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THE COMPETITION IN 1997
U.S. and
Competitor Expenditures on Export Promotion and
Export Subsidies for Agricultural, Forestry and Fishery Products
United States
The United States has a sophisticated agricultural export promotion system which operates world-wide. It is a partnership between USDA’s Foreign Agricultural Service and numerous non-profit private sector commodity and regional associations. U.S. government expenditures on these activities for FY 1997 amounted to a little over $135 million, while private sector contributions were nearly $176 million. Many of the industry activities are funded by producer/processor check-offs which have been approved in a referendum by a majority of the affected industry. There is no information on promotional expenditures by private U.S. companies.
The United States is an attractive market for many agricultural products. Consequently a significant amount of our competitors’ promotion expenditures, averaging ten percent, is spent in the United States. For some countries, such as Brazil, Canada, India, Argentina, Spain, New Zealand and Italy, the proportion of promotion expenditures devoted to the United States is as much as 25 percent.
U.S. Promotional Activities:
The main U.S. agricultural promotion programs are USDA’s Foreign Market Development Cooperator Program (FMD) and Market Access Program (MAP). USDA also provides a number of services to exporters through its overseas offices and its trade show and trade leads programs. Other programs provide technical assistance to develop, maintain, or expand markets for U.S. agricultural exports in emerging markets and sponsor short-term study and training programs in the United States for senior and middle level specialists and administrators involved in agricultural trade in foreign markets.
The goal of the FMD program, also known as the Cooperator program, is to develop, maintain and expand long-term export markets for U.S. agricultural products. The program, started in the mid-1950s, has fostered a trade promotion partnership between USDA and U.S. agricultural producers and processors who are represented by nonprofit commodity or trade associations called cooperators. Under this partnership, USDA and the cooperators pool their technical and financial resources to conduct market development activities outside the United States. These cooperators compete for USDA funding annually based on their proposed activities. Groups which have been successful in expanding exports and contribute a substantial amount of their own funds are more likely to get increased funding. Only generic promotions are funded. There are 32 cooperator groups which received funding in 1997, covering a broad range of agricultural commodities. Half of the $27.5 million dollars in U.S. government funding under FMD was spent on feedgrains, wheat and soybeans. Most of the remaining funds went to forest products, meat, rice and poultry exporters. Japan, Western Europe, China and Mexico together accounted for half of the funded projects. Other Asia, the Middle East and Latin America accounted for most of the rest of the expenditures. Projects funded by the program generally fall into one of three categories; market research, trade servicing and technical assistance. Market research is often the first step to identifying market potential. Trade servicing activities are aimed at developing or improving relationships with the trade. Technical assistance activities are usually intended to expand the foreign country’s capability to use or process U.S. commodities.
The MAP program also helps U.S. producers, exporters, private companies and other trade organizations finance promotional activities for U.S. agricultural products. While it funds many of the same types of activities as the FMD program, MAP is intended to be used for shorter term, consumer oriented promotions. It is primarily used for high value and processed products, while FMD is generally used for bulk products. The MAP program was originally started in 1985 as the Targeted Export Assistance Program. Since then, it has provided cost-share funds to nearly 1,000 U.S. companies, cooperatives, and trade associations to promote their products overseas. Branded promotions are permitted under the MAP known. Under the branded program, small businesses and cooperatives receive preference for funding, however, the promotion of a branded product in a single country is generally limited to five years. MAP applicants submit proposals for projects annually. These applications are reviewed and funds are allocated to proposals which best meet program requirements, including cost-sharing, strategic planning, export goals and activity evaluations. 64 organizations received MAP funding in 1997. 18 of these organizations also participate in the FMD program. Fruit and vegetables, represented by numerous organizations, received more than a quarter of the MAP funds. Substantial allocations were also made for cotton, meat and forest products, as well as to the state regional organizations which assist small companies in their regions. Half of the $90 million in U.S. government funding for MAP was directed at the Japanese and European markets. Other Asian markets, the Middle East and Latin America were also major targets for MAP funded promotions. Most of the activities funded under MAP involve trade show participation, in-store demonstrations and market research activities.
Other USDA promotion programs include participation in trade shows, collection and dissemination of buyers lists and trade leads to connect U.S. exporters and foreign buyers and sponsorship of U.S. promotions by U.S. embassies overseas. Promotions and trade shows are usually conducted in conjunction with FMD and MAP programs. Trade show costs are usually fully reimbursed by show participants. It is estimated that Cooperator organizations fund an additional $75-80 million in overseas promotions outside of the federally funded programs described here. In addition, many of these organizations conduct domestic promotions to encourage consumption of their products. Private industry also conducts overseas market promotion, but no information is available on those expenditures.
Competitor Activity:
Available information indicates that foreign export promotion expenditures in the United States exceeds $95 million. The biggest single country expenditure is by New Zealand which spent more the $42 million, or 19 percent of its total promotion expenditures in the United States. The next largest expenditures were by Italy and Spain. Italy spent nearly $11 million, or 16 percent of its total expenditures in the United States, while Spain spent $8 million, or 20 percent of its total expenditures. European Union member states spent nearly $31 million, or 8.6% of their total promotion expenditures in the United States. Australia spent nearly $6 million on U.S. promotions, although this represented only about 3 percent of its total expenditures. Nearly a quarter of Canada and India’s export promotions, valued at $5.7 million and $3.2 million respectively, were directed at the U.S. market. Argentina and Brazil also devote more than 20 percent of their export promotion expenditures to the United States.
European export promotion is generally conducted through national export promotion agencies; ICE for Italy, ICEX for Spain, SOPEXA for France, OPE for Greece and CMA for Germany. Most of these groups have an office in New York. ICE, ICEX and SOPEXA also have Chicago and Los Angeles offices as well as offices in either Florida or Atlanta. European food industry associations also participate in market promotions in the United States, and private companies conduct their own advertising and promotion campaigns. No information is available on private company expenditures.
The focus of Italy’s promotions is the Fancy Food Shows in New York and San Francisco and trade journal advertising associated with those shows. Pasta and other processed foods get the biggest proportion of ICE’s funding. Italian industry consortia such as Parma Ham, Italian Wine Exporters and Italian Cheese Producers are also operate out of the New York office. Spain and Greece spend most of their promotion funds on olive oil. Spain also promotes wine. Advertising and trade show participation are important activities, as well as retail promotions. Nearly 80 percent of France’s export promotion budget is spent on wine, including press campaigns for Bordeaux wine and Cognac. These expenditures are largely funded by industry associations. SOPEXA conducts training seminars for U.S. supermarket staff and large importers for French wine and cheese and uses point-of-sale tastings to promote cheese. It also promotes products such as foie gras, biscuits and confectionery through in-store promotions and food shows.
New Zealand market promotion activities in the United States are generally conducted by its producer boards, many of which maintain U.S. offices. The focus of their efforts tends to be trade servicing activities, with little direct consumer promotion. Exceptions to this include consumer sweepstakes and in-store promotions by the Apple and Pear Marketing Board, in partnership with a Canadian marketing company and New Zealand lamb promotions. The New Zealand Dairy Board maintains six wholly owned U.S. subsidiaries and is undertaking several major development projects to promote increased milk protein sales. The Board expects to be the leading milk protein supplier in the United States and Canada within the next five years.
The United States is an important market for Canadian agriculture, accounting for nearly half of Canadian agricultural exports. In order to increase these exports, a U.S. Action Plan Team has been created to coordinate federal and provincial programs. The action plan includes the Federal and Provincial Ministers of Agriculture and a total of 200 professional staff located in the provinces and in Canadian consulates in the United States. The plan includes educational activities to increase the number of firms involved in exporting, market intelligence, market development and promotion and investment and alliance promotion. Market promotion activities include developing an annual trade show plan and exhibit for each U.S. regional market, incoming trade missions from the United States, development of virtual national stands at U.S. trade shows, media kits for the U.S. press and selective in-store retail promotions. Efforts are also made to conduct outreach to Fortune 500 companies.
Indian market promotion activities are generally conducted by the state export promotion agency, APEDA. It maintains an office in New York, as does the Indian Tea Board. Products promoted are primarily marine products such as shrimp and frozen fish, tea, spices and lesser amount on processed foods, fruits and vegetables, nuts and basmati rice. Activities funded include trade shows, generic advertising and hosting trade delegations.
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