If the Obama administration has its way, iconic red, white and blue bags of grain marked with a U.S. flag shipped from U.S. producers to scenes of famine and disaster will be largely replaced by goods purchased on local markets.

Food aid reform proposed in President Barack Obama's budget would strip dollars away from a program in which the U.S. government purchases food from American farmers and ships it abroad to be given to charitable organizations to distribute or sell for cash.

The new plan would instead divert those funds to buy food on local markets, securing greater flexibility and bang for the buck. The USAID food program last year cost $1.4 billion, and 25 percent of it went to shipping costs.

Many charitable organizations — including Bread for the World, CARE and Save the Children — support the proposal, as do a number of conservative groups that generally tend to oppose any Obama proposal, including the American Enterprise Institute and the Heritage Foundation.

Standing in their way are a powerful coalition of U.S. agricultural interests, whose products are currently bought on the open market for foreign aid; U.S. maritime interests, whose shipping is legally required under current USAID policy; and a number of major on-the-ground food aid organizations, who fear that the sudden policy shift will disrupt two generations of political commitment and delivery experience.

Negative consequences

While the food aid budget dispute falls along predictable lines, the conflict has also divided major aid organizations. Under the banner of the Alliance for Global Food Security, an advocacy coalition made up of several major charities, groups have opposed the Obama budget plans. Included in this coalition are World Vision, International Relief and Development, Food for the Hungry and several major world hunger non-government organizations.

“They are saying, ‘Don’t worry. It will work,’” said Ellen Levinson, executive director of the Alliance for Global Food Security. “We are just saying this is a major change in a program that has been reliable and has a strong constituency.”

AGFS is open to some significant changes in how food aid is obtained or shipped, Levinson said, especially if it helps reach more people. But she fears that the current Obama proposal would have unintended negative consequences.

For now, defenders of the status quo have held their ground, as American farmers played a strong hand in the agricultural committees of both houses this month. Compromise negotiations are now underway.

Fostering markets abroad

One of the flashpoints of controversy is "monetization," which occurs when a charitable organization is given supplies of U.S. food through the USAID program and is then allowed to sell those supplies in local markets and use the proceeds to fund their ongoing development and aid projects.

Monetization is controversial. Critics contend funds are squandered by shipping food halfway across the globe. The U.S. government pays for the food, but the charities on the ground that receive it and monetize it must arrange for shipping, distribution and sales in targeted areas. Critics argue that U.S. agricultural products inserted into regional markets undermine the local economy by discouraging domestic farmers.

Defenders argue that when monetization is done correctly, disruptions of local economies are minimized, and in fact, markets can be fostered, in part because the non-government organizations prime the pump with goods and currency otherwise in short supply.

One argument against monetization is that it diverts staff resources and attention away from what charitable agencies are built to do, forcing them to focus on shipping and logistics instead.

"Doing monetization is a massive undertaking," said Bill O'Keefe, vice president for government relations at Catholic Relief Services, one of several major relief organizations supporting the Obama proposals. O'Keefe would prefer to strictly limit the amount of food purchased in the U.S. and shipped abroad, looking instead for lower prices on regional markets.

But using cash for local purchases isn't always possible, said Jeff Grieco, chief of communications at International Relief and Development. “The reason they are in a food crisis is because they don't have functioning food markets," he said.

IRD and its allies want a predictable supply of food based on long-term budgets. The Obama proposal could put them at the mercy of unpredictable local and regional markets for food supplies.

"We support the objectives of reform," Grieco said. "It's how you get there. That's where the tire meets the road, and that's the difficult conversation.

"The field perspective is that we need to slow down here and get truth and facts out."

Diplomatic benefits

O'Keefe shares Levinson's fear that the Obama administration's ad hoc approach — which simply shifts dollars around on a temporary basis, rather than reforming the underlying law — would leave the funding in limbo in subsequent budgets.

Showing the American flag has always been a subtext of USAID policy, O'Keefe said, noting the enduring partnership "between American farmers and farmers overseas, signified by that handshake on the bags." O'Keefe suggested that one reason the Obama administration is seeking to keep 55 percent of aid funding for U.S. products is to keep that diplomatic leverage.

With President Obama's more aggressive reform proposals derailed for now, Grieco is looking forward to a compromise that would meet in the middle, one that would “give the president greater flexibility and achieve greater efficiencies, but at the same time keeping the operating system in place that has worked for 60 years.”

Eric Schulzke writes on national politics for the Deseret News. He can be contacted at eschulzke@desnews.com.