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Summary of Program Activities

Public Law 104-127, the Federal Agriculture Improvement and Reform Act of 1996 (FAIR Act), was signed into law on April 4, 1996. The FAIR Act oriented trade and food aid programs toward greater market development, with increased emphasis on high-value and value-added products. It reauthorized and revised such longstanding export assistance programs as Public Law (P.L.) 480, short- and intermediate-term export credit guarantees (GSM-102 and GSM-103), the Export Enhancement Program, the Dairy Export Incentive Program, and the Market Access Program (formerly the Market Promotion Program). The FAIR Act also provided for the creation of the Supplier Credit Guarantee Program and the Facility Guarantee Program.

The U.S. Department of Agriculture administers the export assistance programs contained in the FAIR Act, except for Titles II and III of the revised P.L. 480, which are assigned by law to the Agency for International Development. Within USDA, the Foreign Agricultural Service (FAS) is the leader in developing and executing these programs and initiatives.

 

Food Aid Programs

The FAIR Act reauthorized and added activities to one of the oldest U.S. export assistance programs--P.L. 480, also known as Food for Peace. Fiscal year 1999 commodity programming for food aid under P.L. 480 is estimated at about $1.2 billion, including $656.1 million for Title I (including Title I-funded Food for Progress), $496.3 million for Title II (including Title II/World Food Program), and $13.7 million for Title III. The $1.2 billion in P.L. 480 food assistance supported the shipment of approximately 4.0 million metric tons of commodities.

The FAIR Act reauthorized Title I government-to-government concessional sales and included the authority to sign agreements with private entities. It also modified the repayment terms for Title I credit, eliminating the minimum repayment period of 10 years and reducing the maximum grace period from 7 to 5 years. An agricultural trade organization will be allowed to carry out projects or programs in developing countries using funds from the sale of Title I commodities if the organization has a market development plan approved by the Secretary of Agriculture.

For FY 1999, Title I and Title I-funded Food for Progress agreements were signed for 2.2 million tons of commodities valued at about $656.1 million. Of this, about 1.4 million metric tons of commodities valued at about $507.6 million was programmed for Russia as part of the food assistance package announced by the Secretary of Agriculture on Nov. 6, 1998. Ocean freight financing and ocean freight grants totaling $80.2 million were provided to ship these commodities to Russia under the food assistance package.

The FAIR Act reauthorized the Title II emergency and private assistance donations program. It increased the maximum level of funding that can be provided as overseas administrative support from $13.5 million to $28 million and added intergovernmental organizations such as the World Food Program to the list of organizations eligible to receive these funds. For FY 1999, donations of about 1.6 million metric tons of commodities valued at an estimated $496.3 million were programmed under Title II, including Title II donations through the World Food Program.

The FAIR Act reauthorized the Title III Food for Development program. This program provides government-to-government food assistance grants to least-developed countries. Local sales proceeds can be used to support a variety of economic development and related activities in recipient countries. For FY 1999, 116,400 metric tons of wheat valued at $13.7 million was programmed under Title III.

Another program, Food for Progress, is carried out using commodities available for distribution under Section 416(b), funds available to the Commodity Credit Corporation (CCC), or funds appropriated under P.L. 480, Title I. This program provides commodities to needy countries as a reward for having undertaken economic or agricultural reform. The FAIR Act extended the authority for the Food for Progress program to provide assistance in the administration and monitoring of food assistance programs to strengthen private sector agriculture in recipient countries through 2002. The authority was also expanded to include intergovernmental organizations in Food for Progress programming, to make sales on credit terms to all eligible countries in addition to the former Soviet Union, and to include the provision of technical assistance for monetization programs.

FY 1999 Food for Progress bilateral agreements using the Title I authority were signed with Honduras, Nicaragua, and Russia totaling 235,140 metric tons valued at about $227 million. In addition, Food for Progress agreements with private entities using the Title I authority were signed with Bosnia-Herzegovina (4,750 tons valued at about $3.9 million) and with Russia (26,500 tons valued at about $11.6 million). Food for Progress programs using CCC funds were planned with U.S. private voluntary organizations for projects in 21 countries totaling 164,110 tons of commodities valued at about $71 million. The Food for Progress program is limited by a global 500,000-metric-ton legislative ceiling and by a cap of $35 million on noncommodity costs paid directly by CCC (primarily transportation).

The FAIR Act reauthorized the Farmer-to-Farmer Program, which can include middle-income countries and emerging markets. FAIR also increased the minimum percentage of P.L. 480 funding for the Farmer-to-Farmer Program from 0.2 to 0.4 percent.

Section 416(b) of the Agricultural Act of 1949 provides for the donation to needy countries of eligible commodities held by the CCC. For FY 1999, 5.5 million metric tons of commodities valued at about $793.6 million were donated under the Section 416(b) program. On July 18, 1998, President Clinton announced a Food Aid Initiative providing for the purchase of wheat by the U.S. Government from the domestic market. Two authorities were used to carry out the initiative. The wheat was purchased under the authority of the CCC Charter Act and was donated under the authority of Section 416(b) of the Agricultural Act of 1949. About 5.2 million tons of wheat and wheat products valued at about $712.3 million were donated under this initiative. In addition, 22,670 tons of nonfortified, nonfat dry milk and 274,240 tons of corn were donated under the Section 416(b) program in FY 1999.

U.S. food assistance under the programs administered by USDA (P.L. 480, Title I, including Title I-funded Food for Progress; the CCC-funded Food for Progress program; and the Section 416(b) program) totaled about 7.8 million metric tons with a value of about $1.5 billion for FY 1999.

 

Commercial Export Credit Guarantee Programs

A minimum annual program level of $5.7 billion is available for the Export Credit Guarantee Program (GSM-102) and the Intermediate Export Credit Guarantee Program (GSM-103). The FAIR Act mandates a minimum annual program level of $5.5 billion for 

GSM-102 and GSM-103, but it allows flexibility in how much is made available for each program. Provisions of the Food, Agriculture, Conservation, and Trade (FACT) Act of 1990 mandate that a minimum of $1.0 billion be made available for direct credits or export credit guarantees to emerging markets during fiscal years 1996-2002. Under this mandate, $200 million is made available annually, increasing the minimum annual program level for GSM-102 and GSM-103 to $5.7 billion.

The GSM-102 program guarantees repayments of short-term credits (90 days to 3 years) extended by U.S. financial institutions to eligible banks in countries that purchase U.S. farm products. For FY 1999, GSM-102 allocations of about $5.1 billion were announced to 24 countries and 11 regions, including the Andean, Baltic, Central America, Central Europe, East Africa, East Caribbean, Southeast Asia, Southeast Europe, Southern Africa, West Africa, and West Caribbean regions. Under this availability, GSM-102 registrations totaled about $3.0 billion for exports to13 countries and eight regions.

Guarantees issued under the GSM-103 program can cover financing periods of more than 3 and up to 10 years. This program is designed to help developing nations make the transition from concessional financing to cash purchases. For FY 1999, $377 million in intermediate credit guarantees were made available for sales to 12 countries and two regions B the Central America and Southern Africa regions. Under this availability, GSM-103 registrations totaled about $44.2 million for five countries and one region.

The Supplier Credit Guarantee Program (SCGP) became operational in late FY 1996. This program is designed to encourage U.S. exporters to expand, maintain, and develop markets for U.S. agricultural products in areas where commercial financing may not be available without a CCC payment guarantee. The program can help U.S. exporters who wish to provide short-term credit (180 days or less) directly to their foreign buyers.

For FY 1999, SCGP allocations totaled $361 million in coverage for sales to 12 countries and eight regions, including the Andean, Baltic, Central America, Central Europe, East African, East Carribean, Southeast Asia, and Southeast Europe regions. Under the announced FY 1999 availability, registrations totaled $46.02 million.

The Facility Guarantee Program was implemented in December 1997 to extend credit guarantees for export sales of U.S. capital goods and services to improve agriculture-related facilities in emerging markets. No sales were registered under this program in FY 1999.

 

Export Assistance Programs

The Export Enhancement Program (EEP), announced by USDA on May 15, 1985, operates under the authority of the Agricultural Trade Act of 1978 as amended, the Uruguay Round Agreements Act, and the FAIR Act. The EEP permits USDA to provide bonuses to make U.S. commodities more competitive in the world marketplace and to offset the adverse effects of unfair trade practices or subsidies. The FAIR Act sets maximum funding levels for CCC to make available under the EEP each fiscal year through 2002 as follows: FY 1996, $350 million; FY 1997, $250 million; FY 1998, $500 million; FY 1999, $550 million; FY 2000, $579 million; FY 2001, $478 million; and FY 2002, $478 million.

On July 1, 1999, a one-year EEP allocation was announced for 20,210 metric tons of frozen poultry to six Middle Eastern countries in accordance with the quantity limitations of the Uruguay Round Agreement on Agriculture. Aside from the poultry allocation, the Uruguay Round Agreement would permit export subsidies for wheat, wheat flour, barley, malting barley, malt, sorghum, rice, vegetable oils, and table eggs. However, the EEP was made operational only for frozen poultry in FY 1999. FY 1999 bonuses of about $1.4 million were awarded for 2,446 metric tons of frozen poultry.

Section 148 of the FAIR Act extended the Dairy Export Incentive Program (DEIP) through FY 2002. Section 148 focuses the DEIP on market development, providing full authority and funding to reach the volume or spending limits consistent with U.S. obligations as a member of the World Trade Organization. The DEIP operates on a bid bonus system similar to the EEP, with cash bonus payments. This program helps exporters of U.S. dairy products meet prevailing world prices and helps develop foreign markets for the targeted products.

Allocations under the current DEIP for July 1, 1999, through June 30, 2000, were announced on July 1 and Oct. 1, 1999. The major markets being assisted include Africa, Asia, the Former Soviet Union, Latin America, and the Middle East.

The major markets assisted in FY 1999 included Asia, the Former Soviet Union, and Latin America. Bonuses totaling $145.4 million were awarded for 127,808 metric tons of nonfat dry milk, 5,340 tons of whole milk powder, 355 tons of anhydrous milkfat, 40 tons of butter, 1,974 tons of processed American cheese, 697 tons of mozzarella cheese, 81 tons of cheddar cheese, 6 tons of Monterey jack, and 21 tons of varietal cheese.

The Market Access Program (MAP) was authorized by the FAIR Act. The MAP is funded at $90 million annually for FY 1996 through 2002 and is designed to encourage the development, maintenance, and expansion of foreign markets for U.S. agriculture, fish, and forest products. The MAP forms a partnership among small businesses, cooperatives, state-regional trade groups, trade associations, and FAS to use the experience of specialists deployed around the world and share the costs of eligible overseas marketing and promotional activities. Eligible activities include consumer promotions, market research, trade shows, and trade seminars. On June 25, 1999, USDA announced FY 1999 MAP allocations of $90 million to 65 U.S. trade organizations for export promotion activities in foreign markets.

The Foreign Market Development Cooperator Program (FMD) also provides cost-share assistance to eligible nonprofit agricultural and trade organizations to conduct approved international market development activities. USDA enters into agreements with nonprofit U.S. trade organizations that have the broadest producer representation of the commodity being promoted and gives priority to those organizations that are nationwide in membership and scope. Activities conducted under this program generally address long-term foreign import constraints and are designed to develop, maintain, and expand long-term growth in demand for U.S. agriculture, fish, and forest products. For the FY 1999 FMD, the program level was $33.5 million to 26 U.S. trade organizations. The program level for the FY 2000 FMD will also be $33.5 million. USDA plans to announce the allocations soon.

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