Order Code RL33553
Agricultural Export and Food Aid Programs
Updated March 15, 2007
Charles E. Hanrahan
Senior Specialist in Agricultural Policy
Resources, Science, and Industry Division

Agricultural Export and Food Aid Programs
Summary
The U.S. Department of Agriculture (USDA) administers programs to promote
agricultural exports and to 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 activities expires with the 2002 farm bill in 2007, and the 110th
Congress has begun deliberations on a new farm bill. The Administration also has
made proposals for significant change in the export and food aid programs. In
addition, USDA’s international programs could be affected by the outcome of
agricultural trade negotiations in the World Trade Organization (WTO) or WTO
trade litigation.
USDA’s direct export 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. Export
subsidies, but not other U.S. export and food aid programs, are subject to reduction
commitments agreed to in multilateral trade negotiations. Export market
development programs include the Market Access Program (MAP) and the Foreign
Market Development or “Cooperator” Program (FMDP). Although criticized by
some as corporate welfare, these programs are considered to be non-trade-distorting
by the World Trade Organization (WTO) and thus are exempt from multilateral
spending constraints. The FSRIA authorizes MAP spending of $200 million
annually in FY2006 and FY2007 and sets FMDP spending at $34.5 million annually
through FY2007. 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 2002 farm bill 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, also 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 need. Increased allocations of U.S. food aid for emergency relief has
reduced the volume of food aid available for development projects.
The 109th Congress adjourned without enacting an agriculture appropriations
measure that would have included funding for USDA’s international programs.
Provisions of the continuing resolution (P.L. 110-5) limit international programs
whose funding is discretionary (P.L. 480, Food for Education, the Foreign
Agricultural Service) to FY2006 spending levels. Spending on export programs (and
some food aid) is mandatory and unaffected by the continuing resolution.
This report will be updated periodically.

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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
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) . . . . . . . 9
Supplier Credit Guarantee Program . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Facilities Guarantee Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Recent Export Credit Guarantee Activity . . . . . . . . . . . . . . . . . . . . . . 10
Export Credit Guarantees and the WTO Cotton Case . . . . . . . . . . . . . 10
Foreign Food Aid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
P.L. 480 Food for Peace . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 416(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Food for Progress (FFP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
McGovern-Dole International Food for Education and
Child Nutrition Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
The Bill Emerson Humanitarian Trust (BEHT) . . . . . . . . . . . . . . . . . . 13
The John Ogonowski Farmer-to-Farmer Program . . . . . . . . . . . . . . . . 14
Recent Food Aid Program Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Food Aid Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
FY2006 Appropriations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Foreign Agricultural Service (FAS) . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
P.L. 480 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
McGovern-Dole . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Food for Progress, Section 416, and Emerson Trust . . . . . . . . . . . . . . 18
Export Credit Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Export Promotion and Export Subsidies . . . . . . . . . . . . . . . . . . . . . . . 18
FY2006 Emergency Supplemental Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Status of FY2007 Appropriations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
The Continuing Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Proposed FY2007 Spending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Food Aid Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Export Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
FY2007 Supplemental Request for Food Aid . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

FY2008 Budget Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
USDA 2007 Farm Bill Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Market Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Export Credit Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Export Subsidies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Food Aid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Other Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
WTO Negotiations and USDA International Programs . . . . . . . . . . . . . . . . . . . . 23
List of Tables
USDA International Program Activity, FY1997-FY2006 . . . . . . . . . . . . . . . . . . . 3

Agricultural Export and Food Aid Programs
Recent Developments
On February 15, 2007,the President signed a continuing resolution (P.L. 110-5)
providing funding for FY2007 through September 30, 2007. It funds agricultural
programs at the lower of either the FY2006 level or the House-passed level in H.R.
5384, the agriculture appropriations bill. As a result, funding for P.L. 480 food aid,
the McGovern-Dole Food for Education program, and the Foreign Agricultural
Service will be at the FY2006 level. Spending on mandatory food aid and export
programs is unaffected by the continuing resolution.
The Secretary of Agriculture, on January 31, 2007, unveiled U.S. Department
of Agriculture (USDA) proposals for the 2007 farm bill. Included among 65
proposals are initiatives that would increase spending on export market development
programs and other trade activities by $400 million. The Secretary proposed
authorizing the use of up to 25% of P.L. 480 Title II funds for local or regional
purchase (instead of U.S. commodities) to meet emergency food aid needs.

The World Trade Organization (WTO) formally suspended the Doha Round of
multilateral trade negotiations in July 2006, largely because of inability of WTO
members to agree on reductions in domestic farm subsidies and tariffs on agricultural
products. Prior to the collapse of negotiations, WTO members 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 48% of food grain production, almost 20% of feed grains, and about 36%
of U.S. oilseeds. Cotton exports amounted to 70% of production in 2006. Exports
also generate economic activity in the non-farm economy. According to USDA, each
$1 received from agricultural exports stimulated another $1.48 in supporting
activities to produce those exports. Recent data show that agricultural exports
generate an estimated 825,000 full-time civilian jobs, including 437,000 jobs in the
non-farm sector.1

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
Nearly every state exports agricultural commodities. USDA data shows that the
states with the greatest shares of U.S. agricultural exports by value are 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
FY2005. In addition, Arkansas, Florida, Kentucky, Missouri, North Carolina, Ohio,
Pennsylvania and Wisconsin each shipped over $1 billion worth of commodities.2
U.S. agricultural exports for FY2007 are forecast by USDA to be a record high
$78 billion, while imports will reach $70 billion, also a record. If this forecast holds,
the U.S. agricultural trade balance in FY2007 would be $8 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 FY2006, high value agricultural exports accounted for 63% 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. domestic farm policies that
affect price and supply, and trade agreements with other countries, also influence the
level of U.S. agricultural exports. While many of these factors are beyond the scope
of congressional action, farm bills have typically included programs that promote
commercial agricultural exports or provide foreign food aid.
Agricultural Export and Food Aid Programs
The trade title of the 2002 farm bill, the 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 these export and food
aid programs, with the exception of P.L. 480 Titles II (humanitarian food aid) and III
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/MannUsda/viewDocumentInfo.do?documentID=
1196].
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]

CRS-3
(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
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 $30 billion at any one time
from the U.S. Treasury.
USDA International Program Activity, FY1997-FY2006
($ millions)
Program 1997
1998
1999
2000
2001
2002
2003
2004
2005
2006*
EEPa
0
2
1
2
7
0
0
0
0
0
DEIPb
121
110
145
78
8
55
32
3
0
0
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
1,363
P.L. 480f
1,054 1,138
1,808
1,293
1,086
1,270
1,960
1,809
2,115
1,829
FFEg






100
50
90
97
Section
416(b)h
0
0
1,297
1,130
1,103
773
213
173
76
20
FFPi
91
111
101
108
104
126
137
138
122
131
FASj
191
209
178
183
201
198
195
197
206
246
Total
4,423 5,697
6,693
6,000
5,854
5,944
6,004
6,245
5,408
3,941
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%);

CRS-4
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.
Export Subsidies
The current farm bill 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 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
5 Additional information on the Export Enhancement Program is available at [http://www.
fas.usda.gov/info/factsheets/eep.asp]

CRS-5
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 2002 FSRIA. Authority to spend CCC funds on EEP expires in
FY2007.
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 of the
use of EEP found that wheat exports would have decline somewhat if EEP were
eliminated, suggesting that the EEP program increased wheat exports. Other
analysts, however, found that subsidizing wheat exports under EEP resulted in
displacing 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 FY2006, a total of only $17 million of EEP
bonuses were awarded. There were no EEP bonus awards from FY2002 to FY2006.
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.
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
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. Legislative authority for DEIP expires on December 31, 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.
Recent DEIP Activity. No DEIP bonuses were awarded in FY2005 or
FY2006. The program level for DEIP in FY2003 was $32 million and in FY2004 it
was $3 million.
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. Farm bill authorization of CCC funds for the market development programs
expires at the end of FY2007. Legislation (H.R. 6193, the Eat Healthy America Act)
introduced during the 109th Congress, and expected to be reintroduced in the 110th
Congress, included provisions to substantially increase funding for MAP and TASC.
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 for FY2006 and FY2007. 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 policy has been to
allocate all MAP funds for promotion of branded products to cooperatives and small
U.S. companies.
8 Additional information on MAP is available at [http://www.fas.usda.gov/mos/programs/
map.asp].

CRS-7
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 agriculture 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. MAP has
often been targeted for cuts by some Members of Congress who maintain that it is a
form of corporate welfare, or to help offset increased expenditures on other
programs, but such efforts have been unsuccessful. USDA allocated the maximum
amounts authorized for MAP in the 2002 farm bill for FY2002 through FY2006.
Foreign Market Development Program (FMDP).9 The FSRIA also
reauthorizes CCC funding for this program through FY2007 at an annual level of
$34.5 million. The 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. As with 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
mainly promotes generic or bulk commodities.
MAP and FMDP Issues. 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 and agribusinesses market their products overseas. Some
argue that MAP and FMDP are forms of corporate welfare in that they fund activities
that private firms would and could fund for themselves. Others 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, also 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. USDA allocated the farm-bill authorized amount of $34.5 million for
the program in FY2002 through FY2006.

9 Additional information on FMDP is available at [http://www.fas.usda.gov/mos/programs/
fmdprogram.asp].

CRS-8
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.
Funding for the EMP is set at $10 million each fiscal year through FY2007 in
the 2002 farm bill. In FY2006, EMP allocated $10 million for 76 agricultural trade
promotion projects to support generic promotions and distribution of U.S.
agricultural products, trade missions, and research on new markets. FAS has
announced it will publish reports evaluating EMP projects during FY2007.
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 uses up to $2 million of CCC funds
to carry out the program. In FY2006, FAS allocated $1.8 million to 17 trade
organizations participating in QSP.
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 of CCC funds each fiscal year
through FY2007 for the TASC program. In FY2006, FAS allocated $2.6 million to
TASC projects carried out by 26 U.S. trade 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-
10 Additional information on the Emerging Markets Program is available at [http://www.fas.
usda.gov/mos/em-markets/em-markets.html].
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].

CRS-9
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
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.
13 Additional information on CCC export credit guarantees is at [http://www.fas.usda.gov/
excredits/exp-cred-guar.html].

CRS-10
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.
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. Guarantees of $1.4 billion of farm exports were made available
in FY2006. The amounts of credit guaranteed each year depend on the demand for
guaranteed financing of U.S. agricultural commodities by eligible borrowing
countries. Substantially lower guarantees in FY2006 may have resulted from the
suspension in FY2006 of the Supplier Credit Guarantee Program because of a high
rate of defaulted obligations and other problems. USDA has proposed terminating the
SCGP in its 2007 farm bill proposal. In addition, applying a more rigorous risk
analysis (as a result of the U.S. response to the WTO cotton case) to prospective
beneficiaries could have contributed to the decline in guarantees.
The farm bill made no specific authorization of funds for the FGP and no funds
have been allocated by USDA to this program under the current farm bill. In its 2007
farm bill proposals, USDA suggests changes (see below) that would make the
program an effective vehicle for improving the infrastructure for handling U.S. farm
exports in emerging markets.
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
14 Additional information on SCGP is available at [http://www.fas.usda.gov/excredits/scgp.
html].
15 Additional information on the FGP is available at [http://www.fas.usda.gov/excredits/
scgp.html].

CRS-11
program.16 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 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.17 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
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 a request to Congress to remove the 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
termination of GSM-103 export credit guarantees programs can be made
administratively, but changes in the cap on fees and 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 provided for the elimination of
Step 2 by August 1, 2006. However, Congress has yet to act on changing the cap on
fees. (The Administration’s 2007 farm bill proposals, discussed below, include a
proposal to eliminate the 1% cap and to repeal the statutory authority for the
intermediate term credit guarantee program).
In the meantime, 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. Also, at Brazil’s request, the WTO has
established a panel to determine if the United States has adequately complied with
the dispute panel’s decision in the cotton case. That review, which began in October
2006, is still underway.
Foreign Food Aid
The 2002 farm bill authorizes a number of international food aid programs that
supply U.S. commodities abroad. These include Titles I, II, and III of P.L. 480, also
16 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.
17 For more information on Step 2 payments, see CRS Report RL32442, Cotton Production
and Support in the United States
, by Jasper Womach.

CRS-12
known as Food for Peace; the Food for Progress Program; the McGovern-Dole
International Food for Education and Child Nutrition Program; and the Bill Emerson
Trust, a reserve of commodities and cash to be used in the case of unanticipated
emergencies. All of these programs are authorized through FY2007. One other food
aid program, Section 416(b) surplus commodity donations, is permanently authorized
in the Agricultural Act of 1949. The McGovern-Dole program is a new food aid
program established by the 2002 farm bill. It replaces a pilot activity, the Global
Food for Education Initiative, established in 2000 by the Clinton Administration.
The John Ogonowski Farmer-to-Farmer Program, a small program of volunteer
technical assistance to agriculture in developing countries, is funded from the P.L.
480 appropriation.

P.L. 480 Food for Peace.18 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).
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 U.N. World Food
Program) as organizations eligible to carry out Title II non-emergency (development)
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.
The FSRIA mandates an annual minimum tonnage level provided as Title II
commodity donations of 2.5 million metric tons, of which 1.875 mmt (75%) is to be
channeled through the eligible organizations. This mandate, which has rarely been
18 Additional information on P.L. 480 food aid is available at [http://www.fas.usda.gov/
food-aid.asp].

CRS-13
met, can be waived by the USAID Administrator upon a determination that this
volume of commodities cannot be used effectively or in cases of emergency need.
In recent years, the volume of P.L. 480 emergency food aid has far exceeded the
amount of non-emergency or development food aid.
Section 416(b).19 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).20 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.
McGovern-Dole International Food for Education and Child
Nutrition Program.21 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. Legislation (H.R. 6229) was
introduced in the 109th Congress, and is expected to be reintroduced in the 110th, to
increase substantially spending on McGovern-Dole and to make spending on the
program mandatory.
The Bill Emerson Humanitarian Trust (BEHT).22 The 2002 farm bill
reauthorized the BEHT, enacted in the 1998 Africa Seeds of Hope Act (P.L. 105-
19 Additional information on Section 416(b) is available at [http://www.fas.usda.gov/
excredits/FoodAid/416b/section416b.asp].
20 Additional information on the Food for Progress program is available at [http://www.fas.
usda.gov/excredits/FoodAid/FFP/foodforprogess.asp].
21 Additional information the McGovern-Dole program is available at [http://www.fas.
usda.gov/excredits/FoodAid/FFE/FFE.asp].
22 Additional information on the Emerson Trust is available at [http://www.fas.usda.gov/
excredits/FoodAid/emersontrust.asp].

CRS-14
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.
The John Ogonowski Farmer-to-Farmer Program. The Farmer-to-
Farmer program (FTF), first authorized in the 1985 farm bill, was reauthorized by the
2002 farm bill and renamed in honor of John Ogonowski, a pilot killed on September
11, 2001. Ogonowski had participated in the Farmer-to-Farmer program. FTF is a
program of technical assistance (not commodity food aid) provided to farmers, farm
organizations, and agribusinesses in developing and transitional countries. The
program mobilizes the expertise of volunteers from U.S. farms, land grant
universities, cooperatives, private agribusinesses, and nonprofit organizations to carry
out projects overseas. The FSRIA provides minimum funding for FTF at 0.5% of the
funds appropriated for P.L. 480 programs. Special emphasis is given to FTF
activities in the Caribbean Basin and sub-Saharan Africa. FTF funding under the
current farm bill has been $10 million annually.
Recent Food Aid Program 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.
The Global Food for Education Initiative. Around $300 million of
Section 416(b) commodities acquired in the FY1999 and FY2000 purchases 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. The
commodities were either monetized or used directly in projects. USDA’s Food and
Nutrition Service provided technical assistance to the GFEI. USDA-approved
projects were implemented by the U.N. World Food Program (WFP), private

CRS-15
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.
Food Aid Issues. The U.S. food aid program is often criticized as an
inefficient way to meet the objectives of relieving emergency food needs or fostering
economic and agricultural development in receiving countries. Critics, including the
Administration, point to delayed arrivals of up to four months when U.S.
commodities are shipped in response to emergency situations. Ocean transportation
costs can be high. In FY2006, USAID estimated that almost half of its food aid
allocations went to paying the cost of transportation.23 Ocean freight rates vary from
year to year, but paying such costs is one reason that both USDA and USAID have
proposed in various budget proposals allocating some portion of funds available to
P.L. 480 Title II emergency programs to purchase commodities in areas near to the
emergency. Congressional and other critics of the local purchase proposal maintain
that allowing non-U.S. commodities to be purchased would result in undermining the
coalition of commodity groups, private voluntary organizations, and shippers that
support the program and in reductions in U.S. food aid. 24
Related to the question of cost-effectiveness is the cargo preference issue. The
Cargo Preference Act, P.L. 83-644 (August 26, 1954), as amended, contains
permanent legislation concerning the transportation of waterborne cargoes in
U.S.-flag vessels. The act requires that 75% of the volume of U.S. agricultural
commodities financed under P.L. 480 and other concessional financing arrangements
be shipped on privately owned U.S.-registered vessels. Maritime interests generally
support cargo preference, but proponents of P.L. 480 argue that it increases the costs
of shipping U.S. commodities to poor countries and potentially reduces the volume
23 See USAID FY2006 Congressional Budget Justification at [http://www.usaid.gov/policy/
budget/cbj2006/pdf/fy2006summtabs6_PL480TitleII.pdf].
24 See H.Rept.109-255 on H.R. 2744, the FY2006 agriculture appropriations measure.

CRS-16
of food aid provided. A GAO report found that shipments of food aid on U.S.-flag
vessels did little to meet the law’s objective of helping to maintain a U.S. merchant
marine and that cargo preference requirements adversely affect operations of the food
aid programs, chiefly by raising the cost of ocean transportation and reducing the
volume of commodities that can be shipped.25
The monetization (selling in local markets) of food aid commodities also is an
issue. A P.L. 480 provision (Section 203) first included in the Food Security Act of
1985 (P.L. 99-198) allows private voluntary organizations and cooperatives to sell
a percentage of donated P.L. 480 commodities in the recipient country or in countries
in the same region. Under Section 203, private voluntary organizations or
cooperatives are permitted to sell (i.e., monetize) for local currencies or dollars an
amount of commodities equal to not less than 15% of the total amount of
commodities distributed in any fiscal year in a country. The currency generated by
these sales can then be used to finance internal transportation, storage, or distribution
of commodities; to implement development projects; or to invest and with the
interest earned to finance distribution costs or projects.
Many of the organizations that rely on sales of U.S. food aid commodities to
finance development projects support monetization as their major source of
development finance. Some private voluntary organizations, however, have begun
to question the use of monetization as a source of funds.26 CARE, which has been
a major supporter of monetization in the past, has decided to transition out of
monetization over the next two years. According to CARE, monetization is
management-intensive and costly and fraught with legal and financial risks. In
addition, it is economically inefficient. As CARE notes in its food policy paper:
“Purchasing food in the U.S., shipping it overseas, and then selling it to generate
funds for food security programs is far less cost-effective than the logical alternative
— simply providing cash to fund food security programs.” Finally, echoing
criticisms of food aid heard in WTO Doha Round negotiations, CARE notes that
when monetization involves open-market sale of commodities to generate cash,
which is almost always the case, it inevitability causes commercial displacement. As
such, it can be harmful to traders and local farmers and undermine the development
of local markets, and be detrimental to longer-term food security objectives. Catholic
Relief Services (CRS) has taken a similar position with respect to monetization.27
Using some portion of the funds available to food aid programs to make local
or regional purchases of emergency food aid rather than U.S. commodities has been
an issue in annual food aid appropriations debates since 2003. The issue is discussed
below.
25 See General Accountability Office, “Cargo Preference Requirements: Objectives Not Met
When Applied to Food Aid Programs,” September 29, 1994, available at [http://archive.gao.
gov/t2pbat2/152624.pdf]
26 See White Paper on Food Aid Policy, CARE USA, June 6, 2006, at [http://www.care.org/
newsroom/articles/2005/12/food_aid_whitepaper.pdf].
27 See Catholic Relief Services, Food Aid and Food Security, at [http://www.crs.org/
get_involved/advocacy/food_aid/in_depth.cfm].

CRS-17
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.28 The total program value of
discretionary and CCC-funded international activities for FY2006 are estimated at
$3.9 billion. Because of the provisions of the FY2007 continuing resolution
(P.L.110-5), funding for discretionary international activities will be at the level of
FY2006 appropriations. Funding for CCC-funded activities is unaffected by the
continuing resolution.
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.
P.L. 480. 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 Local Purchase vs. U.S. Commodities Issue. 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
this change would make for more timely and 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 many 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.
28 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-18
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.
McGovern-Dole. 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.

Food for Progress, Section 416, and Emerson Trust. 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 estimated 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 anticipated 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 was indicated in the President’s budget for the BEHT.
Section 738 of Title VII (General Provisions) of the House bill limited to $20 million
the amount of FY2005 P.L. 480 appropriations that could be used to reimburse the
CCC for the release of commodities from the BEHT.
Export Credit Guarantees. Export credit guarantees during FY2006 were
$4.4 billion, all for commercial credits with short-term repayment terms (up to three
years). No funds were allocated to either the Supplier Credit Guarantee Program or
the Facilities Financing Guarantee Program.
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 $2 million to the Dairy Export Incentive
Program (DEIP); however, no EEP or DEIP bonuses were allocated in FY2006.
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.

CRS-19
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
The Continuing Resolution. The 109th Congress did not enact an FY2007
annual agriculture appropriations law before it adjourned. A continuing resolution
(P.L. 110-5) is providing funding for FY2007 through the end of the fiscal year, at
the lower of either the FY2006 level or the House-passed level in H.R. 5384. Since
funding for USDA’s discretionary international activities is lower in the FY2006
appropriations than in the House-passed bill, the FY2006 level will apply. Two food
aid programs (P.L. 480 and the McGovern-Dole Food for Education program) and
the Foreign Agricultural Service will be affected by this situation. Spending on
export programs (and some food aid) is mandatory and unaffected by the continuing
resolution.
Proposed FY2007 Spending. 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 Administration’s budget indicates that an
additional $3.8 billion would be allocated to CCC-funded export and food aid
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.
Food Aid Programs. 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.

CRS-20
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).
Local Purchase vs. U.S. Commodities Again. 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 “[t]he 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) makes mention of these Administration proposals. Congress rejected
similar requests made in the FY2006 budget proposal.
Export Programs. The estimated FY2007 program level for export credit
guarantees is $1.964 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.
The Senate-reported bill deleted statutory authority for the intermediate export
credit guarantee program (guarantees up to 10 years). Earlier, the Administration had
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

CRS-21
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.
FY2007 Supplemental Request for Food Aid
The Administration has submitted a supplemental appropriations request that
would increase FY2007 funding for P.L. 480 Title II donations by $350 million.29
USDA explains that the increased funding would be used to meet humanitarian needs
in the Darfur region of Sudan, among refugees from Darfur in Chad, and in other
critical food situations in the Horn of Africa, Southern Africa, and Afghanistan. A
supplemental appropriations bill now under consideration in the House
Appropriations Committee would increase FY2007 Title II spending by $450
million.30 If the supplemental is enacted, the total of spending on P.L. 480 Title II in
FY2007 would be an estimated $1.750 billion.
FY2008 Budget Request
The President’s FY2008 budget request reports the total program value for
USDA discretionary and CCC-funded international activities at an estimated $4.6
billion, of which $1.490 billion would be appropriated. The FY2008 program level
is $392 million more than FY2007, with most of the difference accounted for by
anticipated increases in the value of short-term export credit guarantees. The
Administration requests an appropriation of $173 million for the Foreign Agricultural
Service (FAS) to administer its international programs.
For P.L. 480 foreign food assistance, the Administration requests a $1.222
billion appropriation ($1.343 billion program value with carryover and
reimbursements), all of it for Title II commodity donations. The President’s budget
requests no funds for P.L. 480 Title I loans, nor any for the Bill Emerson
Humanitarian Trust, which currently holds 900,000 metric tons of wheat and $107
million in cash. The budget assumes $163 million of CCC funds for the Food for
Progress (FFP) program, which provides food aid to emerging democracies. Absence
of Title I funds would effectively reduce spending on FFP. For the McGovern-Dole
International Food for Education and Child Nutrition Program, the budget requests
a $100 million appropriation. Proposed appropriations language (and the
Administration’s farm bill proposal) would 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. Congress rejected a similar request in FY2006 and FY2007.
29 The P.L. 480 Title II supplemental is discussed in USDA, FY2008 Budget Summary and
Annual Performance Plan, February 2007, available at [http://www.obpa.usda.gov/budsum/
fy08budsum.pdf].
30 The text of the FY2007 supplemental is available at [http://www.cq.com/getpdf.do?file=
20070312-iraqsuppbill.pdf].

CRS-22
For CCC export credit guarantee programs, which secure commercial financing
of U.S. agricultural exports, USDA’s estimates a FY2008 program level of $2.4
billion, all of it for short-term guarantees. This estimate reflects the U.S. response
to an adverse ruling by the World Trade Organization in the 2005 U.S.-Brazil cotton
dispute: suspending long-term guarantees, implementing a risk -based fee structure,
and eliminating high-risk countries from the program. Although $200 million is
allocated, “pending review,” to the Supplier Credit Guarantee Program, USDA’s
farm bill proposal calls for repeal of the program because of substantial defaults and
evidence of fraudulent activity. The budget proposes $200 million of CCC funds (the
authorized level) for the Market Access Program, which primarily promotes sales of
high-value products. The Foreign Market Development Program, which mainly
promotes bulk commodities, would receive $34.5 million, also the farm bill
authorized amount. Other, smaller export promotion programs would be allocated
a total of $14 million. Of two current export subsidy programs, citing favorable
supply and demand conditions for exports, the budget allocates no funds to the
Export Enhancement Program and just $3 million to the Dairy Export Incentive
Program. USDA’s farm bill proposal calls for repeal of EEP. Noting the expense
of the program and the relative absence of applicants, the Administration proposes
no funds for Trade Adjustment Assistance, which is authorized at $90 million.
USDA 2007 Farm Bill Proposals
USDA’s farm bill proposals, announced by Secretary Johanns on January 31,
2007, would affect programs to develop markets, subsidize exports, guarantee
commercial financing of U.S. farm exports, and provide food aid for emergency
relief.31 The Secretary’s farm bill proposals for a new trade title would also place
greater emphasis on addressing sanitary and phytosanitary and technical barriers to
trade that especially affect specialty crop and livestock product exports.
Market Development. The Secretary proposes increased funding for the
Technical Assistance for Specialty Crops (TASC) Program from its current level of
$2 million annually in mandatory funding. Under the proposal, TASC would
increase to $4 million in FY2008, $6 million in FY2009, $8 million in FY2010, and
$10 million thereafter through FY2015. For the Market Access Program (MAP),
funding would rise from the current mandatory funding of $200 million annually to
$250 million annually. The additional funding would address perceived inequities
between farm bill program crops (grains, oilseeds, and cotton) and non-program
crops (especially specialty crops). Organic agriculture would be allowed to compete
for MAP funding to help develop the export of organic products.
Export Credit Guarantees. Three major changes are proposed for the
export credit guarantee programs. First, the proposals call for reforming the credit
programs to make them consistent with U.S. WTO commitments. The WTO cotton
dispute panel found that the export credit guarantees were not consistent with U.S.
commitments under international trade rules. To bring them into conformity with
trade rules, the Administration recommends removing the 1% cap on fees that can
31 USDA’s farm bill proposals are at [http://www.usda.gov/documents/07finalfbp.pdf].

CRS-23
be collected under the Short-Term Credit Guarantee Program (GSM-102) and
eliminating specific legislative authority for the Intermediate Export Credit
Guarantee Program (GSM-103). Second, the Administration proposes termination
of the Supplier Credit Guarantee Program, largely because the SCGP has incurred a
number of defaults and there have been instances of fraud. USDA had already
suspended FY2006 program announcements. Third, the Administration proposes to
expand the Facilities Financing Guarantee Program (FGP) by allowing lower or no
down payments, 98% principal and interest coverage, and longer terms for up to the
life cycle of a facility’s depreciation schedule (not to exceed 20 years). These
recommendations are made, USDA notes, because the current requirements to qualify
for FGP have discouraged its use.
Export Subsidies. The Administration calls for the repeal of the Export
Enhancement Program (EEP). USDA’s justification for this move is that EEP is no
longer a useful tool for U.S. agricultural exports, it has been inactive since 1995, and
its elimination would not materially affect U.S. exports. EEP, the Secretary says, is
inconsistent with the U.S. goal of eliminating export subsidies worldwide in Doha
Round negotiations.
Food Aid. USDA proposes legislative authorization to use up to 25% of the
P.L. 480 Title II budget request to procure food from selected developing countries
near the site of a crisis. The Administration justifies this proposal on the grounds that
the U.S. response to food emergencies would be more efficient and cost-effective if
commodities could be procured locally. The Administration’s farm bill document
notes instances in which the U.S. food aid response to emergencies would have been
enhanced with this kind of authority: Iraq in 2003, the Asian tsunami in 2004,
Southern and West Africa in 2005, and East Africa in 2006. As if anticipating the
same congressional antipathy expressed in regard to this idea in past budget requests,
the Administration is careful to note that: “U.S. grown food will continue to play the
primary role and will be the first choice in meeting global needs.” Local and regional
purchases would be made only where the speed of the arrival of food aid is essential.
Other Proposals. Other Administration 2007 farm bill proposals would
strengthen U.S. capacity to address international SPS and technical trade barriers;
strengthen staff support for U.S. participation in international standard setting bodies,
such as the Codex Alimentarius, the International Plant Protection Convention, and
the World Animal Health Organization; provide technical assistance to limited-
resource agricultural producers to respond to trade disputes and challenges; and
expand trade capacity, food safety, and agricultural extension programs in fragile
regions.
WTO Negotiations and
USDA International Programs

Prior to the suspension of WTO Doha Round negotiations in July 2006, a
number of agreements were reached that could result in substantial change in U.S.
agricultural export and food aid programs. 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

CRS-24
Doha Development Agenda (DDA).32 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”;
! 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. Some large U.S. PVOs, however, have indicated that they will
32 For details, see CRS Report RL33144, WTO Doha Round: The Agricultural Negotiations,
by Charles E. Hanrahan and Randy Schnepf.

CRS-25
begin to phase out monetization as a source of funding for their development
projects.
New multilateral rules for export and food aid programs are contingent on
completing the Doha Round negotiations. Efforts are underway to complete the
negotiations before congressional procedures for expedited consideration of trade
agreements expires. The outcome of such efforts to bring the Doha Round to a
mutually satisfactory conclusion appears highly uncertain. Any changes in farm bill
export and food aid programs made necessary by a multilateral trade agreement
would be debated if and when Congress took up legislation to implement the
agreement. New multilateral trade rules for export subsidies, export credit
guarantees, and food aid programs also would be taken up during the debate on the
next farm bill.