Earlier today, I wrote about Sri Lanka’s default and what it could portend for the rest of the developing world. As global economic conditions worsen and some of the international ties that developing countries were counting on change or disappear, we could see many crises similar to Sri Lanka’s take place over the next year or two. In wealthy countries, worsening economic conditions mean higher prices and unemployment. In developing countries, they can mean lack of food, and lack of food often leads to protests, revolts, civil wars, and state failure.
That kind of global instability is not in the United States’ best interest, and that’s why the U.S. has various humanitarian programs to aid developing countries facing acute food shortages. Wise to the economic conditions that could speed those shortages (see last week’s Capital Letter for more on that topic), Secretary of State Antony Blinken announced $215 million in additional humanitarian funding for food security in mid May.
That’s a relatively small price for the federal government (equivalent to approximately two Joint Strike Fighters), and well worth the money (unlike the Joint Strike Fighter) if it can be used effectively to bridge the gap in food supplies that some poor countries will be facing in the near future. The humanitarian role of U.S. foreign policy is one of the things that sets America apart from its adversaries, and it’s a role that China is starting to take more seriously. The Chinese have already announced aid to Sri Lanka, for example.
Our shipping protectionism, which exacerbates our own energy and transportation problems, also hinders this vital aspect of our foreign policy. Colin Grabow of the Cato Institute explains in a blog post from yesterday:
Undermining [American] relief efforts, however, is an oft‐overlooked form of shipping protectionism. Known as “cargo preference,” it mandates that at least 50 percent of government food aid be transported on costly U.S. ships instead of more affordable foreign vessels.
How much more costly? A 2015 Government Accountability Office (GAO) report calculated that this requirement increased food aid shipping costs by an average of 23 percent while a 2020 American Enterprise Institute (AEI) working paper found that food aid shipping costs over a six‐year period would have been 34–38 percent cheaper in cargo preference’s absence.
That’s not surprising. A 2011 U.S. Maritime Administration study found that U.S.-flagged ships were 2.7 times costlier to operate than their foreign counterparts—a differential that has further increased according to a 2018 GAO report.
The price of cargo preference shipping is driven still higher by a lack of competition. The U.S. commercial fleet offers just four dry bulk ships to choose from, with three of the vessels owned by a single company. Over two‐thirds (28 of 39) of containerships operating in foreign trade—the main pool of vessels that participate in cargo preference—are operated by just two companies.
These policies guarantee that the U.S. isn’t getting what it’s paying for in humanitarian aid. On top of that, it’s a form of corporate welfare for our inefficient shipping industry — taken out of funding that’s supposed to be used to feed the poor. Unlike retail or meatpacking, domestic shipping is an actual case where lack of competition contributes to higher prices than a competitive market would allow. That lack of competition is the direct result of protectionist policies. For the sake of the taxpayers and the people in need of humanitarian aid — of which there will likely be more in the near future — Congress should repeal these policies and allow U.S. aid to be delivered in the most efficient way possible.