Order Code IB98006
Issue Brief for Congress
Received through the CRS Web
Agricultural Export and Food Aid Programs
Updated March 10, 2003
Charles E. Hanrahan
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress

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CONTENTS
SUMMARY
MOST RECENT DEVELOPMENTS
BACKGROUND AND ANALYSIS
U.S. Agricultural Exports
Agricultural Export and Food Aid Programs
Export Subsidies
Export Enhancement Program (EEP)
Dairy Export Incentive Program (DEIP)
Market Promotion
Market Access Program (MAP)
Foreign Market Development Program (Cooperator Program)
Export Credit Guarantees
Export Credit Guarantee Programs (GSM-102 and GSM-103)
Foreign Food Aid
P.L. 480 Food for Peace
Section 416(b)
Food for Progress (FFP)
The Bill Emerson Humanitarian Trust
McGovern-Dole International Food for Education and Child Nutrition Program
Recent Program Activity
Export Subsidies
Market Development
Export Credit Guarantees
Food Aid
FY2003 Appropriations for International Activities
FAS Salaries and Expenses
Foreign Food Aid: Funding and Issues
FY2004 Budget Proposals for International Activities
Trade Negotiations

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Agricultural Export and Food Aid Programs
SUMMARY
The U.S. Department of Agriculture
guarantees by USDA’s Commodity Credit
(USDA) forecasts that FY2003 agricultural
Corporation(CCC) of $5.5 billion worth of
exports will be $57 billion. Projected imports
farm exports annually plus an additional $1
of $43 billion will result in an export surplus
billion for emerging markets through 2007.
of $14 billion, $1.7 billion greater than in
Actual levels guaranteed depend on economic
FY2002.
conditions and the demand for financing by
eligible countries. Agricultural export credit
USDA operates four kinds of programs,
programs are not subject to multilateral disci-
which are authorized in the 2002 farm bill
plines or reduction commitments.
(P.L. 107-171), the Farm Security and Rural
Investment Act (FSRIA), and permanent
The FSRIA also authorizes P.L. 480
legislation, to promote exports or provide food
Food for Peace programs and Food for Prog-
aid. These programs include: direct subsi-
ress through FY2007. Section 416(b),
dies, market promotion, export credit guaran-
permanently authorized in the Agricultural
tees, and foreign food aid. Legislative author-
Act of 1949, provides surplus commodities
ity for most of these programs now extends to
for donation overseas. Food shortages in
the end of 2007. Export subsidies, but not
Africa, North Korea, Afghanistan, and else-
other types of export and food aid programs,
where are putting pressure on the ability of
are subject to reduction commitments agreed
food aid providers, including the United
to in the 1994 Uruguay Round Agreement on
States, to meet estimated needs.
Agriculture (URAA).
The President’s FY2003 budget
Direct subsidies include the Export
submission announced several food aid policy
Enhancement Program (EEP) and the Dairy
changes, including a phase out of food aid
Export Incentive Program (DEIP). EEP
based on surpluses, coupled with a requested
spending has been negligible since 1996.
increase in food aid appropriations, and
DEIP spending, however, has been at the
measures to streamline management of food
maximum allowed under the Uruguay Round
aid programs. However, excepting an increase
Agreement.
in P.L. 480 funding, FSRIA and FY2003
omnibus appropriations (P.L. 108-7) counter-

Market promotion programs include the
manded most of these changes.
Market Access Program (MAP) and the For-
eign Market Development or “Cooperator”
Congress is considering the President’s
Program (FMDP). Considered to be non-trade
FY2004 budget, which proposes $6.2 billion
distorting, these programs are exempt from
in program activity for export and food aid
Uruguay Round reduction commitments. The
programs. Congress also is monitoring World
FSRIA increases MAP to $200 million annu-
Trade Organization agriculture negotiations
ally by FY2006 and sets FMDP spending at
where export subsidies and food aid are on the
$34.5 million annually.
agenda.
The FSRIA authorizes export credit

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MOST RECENT DEVELOPMENTS
The President signed into law the FY2003 omnibus appropriations act (P.L. 108-7,
H.J.Res. 2) on February 20, 2003. For USDA’s international activities, the measure includes
$1.455 billion in foreign food aid under P.L. 480 Title II, including $250 million in
additional funding for emergency food aid that is available through FY2004. P.L. 108-7
requires USDA to provide a minimum of 400,000 tons of commodities under the Food for
Progress program.
On February 3, 2003, the President transmitted his FY2004 budget proposals to
Congress. The President proposed budget authority of about $1.4 billion to finance P.L. 480
food aid and the salaries and expenses of the Foreign Agricultural Service. The budget also
assumes an estimated $4.8 billion program level for export subsidies, export credit
guarantees, and some food aid.
President Bush signed into law the Farm Security and Rural Investment Act (P.L. 107-
171) on May 13, 2002. The FSRIA reauthorizes most agricultural export and food aid
programs through FY2007.
BACKGROUND AND ANALYSIS
U.S. Agricultural Exports
Agricultural exports are important both to farmers and to the U.S. economy. Production
from more than a third of harvested acreage is exported, including an estimated 43.5% of
wheat, 53.3% of rice, 43.1% of soybeans and products, 20.1% of corn, and 45.3% of cotton.
About 25% of gross farm income comes from exports. Exports generate economic activity
in the non-farm economy as well. According to USDA, each $1.00 received from
agricultural exports stimulates another $1.47 in supporting activities to produce those
exports. Agricultural exports generated an estimated 740,000 full-time civilian jobs,
including 444,000 jobs in the non-farm sector in 1998. In contrast to the continuing overall
trade deficit, U.S. agricultural trade has consistently registered a positive balance.

Nearly every state exports agricultural commodities, thus sharing in export-generated
employment, income, and rural development. In 2001, the states with the greatest shares in
U.S. agricultural exports by value were California, Texas, Iowa, Kansas, Illinois, Nebraska,
Minnesota, Washington, Indiana, and North Carolina . These 10 states accounted for 60%
of total U.S. agricultural exports. In addition, Arkansas, Ohio, Florida, Missouri, Georgia,
and South Dakota each shipped over $1 billion worth of commodities.
After growing rapidly in the 1970s, U.S. agricultural exports reached a high of $43.8
billion in FY1981, but then declined by 40% to just $26.3 billion by FY1986. By FY1995,
agricultural exports had recovered and reached a new peak of $54.6 billion. Agricultural
exports reached nearly $60 billion in FY1996, but declined to $57.3 billion in FY1997. U.S.
agricultural exports declined further in FY1998 to $53.6 billion. Main reasons for the
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decline were financial difficulties and an economic slow-down in East and Southeast Asian
countries, and increased competition for global corn, wheat, and soybean markets. For the
same reasons, exports fell in FY1999 to $49 billion. They rose to $50.9 billion for FY2000.
USDA reports that FY2001 exports were $53 billion and increased slightly to $53.5 billion
in FY2002. USDA forecasts FY2003 exports at $57 billion, a $3.7 billion increase over
FY2002.
The commodity composition of U.S. agricultural exports has changed over time with
exports of high value agricultural products now exceeding those of bulk commodities. Since
FY1991, bulk commodities (grains, oilseeds, and cotton) have accounted for less than total
non-bulk exports (intermediate products such as wheat flour, feedstuffs, and vegetable oils
or consumer-ready products such as fruits, nuts, meats, and processed foods). In FY2001,
high value agricultural exports accounted for 65% of the value of total agricultural exports.

Many variables interact to determine the level of U.S. agricultural exports: income,
population growth, and tastes and preferences in foreign markets; U.S. and foreign supply
and prices; and exchange rates. U.S. agricultural export and food aid programs, domestic
farm policies that affect price and supply, and trade agreements with other countries also
influence the level of U.S. agricultural exports.
Agricultural Export and Food Aid Programs
The trade title of the 2002 FSRIA (Title III of P.L. 107-171) authorizes and amends four
kinds of export and food aid programs:
! Direct export subsidies;
! Export Promotion Programs;
! Export credit guarantees; and
! Foreign food aid.
USDA’s Foreign Agricultural Service (FAS) administers the export and food aid
programs, with the exception of P.L. 480 Titles II (humanitarian food aid) and III (food for
development), which are administered by the U.S. Agency for International Development
(USAID).
USDA International Program Activity, FYs1995-2002
($ millions)
2003
Program
1996
1997
1998
1999
2000
2001
2002
est.
Export Enhancement
5
0
2
1
2
7
0
28
Program
Dairy Export Incentive
20
121
110
145
78
8
55
36
Program
Market Access Program
90
90
90
90
90
90
100
110
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2003
Program
1996
1997
1998
1999
2000
2001
2002
est.
Foreign Market
–
–
–
28
28
28
34
34
Development Programa
CCC Export Credit
3,230
2,876
4,037
3,045
3,082
3,227
3,388
4,225
Guarantees
P.L. 480 Food Aid
1,207
1,054
1,138
1,808
1,293
1,086
1,270
1,480
Section 416(b)b
0 0
0
1,297
1,130
1,103
773
175
Food for Progressc
84
91
111
101
108
104
126
158
Foreign Agricultural
167
191
209
178
183
201
198
202
Service
Total
4,803
4,423
5,697
6,693
6,000
5,854
5,940
6,453
a FY1995-FY1998 FMDP spending included in FAS appropriation.
b Commodity value and ocean freight and transportation
c Includes only CCC purchases of commodities for FFP. P.L. 480 Title I funds allocated to FFP are included
in P.L. 480.
Source: USDA, Annual Budget Summaries, various issues.
Export Subsidies
The FSRIA authorizes direct export subsidies of agricultural products through the
Export Enhancement Program (EEP) and the Dairy Export Incentive Program (DEIP).
Export Enhancement Program (EEP). EEP was established in 1985, first by the
Secretary of Agriculture under authority granted in the Commodity Credit Corporation
Charter Act, and then under the Food Security Act of 1985 (P.L. 99-198). The program was
instituted after several years of declining U.S. agricultural exports and a growing grain
stockpile. Several factors contributed to the fall in exports during the early 1980s: an
overvalued dollar and high commodity loan rates under the 1981 farm bill made U.S. exports
relatively expensive for foreign buyers; global recession reduced demand for U.S.
agricultural products; and foreign subsidies, especially those of the European Union (EU),
helped competing products make inroads into traditional U.S. markets. EEP’s main stated
rationale was to combat “unfair” trading practices of competitors in world agricultural
markets.
The Office of the General Sales Manager in USDA’s Foreign Agricultural Service
(FAS) operates EEP. The Sales Manager announces target countries and amounts of
commodities to be sold to those countries, and then invites U.S. exporters to “bid” for
bonuses that effectively lower the sales price. An exporter negotiates a sale with a foreign
importer, calculates the bonus necessary to meet the negotiated price, and submits the bonus
and price to FAS. FAS awards bonuses based on the bids and amount of funding available.
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Initially awarded in the form of certificates for commodities owned by the CCC, bonuses
since 1992 have been in the form of cash.
Most EEP bonuses have been used to assist sales of wheat. In FY1995, the last year
with significant program activity, 72% of EEP sales were wheat, 8% flour, 6% poultry, and
the remaining sales were eggs, feed grains, pork, barley malt, and rice. Although many
exporters have received bonuses, since 1985 three exporting firms have received almost half
of the total, which now exceeds $7 billion. The former Soviet Union, Egypt, Algeria, and
China were major beneficiaries of EEP subsidies.
The United States agreed to reduce its agricultural export subsidies under the 1994
Uruguay Round Agreement on Agriculture. The Agreement requires that outlays for export
subsidies fall by 36% and the quantities subsidized by 21% over 6 years (1995-2001).
Legislation to implement the Uruguay Round Agreement (P.L. 103-465) reauthorized EEP
through the year 2001 and specified that EEP need not be limited to responses to unfair trade
practices as in the 1985 Food Security Act, but also could be used to develop export markets.
EEP has been a controversial program since it was initiated in 1985. Many oppose the
program outright on grounds of economic efficiency. EEP, they argue, like all export
subsidies, interferes with the operations of markets and distorts trade. Others, noting that the
Uruguay Round Agreement on Agriculture restricts but does not prohibit agricultural export
subsidies, point out that as long as competitors, such as the European Union, use export
subsidies, the United States should also be prepared to use them. The effectiveness of EEP
also has been an issue. Several studies have found that wheat exports would decline
somewhat if EEP were eliminated, suggesting that EEP increases wheat exports. Other
analysts, however, find that subsidized wheat exports under EEP displace exports of
unsubsidized commodities such as corn.
Dairy Export Incentive Program (DEIP). DEIP was established under the 1985
farm act to assist exports of U.S. dairy products. Its purpose was to counter the adverse
effects of foreign subsidies, primarily those of the European Union. Early bonus payments
were in the form of sales from CCC-owned dairy stocks; later they were generic commodity
certificates from CCC inventories; now they are cash payments. As with EEP, USDA
announces target countries and amounts of dairy products that may be sold to those countries
under the program. Exporters negotiate tentative sales and “bid” for bonuses to subsidize
the prices of the sales.
The Uruguay Round subsidy reduction commitments (see EEP above) apply also to
DEIP. Uruguay Round implementing legislation authorized DEIP through the year 2001.
The 1996 FAIR Act extended DEIP authority to FY2002, and FSRIA reauthorizes DEIP
through 2007.

While many oppose subsidizing dairy products for reasons similar to those held by EEP
opponents, the program has strong support in Congress. Dairy producers consider DEIP an
integral part of U.S. dairy policy, an important adjunct to domestic support programs. That
is perhaps why DEIP is reauthorized as part of Title I commodity programs of the FSRIA,
not the trade title.
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Market Promotion
USDA operates two market promotion programs, the Market Access Program (MAP),
formerly the Market Promotion Program (MPP) which in its turn had succeeded the Targeted
Export Assistance Program (TEA), and the Foreign Market Development Program (FMDP)
also know as the “Cooperator” program.
Market Access Program (MAP). TEA, authorized in 1985, was intended to
compensate U.S. exporters for markets lost to unfair foreign competition. MPP/MAP is
broader: its aim is to help develop foreign markets for U.S. exports.
MAP assists primarily value-added products. The types of activities that are undertaken
through MAP are advertising and other consumer promotions, market research, technical
assistance, and trade servicing. Nonprofit industry organizations and private firms that are
not represented by an industry group submit proposals for marketing activities to the USDA.
The nonprofit organizations may undertake the activities themselves or award funds to
member companies that perform the activities. After the project is completed, FAS
reimburses the industry organization or private company for part of the project cost. About
60% of MAP funds typically support generic promotion (i.e., non-brand name commodities
or products), and about 40% support brand-name promotion (i.e., a specific company
product).
The FSRIA authorizes MAP through 2007. The funding level for the program
(previously capped at $90 million annually) gradually increases to $200 million by FY2006.
The 2007 farm bill continues restrictions on the recipients of MAP assistance. No foreign
for-profit company may receive MAP funds for the promotion of a foreign-made product.
No firm that is not classified as a small business by the Small Business Administration may
receive direct MAP assistance for branded promotions. Starting in FY1998, USDA’s policy
has been to allocate all MAP funds for promotion of branded products to cooperatives and
small U.S. companies.
Foreign Market Development Program (Cooperator Program). The FSRIA
reauthorizes this program with annual funding of $34.5 million. This program, which began
in 1955, is like MAP in most major respects. The purpose of the program is to expand
export opportunities over the long term by undertaking activities such as consumer
promotions, technical assistance, trade servicing and market research. Like MAP, projects
under the Cooperator Program are jointly funded by the government and industry groups, and
the government reimburses the industry organization for its part of the cost after the project
is finished. Like MAP, the Cooperator Program is exempt from Uruguay Round Agreement
reduction commitments. Unlike MAP, which is more oriented toward consumer goods and
brand-name products, the Cooperator Program is oriented more toward bulk commodities.
Some of the same issues raised with respect to MAP are also raised about the
Cooperator Program and in some cases all the export programs. The basic issue is whether
the federal government should have an active role in helping agricultural producers market
their products overseas. Some argue that the principal beneficiaries are foreign consumers
and that funds could be better spent, for example, to educate U.S. firms on how to export.
Program supporters emphasize that foreign competitors, especially EU member countries,
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spend money on market promotion, and that U.S. marketing programs help keep U.S.
products competitive in third-country markets.
Export Credit Guarantees
The FSRIA reauthorizes USDA-operated export credit guarantee programs, first
established in the Agricultural Trade Act of 1978, to facilitate sales of U.S. agricultural
exports. Under these programs, private U.S. financial institutions extend financing at interest
rates which are at prevailing market levels to countries that want to purchase U.S.
agricultural exports and are guaranteed that the loans will be repaid. In making available a
guarantee for such loans, the U.S. government, or more specifically, the CCC, assumes the
risk of default on payments by the foreign purchasers on loans for U.S. farm exports.
Export Credit Guarantee Programs (GSM-102 and GSM-103). GSM-102
guarantees repayment of short-term financing (6 months to 3 years) extended to eligible
countries that purchase U.S. farm products. GSM-103 guarantees repayment of
intermediate-term financing (up to 10 years) to eligible countries that purchase U.S. farm
products. Eligible countries are those that USDA determines can service the debt backed by
guarantees (the “creditworthiness” test). Use of guarantees for foreign aid, foreign policy,
or debt rescheduling purposes is prohibited.
The 2002 farm bill authorizes export credit guarantees of $5.5 billion worth of
agricultural exports annually through FY2007, while giving CCC flexibility to determine the
allocation between short and intermediate term programs. The actual level of guarantees
depends on market conditions and the demand for financing by eligible (i.e., creditworthy)
countries. A provision in the statute allows guarantees to be used when the bank issuing the
underlying letter of credit is located in a country other than the importing country. The new
farm bill continues the provision that minimum amounts of credit guarantees would be made
available for processed and high-value products through 2007. The farm bill permits credit
guarantees for high-value products with at least 90% U.S. content by weight, allowing for
some components of foreign origin. The legislation provides for an additional $1 billion
through 2007 in export credit guarantees targeted to “emerging markets,” countries that are
in the process of becoming commercial markets for U.S. agricultural products.
The General Sales Manager in FAS administers GSM-102 and -103. U.S. financial
institutions providing loans to countries for the purchase of U.S. agricultural commodities
can obtain, for a fee, guarantees from the CCC. If a foreign borrower defaults on the loan,
the U.S. financial institution files a claim with the CCC for reimbursement, and the CCC
assumes the debt. If a country subsequently falls in arrears to the CCC, its debts may
ultimately be subject to rescheduling.
Historically, the biggest recipients of export credit guarantees have been Mexico, South
Korea, Iraq, Algeria, and the former Soviet Union (FSU). Iraq, for foreign policy reasons,
no longer participates in the program, and is in default of more than $3 billion of previously
extended guarantees. Republics of the FSU, because they are less important as commercial
markets for U.S. agricultural exports, are no longer major beneficiaries. In FY2002, the
major recipients were Mexico ($595.3 million), Turkey ($395.4 million), South Korea
($379.7), China/Hong Kong ($189.5), and Algeria ($89.1 million). Guarantees have helped
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facilitate sales of a broad range of commodities, but have mainly benefitted exports of wheat,
wheat flour, oilseeds, feed grains, and cotton.
The CCC can guarantee credits under GSM-102 for two other programs: “supplier
credit guarantees” and “facilities financing guarantees.” Under the former, the CCC will
guarantee payment by foreign buyers of U.S. commodities and products which are sold by
U.S. suppliers on a deferred payment basis. Under this variation of short-term credit
guarantee, the foreign buyer alone will bear ultimate responsibility for repayment of the
credit. The duration of the credit is short, generally up to 180 days, although the FSRIA
permits guarantees of up to 360 days. These credits are expected to be particularly useful in
facilitating sales of high-value products, the fastest growing components of U.S. agricultural
exports.
The “facilities financing guarantee” is also carried out under the GSM-102 program.
In this activity, the CCC will provide guarantees to facilitate the financing of goods and
services exported from the United States to improve or establish agriculture-related facilities
in emerging markets. Eligible projects must improve the handling, marketing, storage, or
distribution of imported U.S. agricultural commodities and products.
The major issue concerning export credit programs is to what extent and how they
might be treated in WTO agriculture negotiations. This issue is discussed below.

Foreign Food Aid
USDA provides food aid abroad through three channels: the P.L. 480 program, also
known as Food for Peace; Section 416(b) of the Agricultural Act of 1949; and the Food for
Progress Program. All these programs are authorized in the 2002 FSRIA, except Section
416(b) which is permanently authorized in the Agricultural Act of 1949. The FSRIA also
authorizes the Bill Emerson Humanitarian Trust, which is primarily a commodity reserve,
that can be used, under certain circumstances, to provide P.L. 480 food aid. The 2002 farm
bill also establishes a new food aid program, the McGovern-Dole International School
Feeding and Child Nutrition Program, which replaces a pilot activity, the Global Food for
Education Initiative established in 2000 by the Clinton Administration.
P.L. 480 Food for Peace. P.L. 480, the Agricultural Trade Development and
Assistance Act of 1954, has three food aid titles. Title I, Trade and Development Assistance,
provides for long-term, low interest loans to developing countries for their purchase of U.S.
agricultural commodities. Title II, Emergency and Private Assistance Programs, provides
for the donation of U.S. agricultural commodities to meet emergency and non-emergency
food needs. Title III, Food for Development, provides government-to-government grants to
support long-term growth in the least developed countries. Title I of P.L. 480 is administered
by USDA; Titles II and III are administered by the Agency for International Development
(AID).
Private entities in addition to governments in developing countries are eligible to enter
into Title I sales agreements. A 5-year grace period may be granted before a recipient must
begin repaying the principal on the credit extended under a Title I agreement. The Secretary
could still allow up to 30 years for repayment, but could require repayment in fewer than 10
years if the recipient has the ability to repay in a shorter time. Priority for Title I agreements
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is accorded to developing countries with demonstrated potential to become commercial
markets for U.S. agricultural commodities.
The P.L. 480 legislation allows private voluntary organizations (PVOs) and
cooperatives to carry out Title II non-emergency programs in countries where USAID does
not maintain a mission. FSRIA authorized funding to pay project or administrative and
other costs of PVOs and coops at 5% to 10% of annual Title II funding. Previously, from
$10 million to $28 million was available for these kinds of costs. Intergovernmental
organizations, such as the World Food Program, also are eligible to apply for such funds.
A minimum of 15% of non-emergency Title II commodities can be monetized (i.e., sold for
local currencies). Monetization enables PVOs and coops to defray the costs of distributing
food or implementing development projects in countries where they operate. Local
currencies from Title II commodity sales (monetization) can be used in a country different
from the one in which the commodities were sold, if the country is in the same geographic
region. FSRIA stipulates that the annual minimum tonnage level provided as Title II
commodity donations shall be 2.5 million metric tons, of which 1.875 mmt (75%) is to be
channeled through such eligible organizations as private voluntary organizations,
cooperatives, and the World Food Program.
Section 416(b). This program, authorized in permanent law and administered by
USDA, provides for the donation overseas of surplus agricultural commodities owned by
the CCC. This component of food aid is the most variable because it is entirely dependent
on the availability of surplus commodities in CCC inventories. Section 416(b) donations
may not reduce the amounts of commodities that traditionally are donated to domestic
feeding programs or agencies, prevent the fulfillment of any agreement entered into under
a payment-in-kind program, or disrupt normal commercial sales.
Food for Progress (FFP). FFP, first authorized by the Food for Progress Act of
1985 and also administered by USDA, provides commodities to support countries that have
made commitments to expand free enterprise in their agricultural economies. Commodities
may be provided under the authority of P.L. 480 or Section 416(b). The CCC may also
purchase commodities for use in FFP programs if the commodities are currently not held in
CCC stocks. Organizations eligible to carry out FFP programs include PVOs, cooperatives,
and intergovernmental organizations such as the WFP.
The Bill Emerson Humanitarian Trust. The FSRIA reauthorizes the Emerson
Trust enacted in the 1998 Africa Seeds of Hope Act (P.L. 105-385). The trust is primarily
a reserve of 4 million metric tons of wheat, corn, sorghum and rice that can be used to help
fulfill P.L. 480 food aid commitments to developing countries under two conditions: (1) to
meet unanticipated emergency needs in developing countries, or (2) when U.S. domestic
supplies are short. The trust, as presently constituted, replaced the Food Security Commodity
Reserve established in the 1996 farm bill and its predecessor, the Food Security Wheat
Reserve of 1980. The trust, which the Administration recently tapped to meet urgent food
aid needs in southern African countries, was used six times between 1980 and 1996–three
times for urgent humanitarian relief and three times when domestic supplies were limited.
With the release of 575,000 metric tons of wheat from the trust to meet unanticipated food
needs in southern Africa, around 1.5 million metric tons remain in the trust.
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McGovern-Dole International Food for Education and Child Nutrition
Program. The FSRIA authorizes this new food aid program, which can use commodities
and financial and technical assistance to carry out preschool and school food for education
programs and maternal, infant and child nutrition programs in foreign countries. Private
voluntary organizations, cooperatives, and the World Food Program and foreign governments
are all eligible organizations for carrying out these activities . FSRIA mandates CCC funding
of $100 million for the program in FY2003 and authorizes appropriations of “such sums as
necessary” from FY2004-2007. McGovern-Dole replaces the pilot Global Food for
Education Initiative discussed below. By decision of the President, as mandated by the 2002
farm bill, USDA, rather than USAID, administers this program.
Recent Program Activity
Export Subsidies. Although almost always under some pressure from interested
commodity groups to use EEP more extensively, USDA has limited its scope and funding
since 1995. The rationale for not using EEP is based on the argument that using it in the
current international economic environment might depress wheat and other commodity prices
now on the increase from lows reached in the late 1990s. Some analysts say that not using
EEP also strengthens the U.S. hand in on-going WTO agriculture negotiations where a major
U.S. aim is the elimination of agricultural export subsidies.
In FY1995, the last year of significant program activity, EEP bonuses were valued at
$339 million. In FY1996, $5 million in EEP bonuses were awarded and none were awarded
in FY1997. In FY1998, EEP bonuses amounted to just $2 million. Expenditures for EEP
sales in FY1999 totaled $1 million. EEP bonuses of $2 million were awarded in FY2000.
For FY2001, $7 million of EEP bonuses were awarded. No EEP bonuses were awarded in
FY2002.
Recent levels of DEIP reflect limits imposed by Uruguay Round Agreement
commitments, an end to the “roll-over” authority in the Agricultural Agreement, which
allowed countries to draw on unused subsidy authority from previous years, and improved
world market conditions for skim milk powder. The program level for DEIP in FY2000 was
$78 million and in FY2001 was $8 million. In FY2002, DEIP bonuses were $55 million.
Market Development. MAP, like EEP, is not funded by annual appropriations, but
appropriations bills have on occasion capped the amounts that could be spent on the
program. For example, the FY1999 agricultural appropriations legislation imposed no limits
on MAP funding, but did prohibit MAP spending in support of promotion of exports of mink
pelts or garments, a provision that was first adopted in the FY1996 agriculture appropriations
bill. Since 1993, no MAP funds may be used to promote tobacco exports. Some Members
of Congress targeted MAP for cuts in FY2000 to help offset increased expenditures on other
programs, but such amendments were defeated. MAP was unsuccessfully targeted by budget
cutters in FY2001 as well. USDA’s allocation of $100 million for MAP funding in FY2002
is the full amount authorized in the 1996 farm bill plus $10 million authorized by the 2002
farm bill. A proposed amendment to eliminate completely MAP funding in FY2002 was
defeated during floor consideration of H.R. 2330, the House-passed version of FY2002
agriculture appropriations.
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Prior to FY2000, FMDP was funded as part of the appropriation of the Foreign
Agricultural Service. The 1996 farm bill provided new statutory authority for the Program
and authorized it through 2002. In FY2000, USDA moved funding for FMDP from
discretionary to CCC funding, thus shifting its funding into the mandatory category. Funds
allocated for FMDP in FY2001 were $28 million and USDA has allocated $34 million for
the program in FY2002.
Export Credit Guarantees. For FY2001 export credit guarantees financed an
estimated $3.2 billion of U.S. agricultural exports. FY2002 guarantees were estimated to be
$3.4 billion.
Food Aid. P.L. 480 food aid averaged around $1.2 billion from 1995 to 1998. In
FY1999, however, more than $1.8 billion in P.L. 480 food aid was provided. Although only
around $1.1 billion was appropriated for P.L. 480 in FY1999, the final total included
approximately $700 million of Title I food aid for Russia, which was financed by a transfer
of funds from the CCC. The FY2000 program level for P.L. 480 was $1.3 billion, while
FY2001 P.L. 480 spending was $1.086 billion. The FY2002 program level for P.L. 480 was
$1.270 billion, including Emerson Trust releases valued at $175 million.
Section 416(b) was used to donate CCC purchases of around 5.3 million metric tons
of wheat and wheat flour in the President’s Food Aid Initiative in FY1999. Approximately
30 countries designated as having food problems received Section 416 commodities. The
FY2000 CCC purchase of 3 million metric tons of wheat were also donated under Section
416(b). Allocations of Section 416(b) commodity donations in FY2001 were an estimated
2.6 million metric tons and in FY2002 were estimated to be 1.6 million metric tons.
Around $300 million of Section 416(b) commodities and CCC funding were used to
launch a global food for education initiative (GFEI) in July 2000. Under the GFEI, USDA
donated agricultural commodities for use in school feeding and pre-school nutrition projects
in developing countries. USDA-approved projects were implemented by the UN World
Food Program (WFP), private voluntary organizations, and eligible foreign governments.
The GFEI was superceded by the McGovern-Dole International School Feeding and Child
Nutrition Program authorized in the 2002 farm bill.
Emerson Trust. The Secretary of Agriculture announced releases from the Trust of
275,000 tons of wheat on June 10, 2002 and 300,000 tons of wheat on August 28, 2002.
The wheat from the reserve was exchanged for an equal value of corn, beans and vegetable
oil for use in humanitarian relief in southern Africa. There, an estimated 14.4 million people
will need emergency food aid to compensate for severe food shortages and stave off famine
through much of 2003. Private voluntary organizations and cooperatives that implement
food aid programs in developing countries, while welcoming use of the trust to alleviate
hunger in Africa, have expressed concerns that the trust be reimbursed in a way that does not
use P.L. 480 funds as required in current law.
FY2003 Appropriations for International Activities
The FY2003 omnibus appropriations measure (P.L. 108-7, H.J.Res. 2) authorizes
appropriations of $1.477 billion for P.L. 480 food aid and the Foreign Agricultural Service.
Taking into account estimated spending for CCC-funded or guaranteed activities (some
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additional food aid programs, market development, export subsidies, export credit
guarantees) results in a program level of about $6.4 billion for all USDA international
activities for FY2003. The program level for USDA’s international activities was an
estimated $5.9 billion in FY2002. The program level reflects not only increased
appropriations for food aid during FY2003, but also Congress’s rejection in the 2002 farm
bill of many of the food aid reforms proposed by the Administration in its FY2003 budget
proposals.
FAS Salaries and Expenses. For salaries and expenses of FAS, the omnibus
appropriations measure provides $129.9 million, which is $8.1 million above the FY2003
enacted amount and about $1.5 million less than requested by the President.
Foreign Food Aid: Funding and Issues. The FY2003 omnibus appropriations
measure contains an appropriation of $1.477 billion for USDA’s international activities that
are subject to annual appropriations (P.L. 480 food aid, salaries and expenses of the Foreign
Agricultural Service, and administrative expenses for managing export credit guarantee
programs). P.L. 480 food aid accounts for $1.343 billion (more than 90%) of the
appropriation for discretionary programs. Included in the P.L. 480 authorization is $1.2
billion for humanitarian commodity donations under P.L. 480 Title II. In addition, the
omnibus measure includes an appropriation of $250 million for emergency relief activities
under P.L. 480, which will remain available through FY2004. Not counting the additional
$250 million (which can be spend over two fiscal years), the total for appropriated
international programs is $344 million greater than enacted for FY2002 with most of the
increase going to humanitarian food donations.
The increase in food aid appropriations in the omnibus measure is in response both to
large estimated global food needs and to the Administration’s decision to phase out food aid
based on commodity surpluses or CCC funding. Proposed reductions in Section 416(b)
(which uses surplus commodities and CCC funds) are based on the Administration’s review
of food aid that also recommended (in the FY2003 budget proposal) that all programs now
run through private voluntary organizations (PVOs), cooperatives, and the World Food
Program be placed in USAID, with USDA food aid activities confined to government-to-
government programs. Consistent with this approach, the Administration requested in the
FY2003 budget proposal an increase in P.L. 480 Title II commodity donations to compensate
partially for the phase-out of Section 416(b) commodity donations.
Initial Administration budget proposals also excluded any CCC funding in FY2003 for
Food for Progress (FFP) which provides U.S. commodities to developing countries and
emerging democracies. CCC funding of this program has averaged around $100 million
annually in recent years. Under the President’s proposals, any FFP activity would have been
limited to government-to-government programs financed with money appropriated for P.L.
480 Title I. However, reauthorization of the FFP program in the 2002 farm bill (P.L. 107-
171), with continued reliance on CCC funding, complicated the efforts of the Administration
to phase out CCC-funded food aid programs. P.L. 108-7 goes further and amends the FFP
statute by requiring a minimum volume of 400,000 metric tons of commodities (which
effectively entails CCC funding) and by requiring the President to enter into FFP agreements
not only with foreign governments, but also with PVOs, coops, and intergovernmental
organizations. In consequence, the President’s FY2003 estimates for international programs
now include $158 of CCC funding for FFP.
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Consistent with its phase-out of Section 416(b), the President’s budget assumes that
$118 million will be available for programming under Section 416(b) in FY2003. That
would consist of surplus nonfat dry milk held in CCC inventories. In contrast, $175 million
of commodity assistance and transport/distribution costs under Section 416(b) were funded
in FY 2002 and $948 million in FY2001.

By far the largest component of FY2003 program level is accounted for by an estimated
$4.225 billion of U.S. agricultural exports that would be financed with CCC export credit
guarantees. As noted, the actual export value of credit guarantees made available in FY2003
will depend ultimately on market conditions and demands for credit. Historically, the value
of such guarantees has rarely reached (or exceeded) the levels anticipated in budget requests.
For the Market Access Program (MAP), the Administration assumes spending of $110
million and for the Foreign Market Development ( or “Cooperator”) Program (FMDP), $34
million. These amounts are authorized in the 2002 farm bill (P.L. 107-171).
For one CCC-funded direct export subsidy program, the Export Enhancement Program
(EEP), the conference report limits CCC spending to $28 million. For its reduction from
the level authorized in the farm bill ($478 million), the conference report for P.L. 107-171
scores savings of $450 million. In the past, the Congressional Budget Office (CBO) has
scored no savings for proposed cuts to EEP funding since actual spending in the program has
been negligible (e.g., $1 million in FY2001, $0 in FY2002). However, the conference report
estimate of savings is based on the Office of Management and Budget’s (OMB) scoring
method (rather than CBO’s) which allows dollar-for-dollar savings for cuts from the
authorized EEP level. For the other export subsidy program, the Dairy Export Incentive
Program (DEIP), the President’s budget anticipates that $57 million would be provided, an
estimate that reflects the maximum permitted under international trade agreements.
For the new food aid program established in the farm bill, the McGovern-Dole
International Food for Education and Child Nutrition Program, the budget assumed that the
farm bill-mandated $100 million of CCC-funding would be made available for FY2003. In
subsequent fiscal years (FY2004-FY2007), the appropriations of “such sums as necessary”
is authorized in the farm bill.
FY2004 Budget Proposals for International Activities
For FY2004, the President’s budget request estimates that agricultural export and food
aid programs would have a program value $6.2 billion. Of that amount, approximately $1.4
billion (for P.L. 480 and FAS) would require authorization of budget authority in an
appropriations act. The FY2004 program level is about $200 million less than estimated for
FY2003.
For P.L. 480, the President’s budget estimates a program level of $1.345 billion. Most
of that, an estimated $1.185 billion requested for P.L. 480 Title II, is the same as requested
in FY2003, and would go to meet humanitarian needs for development and relief in food
deficit countries. However, the President’s budget request for Title II is less than
appropriated in FY2003, $1.2 billion, plus an additional $250 million for emergency relief
to remain available through FY2004. Credit sales under P.L. 480 Title I would be $160
million. The 2002 farm bill authorized $100 million of CCC funding for the McGovern-Dole
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school feeding program in FY2003. Beginning in FY2004, however, the program will be
funded by appropriations and the President requested $50 million for McGovern-Dole in
FY2004.
FFP is financed principally by P.L. 480 Title I or CCC funds and the President’s budget
envisions $151 million of CCC funding for FFP. That program level is expected to provide
the minimum 400,000 tons of commodities in FFP required by the 2002 farm bill.
In FY2002, $175 million of commodity donations were provided via the Emerson Trust
to meet unanticipated food aid needs in southern Africa. None have yet been provided in
FY2003. Around 1.5 million metric tons of wheat remain in the trust, but the Administration
makes no estimates about its use in FY2004. For Section 416(b), which the Administration
said it will phase out, the President’s budget assumes that $118 million of nonfat dry milk
will be made available in FY2004.
The President’s budget assumes a program level of $28 million in both FYs 2003 and
2004 for EEP. The 2002 farm bill, however, allows EEP spending of $478 million, which
is the maximum allowed under the World Trade Organization/Uruguay Round agreement on
subsidy reduction commitments. Although EEP is capped at $28 million in FY2003 by P.L.
108-7, unless Congress decides otherwise, USDA retains some flexibility to increase the
level of EEP subsidies in FY2004. For DEIP, the budget expects a program level of $57
million for FY2004, an increase above the $36 million estimated for FY2003.
The budget request assumes that the CCC will guarantee commercial financing of $4.2
billion of U.S. agricultural exports in FY2004. The anticipated level for each credit program
is: GSM-102 ($3.4 billion); GSM-103 ($18 million); supplier credit guarantees ($750
million); and facility financing guarantees ($44 million).
Consistent with the farm bill reauthorization of MAP, the budget provides for MAP
funding of $125 million in FY2004. The budget assumes the farm bill-authorized level of
$34.5 million for FMDP in FY2004. The budget provides $2.5 million for a Quality
Samples Program and $2 million for a new Technical Assistance for Specialty Crops
Program to address phytosanitary and related technical trade barriers.
The budget requests $145 million in budget authority for FAS. With USAID
reimbursements for technical assistance in developing countries from USAID, FAS’s total
estimated program level rises to $217 million for FY2004.
Trade Negotiations
Agricultural export and food aid programs could be affected by on-going WTO
agricultural trade negotiations. The United States has proposed that agricultural export
subsidies be eliminated, while the European Union, which opposes complete elimination of
such subsidies, has conditioned its willingness to negotiate reductions in export subsidies on
the inclusion of export credit programs (such as the CCC export credit guarantees) and food
aid (such as Section 416) on the WTO agriculture negotiating agenda.
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The EU and other trading partners charge that the U.S. credit program has a subsidy
element (although it is much less than the subsidy represented by the EU’s export restitution
program) and gives the U.S. an unfair competitive advantage in exporting certain agricultural
commodities. Negotiations on export credit programs were carried out in the Organization
for Economic Cooperation and Development (OECD), but did not succeed and have been
suspended. Any changes in the U.S. program that might result from WTO trade negotiations
would have to withstand scrutiny by Congress, where House and Senate Agriculture
Committees strongly support the programs as they are presently constituted.
The EU and other U.S. trading partners, such as Australia, Brazil, and a number of
agricultural exporting developing countries, also have raised the issue of large U.S. food aid
shipments in on-going WTO agriculture negotiations. They have suggested that the United
States is using food aid to get around its export subsidy reduction commitments made in the
1994 Uruguay Round Agriculture Agreement. The United States has countered that its food
aid shipments, though large, are made in conformity with WTO rules, and are being made
available to countries with food needs or used for development programs. Food aid is also
an issue for some food-importing developing countries who feel that the United States and
other developed countries have not adequately addressed their commitment made in the
Uruguay Round negotiations to meet long-term needs for food aid, for financing food
imports, and for technical assistance to improve food production. Relatedly, the United
States has argued that export credit programs also meet food security needs of some
importing countries.
Many in the U.S. agricultural community have expressed concerns that what they regard
as an effective tool for expanding agricultural exports, the CCC export credit guarantee
programs, not be adversely affected by trade negotiations. The Trade Act of 2002, which
contains negotiating objectives for U.S. participation in the current round of multilateral
trade negotiations in the WTO (P.L. 107-210), makes preservation of export credit programs
(and food aid) a principal negotiating objective. This objective calls for eliminating
agricultural export subsidies, but maintaining bona fide food assistance programs, and
preserving U.S. market development and export credit programs. Nevertheless, in WTO
agriculture negotiations, U.S. officials have indicated a willingness to discuss disciplines on
export credit programs. (For more information, see Agricultural Export Subsidies, Export
Credits, and the World Trade Organization, CRS Report RS20858.)
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