Bad Habits Die Hard: On USAID "Relaxing" Tied Aid

Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime - Chinese proverb

Give LDCs subsidized American foodstuffs and you can feed them for a while, albeit with the risk of decimating unsubsidized local food production. Help develop their food self-sufficiency by buying food locally...well, to hell with that - paraphrasing US aid policy

Here's a very important development you may have missed: I certainly did because it wasn't widely publicized at the beginning of the year--even in development circles where I assume it's groundbreaking news. The US Agency for International Development (USAID) has repeatedly been cited as one of the most flagrant offenders in the tied aid sweepstakes. That is, this aid agency has been encouraged to give business to American contractors for various development and emergency relief projects. The pitfall here is obvious: instead of supporting budding enterprises in developing countries, USAID has traditionally obtained supplies from stateside since it was obligated to do so regardless of cost.

The argument many USAID folks make nowadays is that this is no longer so. The proportion of tied aid to untied aid is supposedly falling. More recently, the (mostly unreported) news concerns the US government now allowing for procurement from non-US suppliers of aid goods and services. Not only should inefficiencies due to distance such as spoilage be minimized, but USAID should be able to procure these more inexpensively. Times have changed, or so they say:

Because of the end of the Cold War and the subsequent globalization of the economy, this [tied aid procurement] approach has become increasingly difficult to administer and, in some respects, obsolete. The costs of compliance with the complex regulation, and of the self-imposed and unnecessary restrictions on procurement in recipient and developing countries means that the foreign assistance dollar does not go as far as it would with a more straightforward regulation that reflects the statutory authority to procure in the recipient country and other developing countries, in addition to the U.S.

Which is all well and good, but the most symbolic of all forms of aid is excluded. Just as Live Aid's refrain was "feed the world" and USA for Africa zeroed in on hunger, particular attention will be placed on alleviating food scarcity. Unfortunately, untying aid does not extend to that particular area. From the Guardian, we are provided an exclusion list:

But last month, USAid revised its procurement regulations. The new rules...will allow the agency to purchase most goods and services from developing countries, with notable exceptions including US-funded food aid, motor vehicles and US-patented pharmaceuticals...

The new rules do not extend to US-funded food aid. Under federal law, the vast majority of American food aid must be bought from US suppliers and transported on US ships. Also exempt from the new regulation are motor vehicles, which must be made in America, and US-patented pharmaceuticals, which can only be manufactured outside America with express permission from the patent holder. The procurement changes do not extend to other US agencies that spend foreign assistance. 

The motor industry's capture of the US government is obvious given the huge bailouts of GM and Chrysler during the subprime crisis. That pharmaceutical firms would allow the US government to purchase generic drugs only over their dead bodies should be plenty obvious, too. However, it is galling that the most symbolically important aid of all, food, continues to be so influential in the formation of US aid policy. It returns us to that chestnut of a debate over rich world farm subsidies hurting LDC farmers. Just in time for the 2012 Farm Bill come these aid controversies. As the proverb above suggests, what lasting good does temporary aid consisting of US foodstuffs (which are likely highly subsidized and may hurt poor farmers who cannot compete with American giveaways to rural interests besides) do?

I suspect the main reason why this untying of aid has received so little attention is because it doesn't really address these grievances concerning American government policies that support overzealous IP protection over pharmaceutical products and the continuing unavailability of support for overseas food procurement.

Moreover, does USAID really aid represent goodwill on the part of the American people given that federal outlays like aid are significantly funded by others? I guess it's white man, forked tongue...and tied food aid.