Agricultural Export Assistance Update: Quarterly Report
September 2000

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 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 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. As of Aug. 2, fiscal year 2000 commodity allocations for food aid under P.L. 480 were estimated at $707 million, including $263 million for Title I (including Title I-funded Food for Progress), and $443 million for Title II (including Title II/World Food Program). The $707 million in P.L. 480 food assistance will support the shipment of approximately 3.5 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.

As of Aug. 7, FY 2000 concessional sales and donations of about 1.4 million metric tons of commodities valued at $263 million had been allocated to 14 countries under Title I and the Food for Progress program using Title I funds. This includes Title I-funded Food for Progress donations of about 300,000 metric tons of commodities valued at approximately $95 million.

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 2000, donations of about 2 million metric tons of commodities valued at an estimated $443 million have been allocated 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. As of Aug. 2, no donations had been programmed under Title III. Although no appropriation was authorized for Title III in fiscal year 2000, small amounts of carry-over funds are available that could be programmed. In addition, current P.L. 480 statutory authorities allow up to 15 percent of the funds of any title of P.L. 480 to be transferred to carry out any other title.

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.

As of Aug. 7, FY 2000 Food for Progress bilateral agreements using the Title I authority were planned with Bosnia-Herzegovina, Ecuador, Guyana, Honduras, Mozambique, and Russia totaling 300,060 metric tons valued at about $95 million. Food for Progress programs using CCC funds were planned with U.S. private voluntary organizations for projects in 13 countries totaling 158,200 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 $30 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 2000, total programmed donations under Section 416(b) amount to around 4 million metric tons valued at approximately $840 million to about 50 countries.

As of Aug. 7, FY 2000 food assistance allocated under programs administered by USDA (P.L. 480, Title I; the Food for Progress program; and the Section 416(b) program) totaled about 5 million metric tons.

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 from $5.5 billion 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. As of Aug. 4, FY 2000 GSM-102 allocations of about $4.4 billion had been announced to 22 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 $2.5 billion for exports to 11 countries and five 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. As of Aug. 4, $188 million in FY 2000 intermediate credit guarantees had been made available for sales to 11 countries and two regions B the Central America and Southern Africa regions. Under this availability, GSM-103 registrations totaled about $18.1 million for three 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.

As of Aug. 4, FY 2000 SCGP allocations totaled $461 million in coverage for sales to 13 countries and ten regions, including the Andean, Baltic, Central America, Central Europe, East Africa, East Caribbean, Southeast Asia, Southeast Europe, West Africa, and West Caribbean regions. Under the announced availability, registrations totaled about $91.1 million to seven countries and six regions.

The Facility Guarantee Program (FGP) 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. As of Aug. 4, FY 2000 FGP registrations totaled $4.8 million to one country.

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 set maximum funding levels for CCC to make available for 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 allocation for 20,210 metric tons of frozen poultry to six Middle Eastern countries under the EEP was announced 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, EEP was made operational only for frozen poultry. For FY 2000, as of Aug. 9, bonuses of about $1.4 million had been awarded for 2,095 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 EEP, with cash bonus payments. The DEIP 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 program for July 1, 2000, through June 30, 2001, were announced on July 3, 2000. The major markets being assisted in FY 2000 to date include the Caribbean and Central and South America. For FY 2000, as of Aug. 9, bonuses totaling $77.3 million were awarded for 67,862 metric tons of nonfat dry milk, 15,832 tons of whole milk powder, 3,898 tons of anhydrous milkfat, 1,385 tons of butter, 15 tons of butteroil, 515 tons of processed American cheese, 1,642 tons of mozzarella cheese, 1,830 tons of Monterey Jack cheese, and 2,025 tons of cheddar  cheese.

The Market Access Program (MAP) was authorized by Section 203 of the Agricultural Trade Act of 1978, as amended. 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, agricultural 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, in-store demonstrations, trade shows, and seminars. On June 9, 2000, USDA announced FY 2000 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 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. USDA announced an FY 2000 FMD program level of $33.5 million, allocated among 25 U.S. trade organizations. Applications for the FY 2001 FMD program have been reviewed, and USDA expects to announce the allocations soon.