major obstacles to modernizing Food for Peace are those who continue to support and profit from cargo preference rules. Representatives of the shipping industry claim that food aid has a significant impact on US maritime jobs and our military sealift capacity to move defense materials overseas. I've asked our witnesses-- we have two panels today-- to provide the committee with facts, analysis, and sound research to determine whether this is true.
For example, the industry argues that 40 ships and 2000 mariners needed for military sealift are at stake should we reduce the amount of food aid we ship from the US. A simple review of USAID data shows that, in 2016, only five US flagged ships out of a fleet of 175 arguably were allowing food aid shipments to stay afloat. Let me say this. Only one of which is even capable of carrying military cargo. One.
Some have even questioned why we have cargo preference at all, since there is little supporting evidence that the requirement effectively secures naval sealift capacity. For example, the vast majority of food aid is moved on ships incapable of moving military cargoes. And the ones that can already receive a $5 million a year subsidy. According to Navy officials briefing our committee earlier this year, we maintain a strategic sealift officer reserve program that can meet virtually all of our mariner sealift mobilization requirements.
We also cannot forget the human toll of commodity and cargo preferences with millions of people who go hungry each year unnecessarily because of these two ridiculous requirements that Congress places on food aid. One of our witnesses, Dr. Barrett of Cornell University, will testify later that research suggests at least 40,000 children die annually who would otherwise be saved if we reformed this system. There are few areas in government where we can have more impact on lives without additional resources than by modernizing the Food for Peace program.
I urge all my colleagues today to listen to today's testimony, work with us to make commonsense changes in food aid that are long overdue. And let me just say this. I spoke to the Tennessee Farm Bureau. Each state has one. The audience was aghast at the fact that, here in Washington, those people who quote "represent them" with 0.1% of all US ag exports going to this-- not 1%, 0.1%-- they were aghast at the fact that Congress had people up here in the name of protecting them. These are good people that care about their communities, that care about people around the world. They were aghast at the fact that Congress had these ridiculous requirements in place and that people are starving because of these ridiculous requirements when their goal is to feed America and to feed the world. With that, ranking member Cardin.
BEN CARDIN: Well, Mr. Chairman, first, thank you for conducting this hearing. I think every member of this committee very much admires your passion on this issue and your leadership on this issue so that America can more effectively deal with world hunger issues. So we're proud to be a part of your team to figure out a better way to get this done. And I think we need to understand the dimensions of this problem. I don't think any of us have experienced the real fear of hunger. Maybe because of our schedules, we might miss a meal, but we don't understand what 815 million people globally face, which is a real fear of whether they will be able to get the nutrition they need in order literally to survive.
Our world produces enough to feed all of its inhabitants. However, as we sit here, over 20 million people in four countries alone-- just four countries-- South Sudan Nigeria, Somalia, and Yemen are threatened by famine. A declaration of famine, as is the case in South Sudan, means people, especially women and children, are dying of hunger. Dying of hunger. The UN has called this the largest humanitarian crisis since 1945.
The chairman's right. This is an urgent issue and needs to be dealt with. And Mr. Chairman, I appreciate that you and Senator Coons recently traveled to some of these countries to learn how the US can best help those in need, and are working on legislation to modernize and reform the food aid programs. You've gone there. And they're not easy places to get to. We appreciate very much you taking the time to better understand by seeing the circumstances on the ground.
I agree with you that our values as Americans and our place as leaders in the global community means the United States must commit to improving how the world is tackling this crisis. That means taking a close and honest look at how our policies towards food aid and improving global food security can be most impactful. And it means ensuring adequate funding for these programs. Adequate funding is important. Yes, you can reform, and you can get better use of our funds, but it does require that we put up the resources.
For more than 60 years, the United States has played a leading role in tackling hunger. We are still by far the world's largest food aid donor. In cases of disaster, natural or man-made, the American people are the most generous in the world.
As we look to modernize the food aid programs, we should not only look at the shipping requirements, but also address issues related to pre-positioning food aid in the region, concerns about monetization practices, options for increasing cash-based options, and support local and regional purchasing programs. We also should be sure to adequately fund our food security efforts that invest in local agricultural markets, such as Feed the Future, which helps mitigate the need for emergency food aid by creating resiliency, and helps foster healthier, thriving communities. Our agricultural development programs require adequate funding.
And as we embark on this effort to reform our food aid program, I want to point out that there will always be a place for food grown in the United States to be shipped abroad. Sometimes, it's simply not possible to buy enough to address the needs in the local markets. Our focus today should be on giving aid distributing organizations on the ground the flexibility to use the best methods for each situation. With a tailored approach aimed at providing as much choice as possible, we can feed more people and save more lives.
I do look forward to all of our witnesses, but I want to particularly acknowledge Bill O'Keefe, who's here, Vice President for Government Relations for the Catholic Relief Services. We take particular pride because of the Catholic Relief Services' presence in Baltimore. We admire greatly the work that they do globally, and so glad to have him on our second panel.
BOB CORKER: Thank you very much. I saw Bill earlier this morning and our other witness at the second panel. Thank you for your comments.
Our first witness is the Acting Director of the Office of Food for Peace at USAID, Matthew Nims. Director Nims manages both of our international food assistance programs, the reformed Emergency Food Security Program we authorized last Congress and the unreformed Food for Peace program that is authorized in the Farm Bill. We thank you for being here.
I know you-- understand you can summarize your comments in about five minutes. Any written materials you have, without objection, we enter it into the record. And if you had began, we'd appreciate it. Again, thank you for being here. Thank you for your service to our country.
MATTHEW NIMS: Chairman Corker, thank you for--
SPEAKER 2: Your microphone is off.
BOB CORKER: Mic.
MATTHEW NIMS: Sorry about that. Thank you. Chairman Corker, ranking member Cardin, and members of the committee, thank you for the invitation to come speak with you today about how to increase the cost effectiveness and agility of the Food for Peace program. We are grateful for your support to humanitarian efforts at this critical moment in history. As the committee members know, we are facing unprecedented levels of global food security.
Echoing some of the comments on the opening statement of ranking member Cardin, in conflict zones of South Sudan, Somalia, Nigeria, and Yemen alone, more than 20 million people are at risk of severe hunger or starvation. The United States has provided lifesaving humanitarian assistance, helping to stem malnutrition, avert famine, and contain deadly diseases like cholera. Yet, these four countries represent only a small part of the global food insecurity.
Global hunger increased in 2017 for the first time in more than a decade. And food insecurity now affects 11% of the world's population. That's 815 million people going to bed hungry each night, or more than twice the population of the United States. In response to this great need, the Office of Food for Peace has provided lifesaving food assistance to people in need in about 50 countries this year. Providing food assistance to the world's most vulnerable people reflects America's compassion and generosity.
It is also critical to our national security. Where hunger persists, instability grows. US food assistance in all of its forms contributes to a more stable world where people have the chance to lead healthy, productive lives.
Given these global challenges and the need for us to improve the cost effectiveness and efficiency of Food for Peace programs, the logistics is incredibly important. Today, I will focus on one challenge to improving efficiency-- how we procure and ship US commodities through the Title II. Program Under Title II of the Food for Peace Act, we receive funds to purchase US commodities, such as wheat, rice and sorghum, and certain specialty nutritional products to meet the emergency food needs.
Working closely with our partners, such as Catholic Relief Services and the UN World Food program, we identify when and where US commodities are needed. And we arranged for these commodities to be shipped from US ports to their destination. Upon arrival, the food is distributed in various ways, always prioritizing the most vulnerable, usually children under five, pregnant and lactating women, the elderly, and other vulnerable populations.
The shipment of commodities overseas is a critical step in the Title II process. The Cargo Preference Act requires that at least 50% of the gross tonnage of US financed ocean cargoes must be transported on US flagged, privately owned commercial vessels to the extent those vessels are available at fair and reasonable rates. However, in many cases, Food for Peace has found the US flag fleet is not always available to provide the services needed. For example, in fiscal year 2017, we did not receive a single offer from US flag vessels on over 250,000 metric tons of commodity that we offered. The majority of our bulk cargoes is carried by only four US flag ships, which can contribute to USAID's challenges to respond in emergencies.
Another obstacle is the lack of direct shipping services to certain regions. Food for Peace destinations and US flag vessel routes are not always well matched. Regular US flag services do not exist to most of our destination ports directly, particularly in Western and Southern Africa, which requires USAID rely on a hub and spoke system to deliver our US in-kind food aid.
Finally, there is the matter of cost. In fiscal year 2016, it cost Food for Peace substantially more per metric ton for US flag vessels compared to foreign flag vessels. This cost differential has significant impacts on programs, in particular for humanitarian operations like ours already struggling to keep pace with the unprecedented levels of global hunger. Cargo preference requirements mean that we pay millions more for ocean freight out of the Food for Peace program budget each year.
Now, more than ever, every dollar counts. Our primary concern at Food for Peace is to save lives, relieve suffering, and reach people in need. To do this the best we can, we are constantly looking to improve our performance to reach as many people as possible and to ensure we make the most cost effective use of American tax dollars.
Thank you again for your invitation here today. And I'm happy to take your questions.
BOB CORKER: Thank you. I typically don't ask questions first. I am today. I'll try to be brief.
Maritime industry claims that 40 US flag ships rely upon food aid shipments in order to stay in business and provide our military with sealift capacity, but according to your data from last year, I just want to reiterate some of the things you're saying. Five ships carried 66% of all food aid on US flag ships under the Cargo Preference Law that you're unfortunately having to adhere to. The rest of such food aid was spread amongst 19 ships. So that's just 24 total ships with only five that rely arguably on food aid to stay afloat. Is it typical for such a small concentration of US flag vessels to carry such a large percentage of US food aid?
MATTHEW NIMS: Thank you for that question, senator. In the last two years especially, that has been the norm, where a very small number of ships carry the majority of our bulk cargo. To be clear, 2016, we had five ships that carried the majority of that. In the middle of the year, one those ships was scrapped by industry. So it has become four ships that carry over 60% of the bulk cargo-- of our cargo.
BOB CORKER: And why is that the case? Because we're having to rely on US flagged ships, there's a concentration in these two companies, if you will, on these ships-- is that correct? And there's just two companies that provide those four ships?
MATTHEW NIMS: Those four ships, or five ships-- those four ships are owned by two companies. They do have the appropriate ships to carry US cargo. And we are not receiving other offers from other shipping line available. So they really--
BOB CORKER: If they weren't US flag, would you receive other offers, do you think, from other companies?
MATTHEW NIMS: Most assuredly yes. Just to put it in perspective, we had 26 ships that we used for US flag. We had over 90 ships that we went foreign flag.
BOB CORKER: OK. And of the five US flagged-- or four, with one being scrapped-- how many are even capable of providing sealift of capacity for military cargo?
MATTHEW NIMS: So I would defer that question to my military colleagues as far as what's military useful or not. I will say that what's useful and has proven useful for Title II are the bulk shipments, the bulk carriers.
BOB CORKER: Well, let me answer it for you. It's one. How much more does it cost you to ship on US flagged vessels than foreign flag vessels?
MATTHEW NIMS: Using 2016 to give you that answer, we paid on average $135 per metric ton for US ships. On foreign flag ships, we paid on average $65 per ton.
BOB CORKER: I think I'll stop. I can't imagine why we cause people around the world to starve to support two companies based in New York. Somebody else may have a rational reason for that, but I'll defer to the ranking member.
BEN CARDIN: Mr. Nims, I want to go into the areas of reform that we had in the 2014 Farm Bill that allowed additional flexibility in regards to in-kind and commodity based food aid and that allowed the use of the USAID International Disaster Assistance accounts for emergency food security programs. And could you just comment as to those changes, how they have impacted our ability to respond to the global needs?
MATTHEW NIMS: Thank you for the question, senator. The addition or the emergence of the International Disaster Assistance funds to food for peace has been instrumental for us to combat food insecurity around the world. There are several areas where in-kind US food assistance is not the appropriate tool to use to fulfill our mission. Primary amongst those would be Syria. Both inside and outside Syria, in-kind Title II food assistance would not have an impact that our voucher and cash-based systems have allowed.
In addition, IDA is also helping us to lead innovation. For example, for voucher programs that we've set up outside of Syria, we have developed retinal scans to ensure that the people we've identified are those people and are receiving those food vouchers. In addition, it has allowed us to buy food locally and even regionally to be able to respond on a much more quick basis. In the emergency field, being able to move the appropriate commodity to the place in a small amount of time is crucial to save lives. IDA has given us that flexibility to do exactly that.
BEN CARDIN: Our ultimate goal is to have self-sustaining countries on their own food supply-- resiliency. Can you just tell us how the flexibilities that you had, the use of these funds-- are they being targeted so that we do aim to achieve the resiliency, so that the local communities can in fact one day be able to handle their own food needs?
MATTHEW NIMS: Thank you for that question as well. Most definitely yes. When we use the IDA funds, we do a market-based assessment to ensure that the markets are able to support this. And then sometimes, by incentivizing the market, we're actually making it stronger to allow the area affected by this crisis to more quickly recover. So in a sense, instead of bringing in, where it's inappropriate, foreign commodity into a system-- disrupting, having negative market impact-- we're actually incentivizing the market, either through local procurement or a voucher type program.
So most definitely these programs are geared-- the IDA gives us the flexibility where it's appropriate. And our teams do the studies to ensure that this is the case. Where appropriate, we are actually strengthening marketing, getting that group back on their feet more quickly.
BEN CARDIN: I think I understand why we do monetization, that this is a source of funds. And otherwise, you can't get the funds unless you use this method. It seems terribly inefficient to ship food overseas, sell it in order to get money for the programs that you need. Isn't there a better way?
MATTHEW NIMS: Monetization is part of the Farm Bill at this time. And the Farm Bill stipulates that we do 15% to do monetization. And it has been a way to generate those crucial funds, as you've said. We are losing on average $0.75 on the dollar, if not more, when we have done traditional monetization programs in the past. Right now, we have one program in Bangladesh that fulfills our requirement. And we are still-- that is not the most efficient way to generate the funds necessary to support those development programs.
BEN CARDIN: I understand the requirements. And I understand the third party's needs for funds. And this is one of the ways they can get funds. But I think you've answered my question. This is not the most efficient way to be able to get resources to deal with the problem.
MATTHEW NIMS: This is not the most efficient way to do that, yes. And I believe that-- I am hopeful that as we go forward that we can develop new ways or more efficient ways to provide that necessary cash--
BOB CORKER: Thanks.
MATTHEW NIMS: --apsect to support the bill.
BOB CORKER: I'm going to use your remaining 39 seconds to embellish and then just say, look, we in our own country have issues with China dumping steel or dumping panels or whatever. I mean, that's a big issue to us. We, with our program, where we'd like for USAID to help countries be self-sustainable, right? Our goal is that over time, these countries, through our programs, can-- we take our commodities, ship them overseas, lose $0.75 on the dollar, and then sell them sub-market prices in the market and destabilize the very farmers in those areas that we're hoping over time are going to build the capacity to feed their own people. It's the most idiotic requirement one could possibly come up with. And again, the entire program is 0.1% of what our whole US ag output is, meaning it has no effect on our agriculture community. So anyway, thank you.
I reserve my seven seconds. You're absolutely right. If we appropriated the money so that they had the money, this is done, I think, yes, because of the local agricultural interests, but also supported by the third party groups, because it's a source of funds they otherwise couldn't get.
BOB CORKER: Yeah. Now, we would need to make sure that it's appropriated in another part in and allow you and others to carry this out. I agree with that 100%. And it's really an issue of ag staffers-- let's face it-- keeping under their wing additional dollars that the ag community doesn't want them to keep. But anyway, Senator Young.
TODD YOUNG: Thank you, chairman. Mr. Nims, good to see you again. You testified before my subcommittee on July 18. And I was grateful for that. And I'd like to follow up with you and request an update on the situation in Yemen, specifically the humanitarian crisis there, and the number of people who are food insecure and subject to the cholera epidemic. Could you kindly provide a quick summary of that?
MATTHEW NIMS: Thank you, senator, for your question. Yes, Yemen still represents one of the largest, probably, humanitarian crisis that we have in terms of numbers. An estimated 17 million people out of a population of 27 million are food insecure at this time. Seven million of those completely dependent upon humanitarian assistance for their survival at this time.
Since last time we spoke, the cholera epidemic continues. We have over 770 documented cases from the World Health Organization, with over 2,000 deaths, mostly in elderly and children.
TODD YOUNG: In our subcommittee hearing, you identified the port of Hodeida as the most critical port of entry for humanitarian supplies to help mitigate and alleviate some of the suffering that's occurring in that country. Can you explain the importance of that port to relief efforts and how the delivery of USAID funded cranes would facilitate delivery of food and medicine through the port?
MATTHEW NIMS: So I definitely affirm that the port of Hodeida is the principal lifeline for humanitarian operations as well as commercial activities. Yemen is dependent upon 90% exports to receive its food. So it is crucial in how this goes forward.
You are correct that USAID did sponsor and fund the purchase of four cranes on behalf of the World Food Program to improve port operations. Those cranes remain in Saudi Arabia in a warehouse there. They were denied entry by the coalition of forces at this time. USAID maintains that the addition to these cranes to port operations would greatly improve the throughput of that port to allow additional humanitarian, as well as commercial cargo, to more quickly throughput through the port and have an impact on the situation.
TODD YOUNG: You mentioned Saudi Arabia. I think you meant to say that the cranes were in Dubai right now.
MATTHEW NIMS: Correct. Now Thank you, senator.
TODD YOUNG: Since you mentioned Saudi Arabia, I'll move on to that. On June 27, the World Food Program sent a letter to the Saudi government asking for permission to try and deliver the cranes, which were turned back by the Saudi-led coalition some time ago. And the content of that letter was, again, seeking permission to deliver those cranes to the port of Hodeida to expedite the delivery of this much needed humanitarian assistance.
The argument we keep hearing, which is consistently met with a compelling and persuasive counter-argument, is that there is a large scale diversion of humanitarian aid to Hodeida. And in July, you said what other experts are saying. You said, quote, "we've had no evidence of any large scale or systematic humanitarian diversions occurring at the port at all", unquote. Is that still accurate?
MATTHEW NIMS: Yes.
TODD YOUNG: And would you say the humanitarian access and the flow of humanitarian aid into Yemen continues to be a leading challenge, sir?
MATTHEW NIMS: Yes.
TODD YOUNG: OK. Well, the participants in the conflict are seeking to control access to the beneficiary communities. It's something you've gone on record saying here today and before. Before, you've indicated it's a tool for advancing their cause. I want to put that in layman's terms to make clear what you've indicated. Have you said, and are you saying today, that the participants of the conflict in Yemen are deliberately restricting food or medicine to the vulnerable populations to advance their aims?
MATTHEW NIMS: Yes. Well, I have-- yes.
TODD YOUNG: Are those political aims?
MATTHEW NIMS: Yes.
TODD YOUNG: Are those war aims?
MATTHEW NIMS: Yes.
TODD YOUNG: In USAID's assessment, or your assessment, are those participants included within-- would that be the Saudi-led coalition?
MATTHEW NIMS: The teams--
TODD YOUNG: Seems like a logical connection to what you--
MATTHEW NIMS: The teams on the ground have--
TODD YOUNG: --earlier said and what you just said.
MATTHEW NIMS: Yes, that both sides are responsible for that situation.
TODD YOUNG: So it is your assessment that it includes the Saudi-led coalition?
MATTHEW NIMS: Correct.
TODD YOUNG: All right. Thank you. So to be clear and to add some clarity to our discussions related to Yemen, Mr. Nims, you just testified saying essentially the Saudi-led coalition is using food as a weapon of war in Yemen. The Houthis are a large part of the problem, no doubt, but I, for one, believe we should use our partnership with the Saudis to bring this unacceptable practice to an end without delay. Thank you.
BOB CORKER: Thank you, sir. You've mastered in this subject, no doubt. And we appreciate it very much. Senator Coons.
CHRIS COONS: Thank you, Chairman Corker, ranking member Cardin. And thank you for this important hearing on an intolerable situation that is a requirement in statute that you, Mr. Nims, and many other dedicated professionals do your absolute best to execute on. I'm grateful for your service and for the fact that we as a generous nation continue to try and meet the unbelievable challenge of 20 million people starving, or at risk of starving, across just four countries and millions, millions more-- you said about 800 million globally-- going to bed hungry every night.
The American people are generous. We have the most productive farms in the world. And so for decades, we have had a program that gives of our abundance to those who are in need around the world, but we do so in a strikingly inefficient way. I was proud to have a chance to work with my good friend Senator Isakson and the chair and ranking and many others on the Global Food Security Act, which permanently authorized the Emergency Food Security Program, an important step in providing flexibility for delivering emergency food aid. And as Senator Cardin reminded all of us, there will always be a role for US commodities in response to crises, but we can and should work together to find ways in advance of this coming Farm Bill to remove some of these harmful restrictions and requirements that I think are so inefficient.
Earlier this year, Senator Corker and I visited the Bidi Bidi camp in northern Uganda. I was grateful for your joining us on that trip. Both there and in South Sudan, I had a chance to visit sites where people depend on food aid for their existence. And later, in August, I traveled to Northeast Nigeria, where millions have been internally displaced mostly by Boko Haram.
I was struck by an innovative program that-- this is an example from Save the Children that I suspect is well known to you. When we talk about a cash assistance program, we're not talking about sending out envelopes full of cash. We're talking about this. This is a card from a real specific individual in an IDP camp that allows her to go out and buy locally food that is appropriate for her and her children and that changes the relationship between this refugee camp and the community around it.
It provides for stability in the local markets. It provides for a better relationship between the refugee community and the community that is hosting them. And it gives more control for individuals for how they feed their children. And it frankly is much more traceable, transparent, and efficient.
So I'd like to ask you a little bit more, if I could about, these so-called cash or voucher assistance programs, because I think they are dramatically more efficient than the average person might realize. When I first heard about changing from sending shiploads of American grain to sending cash, I thought, well, that's not a very good idea. It turns out that's not at all what we're doing. We're mostly doing it through very sophisticated means, whether through cell phones or individually EBT cards or with retinal scans, so that we actually have a very good idea who's getting what money to what purpose.
Could you first speak to how USAID's experience with local and regional procurement has worked out so far? And what are the benefits and the difficulties to some of these innovative-- I need a better word than cash-- some of these innovative direct transfer food programs and how they help you respond to these food crises?
MATTHEW NIMS: Thank you for that question. And thank you for, again, inviting me on that trip. What we are now calling these programs is market-based assistance--
CHRIS COONS: Thank you.
MATTHEW NIMS: --which means that our teams on the ground work very hard to understand the market conditions. And to be clear, there are some places in the world where there are no market and where crises exist and where in-kind food assistance can still play a role. On the local procurement side, we work very hard with our partners to identify those areas, those markets that exist, whether inside a country or in a region in different markets of Africa, where we can buy the needed commodity, that it does not exist in a place where we need to go, in a different location, have our partners the ability to buy this, adhering to the same sort of rules and governance of procurement that we would use in the United States to ensure that we get the right quality of food, a good quality of food. By doing that, the time saved is huge because the ocean leg is not there. Combined with the market impacts, just as you said, in the community of where we're working.
What we have developed over the years is just to ensure that we are not having a negative impact, that we are increasing prices, or that we're buying the wrong commodity, or that we are somehow contributing to an existing crisis that might be there. That takes really a lot of expertise of our partners, like the Catholic Relief Services as well as the World Food Program, to ensure that's happening. For the local procurement, it has saved us both time and money and become more effective as an agency in addressing these concerns.
On the other programs, the voucher programs that you admit or the programs that allow a family member or a family writ large to go to a local market or a grocery store has developed a whole new industry, or helped to develop the industry, in these retinal scans, or in these cards, or in this mobile money, to ensure that the person targeted-- the person that is supposed to receive the aid-- does receive that. And we have put in place methods to ensure that those are the right people that are receiving the assistance.
And as you said, they afford us the ability to know what the group of people are buying to ensure that when we give money that we are having a nutritional or a food security impact and that they aren't using these funds-- and prohibited it in most cases-- using these funds for other commodities that don't have a food security impact. So that we always want to ensure that we are targeting those most food insecure and that we are having impact.
CHRIS COONS: Can I ask one more question, Mr. Chairman?
BOB CORKER: Sure.
CHRIS COONS: The chairman and others, the ranking, we've spoken about the damage, the danger of monetization. I understand the benefit to the NGOs, but the inefficiency is just stunning. What are the negative impacts on the ground in terms of instability in local markets and resiliency of the practice of monetization? Shipping US commodities to remote parts of the world, so they can be resold there.
BOB CORKER: At a $0.75 on the dollar loss.
MATTHEW NIMS: I want to actually take this opportunity to correct that number. It was a $0.25 loss on the dollar. I got my numbers backwards, so I want to enter in the record that it's a $0.25 loss on the dollar.
Thank you for that question as well. Monetization has been around for a long time. And there are rules that govern how we do monetization. Primarily, it's the Bellmon determination, which ensures, when we go into a country, that we do look at the global market or the universal market in that country to ensure that the tonnage that we bring in has a very small to no impact on the market. And we take that very seriously with our colleagues at the Department of Agriculture. And we have done that for quite some time. So to answer your question, very minimal detrimental impact on the market of a given country is what we strive to do, because that's what we have been doing.
For USAID and for my office, for Food for Peace, the biggest detriment is that we lose $0.25 on the dollar. And it does require that our partners who sell this food have to develop ways to be able to sell this food. NGOs traditionally are not commodity brokers. And it takes a specialized skill to do this effectively. And that takes a lot of time and effort that could be better spent on running programs, as opposed to being commodity brokers.
CHRIS COONS: Thank you, Mr. Nims. I think we have a shared question about how we sustain US food assistance while working together to make it more efficient given the scale and scope of the humanitarian need around the world. Thank you for the very hard work you and your folks do to meet this massive humanitarian need.
BOB CORKER: Senator Isakson.
JOHNNY ISAKSON: Thank you, Mr. Chairman. I apologize, Mr. Nims, for being late, so I missed your testimony. My biggest experience in food aid happened a few years ago when a small company in Georgia by the name of MANA-- and you probably are familiar with MANA--
MATTHEW NIMS: Yes, sir.
JOHNNY ISAKSON: --which produces a three and 1/2 ounce fortified peanut butter paste in heat sealed packet in huge volume. And it's the way you can actually keep children and adults alive and avoid malnutrition for a sustained period of time. The peanut is-- I'm not selling for my state here, but I might as well be-- the peanut is a great product. And it tastes good on top of everything else.
But I got in the middle of trying to help them and found out that there's a lot of politics and brokerage going on in whose food gets sent overseas and where it goes and who takes it and everything else. In particular, in terms of nutrition, there was a French company that really had cornered the market in sustaining packets of vitamin fortified foods to get to starved areas. In this case, it was, if I remember correctly, it was Somalia.
Is there still a lot of politics? And are there still a lot of companies that try and corner the market in that? How competitive is it from the standpoint of lowering the cost of price and maximizing the amount of food you can get overseas?
MATTHEW NIMS: Senator, thank you for that question. USAID, in particular, my office, Food for Peace, are incredibly proud of the ready-to-use therapeutic and ready-to-use supplementary food that you mentioned, both from MANA and two other companies here in the United States, that being Tabatchnick Corporation as well as [? Adizia. ?] And we see this as a huge success that we have been able to work with these companies, with US companies, to develop this incredibly crucial commodity that exist to save babies, to save starving children. And we have utilized that effectively over the last four years and increased our purchase of that product.
In answer to your question, are there still politics involved, unfortunately, there are politics involved in everything. But on this particular issue, sir, we no longer have any restrictions on where we can program that food. And our partners have accepted the fact that, regardless of the source, they can use that where needed. We see that the price, over time, has become very competitive in the world market. And we look at continuing to use this product because of the success.
JOHNNY ISAKSON: USAID, I know, is where-- you're under USAID. Does USDA also provide food for overseas use?
MATTHEW NIMS: Yes, they do.
JOHNNY ISAKSON: Do you work with them, or is that a separate function they carry out?
MATTHEW NIMS: We work very closely with them. Elements of USDA purchase all of our commodity. They're our contractors in a sense. They purchased that. And we work closely with the McGovern-Dole Food Program, the school feeding program, as well as a Food for Progress most assuredly on the local level to ensure that our programs are working together.
JOHNNY ISAKSON: So USDA determines how those commodities are actually sourced? Is that correct? Whether you use domestics priority?
MATTHEW NIMS: Correct. They are our contractor. In this particular case of these specialized nutrition products, USAID Food for Peace, we purchase those directly ourselves.
JOHNNY ISAKSON: And where do you get those? Is there any incentive to try and buy those foods in countries that are developing nations, that are beginning a food program to help reinforce what they're trying to do?
MATTHEW NIMS: We would be using our International Disaster Assistance funds to do that. And there are cases if there are companies or facilities overseas outside of Europe that are able to produce a product that meets the requirements of, let's say, the United Nations UNICEF or some of our partners, we would look to purchase locally those products as well. There are at least three, I believe, plants in Africa that can produce a comparable product. And we have purchased those. Our partners have purchased those using International Disaster Assistance funds in our programs.
JOHNNY ISAKSON: That's exactly the genesis of my question, because I've traveled with Senator Coons and others to Africa quite a bit. And Africa, many of those countries are now developing sustainable agricultural program in their country. It would seem like everything we could do to reinforce that by buying their product, that will used to keep other people from going hungry-- would be just a two for one win for us and for USAID and for the country.
MATTHEW NIMS: I agree, sir.
JOHNNY ISAKSON: Thank you very much for what you do. Thank you, Mr.
BOB CORKER: Thank you. Thank you very much. Senator Shaheen.
JEANNE SHAHEEN: Thank you, Mr. Chairman. And thank you, Mr. Nims, both for being here today and for the hard work that you do to make sure people get fed in this world. You referred in your testimony to the amount of money that has been appropriated to help address for famines that are going on right now. Can you be a little more specific about how much of that money's been dispersed, how it's being used, what the progress and roadblocks that we're experiencing in the distribution of food that is being bought by those dollars? And just to follow up on Senator Young's comments, clearly, we're having a problem in Yemen with trying to get help to people who need it. So can you talk more specifically about what's going on?
MATTHEW NIMS: Thank you for that question. I will attempt to answer that the best I can. And please, if there's something I leave out--
I think, first off, just to thank Congress writ large for the incredible amount of financial support that Food for Peace received in 2017. As we've all said, there was unprecedented need in the world. And I can say that for fact. our partners on the ground have not seen-- we thought El Nino was bad in 2016. 2017 is unprecedented need in all sense of the word. It is the scientific word in a sense. We have not seen this.
JEANNE SHAHEEN: Am I correct there was just a report this week that talked about that the direction and number of people who are food insecure is going up for the first time in a number of years?
MATTHEW NIMS: You are absolutely correct, senator. The report that just came out, State of the World on Food Insecurity, that said in the first year in over past 10 years, malnutrition has increased. So in other words, we have been, as a world community, decreasing food insecurity around the world. This year, that number has gone back the other way. This is the beginning of a very unfortunate and deleterious trend.
The report further says that the majority of this is due to the amount of conflict in the world. So I want to be clear, this is not because of international development efforts. This is not because we, as a world community, are trying to address food insecurity to increase food. As the opening statement, there is enough food being produced in the world to feed the hungry people. In this sense, it is a direct cause of the conflicts, the growing conflicts that are existing in the world that is really causing that.
JEANNE SHAHEEN: And those four areas where we're seeing famine are cases in point.
MATTHEW NIMS: Most directly, as well as that the Democratic Republic of the Congo is now entering into this stage. Elements still in parts of the Horn of Africa continue to be plagued by conflict that cause this problem. Yes.
In response to your question, $990 million was the supplemental that Congress added directly towards combating famine. All of that $990 million was spent in all of those four primary countries, both in the form of IDA, of International Disaster Assistance, and $300 million of that was actually converted into Title II, and that was also utilized. So we can say that the $990 million was all spent this year into the four countries. And it came towards the end of the year, end of the fiscal year, where we really started getting that out the door, both ordering large volumes as well as making sure that our primary partners in those operations received funding. And it has been expended.
We are carrying forward money from 2017 into 2018, which is not an abnormal occurrence. And we'll be carrying forward-- we're still actually closing the books, but we'll be carrying forward both Title II in-kind resources as well as IDA resources that we share with our sister office, the Office of Foreign Disaster Assistance, so FDA, an in USAID.
JEANNE SHEEHAN: And the cranes that Senator Young referred to-- were they purchased out of those dollars?
MATTHEW NIMS: They were purchased actually in 2016, if I'm correct. And those were not part of the 2017 funds. And they were purchased using International Disaster Assistance funds, yes.
JEANNE SHAHEEN: And can you talk about who are the next countries that are working in those four areas that have provided funding to try and address the crisis?
MATTHEW NIMS: We can get back to you on the exact levels and assistance as we understand it at this time. In each one of those places, the highest donors maybe differ a little bit between the countries, but maintain it's the European Union, what we call ECHO-- in other words, their disaster group. The British government, the United Kingdom is usually in the top one or two. In Syria right now, the Germans have been very good partners as well. But in all cases, the US government is the largest donor.
JEANNE SHAHEEN: And Mr. Chairman, if I can ask one more question, are any of-- are either Saudi Arabia or any of the Gulf countries providing humanitarian assistance in Yemen to address the crisis there that we know of?
MATTHEW NIMS: They are not providing assistance through the UN or other international NGOs that we have been able to track. We have heard the Saudi Arabian government say that they are providing assistance, but we have not been-- it is not through the traditional ways that we have been able to see.
JEANNE SHAHEEN: And do we have any evidence on the ground that there is assistance being provided by Saudi Arabia?
MATTHEW NIMS: USAID does not have evidence at this time. I am unaware if our partners, maybe certain NGOs or the UN, have direct evidence of this.
JEANNE SHAHEEN: Thank you.
BOB CORKER: Thank you. Senator Merkley.
Thank you, Mr. Chairman. And thank you, Director Nims. Right now, we have a horrific crisis with the ethnic cleansing in Burma and half a million refugees passing across the border into Bangladesh, enormous number of people. The flow continues. I think, 20,000 in the last week or two, another 20,000. So use this as an example of how a crisis is developing, how you respond currently, and how you could respond more effectively.
MATTHEW NIMS: Thank you for that question. What we've seen-- to put it in context, we've seen-- actually, numbers now are 600,000 to almost 700,000 Rohingyas from Myanmar, from Burma, have fled to Bangladesh. Just to put this in perspective, when we went to Bidi Bidi camp, in over about a five to six month period, we saw upwards of 250,000 people that crossed the border from South Sudan into Uganda. What we are seeing in Bangladesh is in a three to four week period, close to 600,000 to 700,000 people crossing over into an area, a very small area. So just to put that in context, we are at the beginnings of a very huge humanitarian crisis.
JEFF MERKLEY: So there it is. Your team is in this business of responding. What is it you're doing? And tell us how changes in the obstacles you face could enable you to be more effective, get there more quickly, get there with more assistance, different types of food assistance, as appropriate. What's happening in the short version? And how could you have been more effective if we changed some rules or regulations?
MATTHEW NIMS: So thus far, Food for Peace is primarily charged, when people cross a border, to feed the refugees with our partners. We work in very good coordination with the State Department's Office of Population, Refugees, and Migration. And they take the leading role as far as helping to set up the actual camps through their partners, whether it be UNHCR or whether that be the International Office of Migration. And I can say that, thus far, PRM and Food for Peace on the ground have been intimately involved in what's going on and have worked diligently together to--
JEFF MERKLEY: Here's what I'm looking for. How many ships do you have? Where is the food coming from? Is it prepositioned? Do you have planes in the air?
Are you requesting cargo planes? Are there obstacles that you run into so people are going to start before we can get there effectively? I'm happy everybody's working together. What's happening, and how could it be improved?
MATTHEW NIMS: In this case, because we have a relatively large operation development program, we've been able to use our development resources and our partners to ensure that food has arrived there. We are well-stead through our partners to buy locally through the IDA funds to ensure that we have food there and ready to go. Because of the remoteness, it is a difficult area. We've also had to improve the logistics-- meaning roads, even construction-- to ensure our partners get there.
So what could we do? The increased flexibility allows our office to do what's needed, whether that is shipping in more quickly the foods that the Senator Isakson talked about, the ready-to-use therapeutic foods-- we are all able to do that with the funds that we have now. And we are doing that.
But in these type of dynamic situations, having flexibility to do this, to be able to respond to the changing needs of this over such a fast time will give us better ability to handle this effectively. So I would say that we are well-stead right now to do the needful, and we have been. As we look forward to as this crisis develops, the increased flexibility that we have, or that we can have, will enable us to ensure that we are meeting the needs.
JEFF MERKLEY: OK. Well, that's very vague. I'm going to follow up with you. Do you have a command center? If I walked in, do you have a command center where you have key experts on all the logistics, and you're saying, hey, we need bulldozers to get a road in there. We need gravel. How are we going to do that? Well, can we really buy locally? That area is already starving, so how does that change it?
What do we have prepositioned? Where is it at? How can we requisition it? How is it impacted by what's needed for Puerto Rico? Do you have a command center like that to respond to these world emergencies?
MATTHEW NIMS: We do not have a command center here in the US right now to respond to that. We do have our people on the ground. US Food for Peace has sent two additional staff to augment the mission team that is there, the USAID mission team. PRM has also sent additional staff to the area. That type of coordination is happening on the ground right now.
JEFF MERKLEY: Thank you.
BOB CORKER: If I could, the quick response that you've been able to have here is because you're using the IDA funds that we gave you the flexibility to use. Is that correct?
MATTHEW NIMS: That is correct.
BOB CORKER: And if you were using US commodities to get there, it might take four to six months to even get the food there in the first place. Is that correct?
MATTHEW NIMS: Yes. In that sense-- as I said, we do have development partners there, so we would be using some of their food. But you're exactly correct.
BOB CORKER: So it's kind of the point of the hearing. So just the flexibilities that we have given them have allowed him to more fully respond to this. If we could do even more that, more people could be helped. We thank you very much for your service.
And it's a shame, by the way, we don't have a leader in Burma that cares about the Rohingyas in the first place, that could keep the military from doing what they're doing to route these people across the border. And I hope she will be demarched by every world leader on the face of this Earth for her insensitive handling of what's happening there. So it's something that she herself is helping create.
With that, thank you so much for your testimony and your service to our country. We're going to move to the next panel. Thank you, sir.
MATTHEW NIMS: Thank you, senator.
[SIDE CONVERSATION]
SPEAKER 3: That'll teach me to show up late.
BOB CORKER: Hey.
SPEAKER 3: Oh, but there's a second--
BOB CORKER: There's another panel, yeah.
[SIDE CONVERSATION]
I want to thank Mr. Nims again for his outstanding testimony and service to our country. And we will now move to our second panel. There are some--- be some votes. We apologize-- let me apologize in advance. We're going to have some people disappearing because of votes, but this testimony will be very important, as it relates to us moving ahead.
Our first witnesses Mr. Tom Melito, Director of International Affairs and Trade at the Government Accountability Office, GAO. Our second witness is Mr. Christopher Barrett-- I spent some time with him this morning-- Professor of Economics and Agriculture at Cornell University. He's done some outstanding work on this topic. Our third witness is Mr. Bill O'Keefe, who was referred to earlier, Vice President for Government Relations and Advocacy at the Catholic Relief Services. We thank you for what you and your organization does in this regard.
With that, if each of you could summarize in about five minutes. If you have any written materials you want entered into the record, without objection, it will be. And if you could just began in the order of interaction, we'd appreciate it. Thank you all for your tremendous efforts. Thank you.
THOMAS MELITO: Chairman Corker, ranking member Cardin, and members of the committee. Thank you for the opportunity to discuss our 2015 report on Cargo Preference for food aid. The United States shipped about 1.5 million metric tons of food aid in fiscal year 2015. Under current US law, at least 50% of US food aid must be shipped on US flag vessels, which was reduced from 75% in 2012. USAID and USDA administer food aid programs. The Department of Transportation, DOT, is responsible for monitoring USAID and USDA adherence to cargo preference requirements.
Our remarks today address three topics-- first, cargo preference's impact on food aid; second, the extent to which cargo preference contributes to sealift capacity; and third, GAO's recommendations. Regarding the first topic, we found that cargo preference increased the cost of shipping food aid for USAID and USDA by $107 million from April 2011 through September 2014. Foreign flag vessels charged on average 25% less for shipping than US flag vessels. According to DOT, this difference is due to several factors, including higher crew, maintenance, and overhead costs.
We also found that USDA paid higher shipping rates and used fewer foreign flag vessels than USAID because of differing applications of cargo preference requirements between the two agencies. According to the law, compliance with cargo preference is tracked by geographic area, but this term is not defined. Pursuant to a court order, USDA must measure compliance on a country by country basis, forcing them to use only US flag vessels to countries where there is just one shipment a year. This prevented USDA from realizing much benefit from the lowering of the cargo preference rate. However, USAID benefited considerably more, since it is not bound by the court order, defining geographic area on a global basis for its packaged food and regionally for bulk food aid.
Regarding the second topic, cargo preference's contribution to sealift capacity, we found that the number of vessels carrying food aid, and US mariners required to crew them, has steadily declined despite the application of cargo preference. From 2005 to 2014, the number of US flag vessels carrying food aid declined from 89 to 38. And the number of mariners crewing them fell from about 1,300 positions to approximately 600.
According to Department of Defense officials, available vessel and mariner capacity has historically been sufficient to meet all of Defense's needs. However, Defense's most serious scenario envisions a full activation of the entire reserve fleet for an extended period of time, including the use of some commercial sealift. Under this extreme scenario, DOT estimated that about 13,000 mariners are required to support both military and commercial needs.
While the Coast Guard database showed over 16,000 potentially qualified actively sailing mariners, DOT stated that only about 11,000 mariners would be readily available. However, Transportation's estimate did not include the almost 2,000 officers in the Strategic Sealift Officer Program, of whom over 1,000 were not actively sailing and could potentially be called up. We requested that DOT provide us the detailed methodology underlying its estimate. However DOT did not provide the methodology to us.
For the third topic, GAO's recommendations, we had one matter for congressional consideration and one recommendation to the Secretary of Transportation. Regarding the matter for congressional consideration, despite two past year recommendations, US agencies have not agreed on a consistent method to implement cargo preference based on geographic area. As such, Congress should consider clarifying cargo preference legislation regarding the definition or geographic area to ensure that agencies can fully utilize the flexibility Congress granted them when it lowered the cargo preference requirements in 2012.
GAO also recommended the Secretary of Transportation study the potential availability of all qualified mariners needed to meet a full and prolonged activation of the reserve sealift fleet. In its written comments, DOT concurred with our recommendation, but it remains unimplemented. In September 2016, DOT tested mariner availability for an initial activation of the full fleet. However, this exercise did not gauge mariner availability on Defense's most severe scenario, where DOT had previously predicted a shortage of available mariners.
Chairman Corker, ranking member Cardin, and members of the committee, this completes my prepared statement. I will please respond to any questions you may have.
BOB CORKER: Thank you so much. Dr. Barrett.
CHRISTOPHER BARRETT: Chairman Corker, ranking member Cardin, honorable senators, thank you for the opportunity to summarize what the best recent research tells us about food aid policies and how we might more effectively use those resources to address global food insecurity. US food aid programs have played a crucial role in saving and improving lives worldwide for more than 200 years. Sadly, the need for international food assistance is growing.
For the first time ever, in 2017, the United Nations declared four nations in famine or near famine conditions and proclaimed it the largest humanitarian crisis since the UN's creation in 1945. But budgetary resources have shrunk by 76% in inflation-adjusted terms since the 1960s. As a result, the agencies that provide front line humanitarian assistance are chronically underfunded. With food aid funding scarcer and needs greater, we must get smarter in how we use these resources.
Congress should make two reforms in particular to enhance the cost effective use of increasingly scarce food aid resources. First, relax or better eliminate the cargo preference restrictions. And two, relax the restrictions that compel commodity purchase only in the United States.
Anti-competitive cargo preference predictably drives up costs by an estimated 23% to 46%, depending upon whose estimates you use, costing us anywhere from $50 to $150 million a year, depending upon prevailing rates. Meanwhile, cargo preference does little to nothing to buttress military readiness beyond what is already provided for by the separately funded Maritime Security Program, MSP. Most US flag cargo preference vessels are not militarily useful by DOD criteria because of their age, size, or vessel type. In 60 plus years under cargo preference, the Pentagon has never mobilized a mariner or vessel from the non-MSP cargo preference fleet.
Nor does cargo preference preserve an American fleet. The daily operating costs of US flag ships average 270% more than comparable foreign vessels, partly because of the fact that they're typically slower, smaller, and older than their competitors. Cargo preference also generates negligible gains for port regions or the maritime workforce because food aid represents less than 0.3% of merchandise exports from the United States. And even in those ports that handle food aid shipments, it is less than 1% of their merchandise export volumes.
Cargo preference matters only for a very small number of owners of bulk and break bulk ships with limited alternative commercial uses. In 2016, just 13 vessels from only three companies accounted for more than 83% of the US food aid shipments from this country. That sort of concentration would excite antitrust concerns in most sectors of the economy. Furthermore, many cargo preference vessels are ultimately owned by foreign corporations. So the profiteers from the anti-competitive statutory restrictions on US food aid are not even American companies.
The second major restriction that Congress should relax compels domestic procurement of all Food for Peace commodities. The most efficient and effective means to meet the needs of hungry people is typically to provide them with vouchers or cash-based electronic transfers or with food purchased locally or regionally, so-called LRP. Far more often than not, LRP and cash or electronic transfers save time, money, and lives while providing foods that are equally healthy and safe and preferred by recipients over commodities shipped from the United States.
The US government has experience with such modalities, especially through the Emergency Food Security Program codified in law as part of the Global Food Security Act of 2016, led by this committee, for which I applaud all of you. Their experience clearly demonstrates that these more flexible methods typically outperform in-kind food aid.
Some claim that food aid purchased in the US somehow helps American farmers. No credible study exists to support such a claim. US food aid programs handle hundreds of millions of dollars worth of commodities, but the US agricultural market is several hundred billion dollars and is tightly integrated into a $4 trillion global agricultural economy. Farm prices and incomes are driven by global markets. They're not driven at all by the US food aid program.
These and other restrictions on US food aid have real consequences. American taxpayers spend far more on shipping and handling than on food. Every tax dollar spent on US food aid yields only $0.35 to $0.40 of commodity to hungry people. And the human cost is stark, because saving lives in disasters is actually relatively cheap. The $300 to $400 million wasted on these various restrictions effectively costs us something like 40,000 children's lives every year.
And what is the Congress buying for an extra 40,000 child deaths annually? Tragically, very little. The volumes of food aid purchased in and shipped from the US, a fraction of 1% of the domestic food market, of the ocean freight cargo from US ports, of militarily useful vessels, and of deep water maritime workforce, is far too small to boost farmers' incomes or mariners' incomes noticeably, or to enhance military readiness.
So what should the Congress do? Eliminate these restrictions. Give the Secretary of Agriculture and the AID administrator the flexibility to employ best practice. Distinguished senators, you have a choice. We can maintain the status quo and thereby keep diverting US taxpayer money from hungry people to foreign companies, accomplishing nothing significant for military readiness or American's incomes, while costing the lives of disaster affected children. Or we can make changes that can help us better serve the world's hungry in honor of this great nation's long heritage of humanitarian leadership by providing cost-effective assistance to the downtrodden throughout the world. Thank you very much for your time and interest.
BOB CORKER: Thank for that outstanding testimony. Mr. O'Keefe.
BILL O'KEEFE: Thank you, Chairman Corker, ranking member Cardin, and members of the committee for this opportunity to provide testimony on modernizing the Food for Peace program. The Food for Peace program and the committed staff of the Office of Food for Peace has been a mainstay of the American response to hunger for over 60 years, and it reflects the generosity of the American people.
Since its founding, Food for Peace has only gotten better and today, is a dynamic program effectively delivering a hand up to people and communities otherwise left out of foreign assistance. In natural and conflict emergencies, Food for Peace provides lifesaving food to millions of people. In vulnerable communities experiencing chronic hunger, its development programs build resilience and prevent people from falling into desperation.
Last year, Eastern and Southern Africa were hit by the most severe El Nino drought in a generation. But an anticipated famine in Ethiopia never materialized because Food for Peace, partnering with other US and international entities, Catholic Relief Services, and other groups, had built the resilience of communities in drought-prone areas and expanded emergency assistance to those who needed it. Similarly, in Malawi, while neighboring communities needed emergency food aid, those who had participated in a development program that had ended two years prior were able to provide for themselves without emergency help.
On behalf of these and others we serve, I want to thank Congress for supporting this program, especially by reversing the draconian cut proposed in the FY 2018 budget request. With unprecedented human need, we must both improve and expand Food for Peace and other foreign assistance programs. My written testimony provides five specific suggestions for Food for Peace. First, eliminate the monetization requirement for development Food for Peace programs. Second, authorize the community development fund mechanism, which replaces monetization to a significant extent and supplements the 202(e) cash funding that the 2014 Farm Bill increased.
Third, streamline regulations in reporting for Food for Peace and the Emergency Food Security Program for more seamless responses. Fourth, elevate past performance as a critical factor in determining winning bids for ocean freight contracts for any in-kind food shipped. And finally, eliminate the cargo preference requirement on all food aid programs.
I'll focus the rest of my marks on cargo preference briefly. Catholic Relief Services is a major implementer of US food aid programs, including the Food for Peace program managed by USAID and the McGovern-Dole Food for Education and Food for Progress programs managed by USDA. Due to the cargo preference requirement, at least 50% of the food aid shipped via ocean freight for these programs must be on US flag vessels.
We reviewed the shipping history for CRS food assisted programs in the fiscal years FY 2013, 2014, 2015. We literally went through all the bills of lading and conducted analysis. And we learned that CRS programs during that time period accounted for about 10% of all the food shipped for USDA and USAID. And we discovered that over the period, US flag carriers were 18% to 51% more expensive per metric ton than foreign flag carriers in the USAID programs. It varies a little bit year by year. And US flag carriers were 80% to 162% more per metric ton than foreign flag carriers for USDA programs.
If US flag carriers had matched the average foreign flag rate in each of these years, we would have spent $23.8 million less in shipping during this three year period. And we did a little back of the envelope math. And we think that comes out to about a half million additional emergency food aid recipients who we could have helped.
Annual congressional appropriations pay for shipping, whether US or foreign flag, as part of our nation's response to hunger and poverty around the world. Extra money spent on shipping is money not spent feeding hungry people. I'm not qualified to judge whether the cargo preference requirement achieves the necessary national security objective of maintaining sealift or the laudable goal of providing jobs tied to that capacity. However, we at Catholic Relief Services deeply appreciate the service and sacrifice of mariners who have helped deliver food aid for the last 60 years. We welcome their contribution in ways that do not reduce the program's ability to assist as many people as possible. Surely, there are other ways of supporting the mariners and maintaining our nation's sealift capacity without indirectly penalizing vulnerable and hungry people.
Short of eliminating the cargo preference requirement, we do have some specific recommendations that could be considered to reduce its unintended negative consequences. I'd be happy to discuss these or any other issues of interest to the committee. Thank you so much for this opportunity.
BOB CORKER: That is some of the best testimony we've had before our committee. And I rest my case with the three of you testifying. So I'm going to defer my questioning time to Senator Cardin, who is going to defer his time to Senator Kaine, who showed up late as usual.
[LAUGHTER]
The late as usual part is a joke.
BEN CARDIN: I want to agree with our chairman. I thought that your testimonies were very specific. And we appreciate that very much. I only have a few questions for the record, but we're going to be tight on time. So we'll give Senator Kaine an opportunity to question.
TIM KAINE: I appreciate my chair. I used to have a history professor-- if you'd come in late, he'd say, a diller, a dollar, a 10 o'clock scholar. So I was a 10 o'clock scholar coming in late for panel two. But good testimony.
I want to direct my questions to Mr. O'Keefe. In your experiences in working with the Food for Peace program, I would love to hear your view, assessment of potential aspects of in-kind food aid relative to the benefits of the cash-based assistance. So we have been pursuing a different direction. And now, a couple of years into that, if you could share your perspectives on are we balancing it right now, that would be helpful.
BILL O'KEEFE: Absolutely. Thank you, senator. So in our assessment, cash is a very important tool to have in our tool box. And we deeply have appreciated the additional flexibility that the program has granted and the EFSP program authorized by this committee as part of the Global Food Security Act.
We still need in-kind food aid in very specific situations. In Ethiopia, for example, where the need is huge, in-kind food aid is critical. In South Sudan, where I was two years ago visiting and saw the dysfunction of markets, the overall lack of food available, and the unbelievable need, we need to bring in food assistance from outside.
In terms of cash assistance, over the last year, CRS is providing $77 million of cash market-based assistance of the type we have been discussing in this hearing. That's doubled since FY 16. And we anticipate it will continue to grow.
Senator Coons, your example from northern Nigeria of the Save program is an excellent one, similar to one we are also doing there. I see you can get lunch with that probably somewhere. The one thing I wanted to add to that is in that conflict situation, we are able to track and monitor the food distributions through this market-based system through, in other words, cash on a card that's used to buy food in a store. We can monitor through the internet who is buying, what store in real time in places where we can't actually go safely. So it allows us to extend further than we might normally be able to do because of just serious security situations. So the balance, I think, is getting better certainly. And cash is a critical tool in our tool box.
TIM KAINE: And do you think the balance is getting better and that the USAID family regional leaders have the tools they need to decide how to adjust that balance to properly account for what's going to be best in any circumstance?
BILL O'KEEFE: I think that there are still situations where the right tool is not always available at the right time, but I don't have an aggregate sense worldwide of kind of what's holding that up. I can say for us at Catholic Relief Services, having the ability to make context specific recommendations based on the market and the people who we are assessing is absolutely critical, which is why we've been advocating for increased flexibility.
TIM KAINE: Can I ask my other two witnesses whether you have any significant difference of opinion with what Mr. O'Keefe has said about sort of this balance between cash and direct food aid?
CHRISTOPHER BARRETT: Senator, no, I completely agree. Things have changed dramatically over the past 15, 20 years while I've studied US food aid programs. Especially thanks to EFSP, there's considerably greater flexibility afforded to humanitarian agencies. And they're using it quite well.
And I applaud USAID. They labor extremely well against the constraints imposed by present statutes, but those are binding constraints. They really slow delivery and they cost money. Groups are being very efficient and creative, but we could do better.
TIM KAINE: Mr. Melito.
THOMAS MELITO: GAO has consistently called on AID to make sure they have the underlying market conditions assessed correctly and then choose the right modality for it. Cash is often the right option, but sometimes because of droughts and conflict, it's actually bringing in commodities. And then the commodities can be brought in either from US or locally, regionally. But the key is to know the underlying problem first. The problem is, if you were actually to provide cash in a situation where there is a shortage of food, you could create inflation, in which case, you'd drive more people into hunger.
TIM KAINE: The last question I'll ask with 30 seconds left is, are we doing enough through USAID, our NGO community, to promote the growth of the agricultural sector of economies that are hard hit? I mean, obviously, I see a real correlation between strong agriculture and reduction in hunger. And that's an important question that USAID and other agencies can address. Are we doing enough there?
BILL O'KEEFE: We can certainly do more, but let me just say the addition of the-- CRS has build, grow-- a sort of recover, build, grow view of agriculture, where we are helping people to move up the market chain of involvement. And the US government now has placed the Food for Peace development program, which helps the poor communities' farmers to become market ready, and then the Feed the Future program, which helps those who are already beginning to participate in the market to engage and earn more income and then become fully self-sufficient and leaders in their community.
Having all those tools in place is very important. They are not mutually exclusive. They don't overlap completely. And we need the Food for Peace development program as a key part of our agricultural strategy.
The resources are never enough. They are not enough. And I think we could all agree to that. Thank you.
BOB CORKER: Thank you. Thank you very much. Senator Young.
TODD YOUNG: Well, thank you, chairman and Mr. Ranking Member, for holding this important hearing. I'd like to direct my questions to you, Mr. Melito. I'm so appreciative of GAO and all the important reports you produce and more importantly, the recommendations you make to various agencies. And as of yesterday, Department of State had 119 open recommendations, 20 of which were priority recommendations that are still open. And USAID had 42 open recommendation, 11 of which are priority.
20 of those recommendations relate directly to food assistance. And five of those are priority. So it's really important, to my mind, that these recommendations are addressed on account of efficiency and effectiveness. And it's my belief that if they were adopted, the efficiency and effectiveness of our food assistance programs could certainly improve. Do you share that view?
THOMAS MELITO: Very much so, senator. Over the last 10 years, there have been a number of closed recommendations for AID and USDA on Food for Peace-- on food aid. And that has improved the program. But the remaining ones should also be closed.
TODD YOUNG: So I want to commend the agency for closing those, but there's still a lot of important work to do.
THOMAS MELITO: Exactly.
TODD YOUNG: On February 16, I introduced S418. It's a Department of State USAID Accountability Act of 2017. And it would require Congress to receive a report from agencies like State and AID about each of these open recommendations. We want them to identify an implementation timeline for each outstanding GAO recommendation, or an explanation as to why they don't intend to implement. It seems reasonable.
So I was able to work with the chairman and his staff to get that included in the Department of State Authorities Bill. And then there was a variant of the legislation we included in this year's National Defense Authorization Act. And I'm working on broader legislation-- Senator Coons is actually an original co-sponsor of this legislation-- that would require all federal agencies to report on outstanding recommendations from the IG and the GAO as part of their annual budget justification. Do you believe this type of legislation would improve the efficiency and effectiveness of agencies across our federal government?
THOMAS MELITO: So GAO cares very deeply about the implementation of recommendations. We strive for at least 80% of our recommendations to be closed. So any effort on the part of the Congress to improve the visibility and awareness and even pressure on the agencies to close the recommendations is welcome.
TODD YOUNG: Thank you.
BOB CORKER: Thank you so much. Senator Coons.
CHRIS COONS: Thank you, Mr. Chairman. Thank you to the genuinely excellent panel providing detailed and thorough testimony on some of the maddening ongoing restrictions on the effectiveness and efficiency in US food aid and some of the genuinely inspiring efforts we are making jointly to meet a hungry world.
Let me ask Dr. Barrett a question, if I might, about the Maritime Security Program because we've explored it a little bit, but there's a lot of other issues. The Maritime Security Program is designed to ensure the Department of Defense has on-demand access to sealift capacity during times of war and national emergency. You noted in your written testimony that the Department of Defense has never mobilized a mariner or a vessel from the non-MSP cargo preference fleet. Is there any evidence that you've come across in your many years of working on this field to support the idea that cargo preference is necessary for our military sealift capacity?
CHRISTOPHER BARRETT: Thank you for the question, Senator Coons. No. The simple answer is no, as you already know.
The military readiness of the cargo preference fleet is quite low. We have a large fleet that is militarily ready, but it's in the Ready Reserve Fleet, in the Military Sealift Command, and in the Maritime Security Program, which is essentially a call option on up to 60 ships, each paid $5 million a year for being prepared to mobilize for the Pentagon, if and when needed. The Pentagon has never needed, even in recent times of war, to activate that whole set of those three types of resources-- Ready Reserve Fleet, Military Sealift Command, and MSP. Cargo Preference does not enhance military readiness. We have plenty of readiness through other mechanisms.
CHRIS COONS: Thank you. I'll ask one other question, if I might. Our friend and colleague from Maryland, former senator Mikulski very pointedly asked me if we were to shift to a predominantly cash-based system of food assistance, wouldn't that undermine the coalition of groups-- shippers, maritime unions, commodity groups-- that have historically advocated actively for Title II in-kind donations, leading to a reduction in overall food aid assistance, thus actually leading to fewer hungry people getting fed? Would any of the three of you care to comment on that assertion?
CHRISTOPHER BARRETT: Senator Coons, it's certainly true that there has been an unusual alliance of shippers, NGOs, and a few millers processors over the years to support Title II. This committee and the Congress have advanced alternative mechanisms that proved much more efficient in meeting the needs of emergency affected populations, the Emergency Food Security Program, in particular. If Title II were to go away it-- and I am a fan of Title II-- but if it were to go away, and there were to be augmentation of the EFSP budgets, we would see enhancement in the service of emergency affected populations around the world.
The Title II is declining steadily. Keep in mind, as I testified earlier, we have a 76% decline in inflation-adjusted terms in US food aid programs since the heyday in the 1960s. So that coalition isn't maintaining the real purchasing power of the programs.
CHRIS COONS: When you say 76%, you mean of those dollars dedicated to purchasing US commodities and shipping them overseas?
CHRISTOPHER BARRETT: Actually, the overall budget has declined by 76% in inflation-adjusted terms. And the margin that differentiates foreign flag from US flag carriers has actually grown. So the decline in true commodity terms is steeper still.
CHRIS COONS: Mr. O'Keefe.
BILL O'KEEFE: Thank you, senator, for that question. And it's obviously an incredibly important one. And I think we as a country must do the right thing for the people who are trying to serve, and continue to find ways to learn from what we're doing and to improve it. And we're certainly committed to that at Catholic Relief Services.
The caution just is-- my understanding in Europe-- and our Dr. Barrett and Mr. Melito may know more-- but when they went from a in-kind to cash-based system, the total amount of resources went down enough that the efficiency gain did not keep up. And so I just think that has to be thought through. I don't think that's a good excuse for doing things that are ineffective or inefficient, but I think maintaining political support for helping hungry people is something we have to exercise care about.
The last thing I'll say, in terms of the farmers, I do think that farmers hear and understand farmers overseas. And the ones I've talked to don't understand the dynamics. And I think Senator Corker, you made this point very clearly in your meeting with the Tennessee Farmer Association. They don't understand how it works and the kind of ineffectiveness at an aggregate level, but it does mean something to them at a human level that things that they produce end up in the mouths of people who need it. And I just think that that's something that we should not toy with. That's real.
CHRIS COONS: Absolutely.
BILL O'KEEFE: That's human and American.
CHRIS COONS: I too have spoken to the Farm Bureau in my state about this issue. There is a deep and deserved pride in America's agricultural community and families in being the most productive farmers on Earth, in feeding a hungry world. But when they hear about the numbers and the inefficiency of how we currently do it-- farmers tend to be pretty thrifty people-- it makes them crazy and concerned that we be more efficient. So I am determined to work with all of you to sustain our support for US food assistance, US programs to efficiently meet the needs of a hungry world rather than celebrating efficiency that leads to fewer being fed. Thank you, Mr. Chairman.
BOB CORKER: We have about 30 seconds left on the first vote. There are three votes. I'm going to close out the meeting as soon as Senator Markey finishes, but I'm going to close it out now from my participation.
I want to thank the three witnesses for being here. It's been outstanding. The record will remain open until the close of business Monday. I assume Senator Markey won't launch a nuclear war or do anything of that sort while we're going to vote. But please enjoy your time, sir. And I'm going to announce the meeting adjourned as soon as you finish. Thank you for being here.
EDWARD MARKEY: I appreciate that. Thank you so much. I think you can trust me with my finger on the button, but I'm not sure. I think we need a hearing on other people having their finger on the button.
So just one question, Mr. O'Keefe. Catholic charities-- how can the US food aid programs better compliment other humanitarian response efforts so that US assistance also addresses the root causes of food insecurity, political conflict, violence, other issues? How can we do that?
BILL O'KEEFE: Thank you so much, senator. Catholic Relief Services does indeed think a lot about this very important question, particularly those of us in the humanitarian sector worked very closely together a year ago to prepare for the World Humanitarian Summit and developed a whole set of recommendations on humanitarian system reform that we look to drive forward. The most important thing for us is to continue to increase resources that go to hungry people, to address both the emergency needs in the kind of creative ways that we've been discussing as part of this hearing, to continue to support and expand the Food for Peace development efforts that allow for getting people at the bottom of the income scale to develop the capacity to begin to connect with markets and have a pathway to sustainability, and then through Feed the Future to continue to expand market-based ways to get millions of farmers and people self-sufficient and addressing their own concerns about malnutrition, income, and other food security challenges. So that the tools, I think, are coming into focus. And it's a question of expanding them.
And then the last thing I'll say is just so many-- and this was alluded to earlier-- so many of the problems we face are, at their core, political. And so we sometimes feel like we are picking up the pieces of problems that are outside of our hands. The people need this assistance, but we need to find political solutions to these conflicts.
EDWARD MARKEY: Thank you. Thank you for that excellent answer. And thank you all so much for your testimony here today.
We're in something that's an annual event. The budget was 10, 20, 30 votes maybe today. So we apologize to you just for the way in which today is going to be conducted. But it doesn't in any way reduce the thanks that we have for you and the impressive nature of your testimony. Thank you so much. This hearing is adjourned.
SPEAKER 4: Thank you.
SPEAKER 5: Thank you.
Christopher Barrett, Deputy Dean and Dean of Academic Affairs, Cornell SC Johnson College of Business, testified before the United States Senate Committee on Foreign Relations Hearing on “Modernizing the Food for Peace Program” on Thursday, October 19, 2017.
In his testimony, Barrett summarized the best recent research on current U.S. international food aid and food assistance policies, and ways in which the United States Government (USG) might more effectively use those policies and resources to address global food insecurity.
