oversight

U.S. Agricultural Exports: Strong Growth Likely But U.S. Export Assistance Programs' Contribution Uncertain

Published by the Government Accountability Office on 1997-09-30.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                   United States General Accounting Office

GAO                Report to the Chairman, Committee on
                   the Budget, House of Representatives



September 1997
                   U.S. AGRICULTURAL
                   EXPORTS
                   Strong Growth Likely
                   But U.S. Export
                   Assistance Programs’
                   Contribution Uncertain




GAO/NSIAD-97-260
             United States
GAO          General Accounting Office
             Washington, D.C. 20548

             National Security and
             International Affairs Division

             B-277683

             September 30, 1997

             The Honorable John K. Kasich
             Chairman, Committee on the Budget
             House of Representatives

             Dear Mr. Chairman:

             Domestic agricultural policy in the United States was significantly changed
             by the 1996 Federal Agriculture Improvement and Reform (FAIR) Act
             (P.L. 104-127, Apr. 4, 1996). Although it continues to provide income
             support to farmers for the next 5 years, FAIR reduces the government’s role
             in regulating the production of bulk commodities such as wheat and corn
             and provides the agricultural sector and farmers enhanced flexibility to
             respond to domestic and international market conditions.

             In response to your request, we assessed (1) the way in which FAIR will
             likely affect U.S. agricultural exports and (2) the continued relevance of
             U.S. agricultural export assistance programs. To address FAIR’s potential
             impact on U.S. exports, we interviewed a wide range of U.S. and
             competitor nation agricultural experts, analyzed available studies and
             reports authored by some of these experts, and reviewed and discussed
             the agricultural trade components of various economic models. To
             evaluate the programs’ relevance, we reviewed both qualitative and
             quantitative evidence regarding the extent to which the programs benefit
             the overall U.S. economy, benefit the U.S. agricultural sector and specific
             U.S. commodities, counter competitor nations’ agricultural export
             programs, and promote U.S. trade negotiating objectives.


             Agriculture is an important component of U.S. trade. Agricultural exports
Background   accounted for $60 billion, or 7 percent, of all U.S. exports (merchandise
             and service) in fiscal year 1996, while agricultural imports accounted for
             $32.4 billion, or 3.4 percent, of all U.S. imports. The agricultural sector
             consistently generates an annual trade surplus, which in fiscal year 1996
             was $27.4 billion, according to the U.S. Department of Agriculture (USDA).
             In addition, the financial well-being of the U.S. agricultural sector has
             become increasingly linked to its export opportunities. Exports represent
             about 20 percent, by value, of U.S. agricultural production and the
             equivalent of one-third of total harvested U.S. acreage. For example, in
             1996, 57 percent of the U.S. wheat crop was shipped overseas, as well as
             47 percent of the rice and 43 percent of the cotton crop. U.S. agricultural




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exports also contribute to U.S. employment. According to the Economic
Research Service (ERS) of USDA, $55.8 billion in agricultural exports in 1995
supported about 950,000 jobs in the United States, with 365,300 of those
jobs occurring in the farm sector and 584,700 occurring in the nonfarm
sector. The total jobs supported represent less than 1 percent of U.S.
civilian employment, but the farm sector jobs supported by exports
represent about 15.5 percent of the sector’s total employment.

The U.S. government has actively sought to expand U.S. agricultural
exports through negotiations to reduce foreign trade barriers and through
subsidies, market promotion, food aid, and loan guarantees. From 1985 to
1996, the U.S. government has spent $9 billion on export subsidies, $2.3
billion on market promotion, and $7.8 billion on food aid and has
guaranteed $53.1 billion in export loans (all in constant fiscal year 1996
dollars).1 Between fiscal years 1980 and 1997, the U.S. government paid
out approximately $2.1 billion in export credit guarantee claims against
these loans because of loan repayments that were in default and have not
been rescheduled.2 Between 1989 and 1993, about 20 percent by value of
U.S. agricultural exports received some government assistance.

USDA  has four types of agricultural export assistance programs. All share
the objective of increasing U.S. agricultural exports. And two—export
subsidies and market promotion programs—are intended to directly
counter competitor agricultural export assistance. Prior to FAIR, most of
these programs also helped the U.S. government in a budgetary sense by
(1) reducing government-held stocks of surplus grain generated by U.S.
domestic agricultural programs3 and (2) helping to offset the cost of U.S.
domestic agricultural price supports.4 Successive farm bills and market

1
 These figures exclude the operational cost of the USDA’s Foreign Agricultural Service (FAS). In fiscal
year 1995, FAS had an operating budget of about $118 million to manage its various agricultural export
assistance programs and carry out its overseas functions (such as the gathering of information on
competitor nations’ agricultural exporting efforts).
2
 See Addressing the Deficit: Budgetary Implications of Selected GAO Work for Fiscal Year 1998
(GAO/OCG-97-2, Mar. 14, 1997).
3
 Prior to FAIR, as one way to maintain domestic prices (and thus farmers’ income) for
government-supported crops, the U.S. government acquired large amounts of these crops. Export
programs, such as export subsidies, helped reduce the need for the government to acquire supported
crops by increasing global demand for these products (which in turn raised their domestic price).
Because FAIR decouples the link between domestic prices and farmers’ income, the U.S. government
no longer acquires surplus agricultural commodities.
4
 Prior to FAIR, price support payments (also known as “deficiency payments”) were made when the
market price for a government-supported crop fell below the USDA target price. Export programs,
such as credit guarantees, helped reduce price support payments by increasing global demand for
some U.S. products. This, in turn, helped raise the domestic prices of these products. With FAIR, this
budgetary offset no longer exists.



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conditions have reduced expenditures for U.S. agricultural export
assistance programs. For example, total funding for these programs has
decreased from $2.1 billion in fiscal year 1992 to $792 million in fiscal year
1996. The four types of programs include the following:5

(1)Export subsidy programs that lower the price of U.S. commodities on
the world market: the Export Enhancement Program (EEP) and the Dairy
Export Incentive Program (DEIP).6 EEP expenditures for fiscal year 1996
were $5 million. Due to high market prices in 1996, EEP’s authorized
program level of $350 million was not fully utilized. DEIP expenditures for
fiscal year 1996 were $20 million.

(2)Export credit programs that offer short- and intermediate-term loan
guarantees to lower the cost of borrowing for importing countries to
purchase U.S. agricultural exports: the Export Credit Guarantee program
(the General Sales Manager (GSM)-102) and the Intermediate Export Credit
Guarantee program (GSM-103). These were jointly authorized to expend not
less than a total of $5.5 billion in guarantees and, in fiscal year 1996,
actually guaranteed exports valued at $3.1 billion and $151 million,
respectively.7

(3)Export promotion programs that attempt to develop, maintain, and
expand foreign markets for U.S. agricultural products through funding for
advertising and other market promotion: the Foreign Market Development
Program (FMDP—also known as the Cooperator Program) and the Market
Access Program (MAP). A program level of up to $34 million and
$90 million, respectively, was approved for these programs for fiscal year
1996.8

(4)Food aid programs that provide U.S. agricultural commodities to
developing countries through either concessional loans that offer
long-term credit with below-market interest rates, such as the Public




5
 See appendix I for further information on the programs’ funding levels.
6
Two other export subsidy programs, the Sunflowerseed Oil Assistance Program (SOAP) and the
Cottonseed Oil Assistance Program (COAP), were not reauthorized by FAIR.
7
 GSM-102 guarantees repayment of short-term financing (up to 3 years), while GSM-103 guarantees
repayment of intermediate-term financing (3 to 10 years) to eligible countries that purchase U.S. farm
products.
8
 MAP was preceded by two similar market promotion programs named the Market Promotion Program
and the Targeted Export Assistance program.



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Law 4809 title I concessional sales program, or grants for market
development purposes, such as the Food for Progress grant program.
These programs had expenditures of $219 million and $107.7 million,
respectively, for fiscal year 1996.

Farm legislation of 1985 and 1990 brought about market-oriented reforms
in domestic agricultural policy. These reforms helped reduce the
market-distorting impact of government-established price supports and
diminished government holding of surplus stocks. The 1996 FAIR Act
expands on market-oriented provisions of previous legislation and for
many commodities ends the tying of direct farm income support to
production decisions. FAIR is also consistent with U.S. commitments to the
Uruguay Round Agreement on Agriculture,10 which reduces domestic and
export agricultural assistance worldwide. While the act provides
government income support payments to farmers through 2002, these
payments are now largely independent from farmers’ planting decisions.11
With the new flexibility, producers’ planting decisions are to be
increasingly driven by market conditions (domestic and international)
rather than by government programs.

Concurrent with these changes, the 1996 FAIR act reauthorized all four
types of export assistance programs, with some operational modifications
aimed at making the programs more focused on market development. Two
changes that FAIR made to the export programs, which USDA officials state
will increase program flexibility, were to authorize (1) the GSM program to
provide credit to private importers in qualified nations and (2) title I
concessional loans to private entities in addition to foreign governments.
They believe these provisions are responsive to changes in the global
trading environment. For example, a trend in some nations in Latin
America, Asia, and Europe is toward less government control of markets
and a greater reliance on the private sector.

Finally, the Uruguay Round Agreement on Agriculture permits the
continued use of export subsidies (though reduced from historical levels)

9
 The Agricultural Trade Development and Assistance Act of 1954 (P.L. 83-480, July 10, 1954),
commonly known as P.L. 480.
10
  With the completion of the Uruguay Round of multilateral trade negotiations in 1994, member
countries of the General Agreement on Tariffs and Trade (GATT) agreed to a variety of measures to
liberalize global agricultural trade.
11
  One exception is that program beneficiaries are prohibited from increasing fruit and vegetable
planting on program acreage. According to an agricultural expert, this exception is designed to protect
traditional U.S. fruit and vegetable growers, whose products’ prices could fall due to an increase in
cultivation of only a few hundred thousand acres.



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                   and other forms of agricultural export assistance, such as market
                   development and promotion efforts, export credit guarantees, and
                   concessional loans to developing countries. And, our competitors continue
                   to use Uruguay Round allowable agricultural export assistance. For
                   instance, in fiscal year 1996, USDA estimated that the European Union (EU)12
                   spent over $9 billion on agricultural export subsidies,13 as compared to the
                   $792 million the United States spent on all export assistance in that same
                   year.14 Thus, world agricultural trade remains greatly influenced by
                   government policies and programs.


                   Agricultural experts generally expect that FAIR’s domestic policy reforms
Results in Brief   will modestly contribute to increased U.S. agricultural exports. The extent
                   to which FAIR’s domestic reforms increase exports is dependent on the
                   degree to which farmers add additional land to production and use FAIR’s
                   planting flexibility to respond to international and domestic market
                   conditions. Independent of FAIR, U.S. government and private forecasters
                   are predicting strong growth of U.S. exports driven largely by favorable
                   international market conditions and the general competitiveness of many
                   U.S. agricultural products. Much of the forecasted growth in U.S.
                   agricultural exports is expected to come from (1) the anticipated rise in
                   income levels in East and Southeast Asian nations and other regions and
                   (2) the liberalization of agricultural markets brought about by the 1994
                   Uruguay Round trade agreements, which brought agriculture under
                   multilateral disciplines (practices) for the first time, and by unilateral
                   policy changes of other nations.

                   FAIR’s domestic policy reforms remove a primary benefit associated with
                   most U.S. export assistance programs—the exporting of surplus stocks
                   generated by domestic price supports. Nevertheless, program proponents,
                   including USDA and some industry groups, maintain that U.S. agricultural
                   export assistance programs have continued relevance because they benefit
                   the overall U.S. economy, benefit the U.S. agricultural sector, counter
                   competitor nations’ agricultural export programs, and promote U.S. trade
                   negotiating objectives.

                   12
                    The EU, since January 1, 1995, includes Austria, Belgium, Denmark, Finland, France, Germany,
                   Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden, and the United
                   Kingdom.
                   13
                     According to USDA, broad EU support of its domestic producers results in high internal prices, thus
                   requiring high levels of export subsidies to make EU agricultural products competitive in world
                   markets.
                   14
                     Total U.S. expenditures in fiscal year 1996 include the monies spent on EEP, DEIP, MAP, FMDP, and
                   the subsidized component of the GSM programs as computed to comply with the Federal Credit
                   Reform Act of 1990 (P.L. 93-344, July 12, 1974, as amended by title XIII, sec. 13201(a) of P.L. 101-508,
                   Nov. 5, 1990).
                   Page 5                                                GAO/NSIAD-97-260 U.S. Agricultural Exports
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    While the evidence is mixed regarding the continued relevance of U.S.
    export assistance programs, such assessments are difficult. In particular,
    assessing the benefits of these programs is necessarily limited largely to
    research and program participants’ past experience. Program performance
    under past conditions may not always be helpful in predicting future
    program relevance because of changing conditions in the global trading
    environment, such as Uruguay Round trade liberalization, or the potential
    for commodity supply and price volatility. Nevertheless, using applicable
    economic research and expert opinion, our review provides an indication
    of these programs’ future contribution in four key areas.

•   With regard to the U.S. economy, no conclusive evidence exists that these
    programs have measurably expanded aggregate employment and output or
    reduced the trade and budget deficits. Export programs could potentially
    expand the economy in cases where markets do not operate efficiently.
    However, economic evidence suggests that the federal government’s
    ability to influence the overall U.S. economy in the short run comes
    primarily through making changes in either fiscal policy, such as the
    overall levels of government expenditures and taxation, or Federal
    Reserve monetary policy. Moreover, government export programs largely
    reallocate production, employment, and income between sectors.
•   Concerning the U.S. agricultural sector, while U.S. agricultural export
    assistance programs may provide some income and employment benefits
    to the sector, there is limited evidence of these benefits. Further, while
    there is some evidence that these programs have increased exports to
    targeted markets, such as China, the research also shows that the
    additional exports that these programs have provided worldwide have
    been relatively small.
•   Regarding competitor nations’ programs, the lack of transparency
    (openness) in these nations’ agricultural export assistance efforts makes it
    difficult to conclusively determine how effectively U.S. export programs
    counter these foreign practices. However, two U.S. export programs—EEP
    and MAP—are no longer authorized only to counter specific competitor
    actions but rather have been broadened to assist U.S. agricultural exports
    in general. In addition, several economic studies (see footnote 79) indicate
    that foreign competitors find U.S. export subsidies relatively inexpensive
    to offset.
•   Concerning U.S. trade negotiating objectives, there are widely divergent
    views about the amount of leverage these programs provided in the past.
    Looking to the future, some private and public officials say the programs
    could provide negotiating leverage for the 1999 World Trade Organization




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                             (WTO)15 agricultural talks, but others disagree and question their continued
                             relevance for future negotiations.

                             Given the mixed evidence concerning the continued relevance of U.S.
                             agricultural export assistance programs, their decreased funding levels,
                             and the trend toward increased liberalization of global agricultural trade,
                             the Congress may wish to reassess the continued viability and/or focus of
                             the programs the next time these programs are reviewed.


                             Agricultural experts predict that FAIR’s domestic policy reforms will likely
While FAIR May               help expand U.S. agricultural exports, though minimally. Other factors,
Modestly Increase            such as expanding worldwide markets and the appeal of many U.S.
U.S. Exports,                agricultural products, are expected to increase U.S. exports independent
                             of FAIR.
International Factors
Are More Important
FAIR May Modestly            The extent to which FAIR’s domestic policy reforms16 may modestly
Increase U.S. Agricultural   increase exports is dependent on the degree to which farmers—who were
Exports                      previously constrained by pre-FAIR policies that restricted acreage and
                             planting decisions—add additional land to production and use FAIR’s
                             planting flexibility to respond to international and domestic market
                             conditions. For example, according to USDA, FAIR’s elimination of the
                             Acreage Reduction Program (ARP)—that set aside or allowed land to lie
                             fallow—will permit more land to be available for cultivation and thus more
                             crops for export. In addition, FAIR’s suspension of the Farmer Owned
                             Reserve Program (FOR) benefits the price competitiveness of U.S.
                             agricultural exports by no longer limiting sales in times of large supply.17

                             FAIR’s reforms are a continuation of the market-oriented reforms of
                             domestic agricultural policy that have been underway since the 1985 and



                             15
                              The Uruguay Round created the WTO on January 1, 1995, as a formal structure to replace the
                             provisional GATT organizational structure. As of May 7, 1997, WTO had 131 member countries.
                             16
                               FAIR in general decouples the link between planting decisions and income support. For example,
                             FAIR production flexibility contract payments replace “deficiency payments,” which were available
                             under previous farm bills. Unlike the deficiency payments, which were made when the market price
                             for a given government-supported crop fell below the USDA target price, production flexibility
                             payments provide income support separate from a crop’s market price or generally from farmers’
                             planting decisions.
                             17
                              See C. Edwin Young and Paul C. Westcott, The 1996 U.S. Farm Act Increases Market Orientation
                             (Washington, D.C.: ERS, USDA, Aug. 1996).



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1990 farm legislation.18 These changes had already reduced the
market-distorting impact of a complex system of government-established
price supports. In addition, they diminished the government’s holding of
stocks, which had limited the private sector’s ability to respond to
changing market demand. For example, prior to the 1985 and 1990 farm
legislation, the U.S. government held sizable stocks of grains, which made
it a major player in the supply management of these commodities.

According to USDA, FAIR’s changes19 to domestic agricultural policy—such
as the use of production flexibility payments, the elimination of ARP, and
the suspension of FOR—increase the ability of farmers to choose which
crops to plant and the amount of land to be cultivated while still allowing
them to receive income support. Therefore, FAIR encourages farmers to
react more quickly to market signals with regard to planting decisions and
the amount of land to cultivate. Thus, FAIR should allow farmers to respond
more rapidly to price changes in the international and domestic markets.
Agricultural experts state that with this increased flexibility, farmers
should be able to export more of their production, capitalizing on the
considerable comparative advantages U.S. agriculture derives from
substantial land resources, advanced transportation and information
systems, and ongoing agricultural research.20 For example, currently there
is strong domestic and international demand for soybeans. Due to the
flexibility FAIR provides, farmers have been able to respond to this
increased demand by switching from planting other crops to cultivating
soybeans. As a result, USDA states that 1997 soybean plantings are the
highest since 1982.

In the past, farmers would have had more difficulty in quickly responding
to this increase in demand. This is because prior to FAIR, in order to receive
government deficiency payments, farmers had to contract with the U.S.
government concerning the crops they would plant; this, in turn, locked
them into certain crop cultivation patterns. However, also under FAIR, with
increased production flexibility by farmers and reduced supply

18
 See the Food Security Act of 1985 (P.L. 99-198, Dec. 23, 1985) and the Food, Agriculture,
Conservation, and Trade Act of 1990 (P.L. 101-624, Nov. 28, 1990).
19
  These changes to domestic agricultural policy affected bulk products more than high-value products
(HVP), which have not been the primary recipient of most domestic support programs. HVPs represent
a complex and diverse range of agricultural products. Some of these products are unprocessed and
include fruits, nuts, and vegetables; semiprocessed and include flour, oilseed meals, and vegetable oils;
or highly processed and include distilled beverages, meats, and other processed foods.
20
 Exports of U.S. wheat, corn, soybeans, and cotton are expected to modestly increase under FAIR.
However, one exception to FAIR’s anticipated modest increase in exports, according to ERS, is rice.
Because of FAIR’s elimination of planting requirements and other changes, U.S. rice production is
down, domestic rice prices are up, and U.S. rice exports are down.



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                              management by government, commodity price volatility is expected to
                              increase. As a result, according to USDA, farmers face greater risk of
                              income volatility, due to these fluctuations in commodity prices.


Favorable International       Notwithstanding unforeseen negative weather conditions or political
Market Conditions:            instability, future increases in U.S. agricultural exports are expected to be
Primary Reason U.S.           largely driven by changes in worldwide supply and demand as well as by
                              the ongoing liberalization of global agricultural trade. According to USDA’s
Exports Are Expected to       baseline projections, between 1997 and 2005 U.S. agricultural exports will
Increase                      increase by 44 percent, from $55.5 billion to $79.7 billion.21 This growth is
                              expected to be largely due to (1) increased demand in East and Southeast
                              Asian nations and in other regions and (2) market opening brought about
                              by Uruguay Round agreements and associated reforms of other nations’
                              agricultural programs. These changes in agricultural markets represent
                              opportunities to U.S. agricultural competitors as well as to the United
                              States. USDA baseline projections and other forecasts take into account
                              how competitor nations respond to these opportunities.

                              Rising income levels in East and Southeast Asian nations, and in Latin
                              America, the Middle East, and North Africa, are anticipated to result in
                              improved diets and a greater demand for imports of grains, fruits,
                              vegetables, and meat. China could play a key role in this increased demand
                              for both bulk and high-value agricultural commodities, particularly as its
                              urban middle class expands and incomes grow. Recent increases in U.S.
                              agricultural exports have been largely driven by Asian demand, and
                              agricultural forecasters say that this trend will likely continue. For
                              example, agricultural researchers expect the following to occur:

                          •   Between 1997 and 2005, East and Southeast Asian nations’ gross domestic
                              product (GDP) is expected to expand at a robust 7 percent per year, with
                              China leading at about 8.5 percent, according to the USDA’s ERS.22 See
                              figure 1 for a comparison of forecasted average East and Southeast Asian
                              real GDP growth rates with other regions and country categories,
                              1990-2005.




                              21
                               See Agricultural Baseline Projections to 2005, Reflecting the 1996 Farm Act, USDA/Interagency
                              Agricultural Projections Committee (Washington, D.C.: ERS, USDA, Feb. 1997).
                              22
                                Agricultural Baseline Projections to 2005.



                              Page 9                                             GAO/NSIAD-97-260 U.S. Agricultural Exports
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Figure 1: Forecasted Average Annual Real GDP Growth Rates for Selected Regions, 1990-2005

Average annual percent change in GDP
10


 8


 6


 4


 2


 0
               1990-1995                          1996-2000                                  2001-2005
                                                    Years

            World     East and Southeast Asian         Latin America          Middle East         North Africa



                                          Source: Agricultural Baseline Projections to 2005.




                                      •   Between 1997 and 2005, strong growth in demand for feed grains and food
                                          products in the East and Southeast Asian nations—particularly in
                                          China—is predicted to fuel much of the growth expected in U.S.
                                          agricultural exports, according to the Food and Agricultural Policy
                                          Research Institute (FAPRI).23
                                      •   Demand for U.S. HVPs such as meat, fruits, vegetables, and prepared foods
                                          will rise, according to ERS. While most U.S. HVPs are exported to developed
                                          countries such as Canada, the EU, and Japan, these goods are increasingly
                                          flowing into the rapidly growing economies of East and Southeast Asia.



                                          23
                                           FAPRI is an agricultural economic research organization that performs analysis for the Congress and
                                          other clients, on the potential impact of legislative changes on international trade in agriculture. See
                                          FAPRI: 1996 U.S. Agricultural Outlook (Ames, Iowa: Iowa State University, Aug. 1996).



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Further influences expected to increase U.S. exports and global
agricultural trade are (1) the market openings created by the Uruguay
Round’s agricultural provisions and (2) other related reforms in foreign
countries’ agricultural policies. The Uruguay Round agreements contain
commitments by WTO members countries to open up—at least to some
degree—their agricultural markets, many for the first time. Countries are
doing so by reducing several important agricultural trade barriers,
including import restrictions and tariffs, export subsidies, and domestic
support programs. The Uruguay Round agreements also set forth rules on
the use of sanitary and phytosanitary (SPS) measures that directly or
indirectly affect international trade.24 For example, SPS measures that
restrict imports must generally be based on scientific principles. Several
WTO members, including the United States, have invoked dispute
settlement procedures regarding four SPS measures that appear to lack a
scientific basis. These SPS rules are intended to make it more difficult for
countries to rely on unjustified SPS measures as a way to protect their
markets from imports. Other Uruguay Round provisions mandate
conversion of most nontariff barriers (NTB), such as import licensing
requirements, to tariffs. These measures were aimed at making trade
barriers more transparent and thus facilitating world agricultural trade by
encouraging a freer trade environment.25

In addition to Uruguay Round and bilateral trade liberalization (such as
the U.S.-Japan beef and citrus agreement), unilateral policy changes have
also significantly liberalized the world trading environment. Specifically,
newly privatized markets are emerging from the collapse of the socialist
economies in the former Soviet Union and Eastern Europe. Moreover,
long-held policies of self-sufficiency, protectionism, and government
control of markets are being challenged, reformed, or dismantled in Latin
America, Asia, and Europe. For example, Argentina has gone a long way
toward reforming its agricultural sector since the 1990s. These reforms
include the privatizing of export facilities (thus reducing port handling
costs) and the scrapping of major state-owned marketing boards for
grains, meats, and sugar. While difficult to quantify, these unilateral policy
changes in other nations are also expected to increase world agricultural
trade, according to USDA.




24
 Sanitary measures pertain to human and animal health and safety. Phytosanitary measures pertain to
protecting plants from pests and diseases.
25
 Uruguay Round-related increases in U.S. agricultural exports have been forecasted by USDA to be
between $4.7 billion and $8.7 billion annually by the year 2005.



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                               Overall, we found that the evidence is mixed regarding the continued
Evidence Is Mixed              relevance of U.S. agricultural export assistance programs. While FAIR’s
Regarding the                  domestic policy reforms remove a primary benefit associated with most
Continued Relevance            U.S. export assistance programs—the exporting of surplus stocks
                               generated by domestic price supports—USDA and some industry officials
of U.S. Export                 state that these programs continue to have relevance. However, others
Assistance Programs            disagree. To address this issue, we reviewed the evidence regarding the
                               extent to which the programs

                           •   benefit the overall U.S. economy,
                           •   benefit the U.S. agricultural sector and specific U.S. commodities,
                           •   counter competitor nations’ agricultural export programs, and
                           •   promote U.S. trade negotiating objectives.

                               One challenge in assessing these programs’ continued relevance is that the
                               evidence, for example, on whether they benefit the U.S. agricultural sector
                               is limited largely to research on how these programs have functioned in
                               the past and to the past experiences of program participants. Program
                               performance under past conditions may not always be helpful in
                               predicting future program contributions.26 For example, EEP was created in
                               the mid-1980s during a period of large grain stocks and low prices.
                               According to ERS, the program is less effective under changed market
                               conditions of higher world prices and tighter stocks. Another challenge is
                               the difficulty in generalizing across these export programs regarding their
                               continued relevance, as they each have multiple objectives and support
                               various commodities and export markets. Nevertheless, we identified
                               applicable economic research and principles as well as expert opinion that
                               provide an indication of the future contributions of these programs in the
                               four key areas previously outlined.


No Conclusive Evidence         Program proponents, including many industry groups and USDA, say that
That USDA Export               the United States receives macroeconomic27 benefits from export
Programs Measurably            assistance programs. Program proponents state that agricultural export
                               assistance programs expand total U.S. output and employment through
Benefit the Overall U.S.       additional exports, reduce the size of the U.S. trade and federal budget
Economy                        deficits, and contribute to overall economic efficiency. Some USDA officials


                               26
                                 In addition, there is uncertainty regarding future agricultural legislation, as FAIR is authorized
                               through 2002. Subsequent farm legislation could alter the potential future contributions of U.S.
                               agricultural export assistance programs.
                               27
                                Macroeconomics refers to the performance of the economy as a whole, including the general levels
                               of output and income, rather than the performance of individual sectors.



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                                state that these programs were not necessarily intended to provide
                                macroeconomic benefits, but rather they are to redistribute resources to
                                the rural economy. However, a 1995 USDA study concluded that MAP has
                                macroeconomic benefits because it increases the level of overall economic
                                activity and employment through expanded U.S. exports. The study states
                                that this expansion of new economic activity and employment is sufficient
                                for MAP to more than fully pay for itself through increased tax revenue,
                                thus contributing to reducing the budget deficit. 28

                                Our analysis and review of economic studies, however, found no
                                conclusive evidence that these programs have provided net benefits to the
                                aggregate economy.29 Government export programs largely reallocate
                                production, employment, and income among sectors. The potential for
                                export programs to affect overall U.S. output, employment, and the trade
                                and budget balances is limited to particular circumstances, such as in
                                cases where markets do not operate efficiently. Moreover, economic
                                research suggests that the federal government’s ability to influence
                                short-run U.S. output and employment levels comes primarily through
                                making changes in either fiscal policy, such as overall levels of
                                government expenditures and taxation, or Federal Reserve monetary
                                policy.30

Effect on Output, Employment,   Government export subsidy, promotion, and loan guarantee programs
and Budget Deficits             largely reallocate production, employment, and income between sectors, a
                                reallocation that occurs when an economy is near or at full employment,
                                but some of these reallocations may also occur when resources are
                                unemployed.31 In general, subsidizing one sector is the equivalent of taxing




                                28
                                 For USDA views on MAP’s impact, see Evaluating the Effectiveness of the Market Promotion
                                Program on U.S. High-Value Agricultural Exports, Foreign Agricultural Service Staff Paper 1-95
                                (Washington, D.C.: USDA, Feb. 1995).
                                29
                                  This conclusion is based on conventional mainstream economic perspectives. Some economists and
                                research organizations disagree with these mainstream views.
                                30
                                  For a discussion, see Herbert Stein, Presidential Economics: The Making of Economic Policy from
                                Roosevelt to Reagan and Beyond, 2nd rev. ed. (Washington, D.C.: American Enterprise Institute for
                                Public Policy Research, 1988) and Charles L. Schultze, Memos to the President: A Guide Through
                                Macroeconomics for the Busy Policymaker (Washington, D.C.: The Brookings Institution, 1992).
                                Changes in the composition of government spending may have output effects. For example, within a
                                given fiscal policy, shifting from spending for current purposes to spending for well-chosen public
                                investments can play an important role in increasing private sector output and economic growth. See
                                Federal Budget: Choosing Public Investment Programs (GAO/AIMD-93-25, July 23, 1993).
                                31
                                   Macroeconomic Consequences of Farm Support Policies, Andrew B. Stoeckel, David Vincent, and
                                Sandy Cuthbertson, eds. (Durham, NC: Duke University Press, 1989).



                                Page 13                                             GAO/NSIAD-97-260 U.S. Agricultural Exports
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other sectors.32 Export subsidies can raise prices for domestic
consumption, change the cost of domestic resources and the composition
of resource usage, alter the composition of trade, and may sometimes
change the level of total trade. Government support for a specific sector
generally implies reduced government spending in other areas.
Agricultural export assistance may also change the location of economic
activity, sustaining rural economic activity that would not occur in its
absence. Because these programs potentially reallocate resources,
changes in these programs, including reductions in funding or elimination,
may result in employment and business dislocation if the subsidized sector
contracts.

With respect to the argument that export programs can stimulate the
economy and raise output and employment, changes in government fiscal
policy may accomplish this in the short term, if the economy is operating
at less than full employment.33 These policy changes have historically
included tax cuts or increased deficit-financed government spending such
as on employment or infrastructure programs.34 Even when agricultural
resources are underemployed, if the government chooses to promote
exports to foreign consumers rather than to increase domestic spending,
U.S. producers may divert some of their output from the domestic to the
foreign market.35 This could, however, raise domestic prices, thus making
domestic consumers worse off. Even if the government could stimulate
overall demand by supporting export assistance programs, an increase in
output and employment would still not be assured, as the Federal Reserve




32
 See discussion by Gene M. Grossman, “Strategic Export Promotion: A Critique,” in Strategic Trade
Policy and the New International Economics, Paul R. Krugman, ed. (Cambridge, MA: The MIT Press,
1986).
33
  Recently, the macroeconomic principle that larger budget deficits can increase output in the short
run has been challenged, though not yet supplanted. Some recent economic policy experience suggests
that contractionary fiscal policies may be expansionary, even in the short run, because they can lower
the long-term real interest rate. See Alan S. Blinder, “Is There a Core of Practical Macroeconomics
That We Should All Believe?” and Oliver Blanchard, “Is There a Core of Usable Macroeconomics?” in
American Economic Review (May 1997).
34
 While the funding of export programs does not increase during periods of unemployment, USDA
officials note that they do account for economic conditions in their administration of the programs.
For example, according to USDA, during periods of high commodity prices and full deployment of
agricultural resources, EEP is not utilized. See discussion of the limitations of fiscal policy in Schultze,
Memos to the President.
35
 The ability of U.S. export promotion programs to create additional exports of a subsidized
commodity is controversial. Only if new export demand is met with new production would there be no
diversion from the domestic market.



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could choose to offset any expansion that it views as inflationary by
raising interest rates.36

Because export programs are unlikely to expand the overall economy
when it is at or near full employment, they cannot generally increase tax
revenues or lower budget deficits. We, and others, have concluded that a
major reduction in the budget deficit would yield long-term
macroeconomic benefits for the U.S. economy.37 Any program analysis
that assumes that the resources involved in a U.S. government export
program would otherwise be unemployed may show employment
expansion and hence tax revenue gains. For example, USDA’s 1995 MAP
study38 claims such impacts, by assuming the resources would otherwise
be unemployed. This assumption leads to a conclusion that the program
has resulted in increased tax revenues. This methodology does not comply
with Office of Management and Budget cost-benefit guidance, which
instructs agencies to treat resources as if they were likely to be fully
employed.39

If export promotion programs impact economic efficiency, they can
potentially affect output, employment, and tax receipts over the longer
run. In principle, the right kind of government intervention may improve
economic efficiency if “market failures” exist. Examples of market failures
include cases where costs and benefits are not “internalized” by firms and
consumers, market participants have asymmetric information, or a market

36
  Currently, members of the Federal Reserve Board are closely monitoring U.S. labor market
conditions to evaluate whether the United States is approaching the maximum rate of noninflationary
employment growth. Additionally, even if aggregate demand expansion does lead to short-run gains in
output and employment, long-term budget deficits can lower national saving and investment, thereby
reducing long-term output and employment prospects. See Schultze, Memos to the President.
37
  These benefits include higher national saving, higher investment, more rapid economic growth, and a
lower foreign debt. The idea that contractionary fiscal policies of deficit reduction may in fact be
expansionary is becoming part of the conventional policy wisdom, although with limited empirical
evidence (see Blinder, “Is There a Core of Practical Macroeconomics”). For our analysis, see The
Deficit and the Economy: An Update of Long-Term Simulations (GAO/AIMD/OCE-95-119, Apr. 26,
1995) and Budget Policy: Prompt Action Necessary to Avert Long-Term Damage to the Economy
(GAO/OCG-92-2, June 5, 1992). The long-term benefits of fiscal policy changes are difficult to
appreciate, particularly compared with the steep short-term costs necessary to achieve significant
deficit reduction. To clarify the consequences of significant change in fiscal policy, we adapted the
long-term economic growth model developed by economists at the Federal Reserve Bank of New York.
The assumptions incorporated in this model are relatively conservative with regard to the relationship
between capital investment and growth in national output.
38
  Evaluating the Effectiveness of the Market Promotion Program.
39
  See “Guidelines and Discount Rates for Benefit-Cost Analysis of Federal Programs, OMB Circular No.
A-94, sec. 6b(3) (Oct. 29, 1992).” OMB’s approach has also been adopted by the interagency Trade
Promotion Coordinating Committee for constructing performance measures that parallels work that
trade agencies are undertaking under the Government Performance and Results Act of 1993 (P.L.
103-62, Aug. 3, 1993).



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participant has market or monopoly power. For instance, some
economists have argued that a targeted government industrial policy of
trade promotion (or protection) could increase national income. The cases
are quite specific, however, and apply to industries with “external”
economies that involve the spillover of knowledge between firms or
economies of scale. While these intervention benefits have been
recognized in principle, economists are generally cautious about their
policy usefulness and application. Typically, these rationales have been
associated with high-tech industries such as aircraft and semiconductors,
not with food processing or agriculture.40

Increasingly, USDA argues that the export assistance programs can address
market failures in agricultural or credit markets but acknowledges it is
difficult to quantify this in most cases. ERS reports that, while claims of
market failure must be carefully scrutinized, agricultural commodity
market failures could include poorly developed credit markets in
developing countries or the lack of broadly available information on a new
or emerging market. There is no assurance, however, that export subsidy,
promotion, or guarantee programs correct these failures. On the other
hand, if government intervention creates distortions that reduce efficiency,
then output, employment, and tax revenue may fall. In summary, we found
no evidence that the export assistance programs enhanced economic
efficiency.

USDA is conducting an assessment of export program impacts at the
direction of the Trade Promotion Coordinating Committee (TPCC). 41 USDA
reports that the results will show that U.S. agricultural export assistance
programs benefit national welfare by addressing market failures, but USDA
and OMB declined to share their current draft report with us. Earlier we
had received an ERS briefing on the preliminary estimates of these




40
 See the discussion of market failures in our May 1996 testimony, Export Promotion: Rationales for
and Against Government Programs and Expenditures (GAO/T-GGD-95-169, May 23, 1995). Also, see
discussion in J. Bhagwati, The World Trading System at Risk (Princeton, NJ: Princeton University
Press, 1991); articles in Strategic Trade Policy and the New International Economics, Paul R. Krugman,
ed. (Cambridge, MA: The MIT Press, 1986 ); Paul R. Krugman, Pop Internationalism (Cambridge, MA:
The MIT Press, 1996); and Laura D’Andrea Tyson, Who’s Bashing Whom?: Trade Conflict in
High-Technology Industries (Washington, D.C.: Institute for International Economics, Nov. 1992).
41
 In an effort to coordinate and develop a U.S. trade strategy, TPCC has directed USDA to assess the
impact of U.S. agricultural export assistance programs. An issuance date for the final TPCC report has
not been set.



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                          programs’ impacts.42 USDA officials state that the final TPCC report will
                          show different conclusions concerning program impact than the
                          preliminary estimates.

Effect on Trade Deficit   Most research by economists has concluded that the overall U.S. trade
                          balance is determined largely by U.S. macroeconomic conditions such as
                          the amount of domestic savings and investment, exchange rates, and the
                          size of the government budget deficit, not by trade policy.43 No conclusive
                          evidence exists to support the assertion that U.S. agricultural export
                          assistance programs influence the size of the U.S. trade deficit. When the
                          United States is spending more on goods and services than its total
                          income, the nation is borrowing from the rest of the world. This net
                          borrowing, or current account deficit, is equal to the government budget
                          deficit plus the difference between private sector investment and savings.44
                          According to the President’s Council of Economic Advisers, the
                          government can contribute to reducing the current account and trade
                          deficits through macroeconomic policy measures such as eliminating the
                          federal budget deficit. These policy measures can narrow the gap between
                          U.S. savings and U.S. investment. However, U.S. trade policies may not
                          change the overall trade balance, but they can alter the composition and
                          the overall levels of U.S. trade. For example, increases in agricultural
                          exports could lead to a reduction in some other export or to increased
                          imports. Thus, successful export promotion can benefit the targeted
                          product but at the expense of nontargeted exports or import-competing
                          domestic producers.



                          42
                             Economic Impact of U.S. Agricultural Trade Programs and Polices (Commercial Agricultural
                          Division, ERS, undated briefing slides). ERS is undertaking the USDA program assessment using three
                          different modeling efforts. These include a multicountry partial equilibrium model of world grain,
                          oilseed, and livestock markets; a computable general equilibrium (CGE) model of the U.S. economy;
                          and an input-output multiplier model to estimate program employment and income impacts. We
                          recognize that isolating the impact of program spending is very difficult empirically. In North American
                          Free Trade Agreement: Assessment of Major Issues, Volume 2 (GAO/GGD-93-137, Sept. 9, 1993), we
                          reported on the strengths and limitations of the CGE methodology. In Agricultural Trade: Significance
                          of High-Value Products as Agricultural Exports (GAO/GGD-93-120, Aug. 10, 1993), we reported that
                          input-output multiplier models should not be used to predict the impact of government export
                          assistance programs.
                          43
                            See discussion of research in International Trade: The U.S. Trade Deficit; Causes and Policy Options
                          for Solutions (GAO/NSIAD-87-135, Apr. 28, 1987) and International Trade: Symposium on the Causes of
                          the U.S. Trade Deficit (GAO/NSIAD-87-135S, May 15, 1987). Similar views are held by the President’s
                          Council of Economic Advisers. See the Economic Report of the President (Washington, D.C.:
                          Government Printing Office [GPO], Feb. 1996) for a detailed discussion of the causes of the trade
                          deficit and its relation to trade policy.
                          44
                             See Rudiger Dornbusch, Open Economy Macroeconomics (New York, NY: Basic Books, 1980). Also
                          see discussion in Competitiveness Issues: The Business Environment in the United States, Japan, and
                          Germany (GAO/GGD-93-124, Aug. 9, 1993).



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U.S. Export Programs            USDA  officials and others state that U.S. agricultural export assistance
Have Provided Small             programs increase the exports of specific U.S. commodities and overall
Global Increases in U.S.        farm sector income and employment. However, we found few studies that
                                support the position that these programs increase farm income and
Agricultural Exports            employment for the sector as a whole.45 Regarding U.S. exports, we found
                                that there have been some instances of increased exports to specific
                                markets from commodities supported by these programs, but the
                                additional exports that these programs have provided worldwide have
                                been relatively small. An adverse effect of these programs has been that at
                                times they have also caused a small decrease in exports of other
                                competing, unassisted, U.S. commodities.

                                It must be noted that it is difficult to assess these programs’ impact on the
                                U.S. agricultural sector. This is because (1) past evaluations of these
                                programs have narrowly focused on an individual U.S. export program,
                                commodity, or foreign market and not on the overall impact of these
                                programs on the agricultural sector as a whole; and (2) these programs’
                                impact on U.S. agricultural exports worldwide cannot be easily isolated
                                from other policies and economic conditions that help increase U.S.
                                agricultural exports. The latter includes lower U.S. interest rates, other
                                U.S. government assistance, depreciation of the U.S. dollar against
                                competitors’ currencies, agricultural commodity production shortfalls in
                                major markets overseas, the liberalization in agricultural markets brought
                                about by the Uruguay Round, and the growing trend in agricultural market
                                reforms around the world.

Export Assistance Programs      USDA  officials and others state that U.S. agricultural export assistance
Have Increased U.S.             programs have resulted in exports above and beyond what would have
Agricultural Exports to         occurred without the programs. However, demonstrating that additional
Targeted Markets but Have Had   exports result from these programs is difficult to prove because of the
Limited Impact Globally         myriad factors that affect import decisions. We found evidence that U.S.
                                export programs have resulted in some increased U.S. agricultural exports
                                to targeted, specific markets, but the additional exports that these
                                programs have provided worldwide have been relatively small. Another
                                effect of these programs, according to some private officials, has been
                                that, at times, they have also caused a small decrease in exports of
                                competing, unassisted, U.S. commodities.



                                45
                                  As mentioned previously, in March 1996 we received an ERS briefing with preliminary estimates
                                regarding U.S. agricultural export assistance programs’ impact on farm income and employment. ERS
                                officials requested that we not use these estimates in our report because they were preliminary and
                                had not been cleared by USDA.



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EEP:  Regarding EEP, prior studies46 have concluded that only a portion of
EEP-supported wheat exports were exports above and beyond the level
that would have occurred without the subsidy. The estimates of the value
of U.S. wheat exports resulting from every dollar of EEP assistance
(1986-88) ranged from 2 to 30 cents of additional wheat exports,
depending on the assumptions made about global export market
conditions and other variables. More recently, FAPRI estimates that if EEP is
utilized, the value of additional U.S. wheat exports resulting from every
dollar of EEP assistance (1997-2004) would range from 10 to 15 cents. ERS
reports that its estimates of EEP’s trade impact depend on market
conditions and the program’s scope (that is, how many foreign markets it
is operating in) but states that the program becomes less effective under
conditions when food stocks are tight and world prices are high. Such
conditions existed during 1996, and the program was not used. And ERS
forecasts that tight market conditions are likely to continue through 2005.

Research has shown that EEP can increase wheat exports to specific
targeted markets.47 Increased EEP wheat exports to the Soviet Union and
China are often cited by USDA as examples of the program’s effectiveness
in bolstering U.S. exports. For instance, in January 1987, China was
offered wheat for the first time under EEP. Sales increased from less than
1 million metric tons in 1985 to about 7.2 million metric tons in 1988. As of
May 1990, China had bought over 15 million metric tons of wheat, making
it the second largest wheat importer under the program, after the Soviet
Union. However, while EEP has increased U.S. exports to individual
markets, it has not historically increased U.S. world market share,
particularly for bulk commodities where the United States is a leading
world exporter. For example, with wheat—where the United States is the
largest exporter—EEP has not significantly increased U.S. export market
share but rather has only lowered the price available to foreign
consumers.

The primary reason cited by agricultural trade researchers for the
relatively small additional U.S. exports that these programs—particularly
EEP and GSM-102—provide worldwide is that U.S. export programs’
increased exports to specific markets are often offset by lost U.S. sales in

46
  See, for example, A.H. Seitzinger and Philip Paarlberg, The Export Enhancement Program: How Has
it Affected Wheat Exports? ERS, USDA (Washington, D.C.: GPO, 1989). Also, K.W. Bailey, Why Did
U.S. Wheat Exports Expand? ABI No. 564, ERS, USDA (Washington, D.C.: May 1989); and International
Trade: Export Enhancement Program’s Recent Changes and Future Role (GAO/NSIAD-90-204, June 14,
1990).
47
 See Stephen L. Haley, “The U.S. Export Enhancement Program: Prospects under the Food,
Agriculture, Conservation, and Trade Act of 1990,” Food Policy (Apr. 1992).



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other nonassisted markets. Specifically, competing suppliers may respond
to U.S. competition in countries that benefit from GSM-102 or EEP by
concentrating their efforts in other countries and displacing potential U.S.
sales in these other countries. Thus, while U.S. exports may increase in
particular markets targeted by U.S. export programs, the overall effect on
U.S. exports worldwide is small. If displacement occurs, the programs may
merely reroute trade flows and do not necessarily increase U.S.
agricultural exports.

Some studies have found,48 and industry officials have argued, that EEP at
times has done more to displace unassisted U.S. agricultural exports than
it has to promote U.S. agricultural exports in general. Specifically, industry
officials state that the concentration of EEP on wheat exports has at times
had the effect of reducing the market opportunities of other commodities
such as corn and soybeans that are broad substitutes for wheat in use and
production.49 But since the impact of EEP globally is not dramatic, the
displacement effect is also limited.

Another concern expressed by some industry officials about EEP is that in
countries where soil and growing conditions allow flexible production of
commodities, reduced prices due to EEP wheat exports can induce
increased production of alternate crops to wheat (such as corn, canola,
and soybeans). This can, in turn, reduce the competitive position of U.S.
producers of these alternate crops.50




48
 See Stephen L. Haley, “The U.S. Export Enhancement Program Over 1991-95 Crop Years” Report No.
690 (Baton Rouge, LA: Louisiana State University, Dec. 1991). Robert L. Paarlberg, “The Mysterious
Popularity of EEP,” Choices (second quarter 1990); and Haley, “The U.S. Export Enhancement
Program: Prospects.”
49
  One displacement example, provided by a major U.S. exporter, involves the impact of EEP-subsidized
wheat to China (it should be noted that while this is an accurate description of displacement, it was a
onetime occurrence in China). In 1994, EEP-subsidized wheat was sold to China. This high-quality
wheat was used in Chinese mills for flour production, freeing up lower quality Chinese wheat as feed
grain for China’s poultry industry. Since the poultry industry had an adequate supply of feed grain,
Chinese corn normally used as feed grain by the industry was instead exported to South Korea, which
is traditionally an export market for U.S. corn. In addition, some Chinese poultry was then exported to
Hong Kong, where it was in direct competition with U.S. poultry sold there. Thus, EEP-subsidized
wheat exports to China helped displace U.S. sales of corn to both China and South Korea and provided
increased competition for U.S. poultry sales to Hong Kong.
50
  One U.S. oilseed exporter reported that it has lost export sales to subsidized EEP wheat sales. It
stated that in the late 1980s, because of the EU/U.S. subsidy war over exported wheat, South American
countries (particularly Argentina) shifted their concentration from wheat production to oilseed
production. Therefore, as a result of the subsidy war in wheat, the United States bought itself
increased competition for oilseeds from South America.



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MAP: Regarding MAP, USDA officials report that program spending has
resulted in additional agricultural exports.51 They identified numerous
studies that conclude that in most cases, MAP subsidies increase U.S. sales
of a commodity in a targeted market. For example, one study found that
each dollar of MAP funds to promote apples in Singapore and the United
Kingdom resulted in over $20 of additional apple exports.52 Another study
explored the long-term impact of in-shell walnut promotion in Japan and
found that a dollar of MAP promotion would, over 40 years, increase U.S.
walnut exports by $5.30.53 Worldwide walnut promotion was evaluated in
another study, which found that while each dollar spent on MAP promotion
increased walnut exports by $1.42 over the long-run, it actually reduced
the exports of eight other horticultural exports by $3.57 (thus reducing
U.S. agricultural exports worldwide by $2.15).54

In some instances, studies of MAP’s impact on specific commodities reach
different conclusions. For example, a study of exports of U.S. meat
products to Japan concluded that USDA market promotion from 1973-91
only resulted in a statistically significant increase in U.S. market share for
beef offals55 but not for beef or pork meat.56 A second study of Japan’s
meat markets, using a different methodology and time period (1973-94),
concluded that USDA-funded beef advertising and promotion expenditures
had a significant positive influence on Japanese demand for U.S. beef but
could not demonstrate that U.S. pork or poultry advertising and promotion
expenditures had any effect on the demand for U.S. pork or poultry

51
 See Evaluating the Effectiveness of the Market Promotion Program on U.S. High-Value Agricultural
Exports, USDA, FAS Staff Paper 1-95 (Feb. 1995).
52
 Timothy J. Richards, et al., “A Two-Stage Analysis of the Effectiveness of Promotion Programs for
U.S. Apples,” Agricultural Commodity Promotion Policies and Programs in the Global Agri-Food
System (Proceedings from the Research Committee on Commodity Promotion [NEC-63] Conference,
Cancun, Mexico, May 26-27, 1996).
53
 Kenneth R. Weiss, et al. “Walnuts in Japan: A Case Study of Generic Promotion under the USDA’s
Market Promotion Program,” Agricultural Commodity Promotion Policies and Programs in the Global
Agri-Food System (Proceedings from the Research Committee on Commodity Promotion [NEC-63]
Conference, Cancun, Mexico, May 26-27, 1996).
54
 “Market Access Program Evaluation: Fruits and Vegetables,” National Food and Agricultural Policy
Project Policy Paper Series, NFAPP #97-2 (Tempe, Arizona: Arizona State University, Apr. 1997).
55
 Beef offals are the byproducts of butchered beef such as the heart, liver, and intestines. The Japanese
category for beef offal imports also includes diaphragm or “skirt” beef.
56
 See Shida Rastegari Henneberry and Marco De Brito, “An Analysis of the Effectiveness of U.S.
Non-Price Promotion Programs: The Case of Red Meats in Japan,” in Promotion in the Marketing Mix:
What Works, Where and Why, study presented at a USDA cosponsored conference, Regional Research
Committee on Commodity Promotion (Toronto, Canada: Apr. 28-29, 1994). The study applied annual
data for the 1973 through 1991 period for beef, and 1973 through 1988 for beef offals and red meats.
Between 1984 and 1991, USDA meat promotion in Japan amounted to $54 million (in 1996 dollars).
According to FAS, MAP data for the period 1973-84 are no longer available.



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products.57 These inconsistent results for beef demonstrate the problem of
verifying whether U.S. export promotion programs expand exports.
Similarly, another study found that while almond exports increased in
Japan, Taiwan, and Hong Kong due to MAP spending, MAP subsidies for
almonds had no significant effect on exports in South Korea and
Singapore.58

The studies evaluating various MAP projects provide limited information for
assessing the program. While the studies do present many cases where
government-funded advertising may have increased U.S. exports to
targeted markets, they fail to show that MAP expenditures were above and
beyond private sector promotion that might have occurred in the absence
of MAP. Most of the studies describe the exports resulting from promotion
as the “returns” for the subsidy, but these studies fail to deduct any of the
costs involved in the production or distribution of the additional
commodity being exported.59 One study noted that this approach assumes
the cost of producing and exporting an additional unit of output is zero
and that thus, the calculated returns are “gross” returns and not “net”
returns to investment.60 Additional cost information is required to
determine whether a specific MAP promotion effort results in a net return
to investment for the private or public sectors. Further, the MAP studies
generally exclude factors that could permit program administrators to
assure a positive net impact from MAP expenditures. These factors include
the levels of private expenditures for promotion, government promotion
by competitor nations, changes in domestic and foreign supply conditions,
and trade liberalization brought about by reductions in tariffs and other
trade barriers. Evaluations of MAP projects that ignore increased trade
liberalization may overestimate MAP’s contribution to increased U.S.
exports. Moreover, little of the research considers whether an increase in
producers’ profits due to MAP-supported exports is sustainable, since
producers may increase supply and thus reduce long-term profits. Nor
does the research make an assessment of MAP’s benefits and costs to U.S.
taxpayers, including the impact of increased exports on U.S. domestic




57
 Allison Comeau, Ron C. Mittelhammer, and Thomas I. Wahl, “Assessing the Effectiveness of MPP
Meat Advertising and Promotion in the Japanese Market,” National Institute for Commodity Promotion
Research & Evaluation, NICPRE 96-10 R.B. 96-20 (Ithaca, NY: Cornell University, Dec. 1996).
58
 Karen Halliburton and Shida Rastegari Henneberry, “The Effectiveness of U.S. Nonprice Promotion
of Almonds in the Pacific Rim,” Journal of Agricultural and Resource Economics (July 1995).
59
  Including these costs would reduce the “returns” reported to MAP.
60
  See footnote 58.


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                               prices.61 Lastly, the available studies do not assess whether MAP
                               expenditures are justified due to a market failure or what the appropriate
                               government responsibility is regarding export promotion.

                               Title I: Concerning title I food aid,62 the assistance it provides can in
                               theory contribute to market development if the program creates
                               preferences for U.S. products that remain after the concessional sales have
                               been discontinued and, thus, can result in a greater U.S. share of a given
                               country’s commercial market (that is, increased U.S. exports). However, it
                               is difficult to develop product loyalty and secure commercial market share
                               when title I commodities, which are typically bulk and semiprocessed
                               agricultural goods, can easily be replaced by or substituted with products
                               from other nations. In the short term, title I allows the United States to
                               move commodities and possibly keep a market presence that it otherwise
                               might not have been able to maintain. However, historically, the
                               concessional sales made possible by title I do not necessarily translate in
                               the long term into increased commercial market share or additional
                               exports.

Limited Evidence Exists That   We found few studies that support the position that U.S. agricultural
U.S. Export Programs Impact    export assistance programs increase income or employment for the farm
Agricultural Sector Overall    sector as a whole. The ability of export programs to affect U.S. agricultural
Income or Employment           sector income and employment is constrained by the limited and selective
                               nature of these programs. That is, export programs only affect a small
                               portion of U.S. agricultural exports. For example, the U.S. government
                               spent approximately $792 million on these programs in fiscal year 1996,63
                               while U.S. agricultural exports for the same period were $60 billion. In
                               addition, 80 percent of U.S. agricultural exports, between fiscal year 1989
                               and 1993, received no government assistance.


                               61
                                Some of these points are made by Karen Z. Ackerman and Shida Rastegari Henneberry in “Economic
                               Impacts of Export Market Promotion,” Commodity Promotion Policy in a Global Economy (Arlington,
                               VA: Proceedings of a Symposium, Oct. 22-3, 1992).
                               62
                                 See Food Aid: Competing Goals and Requirements Hinder Title I Program Results (GAO/GGD-95-68,
                               June 26, 1995). Our report states that title I has five objectives: (1) to combat world hunger and
                               malnutrition and their causes; (2) to promote sustainable economic development, including
                               agricultural development; (3) to expand international trade; (4) to develop and expand export markets
                               for U.S. agricultural commodities; and (5) to encourage the growth of private enterprise and
                               democratic participation in developing countries. Regarding market development, our report found
                               that title I’s importance in helping develop long-term U.S. agricultural markets has not been
                               demonstrated.
                               63
                                 The importance of title I as an export assistance program, for example, has declined significantly
                               since the program’s inception in 1954. Today, title I represents less than 1 percent of the total value of
                               U.S. agricultural exports, whereas the program represented about 19 percent in the late 1950s and
                               mid-1960s.



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These export programs focus primarily on bulk commodities, rather than
HVPs, which represent the largest segment of forecasted increases in world
agricultural trade. Thus, some components of the sector, such as bulk
commodity producers, may receive some income and employment
benefits. USDA believes that if these programs were reduced or eliminated,
some bulk commodity producers—particularly wheat farmers—would
most likely experience some diminished income and employment as a
result. For example, an ERS study estimated that if EEP expenditures of
$938 million were eliminated in 1993, the U.S. grain sector would lose
$538 million in income and 3,100 jobs. The analysis found that eliminating
EEP would also have increased overall domestic welfare (including benefits
to both producers and consumers) by $325 million and did so under all
market conditions analyzed. Moreover, the study stated that export
subsidies amount to an income transfer from U.S. households to
producers and lead to a decline in domestic welfare.64

One reason U.S. agricultural export assistance programs’ impact on
farmers’ income is limited is because some farmers derive a majority of
their income from employment off the farm. And this off-farm employment
is increasingly determined by national economic growth rates and
nonfarm employment opportunities. According to USDA data, over
85 percent of farm household income comes from off-farm employment
and income.65 While there are currently about 2.1 million farms in the
United States, USDA classifies only about 550,000 as commercial farms.66
And it is these farms that are most affected by U.S. agricultural export
assistance programs. Some studies have concluded that using U.S.
agricultural export programs to transfer income to the agricultural sector
is not the most cost-effective method for doing so.67 In 1994, we reported
that the income of wheat farmers would have increased about 21 percent
more if additional federal dollars had been spent on higher commodity
target prices rather than on EEP.68

64
 See Kenneth Hanson, Stephen Vogel, and Sherman Robinson, Sectoral and Economywide Impacts of
Eliminating the Export Enhancement Program, ERS (Washington, D.C.: Nov. 1995).
65
  See Structural and Financial Characteristics of U.S. Farms, 1993, ERS (Washington D.C.: Oct. 1996).
66
  USDA defines “commercial farms” as those farms whose level of gross sales is at least $50,000.
Commercial farms range in size from small (gross sales at or above $50,000), to super large (gross
sales at or above $1 million). About 90 percent of commercial farm operators report that farming is
their major occupation.
67
 See T.W. Hertel, R.L. Thompson, and M.E. Tsigas, “Economy-wide Effects of Unilateral Trade and
Policy Liberalization in U.S Agriculture,” in Macroeconomic Consequences of Farm Support Polices;
and K. Hanson, et al., Sectoral and Economywide Impacts.
68
 See Wheat Support: The Impact of Target Prices Versus Export Subsidies (GAO/RCED-94-79, June 7,
1994).



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Uncertainty Exists    Some U.S. government officials and private sector representatives state
Whether U.S. Export   that U.S. agricultural export assistance programs are valuable because
Programs Counter      they counter competitor nations’ export programs and thus “level the
                      playing field” between our exporters and competitor exporters who
Competitor Nations’   benefit from their own nation’s programs. USDA officials argue that U.S.
Programs              programs (1) protect the income of the agricultural sector from the impact
                      of foreign export subsidies, (2) level the playing field by helping U.S.
                      companies compete against specific foreign competitors’ subsidized sales
                      and other export assistance, and (3) increase the cost of foreign
                      competitors’ agricultural subsidies to their governments. We found that
                      because of the lack of transparency in other competitor nations’ export
                      assistance efforts, it is difficult to verify how effectively U.S. export
                      programs counter these foreign practices. We also observed that some
                      U.S. export programs are no longer used only to counter specific
                      competitor actions but rather have been broadened to assist U.S.
                      agricultural exports in general. In addition, several economic studies
                      indicate that our competitors find U.S. export subsidies relatively
                      inexpensive to offset.

                      USDA states that EEP has provided some income protection to the U.S.
                      agricultural sector from foreign export subsidies. Specifically, because
                      foreign nations subsidize their sales, subsidies such as EEP provide an
                      income transfer to U.S. farmers that protects them from absorbing the
                      lower world sales price. Under previous farm legislation, deficiency
                      payments to farmers insulated farmers’ income from decreases in U.S.
                      domestic market prices. So EEP had a limited impact on the income of
                      farmers participating in U.S. domestic commodity support programs. For
                      farmers not participating in these commodity support programs, however,
                      a slightly higher domestic price due to modest increases in export demand
                      for some EEP-supported U.S. commodities may have countered the income
                      reduction due to foreign export subsidies.

                      We could not identify convincing evidence on the degree to which U.S.
                      export programs have effectively matched U.S. competitors’ agricultural
                      export programs and, thus, have leveled the playing field. By program
                      design, GSM and title I are not specifically used to counter competitor
                      nations’ efforts to assist exports. With respect to EEP and MAP, the evidence
                      is inconclusive. This is due in part to changes in U.S. laws governing these
                      programs and to limited data on foreign governments’ and private entities’
                      export assistance activities. For example, EEP previously was intended to
                      discourage unfair trade practices69 such as competitor nations’ use of

                      69
                        See Food, Agriculture, Conservation and Trade Act of 1990 (P.L. 101-624, sec. 1531, Nov. 28, 1990).



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agricultural export subsidies. However, U.S. implementing legislation for
the Uruguay Round agreements70 states that the program’s use is not
limited solely to countering unfair trade practices. MAP was previously
required to counter unfair trade practices, such as the use of subsidies,71
but U.S. implementing legislation for the Uruguay Round agreements
removed this requirement.72 According to USDA officials, though changed in
law, operationally EEP is still used largely to counter unfair trade practices.

USDA  reports that U.S. competitors are willing to incur large expenses to
support their agricultural exports and, thus, reasons that to remain
competitive and to protect the incomes of U.S. producers, the United
States must do likewise. According to USDA, the EU in fiscal year 1996 spent
about $9 billion on export subsidies.73 Agricultural exporting nations, such
as Australia, Canada, and New Zealand, provide less government support
for export assistance.74 However, they sell some of their agricultural
exports, including wheat and dairy products,75 through state trading
enterprises (STE).76 Some USDA and private sector officials believe that STEs
give these countries advantages over U.S. exporters because of their
ability to charge nontransparent and different prices in different markets.77
Thus, they state that U.S. programs are needed to offset foreign
government subsidies, these marketing organizations, and other
competitor nations’ actions.78 With the lack of transparency in STEs and

70
  See Uruguay Round Agreements Act (P.L. 103-465, sec. 411, Dec. 8, 1994).
71
  See 7 U.S.C. 5623 (1988, Supp. II 1990).
72
  See footnote 71.
73
 The Competition in 1996: Expenditures for Export Subsidies and Export Market Promotion Activities
of Major U.S. Competitors in Global Market for Agricultural and Food Products, FAS, USDA
(Washington, D.C.: Nov. 1996).
74
 We did not review studies of the effectiveness of EU or other competitor nations’ agricultural export
assistance programs.
75
 See Canada, Australia, and New Zealand: Potential Ability of Agricultural State Trading Enterprises to
Distort Trade (GAO/NSIAD-96-94, June 24, 1996).
76
 STEs are generally considered to be governmental or nongovernmental enterprises that are
authorized to engage in trade and are owned, sanctioned, or otherwise supported by the government.
77
 See International Trade: Canada and Australia Rely Heavily on Wheat Boards to Market Grain
(GAO/NSIAD-92-129, June 10, 1990).
78
 According to USDA, the following example of the Australian Wheat Board’s paying for an Indonesian
wheat importer’s son’s university education illustrates why the United States must—in order to
compete—have its own export assistance programs. To gain favor and access to the Indonesia’s wheat
market, the Australian Wheat Board paid for a prominent Indonesian wheat miller’s son’s university
education in Australia. According to FAS, this wheat miller controls two-thirds of Indonesia’s wheat
milling industry. USDA officials state this example represents the type of competitive challenge that
U.S. exporters face. Further, U.S. exporters are subject to the Foreign Corrupt Practices Act of 1977
(P.L. 95-213, Dec. 19, 1977). Therefore, USDA officials believe that U.S. exporters must rely on
programs like MAP or FMDP to combat competitor nations’ export practices.
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other export assistance efforts by competitor nations, it is difficult to
verify that USDA activities directly target foreign practices. Specifically,
without better data on how competitor nations’ agricultural export
assistance programs are funded, to what markets and commodities they
are targeted, and how effective they are in increasing agricultural exports,
it is uncertain how well U.S. export programs match and counter these
efforts.

Some studies have stated that competitors find U.S. export subsidies
relatively inexpensive to offset.79 For example, one researcher concluded
that it is unlikely that EEP can cause the level of EU export subsidies to rise
by more than 4 percent. The researcher also estimated that for every
additional dollar the U.S. government spent exporting wheat under EEP,
the EU had to spend only about 23 cents more on its own wheat and coarse
grain export subsidies to offset EEP’s impact.80 Further, the Australian
Bureau of Agricultural and Resources Economics similarly calculated that
the cost to the EU of offsetting EEP was equal to only about 1.5 percent of
the total EU agriculture budget for 1987 or 1988.81 Another study noted that
the increased cost of EU export subsidies from U.S. export subsidies
appeared to be small.82 Industry officials were divided in their assessment
of how significantly U.S. export assistance programs have increased the
cost of EU agricultural export assistance programs.

U.S. export assistance programs may in the short term increase market
share and, thus, may help U.S. companies compete when these programs
encourage importers to choose U.S. goods over those of competitors. For
example, the availability of credit under the GSM-102 program or the
market development effects of MAP and title I may influence importers to
choose U.S. commodities. However, these programs are unlikely to have a
sustained long-term impact, because competitors’ own agricultural export
assistance programs may counteract them (that is, offer better price or

79
 See G. Anania, M. Bohman, and C. Carter, “United States Export Subsidies in Wheat: Strategic Trade
Policy or Expensive Beggar-Thy-Neighbor Tactic?” American Agricultural Economics (1992); Haley,
“Evaluating The Export Enhancement Program Over 1991-95 Crop Years”; Haley,”The U.S. Export
Enhancement Program: Prospects”; and, I. Roberts, et al., U.S. Grain Policies and the World Market
(Canberra, Australia: Australian Bureau of Agricultural and Resources Economics, 1989).
80
 See Haley, “Evaluating the Export Enhancement Program,” and Haley, “The U.S. Export
Enhancement Program: Prospects.”
81
  In 1987 and 1988, total EU export subsidies for grains were $3.6 billion and $3.5 billion, respectively,
according to USDA. For those same years, EU export subsidies for wheat were estimated to have
increased due to EEP by $400 million and $290 million, respectively. In contrast, total EU agricultural
support outlays were approximately $26 billion for 1987 and $32 billion for 1988. See Roberts, et al.,
U.S. Grain Policies.
82
  Anania, Bohman, and Carter, “United States Export Subsidies in Wheat.”



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                           credit), and because there is no assurance that markets developed with
                           U.S. export programs can be sustained without the continued use of these
                           programs.

                           Finally, some studies83 of U.S. agricultural export assistance programs
                           have noted that countering foreign competitors’ market-distorting
                           practices with subsidies leads to lower prices and reduced market returns
                           for producers in all countries. Several industry officials concurred with
                           this observation. Also, export assistance programs such as EEP and credit
                           guarantees may transfer many of the programs’ benefits to foreign
                           consumers instead of to U.S. producers by lowering the cost of importing
                           U.S. agricultural commodities. For example, a study on EEP84 has estimated
                           that roughly 40 percent of the subsidy value has gone directly to foreign
                           consumers or governments.85


Divergent Views Exist on   U.S. government officials and some private sector representatives argue
Whether U.S. Export        that U.S. agricultural export assistance programs may provide negotiating
Programs Promote U.S.      leverage for the 1999 WTO agricultural trade talks. U.S. objectives for these
                           negotiations will be to further liberalize global agricultural trade (that is,
Trade Negotiating          to further reduce tariffs and NTBs). The United States seeks further
Objectives                 liberalization because global agricultural trade remains one of the most
                           protected areas of world trade in terms of high tariffs and other trade
                           barriers, such as tariff-rate quotas (TRQ).86 Many of these trade barriers
                           remain permissible under the WTO.87 These officials state that the United
                           States should not unilaterally eliminate these programs before 1999
                           because doing so would force the United States to come to the negotiating
                           table with a much-reduced set of items for negotiation. Some public and
                           private sector officials, however, challenge the idea that these programs
                           provide leverage. They question the leverage that these programs provided
                           during the Uruguay Round agricultural negotiations and believe that other

                           83
                              See I. Roberts, et al., U.S. Grain Policies, and Anania, Bohman, and Carter, “United States Export
                           Subsidies in Wheat.”
                           84
                            Robert L. Paarlberg, “Does the GATT Agreement Promote Export Subsidies: A Case of Unintended
                           Consequences,” International Agribusiness Management Association Meeting (May 1995).
                           85
                             Some critics of U.S. agricultural export assistance programs believe that a more potent approach for
                           increasing U.S. agricultural exports (than the use of these programs) would be to pursue broader trade
                           negotiations that can help lower trade barriers and promote fairer trade.
                           86
                            A tariff-rate quota system applies one tariff to imports up to a particular amount and a different,
                           higher tariff rate to imports in excess of that amount.
                           87
                            For a listing of agricultural trade barriers worldwide by countries, see 1997 National Trade Estimate
                           Report on Foreign Trade Barriers, Office of the United States Trade Representative (Washington D.C.:
                           U.S. GPO, 1997).



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factors, such as internal pressure on the EU to further reform its
agricultural policies, rather than U.S. agricultural export assistance
programs, will have a greater impact on the success of the 1999 talks.

Program supporters state that the use or threatened use of these export
programs was helpful in achieving the Uruguay Round’s goal of
agricultural liberalization. A former U.S. agricultural trade negotiator
states that EEP helped pressure subsidizing competitors, particularly the
EU, to come to the negotiating table and agree to reduce the use of
subsidies. Program supporters reason that these programs could provide
negotiating leverage for the 1999 WTO agricultural negotiations and thus
give the United States leverage in negotiating reductions in tariffs,
agricultural subsidies, and the types of trade barriers that have grown in
importance since the Uruguay Round, such as STEs, SPS barriers, and TRQs.
USDA states that these assistance programs have also been valuable in
negotiations to open up specific foreign markets. For example, USDA
reports that in Japan, MAP efforts helped persuade consumers to question
quotas on imported U.S. beef. This contributed to the 1984 market-opening
talks for foreign meat products that were being negotiated between Japan
and the United States.

USDA  officials state that in order for U.S. agricultural export assistance
programs to provide leverage, they must be consistently funded. For
example, some U.S. food exporters cited EEP’s peaks and valleys of
funding over the last 5 years, and the fact that it was basically not used in
fiscal year 1996, as weakening its potential leverage in future trade
negotiations. USDA officials and these exporters believe that even though
trade negotiations are very complex, with many dynamic interacting
factors and that it is hard to quantify each program’s potential negotiating
contribution, the United States should not unilaterally eliminate any of
these programs before the 1999 talks. They state that if we eliminate these
programs, we then come to the negotiating table with a much-reduced set
of items for negotiation. USDA reports its goal for the 1999 WTO negotiations
is to further liberalize global agricultural trade.

One difficulty in assessing arguments for retaining U.S. agricultural export
assistance programs based on the past negotiating leverage they have
provided is that while these arguments are difficult to refute, they cannot
be demonstrated empirically, much less evaluated by comparing costs to
benefits.88 Instead, these arguments rely heavily on anecdotal examples

88
  See Bruce Gardner, “The Political Economy of U.S. Export Subsidies for Wheat,” Working Paper No.
4747, National Bureau of Economic Research (Cambridge, MA: May 1994), for a discussion of the
interaction of EU policy changes and EEP.



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and personal experience. Some public and private sector officials
challenge the assertion that these programs provide leverage and their
achievements in multilateral and bilateral negotiations. Specifically, they
question the notion that EEP subsidies were instrumental in bringing the EU
to the table in the Uruguay Round negotiations. For example, some of
these officials report that EEP caused problems for the United States in
gaining consensus with nonsubsidizing agricultural exporting nations
during the Uruguay Round negotiations. They state that this may have
limited the U.S. ability to negotiate further EU concessions in agriculture.89
Further, some public and private sector officials believe that other U.S.
efforts, such as the use or threatened use of 301 trade sanctions,90 rather
than EEP, were key in bringing competitor nations to the negotiations.
Similarly, they question the effectiveness of a MAP-financed advertising
campaign in creating domestic political pressure to open Japan’s markets
to foreign beef products. Rather, they cite U.S. diplomatic negotiating
efforts; the threatened use of 301 trade sanctions; the fact that the United
States had requested a GATT investigation regarding Japanese beef quotas;91
and the efforts of other meat exporting nations, such as Australia, as being
keys to opening this market.

Looking forward to the 1999 WTO negotiations, some private sector
officials note that many of the trade barriers currently of interest, such as
SPS measures, high tariffs, and TRQs, are problems in importing nations.
Consequently, they question whether U.S. export assistance programs,
which were not intended to address these types of barriers, will be useful
in the WTO talks in gaining access to markets restricted by these barriers.
For example, to the extent that some of these programs’ subsidies are
transferred to consumers in importing nations, these nations may not want
to support the United States in giving up the programs through trade
negotiations.

Further, some public and private sector officials believe that the
EU—which    in fiscal year 1996 spent over $9.1 billion on agricultural export
subsidies alone—will probably be the biggest factor in deciding whether
or not the 1999 talks are a success. They believe that EU budgetary

89
 For example, Robert Paarlberg argues that U.S. leverage over the EU in the Uruguay Round
negotiations was due to the threat that a deadlock in agriculture could block progress in more
important negotiating areas such as trade in manufacturing and services. See Paarlberg, “Does the
GATT Agreement Promote Export Subsidies.”
90
  Section 301 of the Trade Act of 1974, as amended (19 U.S.C. 2411), serves as the U.S. government’s
principal mechanism for addressing unfair foreign trade practices. It gives the U.S. Trade
Representative broad authority to enforce U.S. rights under bilateral and multilateral trade agreements
and seeks to eliminate certain acts, policies, or practices of foreign governments that burden or
restrict U.S. commerce.
91
  See International Trade Reporter, Vol. 5, #29 (July 20, 1988).
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                 pressures, not U.S. agricultural export assistance programs, will provide
                 the greatest incentive for the EU to continue to reform its agricultural
                 domestic and export policies and thus help further liberalize global
                 agricultural trade. Specifically, the cost of extending these EU domestic
                 and export policies to the upcoming new EU members such as Poland,
                 Hungary, and the Czech Republic (all of whom have sizable and protected
                 agricultural sectors) is considerable. In fiscal year 1996, the EU spent about
                 $52.3 billion, or 47 percent of its budget, on domestic agricultural and
                 export assistance programs. These officials question whether the EU will
                 be able to extend this same level of support to the new members.


                 The evidence suggests that while FAIR’s domestic policy reforms will
Conclusion       modestly help boost U.S. agricultural exports, other factors such as the
                 ongoing liberalization of global agricultural trade and increased world
                 demand, are expected to increase U.S. exports independent of FAIR. In fact,
                 forecasts project growth in U.S. agricultural exports well beyond the
                 record $60 billion in 1996.

                 While FAIR’s domestic policy reforms removed a primary benefit associated
                 with most U.S. export assistance programs—the exporting of surplus
                 stocks generated by domestic price supports—program proponents state
                 that U.S. agricultural export assistance programs continue to have
                 relevance because they

             •   benefit the overall U.S. economy,
             •   benefit the agriculture sector and/or specific commodities,
             •   counter competitor nations’ agricultural export assistance programs,
                 and/or
             •   provide leverage to support U.S. trade negotiating objectives.

                 The evidence we found is mixed regarding the contributions of U.S.
                 agriculture export programs in these four areas. We found no conclusive
                 support that the programs benefit the U.S. economy as a whole, through
                 either expanded aggregate employment or output, or reduced trade or
                 budget deficits. Regarding benefits to the U.S. agriculture sector, there is
                 substantial research that concludes that these programs only modestly
                 increase exports above and beyond what is likely to occur in their
                 absence. More substantial benefits to the U.S. agricultural sector may
                 come from these programs’ contributions to countering foreign competitor
                 export assistance and providing leverage for trade negotiations.




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                While we recognize substantial barriers continue to confront U.S.
                agricultural exporters around the globe, the effectiveness of existing
                programs to “level the playing field” by targeting trade barriers and
                competitor programs or by providing negotiating leverage remains
                uncertain. Without better data on the size, nature, and effectiveness of
                competitors’ export assistance programs and unfair trade barriers, it
                remains unclear how much the U.S. agricultural export programs
                contribute to countering these competitors’ efforts or provide negotiating
                leverage.


                Given the mixed evidence concerning the continued relevance of U.S.
Matter for      agricultural export assistance programs, their decreased funding levels,
Congressional   and the trend toward increased liberalization of global agricultural trade
Consideration   from which the U.S. agricultural sector is likely to benefit with or without
                further government support, the Congress may wish to reassess the
                continued viability and/or focus of the programs the next time these
                programs are reviewed.

                To support such an assessment, the Congress may wish to direct USDA to
                develop more systematic information on the potential strategic value of
                U.S. export assistance programs—for example, in countering competitor
                nations’ agricultural export programs or in providing negotiating leverage.
                Specifically, the Congress may direct USDA to develop more systematic
                information on (1) competitors’ programs and negotiating objectives and
                (2) how effective each U.S. agricultural export assistance program is in
                furthering U.S. interests. Once this information is in hand, the Congress
                may wish to refocus the thrust of the programs.


                To assess how FAIR may affect U.S. competitiveness in world agricultural
Scope and       markets, we analyzed and synthesized the results of three tasks. First, to
Methodology     gain an understanding of the act’s impact, we conducted interviews with a
                wide range of U.S. and competitor nation agricultural experts.92 Second, to
                corroborate these opinions and to obtain data on FAIR’s impact, we
                analyzed available studies and reports authored by some of these experts.

                92
                  Specifically,we interviewed officials from USDA (including FAS and ERS), the Department of State,
                the Office of the U.S. Trade Representative, the Congressional Budget Office, the Congressional
                Research Service, and OMB, as well as from the embassies of Canada, Australia, New Zealand, and the
                Delegation of the European Commission. We also interviewed agriculture experts from universities
                such as Harvard, Texas A&M, and Iowa State, and think tanks such as the Cato Institute, the Heritage
                Foundation, World Perspectives, and Sparks Inc. In addition, we interviewed representatives from
                agricultural trade associations such as the North American Export Grain Association and the American
                Farm Bureau Federation and agricultural businesses such as Cargill, Inc., and ConAgra, Inc.



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Third, to obtain insights into the assumptions and variables that affect
global agricultural trade, we reviewed and discussed the economic
modeling results of USDA’s ERS and FAPRI in Ames, Iowa.

To examine the continued relevance of U.S. agricultural export assistance
programs, we performed three tasks. First, to understand the history,
mission, and effectiveness of these programs,93 we drew upon our prior
work in this area.94 Second, to develop a method for organizing the
evidence regarding these programs’ relevance, we took the benefits
proponents state these programs provide and, in consultation with
agricultural experts, constructed a framework that consists of four basic
categories of potential program impact (for example, do these programs
benefit the U.S. economy?). Third, to obtain evidence on the continued
relevance of these programs,95 we interviewed government officials,
agricultural trade experts, and officials of the organizations previously
mentioned and gathered applicable research, empirical evidence, and
other information on the impact of these programs. Finally, we
synthesized all the information to present the best evidence available on
the continued relevance of U.S. export programs in furthering the four
categories of impact. While we have worked to provide the best evidence
available, we acknowledge that determining program relevance is difficult
because many of the domestic and international conditions under which
past observations of and research on these programs have been based
have changed; thus, any assessment of the future relevance of these
programs needs to be tempered with this understanding.

Lastly, we had a draft of this report peer reviewed for accuracy and
objectivity by several public and private sector economists and
agricultural experts.

We performed our review from June 1996 to May 1997 in accordance with
generally accepted government auditing standards.



93
  For the purpose of this review, we focused on USDA’s four types of agricultural export assistance
programs. We did not examine other aspects of USDA efforts to increase U.S. agricultural exports,
such as FAS’ overseas offices which, according to USDA, provide a global strategic network to alert
the U.S. private sector to export opportunities and market expectations, identfy trade and marketing
barriers, and gather information on U.S. competitors. In fiscal year 1995, FAS had an operating budget
of about $118 million to carry out its overseas functions and manage its various agricultural export
assistance programs.
94
  See Related GAO Products.
95
  Regarding USDA market promotion efforts, for the purposes of this review, we focused more on MAP
than on FMDP because FMDP was not significantly affected by or addressed in the FAIR legislation.



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                     We provided a draft of this report to USDA for review and comment. We
Agency Comments      met with officials of the Department, including FAS’ Associate
and Our Evaluation   Administrator and ERS’ Deputy Director, and other senior management
                     officials representing FAS’ various export assistance programs. These
                     officials agreed in principle to the report’s conclusions and matter for
                     congressional consideration. They also stated that the report provided
                     insights into the complexity of isolating the impact of U.S. agricultural
                     export assistance programs on U.S. agricultural exports, separate from the
                     wide range of other variables that affect these exports.

                     They acknowledged that market forces, not these federal programs, were
                     the greatest factor in increasing U.S. agricultural exports. However, FAS
                     officials felt that the report was too negative about the programs and that
                     the assumptions used preordained the outcome of our analysis. In
                     particular, FAS officials stated that our focus on the macroeconomic
                     impact of U.S. agricultural export assistance programs—including the
                     assumption of full employment—imposed an unreasonably high standard
                     that these programs should have a positive impact on the overall U.S.
                     economy. They questioned whether this standard could be met by any
                     federally funded program. Several senior FAS program managers added
                     that U.S. agricultural export assistance programs were in fact designed to
                     redistribute economic resources from other sectors of the U.S. economy to
                     agriculture. FAS officials also felt that our presentation of studies regarding
                     MAP’s impact was selective and unbalanced.


                     In response to USDA’s comments, we have expanded our discussion of
                     MAP’s impact to include five additional studies of the program. Though this
                     expanded the number of countries and commodities targeted by MAP that
                     we discuss, it did not alter our conclusions. In addition, while
                     demonstrating a macroeconomic benefit is a high standard for any federal
                     program, the requester was specifically interested in whether U.S.
                     agriculture export assistance programs benefit the national economy, a
                     claim that USDA has made in the past. Moreover, beyond the review of
                     these programs’ potential macroeconomic effects, we also reviewed their
                     impact on the agricultural sector and specific commodities, on countering
                     competitor export assistance programs, and on providing negotiating
                     leverage. Regarding our use of the full employment assumption, our
                     analysis of USDA programs’ macroeconomic impact did consider the
                     programs’ effectiveness under conditions of less than full employment, as
                     well as full employment. However, under either condition there was no
                     evidence that these programs provide macroeconomic benefits. In
                     addition, it should be noted that (1) our analysis of macroeconomic impact



                     Page 34                                 GAO/NSIAD-97-260 U.S. Agricultural Exports
B-277683




under conditions of full employment is consistent with OMB guidance and
(2) comments on our draft report from several public and private sector
economists and agricultural experts indicated no disagreement with our
methodology or analysis. Moreover, the consensus of these reviewers was
that the report was accurate and balanced.

USDA officials suggested a number of technical revisions to our draft. We
have incorporated them into the report where appropriate.


As arranged with your office, we will send copies of this report to the
Senate and House Agriculture Committees, other interested congressional
committees, the Secretary of Agriculture, and other interested parties. We
will also make copies available to others on request. Major contributors to
this report are listed in appendix II.

Please call me on (202) 512-8984, if you or your staff have any questions
about this report.

Sincerely yours,




JayEtta Z. Hecker, Associate Director,
International Relations and Trade Issues




Page 35                                GAO/NSIAD-97-260 U.S. Agricultural Exports
Contents



Letter                                                                                               1


Appendix I                                                                                          38
                        Export Subsidy Programs                                                     38
Funding for U.S.        Export Credit Guarantee Programs                                            39
Agricultural Export     Market Development and Promotion Programs                                   41
                        Public Law 480 Title I-Food Aid                                             42
Assistance Programs
Appendix II                                                                                         44

Major Contributors to
This Report
Related GAO Products                                                                                47


Figures                 Figure 1: Forecasted Average Annual Real GDP Growth Rates for               10
                          Selected Regions, 1990-2005
                        Figure I.1: Export Subsidy Programs’ Expenditures, Fiscal Year              39
                          1985-98
                        Figure I.2: Export Credit Guarantee Program Assisted Sales,                 40
                          Fiscal Year 1985-98
                        Figure I.3: Market Development and Promotion Program                        42
                          Expenditures, Fiscal Year 1985-98
                        Figure I.4: Public Law 480 Title I-Food Aid Expenditures, Fiscal            43
                          Year 1985-98




                        Page 36                              GAO/NSIAD-97-260 U.S. Agricultural Exports
Contents




Abbreviations

ARP        Acreage Reduction Program
CGE        computable general equilibrium model
COAP       Cottonseed Oil Assistance Program
CRS        Congressional Research Service
DEIP       Dairy Export Incentive Program
EEP        Export Enhancement Program
ERS        Economic Research Service
EU         European Union
FAPRI      Food and Agricultural Policy Research Institute
FAS        Foreign Agricultural Service
FAIR       Federal Agriculture Improvement and Reform Act
FMDP       Foreign Market Development Program
FOR        Farmer Owned Reserve Program
GATT       General Agreement on Tariffs and Trade
GDP        gross domestic product
GSM        General Sales Manager
HVP        high-value product
MAP        Market Access Program
NTB        nontariff barrier
OMB        Office of Management and Budget
SOAP       Sunflowerseed Oil Assistance Program
SPS        sanitary and phytosanitary
STE        state trading enterprise
TPCC       Trade Promotion Coordinating Committee
TRQ        tariff-rate quota
USDA       U.S. Department of Agriculture
WTO        World Trade Organization


Page 37                             GAO/NSIAD-97-260 U.S. Agricultural Exports
Appendix I

Funding for U.S. Agricultural Export
Assistance Programs

                 This appendix presents detailed information about the U.S. Department of
                 Agriculture’s (USDA) four export assistance programs. These include
                 export subsidy programs, export credit guarantee programs, market
                 development and promotion programs, and food aid programs.


                 These programs are intended to help U.S. commodities become more price
Export Subsidy   competitive on the world market. In the past, these programs have
Programs         included the Export Enhancement Program (EEP), the Dairy Export
                 Incentive Program (DEIP), the Sunflowerseed Oil Assistance Program
                 (SOAP), and the Cottonseed Oil Assistance Program (COAP). EEP has been
                 the largest of these programs in terms of government funding and,
                 according to USDA, has been used to pressure foreign nations to reduce
                 trade barriers and eliminate trade-distorting practices. During 1996, EEP
                 was not fully utilized due to market conditions—tight supply and high
                 international demand—that did not warrant its use. The Federal
                 Agriculture Improvement and Reform (FAIR) Act of 1996 did not
                 reauthorize the SOAP and COAP programs. See figure I.1 for expenditures on
                 all export subsidy programs in fiscal years 1985-98.




                 Page 38                               GAO/NSIAD-97-260 U.S. Agricultural Exports
                                             Appendix I
                                             Funding for U.S. Agricultural Export
                                             Assistance Programs




Figure I.1: Export Subsidy Programs’ Expenditures, Fiscal Year 1985-98
Dollars in millions
1,400
                                                                                  1,292

1,200
                                                                 1,067   1,053
                               1,022                    1,009
1,000                   928


  800

                                                                                                                        589
  600
                                                                                             479

  400                                  348
                                                  325
                 256

  200                                                                                                         156

           22                                                                                          25
    0                                                                                                               a         a
         1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
                                       Fiscal year

                                                 EEP    DEIP/SOAP/COAP


                                             a
                                             Estimated fiscal year 1997-98 program levels.


                                             Source: Foreign Agricultural Service (FAS), USDA.




                                             The export credit guarantee programs are intended to develop, expand, or
Export Credit                                maintain U.S. agricultural markets overseas by facilitating access to export
Guarantee Programs                           credit for countries that do not have adequate commercial credit available.
                                             These programs encourage U.S. lenders to extend credit to foreign
                                             importers to purchase U.S. agricultural commodities. USDA has two types
                                             of export credit guarantee programs, also known as the General Sales
                                             Manager (GSM) programs. The GSM-102 program offers short-term
                                             commercial credit guarantees for periods of up to 3 years. The second
                                             program, known as GSM-103, offers intermediate-term loan guarantees and
                                             repayment periods of 3 to 10 years. The GSM export credit guarantee
                                             programs are funded under the auspices of USDA’s Commodity Credit
                                             Corporation. In fiscal year 1996, these programs provided credit



                                             Page 39                                               GAO/NSIAD-97-260 U.S. Agricultural Exports
                                                  Appendix I
                                                  Funding for U.S. Agricultural Export
                                                  Assistance Programs




                                                  guarantees on agricultural exports valued at $3.2 billion.1 The FAIR Act
                                                  established that not less than $5.5 billion was to be made available
                                                  annually for credit guarantees through 2002. The act allows greater
                                                  flexibility in terms of how much is made available for each program. The
                                                  act also allows credit guarantees on high-value products (HVP) with at least
                                                  90 percent U.S. content by weight. See figure I.2 for assisted sales amounts
                                                  for fiscal year 1985-98 export credit guarantees.



Figure I.2: Export Credit Guarantee Program Assisted Sales, Fiscal Year 1985-98

Dollars in millions
7,000

6,000                                                                   5,684                                                 5,700
                                                                                                                  5,500
                                          5,196
5,000
                                  4,504                         4,522
                                                       4,296

4,000                                                                           3,882

                                                                                        3,220             3,230
                          2,873                                                                  2,921
3,000
          2,513   2,535


2,000

1,000

     0                                                                                                                    a           a
         1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
                                       Fiscal year

                                                         GSM102         GSM103



                                                  Note: The Export Credit Guarantee Program was established in 1980 and, as of January 1997, the
                                                  government has paid out approximately $2.1 billion in claims because of loan repayment defaults
                                                  and reschedulings by foreign buyers.

                                                  a
                                                      Estimated fiscal year 1997-98 program levels.


                                                  Source: FAS, USDA.


                                                  1
                                                   According to the Commodity Credit Corporation, the export subsidy amount in fiscal year 1996 was
                                                  $327.4 million.



                                                  Page 40                                                GAO/NSIAD-97-260 U.S. Agricultural Exports
                     Appendix I
                     Funding for U.S. Agricultural Export
                     Assistance Programs




                     These programs are intended to develop, maintain, and expand foreign
Market Development   markets for U.S. agricultural products through subsidies for advertising
and Promotion        and market promotion. In the 1950s, the federal government created
Programs             several market development and export promotion programs. Today, FAS
                     is responsible for (1) the Foreign Market Development Program (FMDP)
                     and (2) the Market Access Program (MAP). These programs provide funds
                     to commercial firms and not-for-profit organizations to promote U.S.
                     agricultural commodities in foreign markets. FMDP (also known as the
                     Cooperator Program) is intended to help develop export markets and
                     promote U.S. agricultural commodities—typically for bulk, or generic,
                     products. MAP, on the other hand, is used primarily to assist in developing
                     markets for high-value or processed products. In 1996, FMDP contributions
                     by the U.S. government were capped at $34 million. The FAIR Act capped
                     funding authority for MAP at $90 million for each fiscal year from 1996 to
                     2002. See figure I.3 for expenditures on market development and
                     promotion programs in Fiscal Year 1985-98.




                     Page 41                                GAO/NSIAD-97-260 U.S. Agricultural Exports
                                          Appendix I
                                          Funding for U.S. Agricultural Export
                                          Assistance Programs




Figure I.3: Market Development and Promotion Program Expenditures, Fiscal Year 1985-98

Dollars in millions
300

250                                 233       234    238       238


                                                                      207
200

                147
150                   137
                             144
                                                                               135
                                                                                          145

                                                                                                   124     124       124


100

 50      36



  0                                                                                                              a         a
       1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
                                     Fiscal year

                                              MAP                    FMDP



                                          a
                                          Estimated fiscal year 1997-98 program levels.


                                          Source: FAS, USDA.




                                          The Public Law 480 food aid program is intended to enhance the food
Public Law 480 Title                      security of developing countries through the use of agricultural
I-Food Aid                                commodities and local currencies to (1) combat world hunger and
                                          malnutrition and their causes; (2) promote sustainable economic
                                          development, including agricultural development; (3) expand international
                                          trade; (4) develop and expand export markets for U.S. agricultural
                                          commodities; and (5) encourage the growth of private enterprise and
                                          democratic participation in developing countries. In fiscal year 1996, USDA
                                          reported that this program resulted in the export of approximately
                                          $370 million, or 1.2 million metric tons, of U.S. commodities. The FAIR Act
                                          extends the authority of the United States to enter into new Public




                                          Page 42                                               GAO/NSIAD-97-260 U.S. Agricultural Exports
                                                Appendix I
                                                Funding for U.S. Agricultural Export
                                                Assistance Programs




                                                Law 480 agreements through 2002. Further, it authorizes, for the first time,
                                                Public Law 480 title I agreements with private entities. The act also
                                                modifies repayment terms for title I credit, including elimination of the
                                                10-year minimum repayment period and reduction of the maximum grace
                                                period from 7 to 5 years.2 See figure I.4 for Public Law 480 expenditures
                                                for fiscal year 1985-98.



Figure I.4: Public Law 480 Title I-Food Aid Expenditures, Fiscal Year 1985-98

Dollars in millions
1,000
          928.2




  800             766.5
                                  721.4   735         725.3
                          695.6



  600


                                                               395.3
  400                                                                  374.2
                                                                                332.8


                                                                                                                  240
                                                                                        217.8              219
  200                                                                                           171.7
                                                                                                                            123




    0                                                                                                                   a         a
         1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
                                       Fiscal Year



                                                Note: fiscal year 1988-96 based on registered sales. Transportation costs are not included.

                                                a
                                                    Estimated fiscal year 1997-98 program levels.


                                                Source: FAS, USDA.
                                                2
                                                 USDA also administers the donation program under section 416(b) of the Agricultural Act of 1949, as
                                                amended by section 302 of P.L. 83-480, (July 10, 1954) (7 U.S.C. 1431(b)), which provides agricultural
                                                commodities held in U.S. government inventories to needy countries. There were no commodities
                                                available for programming in fiscal years 1996 and 1997 due to low inventories. In addition to USDA
                                                food aid programs, there are two food aid programs administered by the Agency for International
                                                Development (the title II emergency and private assistance programs and the title III food for
                                                development program).



                                                Page 43                                                 GAO/NSIAD-97-260 U.S. Agricultural Exports
Appendix II

Major Contributors to This Report


                        Phillip J. Thomas
National Security and   Kurt W. Kershow
International Affairs   Kurt A. Burgeson
Division, Washington,   Gezahegne Bekele
                        Emil E. Friberg Jr.
D.C.                    Rona H. Mendelsohn


                        Richard P. Burkard
Office of the General   Herbert I. Dunn
Counsel, Washington,
D.C.
                        Loren Yager
Office of the Chief     Daniel E. Coates
Economist,
Washington, D.C.
                        Christine M. Broderick
San Francisco Field
Office




                        Page 44                  GAO/NSIAD-97-260 U.S. Agricultural Exports
Appendix II
Major Contributors to This Report




Page 45                             GAO/NSIAD-97-260 U.S. Agricultural Exports
Appendix II
Major Contributors to This Report




Page 46                             GAO/NSIAD-97-260 U.S. Agricultural Exports
Related GAO Products


              Addressing the Deficit: Budgetary Implications of Selected GAO Work for
              Fiscal Year 1998 (GAO/OCG-97-2, Mar. 14, 1997).

              Export-Import Bank: Reauthorization Issues (GAO/T-NSIAD-97-147, Apr. 29,
              1997).

              Canada, Australia, and New Zealand: Potential Ability of Agricultural State
              Trading Enterprises to Distort Trade (GAO/NSIAD-96-94, June 24, 1996).

              Farm Bill Export Options (GAO/GGD-96-39R, Dec. 15, 1995).

              U.S. Department of Agriculture: Foreign Agricultural Service Could Benefit
              From Better Strategic Planning (GAO/GGD-95-225, Sept. 28, 1995).

              State Trading Enterprises: Compliance with the General Agreement on
              Tariffs and Trade (GAO/GGD-95-208, Aug. 30, 1995).

              Food Aid: Competing Goals and Requirements Hinder Title I Program
              Results (GAO/GGD-95-68, June 26, 1995).

              Agricultural Trade: Competitor Countries’ Foreign Market Development
              Programs (GAO/T-GGD-95-184, June 14, 1995).

              Export Promotion: Rationales for and Against Government Programs and
              Expenditures (GAO/T-GGD-95-169, May 23, 1995).

              Former Soviet Union: Creditworthiness of Successor States and U.S.
              Export Credit Guarantees (GAO/GGD-95-60, Feb. 24, 1995).

              Agricultural Trade: Five Countries’ Foreign Market Development for
              High-Value Products (GAO/GGD-95-12, Dec. 14, 1994).

              Cargo Preference Requirements: Objectives Not Significantly Advanced
              When Used in U.S. Food Aid Programs (GAO/GGD-94-215, Sept. 29, 1994).

              International Trade: Impact of the Uruguay Round Agreement on the
              Export Enhancement Program (GAO/GGD-94-180BR, Aug. 5, 1994).

              Public Law 480 Title I: Economic and Market Development Objectives Not
              Met (GAO/T-GGD-94-191, Aug. 3, 1994).




              Page 47                                GAO/NSIAD-97-260 U.S. Agricultural Exports
           Related GAO Products




           General Agreement on Tariffs and Trade: Uruguay Round Final Act Should
           Produce Overall U.S. Economic Gains (GAO/GGD-94-83A&B, July 29, 1994).

           High-Value Product Exports: Good Potential Exists for More Trade With
           Taiwan, Malaysia, and Indonesia (GAO/GGD-94-52, Nov. 19, 1993).

           U.S. Department of Agriculture: Issues Related to the Export Credit
           Guarantee Programs (GAO/T-GGD-93-28, May 6, 1993).

           Loan Guarantees: Export Credit Guarantee Programs’ Costs Are High
           (GAO/GGD-93-45, Dec. 22, 1992).




(711256)   Page 48                               GAO/NSIAD-97-260 U.S. Agricultural Exports
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