Congress Must Ignore Maritime Special Interests to Lower Shipping Costs

Soaring food and energy prices are putting hundreds of millions of people’s lives at risk worldwide. It is thus especially disappointing, though perhaps not surprising, that the US maritime sector is asking Congress to increase the share of food aid shipments that must be carried by US-flagged vessels in this time of crisis. This request, if met, would further raise the cost of providing emergency food assistance to millions of desperately poor families facing a genuine food security crisis. Many legislators and commentators were shocked by the March 2022 disclosure that nearly 60 percent of the cost of providing international food assistance with resources drawn from the Bill Emerson Humanitarian Trust would go to cover processing and shipping, with the remaining 40 percent to cover the purchase of the food. This news prompted the introduction of a concurrent resolution in Congress to waive the food aid cargo preference requirement for the next few years.

Our published research estimates that under the current 50 percent cargo preference requirement, the higher rates charged for shipping US food aid on US-flagged ships increases the overall cost of operating the programs by about $50 million per year. If one or more amendments to the National Defense Authorization Act (NDAA) for 2023—proposed by House of Representatives member John Garamendi (D-CA)—were to be adopted, the cost increase would be even more substantial.

Worse still, recent events indicate that the US maritime industry does not have the capacity to meet the increased demand for shipping food aid that it is seeking from Congress. According to data provided by the US Agency for International Development, companies owning US-flagged vessels were unable to submit bids to carry about 60 percent of all fiscal year 2022 bulk food aid shipping contracts (allocated through mid-June of 2022) under the Title II “Food for Peace” program. And based on the US maritime industry’s performance thus far in FY22, food aid logistical experts do not believe that the industry has the capacity to carry a higher share of US food aid shipments, as Representative Garamendi’s amendment to NDAA would require.

Finally, our research also indicates that food aid cargo preference contributes very little to its primary objective: to support and maintain the US-flagged civilian fleet’s capacity to carry military cargo in the event of widespread conflict. In fact, the three US-flagged bulk carriers most used to transport food aid shipments under cargo preference laws are not deemed to be “militarily useful” by the US Department of Defense.

Based on our findings, we believe that Congress should adopt the concurrent resolution to waive cargo preference requirements for international food aid and rebuff any efforts to increase them.

Stephanie Mercier is an agricultural policy consultant who served for more than a decade as Chief Economist on the Senate Agriculture Committee. Vincent H. Smith is Director of Agricultural Policy Studies at AEI and Professor of Economics in the Department of Agricultural Economics and Economics at Montana State University.