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Five Steps to Make Our Aid More Effective and Save More Than $2 Billion

Five Steps to Make Our Aid More Effective and Save More Than $2 Billion

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John Norris and Connie Veillette detail how Congress could save more than $500 million annually by eliminating unnecessary regulations that make it harder to carry out effective development programs abroad.
John Norris and Connie Veillette detail how Congress could save more than $500 million annually by eliminating unnecessary regulations that make it harder to carry out effective development programs abroad.

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Published by: Center for American Progress on May 05, 2011
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1Center or American Progress | Five Steps to Make Our Aid More Eective and Save More Than $2 Billion
Five Steps to Make Our Aid More Effectiveand Save More Than $2 Billion
John Norris and Connie Veillette April 2011
Introduction and summary
Mos Americans wildly overesimae oreign aid as a percenage o he ederal budge, which makes i unsurprising ha U.S. oreign aid programs once again nd hemselvesa he cener o he debae as he budge batles hea up in Washingon.
1
Policymakersare seemingly divided ino wo camps: hose who wan o deeply cu oreign aid andhose who wan o mainain spending levels and make programs work more eecively.Bu here is a hird way ha makes a grea deal o sense. I saves axpayers billions o dol-lars and will make aid programs more eecive and more likely o produce lasing resuls.Tis brie deails how he new Congress could save more han $500 million annually by eliminaing unnecessary regulaions currenly in place ha are incredibly waseul, ani-compeiive, and make i harder o carry ou eecive developmen programs abroad. Addiional savings and eciencies can also come hrough he reorm o earmarksrelaed o he oreign assisance accouns. Lawmakers can save a leas $1.5 billion more by cuting domesic agriculural subsidies.Besides wasing a grea deal o money, he regulaions discussed in his paper have oneoher key aspec in common: Tey have survived largely because o inense lobbying by special ineres groups ha direcly bene rom heir perpeuaion.I he new Congress is serious abou boh cos savings and reorm i should ake veseps o eliminae oudaed laws and regulaions ha hi he American axpayer hehardes when i comes o oreign aid programs.Tese include:
•
Ending cargo preerence or U.S. ood aid
•
Eliminaing moneized ood aid
•
Cuting U.S. agriculural subsidies
•
Removing limiaions on he local and regional procuremen o ood aid
•
Eliminaing all earmarks on oreign aid accouns We examine each o hese seps in he pages ha ollow.
 
2Center or American Progress | Five Steps to Make Our Aid More Eective and Save More Than $2 Billion
Cost savings
$140 million
to
$200 million
annually
End cargo preference for U.S. food aid
Cargo preerence is he poser child or a se o regulaions ha are old, ineecive, and very dicul o ge rid o inside he belway because o radiional pork barrel poliicsand well-conneced lobbyiss.In a nushell, cargo preerence mandaes ha 75 percen o all U.S. ood aid commodi-ies be shipped aboard U.S. agged vessels, or ships regisered in he Unied Saes. Teoriginal legislaion ha creaed cargo preerence was passed in 1936, wih he ood-aidspecic provisions added in 1954.Cargo preerence was originally esablished because he U.S. miliary waned o ensure hacargo ships and crews were available o serve as an adequae naval reserve in imes o war.Bu i has been apparen or decades ha cargo preerence or ood aid no longer servesis original purpose. I also makes i signicanly more dicul o deliver ood assisancein a imely, cos-eecive ashion o people in need. As early as 1994 he Governmen Accouning Oce, or GAO, noed ha he Penagonno longer saw any real purpose in he ships carrying ood aid and heir crews servingas some kind o marine reserve.
2
Simply pu, here is no miliary purpose whasoeverserved by he curren cargo preerence regulaions.Furher, his same GAO repor noed ha hese regulaions added an esimaed$200 million annually o he cos o delivering ood assisance abroad. A more recenacademic sudy concluded ha cargo preerence cos American axpayers $140 millionin 2006 in unnecessary ransporaion coss.
3
 Cargo preerence rules are really a massive, ongoing subsidy o a well-conneced elieo U.S. shipping companies. Te primary deense o mainaining his cargo preerencepracice comes rom repors prepared by lobbyiss and conracors wih direc ies ohe rms ha reap correlaing benes. Virually every independen analysis has calledor a major overhaul o he program or is complee eliminaion.Eliminaing he pracice would lead o greaer eciency in ood aid programs. Due ocurren pracices only abou one-hird o ederal ood aid spending acually buys ood.Te res goes oward shipping and oher logisical and adminisraive coss.
4
Te logisi-cal cos o U.S. ood aid shipmens is 60 percen higher han our European counerpars,primarily due o cargo preerence regulaions.
5
 Te curren regulaions are so ineecive ha here have been repeaed insances wherehe U.S. governmen has been unable o buy he bes-priced agriculural commodiiesor he mos appropriae ones or a paricular humaniarian siuaion simply because U.S.agged ships were no available a he por where hese commodiies were locaed.
 
3Center or American Progress | Five Steps to Make Our Aid More Eective and Save More Than $2 Billion
Cost savings
$120 million
to
$200 million
annually
Les anyone consider his a broadside agains he U.S. mariime indusry, i should benoed ha he Mariime Securiy Program provides nancial suppor o commercialship operaors, primarily conainer ship operaors, or vessels as well as oher logisi-cal suppor ha could be made available o he Deparmen o Deense upon reques.I policymakers believe ha U.S. shippers need assisance, hen i should be providedhrough programs expressly or his purpose insead o rying o inecienly “mulipur-pose” oher programs such as inernaional ood aid.I’s ironic ha as U.S. developmen programs ry o promoe ree markes and compeiionabroad U.S. developmen ocials are prevened by an arcane law rom shipping U.S. oodaid by he cheapes and mos eecive means available. U.S. axpayers should be assuredha conracs o ship U.S. ood aid are awarded o he lowes and mos capable bidder.Congress could eliminae cargo preerence and ree up hundreds o millions o dol-lars annually ha could be beter served eiher going oward deci reducion or beingapplied o he acual purchase o commodiies raher han providing a axpayer subsidy or U.S. shippers. U.S. shippers should succeed on he meris o heir skills and compe-iveness—no because hey are underwriten by a perpeual governmen subsidy.
Eliminate monetized food aid
Like cargo preerence regulaions, he pracice o moneizing ood aid coninues evenhough i makes litle sense. I is boh cosly and ineecive o he poin ha i acually makes promoing economic developmen more dicul, no less.Moneizaion o ood aid is less complicaed han he name suggess. Under ood aidregulaions he U.S. Agency or Inernaional Developmen, or USAID, is allowed ohave privae volunary organizaions, or PVOs, sell a porion o he ood aid hey receiverom he Unied Saes on local markes in or near needy counries and hen use heproceeds o hese sales o nance developmen projecs or help pay or he coss o dis-ribuing oher ood aid. Some organizaions have come o rely on his sale o ood aid asa signican source o revenue in heir budges.Te program was iniially designed in 1985 o help cover he adminisraive coss o PVOs. I expanded in 1988 o underwrie developmen projecs. In 1996, 28 percen o nonemergency ood aid was moneized and sold by PVOs. Since 2001 his level has morehan doubled o 60 percen o U.S. nonemergency ood aid a a oal o $400 million.
6
 Developmen expers have come o view moneizing ood aid as counerproducivedespie he increase in he pracice. Perhaps mos imporanly, when inernaionalNGOs sell agriculural producs on he local marke i can make i harder or local arm-ers o be economically successul because hey are compeing wih impored commodi-ies ha are essenially being dumped on heir markes.

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