Order Code RL33553
CRS Report for Congress
Received through the CRS Web
Agricultural Export and Food Aid Programs
July 18, 2006
Charles E. Hanrahan
Senior Specialist in Agricultural Policy
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress

Agricultural Export and Food Aid Programs
Summary
The U.S. Department of Agriculture (USDA) operates four kinds of
international programs to promote agricultural exports or provide food aid, all
authorized in the 2002 farm bill, the Farm Security and Rural Investment Act
(FSRIA, P.L. 107-171), or in permanent legislation. These programs include direct
export subsidies, export market development, export credit guarantees, and foreign
food aid. Legislative authority for most of these programs expires in 2007. Export
subsidies, but not other U.S. export and food aid programs, are subject to reduction
commitments agreed to in multilateral trade negotiations.
USDA’s direct subsidies include the Export Enhancement Program (EEP) and
the Dairy Export Incentive Program (DEIP). EEP spending has been negligible since
1996, and DEIP spending has been declining since 2002. Market development
programs include the Market Access Program (MAP) and the Foreign Market
Development or “Cooperator” Program (FMDP). Considered to be non-trade
distorting by the World Trade Organization, these programs are exempt from
spending constraints agreed to in trade agreements. The FSRIA authorizes MAP
spending of $200 million annually by FY2006 and sets FMDP spending at $34.5
million annually. The FSRIA authorizes export credit guarantees by USDA’s
Commodity Credit Corporation (CCC) of up to $5.5 billion worth of farm exports
annually plus an additional $1 billion for emerging markets through 2007. Actual
levels guaranteed depend on economic conditions and the demand for financing by
eligible countries.
The FSRIA also authorizes through FY2007 foreign food aid programs
including P.L. 480 Food for Peace, Food for Progress, the Emerson Trust (a reserve
of commodities and cash), and a new international school feeding program. Section
416(b), permanently authorized in the Agricultural Act of 1949, can provide surplus
commodities for donation overseas. Global food emergencies are putting pressure
on the ability of food aid providers, including the United States, to meet estimated
needs and reducing food aid available for development projects.
Current fiscal year funding for USDA’s international activities is estimated at
$5.2 billion. The President’s FY2007 budget proposal estimates spending for
USDA’s international activities of $5.3 billion in FY2007.

Agricultural export subsidies, export credits, and food aid programs could be
affected by the outcomes of on-going multilateral trade negotiations in the Doha
Round. These programs will also be debated as Congress considers legislation to
replace the 2002 farm bill which expires in 2007.
This report, which will be updated, replaces CRS Issue Brief IB98006,
Agricultural Export and Food Aid Programs, by Charles E. Hanrahan.

Contents
Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
U.S. Agricultural Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Agricultural Export and Food Aid Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Export Subsidies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Export Enhancement Program (EEP) . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Dairy Export Incentive Program (DEIP) . . . . . . . . . . . . . . . . . . . . . . . . 5
Market Development Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Market Access Program (MAP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Foreign Market Development Program (FMDP) . . . . . . . . . . . . . . . . . . 7
Emerging Markets Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Quality Samples Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Technical Assistance for Specialty Crops (TASC) Program . . . . . . . . . 8
Export Credit Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Export Credit Guarantee Programs (GSM-102 and GSM-103) . . . . . . . 8
Supplier Credit Guarantee Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Facilities Guarantee Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Recent Export Credit Guarantee Activity . . . . . . . . . . . . . . . . . . . . . . 10
Foreign Food Aid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
P.L. 480 Food for Peace . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 416(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Food for Progress (FFP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
McGovern-Dole International Food for Education and
Child Nutrition Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
The Bill Emerson Humanitarian Trust (BEHT) . . . . . . . . . . . . . . . . . . 12
Recent Food Aid Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
FY2006 Appropriations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Foreign Agricultural Service (FAS) . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Foreign Food Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Export Credit Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Export Promotion and Export Subsidies . . . . . . . . . . . . . . . . . . . . . . . 15
FY2006 Emergency Supplemental Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Status of FY2007 Appropriations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Export Credit Guarantees and the WTO Cotton Case . . . . . . . . . . . . . . . . . . . . . 17
Trade Negotiations and USDA International Programs . . . . . . . . . . . . . . . . . . . . 18
List of Tables
USDA International Program Activity, FY1997-FY2004 . . . . . . . . . . . . . . . . . . . 3

Agricultural Export and Food Aid Programs
Recent Developments
On June 22, 2006, the Senate Appropriations Committee reported the FY2007
agriculture appropriations bill (H.R. 5384, S.Rept. 109-266). The full House passed
its version on May 23, 2006. Title V of the annual agriculture appropriations law
includes discretionary funding for USDA’s international activities, which include
primarily foreign food aid and the salaries and expenses of the Foreign Agricultural
Service. Both bills provide about $1.5 billion in discretionary appropriations for
USDA’s international programs. Additional funds are available for food aid and
export-related activities through the borrowing authority of the Commodity Credit
Corporation (CCC).
The FY2006 Emergency Supplemental Appropriations Act (H.R. 4939, P.L.
109-234), signed into law on June 15, 2006, contains $350 million for humanitarian
food aid under Title II of P.L. 480 for Sudan and other African regions.

The World Trade Organization (WTO) meeting in Hong Kong, China, on
December 13-18, 2005, reached agreement on eliminating agricultural export
subsidies by the end of 2013, contingent upon eliminating other forms of subsidized
export competition, including subsidized export credit guarantees and food aid that
displaces commercial sales.
U.S. Agricultural Exports
Agricultural exports are important both to farmers and to the U.S. economy.
Production from almost a third of harvested acreage is exported, including an
estimated 49% of food grain production, almost 16% of feed grains, and more than
35% of U.S. oilseeds. Exports also generate economic activity in the non-farm
economy. According to USDA, in 2004, each $1 received from agricultural exports
stimulated another $1.48 in supporting activities to produce those exports.
Agricultural exports generated an estimated 825,000 full-time civilian jobs, including
437,000 jobs in the non-farm sector in 2001.1

Nearly every state exports agricultural commodities. In 2005, the states with the
greatest shares of U.S. agricultural exports by value were California, Iowa, Texas,
Illinois, Minnesota, Nebraska, Kansas, Washington, North Dakota, and Indiana.
These 10 states accounted for 58% of total U.S. agricultural exports. In addition,
1 Data and analysis on the role of agricultural exports in the U.S. economy is available from
USDA’s Economic Research Service at [http://usda.mannlib.cornell.edu/reports/erssor/
trade/fau-bb/text/2006/fau109.pdf].

CRS-2
Arkansas, Florida, Kentucky, Missouri, North Carolina, Ohio, Pennsylvania and
Wisconsin each shipped over $1 billion worth of commodities.2
U.S. agricultural exports for FY2006 are forecast by USDA to be a record high
$67 billion, while imports will reach $65 billion, also a record. Thus, if this forecast
holds, the U.S. agricultural trade balance would be $2 billion.3
Since FY1991, high value exports (intermediate products such as wheat flour,
feedstuffs, and vegetable oils or consumer-ready products such as fruits, nuts, meats,
and processed foods) have outpaced such bulk commodity exports as grains, oilseeds,
and cotton. In FY2005, high value agricultural exports accounted for 62% of the
value of total agricultural exports.4
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 Farm Security and Rural Investment Act (FSRIA)
(Title III of P.L. 107-171) authorizes and amends four kinds of export and food aid
programs:
! Direct export subsidies;
! Export market development 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).
Some of USDA’s international activities (P.L. 480 food aid, the Food for
Education program, and the operations of the Foreign Agricultural Service) are
funded by annual appropriations. Other programs (export subsidies, export market
development programs, export credit guarantees, and some foreign food aid
2 Agricultural export data by state is available from USDA’s Economic Research Service
at [http://www.ers.usda.gov/data/stateexports/].
3 Estimates of U.S. agricultural exports, imports and trade balance are reported in USDA,
Economic Research Service, Outlook for U.S. Agricultural Trade, published quarterly,
visited at [http://usda.mannlib.cornell.edu/reports/erssor/trade/aes-bb/2006/aes50.pdf].
4 Percentage of high value agricultural exports estimated from data provided in USDA’s
Foreign Agricultural Service data base available at [http://www.fas.usda.gov/scriptsw/
bico/bico_frm.asp]

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programs) are funded through the borrowing authority of the Commodity Credit
Corporation (CCC). The CCC is a U.S. Government-owned and operated
corporation, created in 1933, with broad powers to support farm income and prices
and to assist in the export of U.S. agricultural products. Toward this end, the CCC
finances USDA’s domestic price and income support programs and its export
programs using its permanent authority to borrow up to $30 billion at any one time
from the U.S. Treasury.
USDA International Program Activity, FY1997-FY2004
($ millions)
Program 1997
1998
1999
2000
2001
2002
2003
2004
2005
2006*
EEPa
0
2
1
2
7
0
0
0
0
28
DEIPb
121
110
145
78
8
55
32
3
0
2
MAPc
90
90
90
90
90
100
110
125
140
200
FMDPd


28
28
28
34
34
34
34
34
GSM
Programse 2,876 4,037
3,045
3,082
3,227
3,388
3,223
3,716
2,625
3,107
P.L. 480f
1,054 1,138
1,808
1,293
1,086
1,270
1,960
1,809
2,115
1,408
FFEg






100
50
90
103
Section
416(b)h
0
0
1,297
1,130
1,103
773
213
173
76
0
FFPi
91
111
101
108
104
126
137
138
122
158
FASj
191
209
178
183
201
198
195
197
206
217
Total
4,423 5,697
6,693
6,000
5,854
5,944
6,004
6,245
5,408
5,257
Sources: USDA, Annual Budget Summaries, various issues. These data are program levels (i.e., the
value of goods and services provided in a fiscal year). They include for the discretionary programs
(P.L. 480, Food for Education, and the Foreign Agricultural Service), in addition to regular, annually
appropriated funds, emergency supplemental appropriations, carry-over from one fiscal year to
another, transfers from other USDA agencies, transfers between programs, and reimbursements from
other agencies.
* Estimated
a. Export Enhancement Program.
b. Dairy Export Incentive Program.
c. Market Access Program.
d. Foreign Market Development Program. FY1995-FY1998 FMDP spending included in FAS
appropriation.
e. GSM (General Sales Manager) Export Credit Guarantee Programs.
f. The FY2003 estimate for P.L. 480 includes $1.326 billion for regular FY2003 appropriations; $248
million for Title II emergency assistance (after applying the across-the-board recision of 0.65%);
and $369 million in the Emergency Wartime Supplemental Appropriations Act of 2003; FY2005
P.L. 480 includes $377 million from the Emerson Trust.
g. The McGovern-Dole International Food for Education and Child Nutrition Program (FFE)was
authorized in the 2002 farm bill FY2003 funds were from the Commodity Credit Corporation;
funds were first appropriated in P.L. 108-199, the FY2004 appropriations bill.
h. Commodity value and ocean freight and transportation.
i. Includes only CCC purchases of commodities for FFP. P.L. 480 Title I funds allocated to FFP are
included in P.L. 480.
j. Foreign Agricultural Service.

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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).5 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, at its
inception, 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. 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 of all EEP bonuses which now exceed $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
six 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 was reauthorized most
recently in the FSRIA of 2002.
5 Additional information on the Export Enhancement Program is available at [http://www.
fas.usda.gov/info/factsheets/eep.asp]

CRS-5
EEP has been controversial since its initiation 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 grains.6
Recent EEP Activity. Although almost always under some pressure from
interested commodity groups to use EEP more extensively, USDA has limited its
scope and funding since 1995. USDA’s rationale for not using EEP is based on the
argument that using it might depress world market prices for eligible commodities.
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. From FY1996 to FY2005, a total of only $17 million of EEP
bonuses were awarded.
Dairy Export Incentive Program (DEIP).7 DEIP, most recently
reauthorized in the commodity program title, not the trade title, of the 2002 farm bill,
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.

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.
6 See, for example, the article by Paarlberg and Seitzinger, “A simulation model of the U.S.
export enhancement program for wheat in the presence of an EC response,” at
[http://erae.oxfordjournals.org/cgi/content/abstract/16/4/445]. A Government Accountability
Office (GAO) report found that EEP increased exports and helped bring competitors,
notably the European Union, to the bargaining table in Uruguay Round multilateral trade
negotiations. The GAO report is available at [http://archive.gao.gov/d23t8/141716.pdf].
7 Additional information on DEIP is available at [http://www.fas.usda.gov/excredits/
deip.html].

CRS-6
Recent DEIP Activity. No DIEP bonuses were awarded in FY2005 and the
FY2006 level is estimated at $2 million. The program level for DEIP in FY2003 was
$32 million and $3 million in FY2004.
Market Development Programs
FAS administers five programs to promote U.S. agricultural products in
overseas markets, including the Market Access Program (MAP), the Foreign Market
Development Program (FMDP), the Emerging Markets Program (EMP), the Quality
Samples Program (QSP), and the Technical Assistance for Specialty Crops Program
(TASC). All of these programs are funded through the borrowing authority of the
CCC.
Market Access Program (MAP).8 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 FY2007. The funding level for the
program (previously capped at $90 million annually) gradually increases to $200
million by FY2006. 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.
Recent MAP Activity. Although MAP is not funded by annual
appropriations, appropriations acts have on occasion capped the amounts that could
be spent on the program or imposed other restraints on programming. For example,
the FY1999 agricultural appropriations act 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
law. 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 allocated the
maximum amounts authorized for MAP in the 2002 farm bill for FY2002 through
8 Additional information on MAP is available at [http://www.fas.usda.gov/mos/programs/
map.asp].

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FY2004, but reduced MAP spending to $140 million in FY2005. FY2006 MAP
spending is estimated to be at the authorized level of $200 million.
Foreign Market Development Program (FMDP).9 The FSRIA also
reauthorizes this program through FY2007 with annual funding of $34.5 million.
This program, which began in 1955, is like MAP in most major respects. Its purpose
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 FMDP 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, FMDP is exempt from Uruguay Round
Agreement reduction commitments. Unlike MAP, which mainly promotes consumer
goods and brand-name products, FMDP is mainly promotes bulk commodities.
Some of the same issues raised with respect to MAP are also raised about
FMDP 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, spend money on market promotion, and that U.S.
marketing programs help keep U.S. products competitive in third-country markets.
Recent FMDP Activity.
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 allocated the farm-bill authorized amount of $34.5 million
for the program in FY2002 through FY2006.

Emerging Markets Program.10 The Emerging Markets Program (EMP)
provides funding for technical assistance activities intended to promote exports of
U.S. agricultural commodities and products to emerging markets in all geographic
regions, consistent with U.S. foreign policy. An emerging markets is defined in the
authorizing legislation (FSRIA of 2002) as any country that is taking steps toward a
market-oriented economy through food, agricultural, or rural business sectors of the
economy of the country. Additionally, an emerging market country must have the
potential to provide a viable and significant market for U.S. agricultural commodities
or products. Eligible countries must have per capita incomes of less than $10,065
in 2005-2006 and a population greater than 1 million. The FSRIA of 2002 authorizes
funding at $10 million each fiscal year through FY2007.
9 Additional information on FMDP is available at [http://www.fas.usda.gov/mos/programs/
fmdprogram.asp].
10 Additional information on the Emerging Markets Program is available at [http://www.fas.
usda.gov/mos/em-markets/em-markets.html].

CRS-8
Funding for the EMP is set at $10 million each fiscal year through FY2007 in
the 2002 farm bill. In FY2005, EMP allocated $10 million for 71 agricultural trade
promotion projects to support generic promotions and distribution of U.S.
agricultural products, trade missions, and research on new markets.
Quality Samples Program.11 The Quality Samples Program (QSP) assists
U.S. agricultural trade organizations to provide small samples of their agricultural
products to potential importers in emerging markets overseas. The QSP focuses on
industrial and manufacturing users of products, not end-use consumers. Under the
authority of the CCC Charter Act of 1948, FAS makes available annually up to $2
million of CCC funds for the QSP. FAS makes available annually up to $2 million
of CCC funds for the QSP, and in FY2005, FAS allocated $1.7 million to 16 trade
organizations and one private firm.
Technical Assistance for Specialty Crops (TASC) Program.12 The
Technical Assistance for Specialty Crops (TASC) Program aims to assist U.S.
organizations by providing funds for projects that address sanitary, phytosanitary and
technical barriers that prohibit or threaten U.S. speciality crop exporters. The
legislation defines specialty crop as all cultivated plants, and the products thereof,
produced in the United States, except wheat, feed grains, oilseeds, cotton, rice,
peanuts, sugar, and tobacco. The types of activities covered include seminars and
workshops, study tours, field surveys, pest and disease research, and pre-clearance
programs. The FSRIA of 2002 authorizes $2 million annually of CCC funds for the
TASC program. In FY2006, FAS has allocated $410,222 to TASC projects carried
out by eight U.S. organizations.
Export Credit Guarantees
The FSRIA reauthorizes through FY2007 USDA-operated export credit
guarantee programs, first established in the Agricultural Trade Act of 1978 (P.L. 95-
501), 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).13
GSM-102 guarantees repayment of short-term financing (six months to three 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
11 Additional information on the QSP is available at [http://www.fas.usda.gov/mos/
programs/QSP.asp].
12 Additional information on the TASC program is available at [http://www.fas.usda.gov/
mos/tasc/tasc.asp].
13 Additional information on CCC export credit guarantees is at [http://www.fas.usda.gov/
excredits/exp-cred-guar.html].

CRS-9
countries that purchase U.S. farm products. Eligible countries are those that USDA
determines can service the debt backed by guarantees. 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 FAS the 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 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 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.
The biggest recipients of export credit guarantees have been Mexico, South
Korea, Iraq, Algeria, and the former Soviet Union (FSU). Iraq is in default of more
than $2 billion of previously extended guarantees. In FY2005, the major recipients
were Turkey ($455 million), Mexico ($392 million), South Korea ($325 million),
Russia ($294 million), and China/Hong Kong ($146 million). Guarantees facilitate
sales of a broad range of commodities, but in FY2005 mainly benefitted exports of
wheat, meat and poultry, oilseeds, feed grains, and cotton.
The CCC can guarantee credits under GSM-102 for two other programs:
Supplier Credit Guarantee Program (SCGP) and the Facilities Guarantee Program
(FGP).
Supplier Credit Guarantee Program.14 Under SCGP, 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.
14 Additional information on SCGP is available at [http://www.fas.usda.gov/excredits/scgp.
html].

CRS-10
Facilities Guarantee Program.15 The FGP 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.
Recent Export Credit Guarantee Activity. In FY2003 export credit
guarantees financed an estimated $3.2 billion of U.S. agricultural exports. FY2004
guarantees financed $3.7 billion of U.S. farm exports and $2.6 billion worth of
exports in FY2005. USDA estimates guarantees of $3.1 billion of farm exports for
FY2006. The amounts of credit guaranteed each year depend on the demand for
guaranteed financing of U.S. agricultural commodities by eligible borrowing
countries.
The FSRIA of 2002 makes no specific authorization of funds for the SGCP.
In FY2005, USDA allocated $455 million to this program; a total of $602 million
is estimated for FY2006. The farm bill made no specific allocation of funds for the
FGP. In FY2005, no funds were allocated to this program, but FGP guarantees for
FY2006 are estimated at $20 million.
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 of these programs are authorized through
FY2007 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.16 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 and transition
countries and private entities 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).
15 Additional information on the FGP is available at [http://www.fas.usda.gov/excredits/
scgp.html].
16 Additional information on P.L. 480 food aid is available at [http://www.fas.usda.gov/
food-aid.asp].

CRS-11
A five-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 is accorded to developing countries with demonstrated potential to
become commercial markets for U.S. agricultural commodities.
The P.L. 480 legislation identifies private voluntary organizations (PVOs),
cooperatives, and intergovernmental organizations (such as the UN World Food
Program) as organizations eligible to carry out Title II non-emergency programs,
including in countries where USAID does not maintain a mission. FSRIA authorized
funding to pay project or administrative and other costs of eligible organizations at
5% to 10% of annual Title II funding. A minimum of 15% of non-emergency Title
II commodities can be monetized (i.e., sold for local currencies or for dollars).
Monetization enables PVOs and coops to defray the costs of distributing food or
implementing development projects in countries where they operate. 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 the eligible organizations. This mandate can be waived
by the USAID Administrator in cases of emergency need.
Section 416(b).17 This program, authorized in permanent law (the
Agricultural Act of 1949) 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).18 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 2002 farm bill requires that a minimum of 400,000 metric
tons of commodities be provided in the FFP program.
17 Additional information on Section 416(b) is available at [http://www.fas.usda.gov/
excredits/FoodAid/416b/section416b.asp].
18 Additional information on the Food for Progress program is available at [http://www.fas.
usda.gov/excredits/FoodAid/FFP/foodforprogess.asp].

CRS-12
McGovern-Dole International Food for Education and Child
Nutrition Program.19 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 mandated CCC funding of $100 million for the program in
FY2003 and authorizes appropriations of “such sums as necessary” from FY2004 to
FY2007. 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.
The Bill Emerson Humanitarian Trust (BEHT).20 The 2002 farm bill
reauthorized the BEHT, enacted in the 1998 Africa Seeds of Hope Act (P.L. 105-
385), through FY2007. The BEHT replaced the Food Security Commodity Reserve
established in the 1996 farm bill and its predecessor, the Food Security Wheat
Reserve of 1980. Not technically a food aid program, the trust is primarily a reserve
of up to 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. Since 1980, the only commodity held in
reserve has been wheat. The trust can also hold cash in reserve.
Recent Food Aid Activity. P.L. 480 food aid averaged around $1.1 billion
from 1996 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 and the FY2002 program level was $1.270 billion, including Emerson
Trust releases valued at $175 million. In FY2003, the food aid program level spiked
again as Congress appropriated more than $1.8 billion for emergency humanitarian
assistance under P.L. 480 Title II to meet emergency needs in Africa, Afghanistan,
and Iraq. P.L. 480 Title II food aid for FY2005 was $2.1 billion, which includes
$377 million of commodities from the Emerson Trust.

Commodity donations under Section 416(b) were $213 million (commodity
value and ocean freight and overseas distribution costs) in FY2003, consisting of
surplus nonfat dry milk. In contrast, Section 416(b) donations averaged about $1
billion a year from FY1999 to FY2002. Such large donations were made possible
following CCC purchases of over 8 million metric tons of surplus wheat and wheat
flour in FYs 1999 and 2000.
19 Additional information the McGovern-Dole program is available at [http://www.fas.
usda.gov/excredits/FoodAid/FFE/FFE.asp].
20 Additional information on the Emerson Trust is available at [http://www.fas.usda.gov/
excredits/FoodAid/emersontrust.asp].

CRS-13
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 superseded by the
McGovern-Dole International School Feeding and Child Nutrition Program
authorized in the 2002 farm bill.
Releases from the 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, where an estimated 14.4 million people needed emergency
food aid to compensate for severe food shortages and stave off famine through much
of 2003. In FY2003, the Secretary announced releases of 200,000 metric tons for
emergency food needs in Eritrea and Ethiopia and 600,000 metric tons for emergency
needs in Iraq. Of the announced releases, only about half, 400,000 metric tons, were
used. Partial replenishment of the trust was addressed in the FY2003 Emergency
Wartime Supplemental Appropriations Act. There were no releases from the trust in
FY2004. On December 3, 2005, the Secretary of Agriculture and the Administrator
of USAID announced the release of 200,000 metric tons of wheat from the trust for
emergency food relief to western Sudan. On June 7, 2005, the President announced
that $250 million (500,000 metric tons) of Emerson Trust commodities would be
used to meet emergency needs in Africa. Following these releases, approximately
900,000 metric tons of wheat and $107 million in cash remain in the trust.
FY2006 Appropriations
Title V of the FY2006 appropriations act (P.L. 109-97, H.R. 2744) provides
$1.488 billion in budget authority for USDA’s discretionary international activities
(primarily foreign food aid and salary and expenses of the Foreign Agricultural
Service). The food aid budget authority provided in P.L. 109-97 reflects a rejection
by both chambers of the President’s proposal to purchase emergency food aid
commodities in markets near to countries in need rather than from U.S. producers by
shifting funds from P.L. 480 to a U.S. Agency for International Development
(USAID) disaster and famine assistance fund.21 The total program value of
discretionary and CCC-funded international activities for FY2006 are estimated at
$5.2 billion.
Foreign Agricultural Service (FAS). The appropriations act provides
$147.9 million of budget authority for FAS. This amount is $11.2 million more than
enacted in FY2005, but close to the President’s FY2006 budget request.
21 See CRS Report RL32919, Foreign Operations (House)/Foreign Operations and Related
Programs (Senate): FY2006 Appropriations
, by Larry Nowels and Susan B. Epstein, for
a discussion of the disaster assistance and famine account.

CRS-14
Foreign Food Assistance. For P.L. 480 foreign food aid programs, the act
provides $1.230 billion. This amount of budget authority includes $77 million for
P.L. 480 Title I (long-term, low-interest loans to food deficit countries for the
purchase of U.S. food commodities) and $1.150 billion for P.L. 480 Title II
(humanitarian donations for emergency relief and non-emergency development
projects). The P.L. 480 Title II appropriation is $265 million more than requested in
the President’s budget. These amounts and the other discretionary components of
Title V are subject to a 1% recision (as provided in the FY2006 Defense
Appropriations measure, P.L. 109-148).
The President’s FY2006 budget request contained a proposal to shift about $300
million from P.L. 480 Title II to USAID’s International Disaster and Famine
Assistance account, which is administered separately from Title II. The funds would
have been used to purchase food for emergency relief in markets closer to their final
destinations rather than in the United States as required under P.L. 480. The
Administration maintained that so doing would make for more timely and more cost-
effective responses to emergency food needs. The proposal, however, proved
controversial with farm groups, agribusinesses and the maritime industry who supply
and ship commodities for Title II and with private voluntary organizations (PVOs)
who rely on food aid to carry out development projects in poor countries. PVOs sell
(or “monetize”) a substantial portion of food aid commodities in order to finance
their development projects. Both chambers rejected the President’s cash-for-
commodities food aid proposal. Despite some expectations to the contrary, there
were no Senate amendments to the conference report that would have provided some
or all of the $300 million requested by the President for purchase of non-U.S.
commodities for famine relief. The conference report accompanying H.R. 2744
addresses the issue of converting a portion of P.L. 480 commodity food aid into cash
by stating: “The conferees ... admonish the Executive Branch to refrain from
proposals which place at risk a carefully balanced coalition of interests which have
served the interests of international food assistance programs well for more than fifty
years.” During House committee deliberations, amendments to augment P.L. 480
Title II emergency food aid by $393 million and $78 million, respectively, were
defeated.
For the McGovern-Dole International Food for Education and Child Nutrition
Program, the conference report includes an appropriation of $100 million, an amount
recommended in both House- and Senate-passed measures. This level of budget
authority is $13.2 million more than appropriated in FY2005.
Other food aid activities, largely funded by CCC-borrowing, include the Food
for Progress Program (FFP), Section 416(b) commodity donations, and the Bill
Emerson Humanitarian Trust (BEHT)
. The President’s budget estimates that $137
million of CCC funds would go to the Food for Progress (FFP) program. Additional
FFP monies would be available from the funds appropriated to P.L. 480 Title I. The
budget anticipates that $151 million of CCC-owned nonfat dry milk, about 75,000
metric tons, would be available for food aid programming under Section 416(b) of
the Agricultural Act of 1949. No program level is indicated in the President’s budget
for the BEHT. Section 738 of Title VII (General Provisions) of the House bill limits
to $20 million the amount of FY2005 P.L. 480 appropriations that may be used to
reimburse the CCC for the release of commodities from the BEHT.

CRS-15
Export Credit Guarantees. The President’s budget estimates a program
level for export credit guarantees during FY2006 of $4.4 billion. Most guarantees
— an estimated $3.4 billion — are for commercial credits with short-term repayment
terms (up to three years). Another $1 billion would be made available for supplier
credits (where short-term financing is extended directly to importers for the purchase
of U.S. agricultural products). P.L. 109-97 provides $5.3 million to FAS and to the
Farm Service Agency to administer the export credit guarantee programs.
Export Promotion and Export Subsidies. MAP funding in FY2006 is
estimated at $200 million, the FSRIA-authorized amount. A House amendment to
prohibit funds from being used to carry out MAP activities failed by a recorded vote
of 66 to 356. For FMDP, the budget allocates $34.5 million, the same as in FY2005;
the Senate bill’s report (S.Rept. 109-92) instructs FAS to fund FMDP at no less than
the FY2005 level.
For export subsidy programs, the budget allocates $28 million to the Export
Enhancement Program (EEP) and $52 million to the Dairy Export Incentive Program
(DEIP). The President’s budget estimate also included $90 million for Trade
Adjustment Assistance to Farmers, the maximum amount allowed in the authorizing
statute, the 2002 Trade Act. Under this program, USDA makes payments to farmers
when the current year’s price of an agricultural commodity is less than 80 percent of
the five-year national average and imports have contributed importantly to the decline
in price.
FY2006 Emergency Supplemental Funding
On February 16, 2006, the President requested an additional $350 million
FY2006 supplemental appropriation for emergency food aid under P.L. 480 Title II.
The request was included as part of a $72.4 billion supplemental appropriation to
finance on-going military operations in Iraq and Afghanistan. The FY2006
Emergency Supplemental Appropriations Act (H.R. 4939, P.L. 109-234), as enacted,
contained the $350 million for humanitarian food aid under Title II of P.L. 480 for
Sudan and other African regions as requested by the President.
Of this food aid total, an estimated $150 million would address emergency food
needs for individuals in the Darfur region of Sudan, including refugees from the
violence who are in Chad. An estimated $75 million would address emergency food
needs in southern Sudan and an additional $125 million would be used to meet other
critical food situations, including those in East Africa.
Status of FY2007 Appropriations
Discretionary appropriations for international activities are one-tenth of a
percent apart in the Senate-reported and House-passed versions of H.R. 5384, the
FY2007 agriculture appropriations measure. The Senate-reported bill provides
discretionary appropriations of $1.489 billion for international activities, while the
House-passed bill provides discretionary appropriations of $1.488 billion. The

CRS-16
Administration’s budget indicates that an additional $3.8 billion would be allocated
to CCC-funded programs. Combined, the total program value for all USDA
international activities would be an estimated $5.3 billion for FY2007. Included in
the Senate-reported bill is $156.2 million for the Foreign Agricultural Service (FAS)
to administer USDA’s international programs; the House allowance for FAS is
$156.5 million. These amounts represent an increase of about $10 million over the
amount enacted in FY2006 and about $1 million less than proposed in the President’s
budget.
For P.L. 480 foreign food assistance, the Senate-reported version of H.R. 5384
provides $1.225 billion, $87 million more than enacted in FY2006. The
House-passed bill provides $1.223 billion, while the Administration had requested
$1.218 billion. All of the P.L. 480 appropriations would go for Title II commodity
donations.
Both the Senate-reported and the House-passed bill concur with the President’s
requests for no funds for P.L. 480 Title I loans, nor any for the Bill Emerson
Humanitarian Trust, a reserve of commodities and cash held by the CCC, which
currently holds 900,000 metric tons of wheat and $107 million. The budget assumes
$161 million of CCC funds for the Food for Progress (FFP) program to provide food
aid to emerging democracies. In the absence of an appropriation for P.L. 480 Title
I, no funds will be available to FFP from that source during FY2007. Similarly,
USDA anticipates that no CCC commodity inventories would be available for
distribution as food aid under Section 416(b). For the McGovern-Dole International
Food for Education and Child Nutrition Program, both the Senate-reported and the
House-passed bill provide $100 million, an increase of $1 million from both the
FY2006 enacted amount and the budget request (Figure 8).
The President’s budget request contained proposed appropriations language to
allow the Administrator of USAID to use up to 25% of P.L. 480 Title II funds for
local or regional purchases of commodities in food crises. The Senate report (S.Rept.
109-266) explicitly rejects this proposal, stating that “The Committee does not agree
with the Administration’s proposal to shift up to 25% of the Public Law 480 Title II
program level to USAID to be used for direct cash purchases of commodities and
other purposes...” In addition, the Senate report rejects an Administration proposal
to lift the requirement that 75% of P.L. 480 Title II commodities be devoted to
nonemergency or development activities. Neither the House-passed bill nor the
accompanying report (H.Rept. 109-463) make mention of these Administration
proposals. Congress rejected similar requests made in the FY2006 budget proposal.
The estimated FY2007 program level of $3.2 billion for CCC export credit
guarantees reflects the level of sales expected to be registered under the programs.
Actual sales could vary from this estimate, depending upon demand for credit,
market conditions, and other factors. Both the Senate-reported and the House bill
provide $5.3 million for administrative expenses of CCC export credit programs, an
increase of $104,000 above the amount provided in FY2006 and the amount
requested in the budget proposal.
The Senate-reported bill deletes statutory authority for the intermediate export
credit guarantee program (guarantees up to 10 years). Earlier, the Administration had

CRS-17
suspended the operation of the intermediate guarantee program in response to an
adverse ruling by the World Trade Organization (WTO) in the U.S.-Brazil cotton
dispute. The President’s budget contained suggested legislative language for the
statutory change.
The farm bill-authorized funding level for the Market Access Program (MAP),
an export market development program, is set at $200 million for FY2007. Neither
the Senate-reported nor the House-passed bills concurred with an Administration
proposal to cut $100 million from MAP in FY2007. During floor consideration, the
House rejected a perennial amendment to bar the use of funds to carry out MAP by
a vote of 79-342.
The export program that mainly promotes bulk commodities, the Foreign
Market Development Program, would receive $34.5 million, the farm bill authorized
amount. For export subsidy programs, the budget requests $28 million for the Export
Enhancement Program ($28 million in FY2006) and $35 million to the Dairy Export
Incentive Program ($2 million in FY2006). The Administration requests $90 million
for Trade Adjustment Assistance to Farmers, the maximum allowed in the 2002
Trade Act. The House bill stipulates that $3 million of these funds be made available
for an intensive risk management technical assistance program for farmers.
Export Credit Guarantees and the WTO Cotton Case
On March 3, 2005, a World Trade Organization (WTO) Dispute Appeals Panel
ruled against the United States in a dispute brought by Brazil against certain aspects
of the U.S. cotton program.22 The WTO panel found that the GSM-102, GSM-103,
and SCGP export credit guarantee programs effectively functioned as export
subsidies because the financial benefits returned to the government by these
programs failed to cover their long-run operating cost. Furthermore, the panel found
that this applies not just to cotton, but to all recipient commodities that benefit from
U.S. commodity support programs.
The panel also found that certain payments (called Step 2 payments), authorized
as part of special cotton marketing provisions in U.S. farm program legislation to
keep U.S. upland cotton competitive on the world market, were prohibited
subsidies.23 Step 2 payments are made to exporters and domestic mill users to
compensate them for their purchase of U.S. upland cotton, which tends to be priced
higher than the world market price. Payments to exporters were found to be
“contingent upon export performance” and therefore qualified as prohibited export
subsidies in violation of WTO commitments. Payments to domestic users were
22 For a detailed discussion of the U.S. response to the WTO cotton panel’s decision, see
CRS Report RS22187, U.S. Agricultural Policy Response to WTO Cotton Decision; and for
a detailed discussion of the U.S.-Brazil WTO dispute settlement case, see CRS Report
RL32571, Background on the U.S.-Brazil WTO Cotton Subsidy Dispute, both by Randy
Schnepf.
23 For more information on Step 2 payments, see CRS Report RL32442, Cotton Production
and Support in the United States
, by Jasper Womach.

CRS-18
found to be “contingent on the use of domestic over imported goods” and therefore
qualified as prohibited import substitution subsidies.
On July 5, 2005, U.S. Secretary of Agriculture Johanns announced a number of
changes intended to bring the United States into compliance with the WTO cotton
ruling, including removal of a 1% cap on fees charged under the GSM-102 export
credit guarantee program, termination of the GSM-103 export credit guarantee
program, and elimination of the Step 2 program. The announced changes in the
export credit guarantee programs can be made administratively, but changes in the
Step 2 program require legislation. Congress included a provision in the Deficit
Reduction Act of 2005 (P.L. 109-171), signed into law on February 8, 2006, that calls
for the elimination of Step 2 by August 1, 2006. Brazil has requested the imposition
of WTO-sanctioned retaliatory trade measures against the United States, which it
must do within certain time limits or lose its right to seek retaliation.
Trade Negotiations and
USDA International Programs

U.S. agricultural export and food aid programs could be affected by ongoing
WTO agricultural trade negotiations. WTO member countries on December 18,
2006, reached a preliminary agreement on a date certain — 2013 — for eliminating
agricultural export subsidies in the current multilateral trade round known as the
Doha Development Agenda (DDA).24 This agreement was the most concrete
outcome of the WTO’s Hong Kong Ministerial Conference. The European Union
(EU), the largest user of export subsidies, had opposed setting an end date,
maintaining that WTO members needed to determine first how other forms of
subsidized export competition — export credit programs, insurance, export activities
of State Trading Enterprises (STEs), and food aid — would be disciplined. The
United States and Brazil among others had been demanding agreement on an end to
such export subsidies by 2010 with subsequent negotiations on other forms of export
completion. As a compromise, the Hong Kong declaration calls for the parallel
elimination of all forms of export subsidies and disciplines on measures with
equivalent effect by the end of 2013. The end date for export subsidies would be
confirmed, however, only after agreement on how to discipline the other forms of
export subsidies.
With respect to other forms of export competition, the Hong Kong ministerial
declaration included the following:
! Export credit programs should be “self-financing, reflecting market
consistency, and of a sufficiently short duration so as not to
effectively circumvent real commercially-oriented discipline”;
24 For details, see CRS Report RL33144, WTO Doha Round: The Agricultural Negotiations,
by Charles E. Hanrahan and Randy Schnepf.

CRS-19
! Disciplines on exporting STEs will be such that their “monopoly
powers cannot be exercised in any way that would circumvent the
direct disciplines on STEs on export subsidies, government
financing, and the underwriting of losses”; and
! On food aid, a “safe box” will be established for “bona fide” food
aid “to ensure there will be no impediment to dealing with
emergency situations.” However, disciplines will be established on
in-kind food aid, monetization, and re-exports to prevent loopholes
for continuing export subsidization leading to elimination or
displacement of commercial sales by food aid.
The elimination of EU export subsidies has been a long-standing objective of
U.S. agricultural trade policy, as has requiring greater transparency in STEs such as
the Canadian Wheat Board. The Trade Act of 2002 (P.L. 107-210) calls for
eliminating agricultural export subsidies, but makes preservation of export credit
programs and food aid a principal negotiating objective.
Since the Hong Kong meeting, there has been little agreement on the specifics
in the Doha Round negotiations on agriculture, including any new disciplines on
export credits and food aid. U.S. PVOs who monetize in-kind food aid commodities
to finance projects in developing countries are concerned that new WTO disciplines
aimed at preventing commercial displacement could severely limit their ability to do
development work.
Any changes in farm bill export and food aid programs made necessary by a
DDA trade agreement would be debated if and when Congress took up legislation to
implement the agreement. Conclusion of the DDA negotiations could also occur as
Congress begins deliberation on a farm bill to replace the 2002 FSRIA. DDA
implications for export subsidies, export credit guarantees, and food aid programs
could thus also be taken up during the debate on the next farm bill.