Food Aid Cargo Preference: Impacts on the Efficiency and Effectiveness of Emergency Food Aid Programs

Abstract

This paper examines the impact of cargo preference requirements, which create market power for US-flagged ships, on the effectiveness of the Food for Peace emergency food aid program of the US Agency for International Development (USAID). We find that cargo preference requirements increase real ocean transportation costs per metric ton by 68 percent for packaged-goods shipments and 101 percent for bulk-commodity shipments. These differences in cost impacts appear to be associated with differences in the impacts of the mandate on market concentration in the packaged-goods and bulk-commodity shipment markets. These higher costs reduce USAID’s capacity to serve millions of families each year.