The impact of a US bill requiring 75% of US food aid to be shipped on American vessels

Posted on April 29, 2014 by aviyer2010

An article in the New York Times (April 24, 2014) titled “Provision could limit US Food Aid” describes a Coast Guard spending bill that requires “75% of US food aid to be shipped on US owned vessels”. The impact is to increase costs and cause delays in delivery, thus decreasing the amount and effectiveness of US food aid to distant countries like South Sudan. It also runs counter to a move to purchase food closer to the source of the emergency by providing cash rather than food in kind. Do proponents of the requirement, who claim it will preserve US jobs by requiring use of US ships, have an argument that is credible ? Will this requirement decrease the amount of US food shipped and thus run counter to the goal of preserving US jobs ? Should constraints on transportation be eliminated so that USAID can choose the most cost effective solution ?

About aviyer2010

Professor

View all posts by aviyer2010 →

This entry was posted in Cost, emb2019, Global Contexts, imm2018, Supply Chain Issues and tagged Cost, emb2019, Food, Global, imm2018, lead time, regulation, ships, Supply Chain, transport, USAID, vessels. Bookmark the permalink.

13 Responses to The impact of a US bill requiring 75% of US food aid to be shipped on American vessels

Kyle Harshbarger (@KyleHarshbarger) says:

April 30, 2014 at 8:12 am

There is a fairly stable supply of American ships available to do this, and adding to that capacity would be burdensome. This bill presumes that American vessels are plentiful to fulfill the demand for aid. The net result will be less food aid because this is an artificial constraint on supply and capacity.

Reply
Julia Eldridge says:

January 15, 2018 at 5:37 pm

The article states that, “the United States remains the only major donor sending food to areas in the midst of humanitarian crises rather than buying food that is produced in the region itself.” Compounded with the stipulation that food needs to be shipped on US vessels, presumably from the United States, reveals that this system has a major waste issue when it comes to transportation. The excessive transportation within the system could never allow the aid program to be efficient. By increasing waste the program will be not be cost efficient and as the article states, will not allow food to be delivered to those in need when they need it. While it could potentially increase US jobs in the short run with US carriers being used, presumably run by US citizens, such an inefficient program would likely be cut or reduced, eliminating any additional jobs and preventing aid being provided to those in need.

Reply
Vijay Raisinghani says:

January 20, 2018 at 10:58 pm

This provision sounds absurd and possibly detrimental for the American vessels and the job market. If the choice is enforced by law, then alternate transportation would be used to transport the food or same funds would be used to sponsor food be delivered from other countries. I don’t see this being something which will affect US jobs negatively. I agree with Julia’s view – it just will affect the overall efficiency of the US aid process which is counter productive to our efforts for the cause. To reducing the aid would not make US look better. This is the same as any charity which has high overhead costs – it defeats the purpose so it won’t be sustainable in the med to long run. Such constraints should not exist as they lead to entitlement of some sort in business and does not consider the impact of the main purpose of what the country is doing – provide aid.

Reply
Jordan McCroskey says:

January 28, 2018 at 3:01 pm

I agree with Vijay and Julia that this bill appears to be detrimental and politicizing US foreign aid. The goal of US foreign aid is to provide charitable acts that better humanity, help stabilize regions, and improve America’s image worldwide.

I don’t believe US foreign aid shipments are a serious threat to US maritime jobs. The artificial constraint of requiring the use of American vessels will increase the costs of these programs and make the aid slower to arrive and therefore less effective. USAID should have the duty to find the most attractive shipping option to reduce the cost of aid for taxpayers. We should not impose regulation that will increase cost and reduce efficiency. These are the kind of actions that lead taxpayers to feel their government is inefficient and cannot achieve anything.

Reply
bairdjb says:

January 29, 2018 at 2:19 pm

I agree with Jordan, Julia, and Vijay that this bill seems to be detrimental. It almost comes across as political grandstanding. I also agree that the US foreign aid shipments are not a serious threat to US maritime jobs. However, I do think preference should be given to US ships.

Reply
Michael Minor says:

February 1, 2018 at 8:14 am

The letter from shipping officials said, “the food aid provision would protect American jobs and bolster the nation’s defense capabilities by keeping more of the merchant marine fleet on the world’s seas.” I honestly doubt that US job preservation is dependent on their ability to provide disaster relief or the merchant fleets providing any strategic defenses in excess of the Navy. There are funding constraints for each humanitarian aid package, any excess cost from transportation or other expenses will be leveraged by the reduction of food from the USAID. It’s feasible to require the use of US vessels in response to humanitarian efforts within a certain perimeter. We recently seen the effects logistics had on the food and supplies provided to the Puerto Rico. If the US has committed to providing humanitarian aid around the world using taxpayers’ dollars, then the government has an obligation to be good steward of those dollars. Of course, my answer is based on being a good steward with tax payers dollars is far from reality!

Reply
D. Zekveld says:

February 3, 2018 at 1:29 pm

There are two competing goals: providing effective aid and creating jobs. If the purpose and goal is truly Aid, then don’t put restrictions on the Aid as it complicates the effectiveness of the aid. However, if the purpose is jobs, then have a separate policy to encourage jobs. Perhaps this idealist, but by merging these sometimes competing priorities, effectiveness of aid is reduced. I believe the constraints on transportation should be eliminated so that USAID can choose the most cost effective solution.

Reply
Sarah Rosnick says:

February 5, 2018 at 8:54 pm

I suspect that there are provisions to this bill (or captured elsewhere) where the United States government can reallocate or demand they become the priority for service. For example, if FEMA has an emergency, they can quite literally bump everyone out of line and seize equipment (or demand to be first in line for things being manufactured.) I suspect if the food aid was a critical priority, there’s probably a similar mechanism in place. I know these provisions exist for several of our federal customers. Most customers don’t require us to entirely dedicate our manufacturing capacity to them because they try to build out their force in advance.

So while there certainly could be a limitation on natural capacity that hits, it’s also quite possibly an issue that can be resolved by temporarily rededicating resources when needed.

Reply
Paul Aoun says:

February 8, 2018 at 6:38 pm

In my opinion, the benefit that this requirement will be preserving jobs is probably not true. Shipping companies have international crews, and are managed and operated as global companies, so the likelihood of this new requirement impacting the US jobs is fairly low. It will certainly increase the revenues of the big US shipping companies, since they will now have this new business coming their way.

If the cost of shipping on US ships is significantly higher and cause disruption to the supply-chain efficiency, then yes the food shipped will be reduced, since the money will go to cover the shipment costs and disruptions to the supply chain.

Yes, I think so. USAID is about helping the starving peoples in countries plagued by wars, natural disasters (droughts) and famines, so introducing a requirement like this will certainly have an impact on USAID ability to deliver on its mandate.

Reply
Anna Dietrich says:

February 11, 2018 at 1:38 am

I’m in agreement with Paul that the push to ensure that the requirement of having US food aid shipped on US vessels will not significantly promote/preserve US jobs.
I think it’s possible to see this decision as a political one, and not one that promotes and achieves the goals of US aid.
Pending ship fleet capacity, it is possible that it could decrease the amount of food shipped. Also, if US ships must now be used to ship international aid, what is the opportunity cost of other goods that it could be shipping, and therefore money earned, creating more jobs, and so on.
From the job preservation perspective, I see this in a similar light in the debate on trade and the idea of American based manufacturing. As the world becomes more “global” and connected, American workers can benefit from global companies.
From a constraints perspective, limiting the constraint would be beneficial to ensure that the aid that is being shipped can choose the most cost effective solution. Since the US aid is funded by the US government it could argued that the amount of money spent on foreign aid could be decreased (even though foreign aid is a tiny percent of total spending), and thus invested in other means to support American workers.

Reply
srinivas tadepalli says:

February 11, 2018 at 2:02 pm

Similar to Zekveld’s comments above, what is it exactly that we are trying to achieve (1) Humanitarian Aid or (2) Run US vessels to provide employment for US citizens or (3) Both. I believe the primary goal of any organization in this domain (particularly USAID) is to provide aid to countries/people in need of aid. Does it matter as to how its delivered as long as its delivered in the fastest way possible. Also, as Paul said, particularly in the hospitality industry, though there are a lot of US based vessels and they have a lot of international crew (not because they are cheap) and this is due to the fact that they are NOT able to find enough US citizens for these jobs. In my humble opinion, i dont think these types of aid missions will effect US jobs just because they are not using US based vessels.

Reply
Mike Carter says:

February 21, 2018 at 3:52 pm

Agree with Sri and Paul. These are two different issues. Are they making decisions as a business or as humanitarian aid services?

Reply
Matt Slane says:

February 24, 2018 at 10:26 am

It is an interesting issue that was most likely created not thinking of hurricane and emergency needs, rather for planned aid missions. In this case, it may be ok to allow for this restriction. The issue arises when we are bound to this during emergent times like the hurricane in Puerto Rico. This was a challenge to overcome during this time.

Reply