US Farm Bill: One Step Forward, Two Steps Back
By Rachel Bergenfield & Erik Heinonen
The U.S. Farm Bill,[1] signed into law on 7 February, includes crucial, overdue reforms to food aid policy. While these promising changes will contribute to making U.S. international development and global poverty reduction efforts more impactful and cost efficient, the subsidy component of the Bill has the opposite effect. By continuing to artificially reduce the prices of certain U.S. agricultural goods, it serves as an additional barrier to farmers from low-income countries who are seeking to work themselves out of poverty and reduce reliance on aid.
The Bill introduced two key food aid reforms. First, it decreased the amount of U.S. food aid that can be re-sold in low-income countries in order to fund international development programs there. This practice, known as “monetization,” has been shown to be wasteful, ineffective, and potentially distortionary; a study by the U.S. Government Accountability Office found that it wasted $219 million over a three-year period. Second, the U.S. Government will now be able to spend up to $80 million per year on the procurement of food aid locally and regionally rather than shipping it from the U.S.;[2] a U.S. Department of Agriculture study [pdf] found that buying locally or regionally is faster, which is crucial in emergency situations, cheaper, and less likely to distort local markets or put farmers out of business by dumping cheap or free U.S.-produced food. Buying locally may even contribute to jumpstarting local economies after a disaster. Both changes better align U.S. policy with global best practices[3] including those identified by the Government’s own evaluation findings. The scale of the reforms is modest, but they are important steps in the right direction.
The Bill’s subsidy program, however, actually has the opposite effect of the components of the Bill that deal with food aid. Rather than helping vulnerable people in low-income countries, it makes it harder for farmers from these countries to work their way out of poverty. The subsidies, which will now take the form of insurance instead of direct payments, keep the prices of some U.S.-produced agricultural goods artificially low. This makes it difficult, if not impossible, for less technologically advanced and resource-poor farmers in low-income countries to earn a decent price for the same goods.
Consider the chronically food insecure East African nation of Burundi or even the more advanced West African country of Ghana: farmers struggle to access credit, have limited to no access to mechanization, and cultivate extremely small plots of land. Most are subsistence farmers, selling little to none of what they produce locally, and are often one bad season away from having to rely on food aid. From this perspective, only a more robust agricultural system—which includes fair market prices, among countless other changes—will allow their situation to improve. Eliminating policies that deploy U.S. taxpayer dollars to depress the global price of some agricultural goods is a key step in long-term poverty reduction and the generation of economic opportunities, the very objectives of most U.S. international development programs.
Some argue that subsistence farmers and poor consumers actually benefit from cheap agricultural commodities in the form of cost savings. While this may be true in the short-term, the long-term effects of distorting markets cultivates a cycle of dependency on aid and unreliably low prices rather than building the local economies that must ultimately generate livelihoods and employment. Supporting the poorest of the poor is better achieved through interventions that target this population, such as cash transfers or other social benefits.
Simultaneously helping and harming vulnerable populations abroad is a paradox that may be unavoidable in the increasingly globalized world where small changes in one market reverberate in markets on other continents. The challenge for policymakers is coping with this new normal. A crucial change will be generating an updated, more comprehensive understanding of what constitutes development policy; it should be thought of as the net impact of diverse policies on low-income populations abroad, not just the quantity or even the quality of aid. To that end, the Center for Global Development has introduced an index that ranks the commitment of donor countries to development based on a basket of seven policies ranging from migration to security. While it is intended for country-level analysis, its comprehensive understanding of development and its attention to the unintended effects of domestic or security policies on international development prospects could be a helpful framework for guiding assessments of specific issues or policies, such as the Farm Bill.
The Farm Bill reminds us of the ripple effects that domestic and other seemingly unrelated policies can have on the households, plates, and long-term opportunities of poor and food insecure people outside of the U.S. It is crucial that policymakers see aid not merely as a generous handout by the U.S. to low-income countries, but rather understand that U.S. policies, politics, and practices are linked with the dynamics that drive long-term international poverty. Only in understanding the interconnectedness between U.S. policies and the poverty in places as seemingly remote as Burundi is there hope for meaningful, positive change in the effectiveness of U.S. development efforts.
About the Author
Rachel Bergenfield and Erik Heinonen work in international development in Ghana and Burundi respectively. They are alumni of the Jackson Institute for Global Affairs at Yale University.
Endnotes
The Agricultural Act of 2014 is commonly known as the “Farm Bill.”
This is short of the $600 million requested under the President’s initial proposal, but it is still a significant increase over current levels.
For example, see the summary of EU food assistance approaches, which emphasize only shipping food if it is not available in local markets.