IB98006 - Agricultural Export and Food Aid Programs
9-Mar-2006; Charles E. Hanrahan; 18 p.
Update: June 2, 2005
MOST RECENT DEVELOPMENTS:
On February 6, 2006, the Secretary of Agriculture announced details of the President’s FY2007 budget for agriculture. Included in the budget is a request for $1.378 billion of budget authority for USDA’s international programs, most of which — $1.218 billion — will go for foreign food donations under P.L. 480 Title II.
The World Trade Organization (WTO) meeting in Hong Kong, China, on December 13- 18, 2005, reached agreement on eliminating agricultural export subsidies by the end of 2013, contingent upon eliminating other forms of subsidized export competition.
The President signed the FY2006 Agriculture, Rural Development, Food and Drug Administration and Related Agencies Appropriations Act (P.L. 109-97, H.R. 2744) into law on November 10, 2005. The act includes $1.488 billion in budget authority for USDA’s discretionary international activities which include primarily foreign food aid and the salaries and expenses of the Foreign Agricultural Service. Additional funds are available for food aid and export-related activities through the borrowing authority of the Commodity Credit Corporation.
Abstract: The U.S. Department of Agriculture (USDA) forecasts that FY2006 agricultural exports will be $64.5 billion, up from FY2005’s record $62.4 billion. FY2006 imports are forecast at $63.5 billion, also a record high, leaving the United States with an agricultural trade surplus of $1 billion.
USDA operates four kinds of international programs to promote agricultural exports or provide food aid, all authorized in the 2002 farm bill, the Farm Security and Rural Investment Act (FSRIA, P.L. 107-171), or in permanent legislation. These programs include direct export subsidies, export market development, export credit guarantees, and foreign food aid. Legislative authority for most of these programs now extends to the end of 2007. Export subsidies, but not other U.S. export and food aid programs, are subject to reduction commitments agreed to in multilateral trade negotiations.
Direct subsidies include the Export Enhancement Program (EEP) and the Dairy Export Incentive Program (DEIP). EEP spending has been negligible since 1996, and DEIP spending has been declining since 2002.
Market development programs include the Market Access Program (MAP) and the Foreign Market Development or “Cooperator” Program (FMDP). Considered to be non-trade distorting, these programs are exempt from multilateral reduction commitments. The FSRIA authorizes MAP spending of $200 million annually by FY2006 and sets FMDP spending at $34.5 million annually.
The FSRIA authorizes export credit guarantees by USDA’s Commodity Credit Corporation (CCC) of up to $5.5 billion worth of farm exports annually plus an additional $1 billion for emerging markets through 2007. Actual levels guaranteed depend on economic conditions and the demand for financing by eligible countries.
The FSRIA also authorizes through FY2007 food aid programs including P.L. 480 Food for Peace, Food for Progress, the Emerson Trust (a reserve of commodities and cash), and a new international school feeding program. Section 416(b), permanently authorized in the Agricultural Act of 1949, can provide surplus commodities for donation overseas. Global food emergencies are putting pressure on the ability of food aid providers, including the United States, to meet estimated needs and reducing food aid available for development projects.
The FY2006 Agriculture and Rural Development Appropriations Act (P.L. 109- 97, H.R. 2744) supports $5.2 billion in export and food aid programs, funded with appropriated funds or through the borrowing authority of the Commodity Credit Corporation (CCC). The President has proposed an additional $350 million for emergency food aid, mainly for Africa, in an FY2006 supplemental appropriation request. The President’s FY2007 budget proposal estimates spending for USDA’s international activities of $5.3 billion in FY2007.
Agricultural export subsidies, export credits, and food aid programs could be affected by the outcomes of on-going multilateral trade negotiations in the Doha Round. These programs will also be debated as Congress considers legislation to replace the 2002 farm bill which expires in 2007.