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Statement of
August Schumacher, Jr., Administrator
Foreign Agricultural Service
U.S. Department of Agriculture
Before the House Subcommittee on Agriculture,
Rural Development, the Food and Drug Administration
and Related Agencies

 

Mr. Chairman, members of the Subcommittee, I appreciate the opportunity to review the work of the Foreign Agricultural Service (FAS) and to present the President's budget request for fiscal year 1998.

1996--A RECORD YEAR FOR EXPORTS

Exporters of U.S. farm and food products posted another sales record in fiscal year 1996 in both volume and value. Exports climbed to $59.8 billion, a gain of more than $5 billion from the previous year. This marked the second straight year of robust trade growth. In fiscal 1995, U.S. agricultural exports surged to $54.6 billion, up 25 percent from 1994.

With the strong, back-to-back gains of the past two years, U.S. agricultural exports in 1996 were up by some $19 billion or close to 50 percent since 1990. In an average week this past year, U.S. producers, processors and exporters shipped more than $1.1 billion worth of food and farm products to foreign markets, compared with about $775 million per week at the start of this decade.

Fiscal year 1996 sales were up in two of the three major categories of agricultural exports--bulk commodities (such as grains), and consumer-oriented products (mainly foods and beverages). In the intermediate products category (semi-processed commodities, live animals and seeds), exports were off 4 percent from 1995's record level.

The overall export gains outfaced the more moderate growth in imports, raising the fiscal year 1996 agricultural trade surplus to a new record of $27.4 billion--up from $25.0 billion in fiscal 1995. In the most recent comparisons among 11 major industries, agriculture ranked No. 1 as the leading positive contributor to the U.S. merchandise trade balance.

U.S. wood and fishery products didn't fare quite as well as agricultural products this past year. Wood product exports were valued at $7.1 billion, off 4 percent from 1995's record. Sales of edible fish and seafood, at $2.9 billion, were down about 10 percent. However, combined U.S. exports of agricultural, wood and fish products in fiscal 1996 rose 7 percent to a record-high $69.7 billion.

As you can see, we've experienced solid growth in export demand as our product mix becomes more diversified and as we implement the trade agreements that have improved market access. But we have much hard work ahead of us. As domestic farm supports are reduced, export markets become even more critical for the economic well-being of our farmers and rural communities, as well as suburban and urban areas that depend upon the employment generated from increased trade.

Today, U.S. agricultural exports support about 1 million American jobs--with about one third of them in the farm sector. The other two-thirds are off-farm in processing, marketing and transportation. These jobs, on average, are higher paying than non-export related jobs.

Early forecasts of agricultural exports for the current year suggest a more moderate sales pace. In December, USDA analysts projected fiscal year 1997 exports at $56.5 billion, down about 6 percent from 1996, but still the second highest value on record. The anticipated reduction mainly reflects increased foreign production of grains and lower average prices for wheat and coarse grains. High-value exports such as livestock, poultry and soybean products are forecast to set another record this year.

Mr. Chairman, one of Secretary Glickman's goals for the Department is to expand economic security for all of our farmers and ranchers. To do that, we have to expand economic opportunities, and increasingly, these opportunities lie overseas.

To help American agriculture tap into these opportunities, FAS works to:

Through these aggressive measures we are helping our farmers and ranchers meet the competitive challenges both now and in the future.

Market Access and Development

Much of our recent export success can obviously be linked to the combined effects of our trade policy initiatives, export assistance programs, and the market development efforts of FAS working with our agricultural cooperators and others, including participants in the Market Access Program (MAP). For over 40 years, USDA and U.S. agricultural producers and processors have had a unique partnership that allows us to pool our technical and financial resources to conduct market development activities around the world. When the Uruguay Round Agreement was reached, our cooperators had, in many cases, already laid the groundwork for export sales through their on-going market development activities. And in many instances, use of our export assistance programs, such as Public Law 480 and the export credit guarantee programs, had served to introduce quality American products to foreign buyers. So, in fiscal year 1996, the first full year of implementation of the Uruguay Round Agreement, U.S. agriculture was able to take advantage of the solid foundation built over the years and post some notable gains.

Pork: For the first time, Korea opened its market for pork, both fresh and processed. As a result of the increased market access and preparatory work to introduce U.S. pork by the U.S. Meat Export Federation, U.S. pork suppliers now have a 30-percent share of the Korean processed pork market, a 10-fold increase over the token 3-percent market share for the United States in 1994. In addition, the Round enabled U.S. suppliers to crack the Korean market for fresh/chilled pork. The first U.S. container of fresh pork was shipped in September 1996 and now the product is being shipped at the rate of a container a day.

In the Japanese market, the U.S. Meat Export Federation has also been helping to pave the way for U.S. pork exporters to take advantage of increased access, despite stiff competition from Denmark and Taiwan. Several years of trade servicing, and, more recently, promotion directly to consumers have culminated in the United States capturing a phenomenal 46 percent of the market for fresh and chilled product valued at $950 million market.

Beef: In Korea, where the U.S. Meat Export Federation has also been active for many years, the U.S. beef industry has seen its export volume rise more than 50 percent as a result of the Uruguay Round Agreement. In 1995, U.S. exporters shipped 91,000 tons of beef to Korea, capturing 63 percent of the market.

Rice: Increased market access and the U.S. Rice Federation's success in persuading Japanese rice traders and consumers of the dependability of high quality U.S. supplies at competitive prices led to more than $125 million in U.S. sales this crop year. This accounts for almost half of the market -- up from virtually zero in 1993.

Soybeans and meal: Capitalizing on increased market access to the Philippines, the American Soybean Association has been promoting the use of soybean meal to poultry and swine producers. Over the past two years, the value of U.S. soybean and product exports to the Philippine market has grown 122 percent to $160 million.

In Indonesia, increased market access, reduced tariffs and the American Soybean Association's promotion of soybean meal in poultry rations helped to boost U.S. soybean meal exports from zero to 100,000 tons valued at $20 million over the past two years.

Cotton: Under the sanitary and phytosanitary provisions of the Uruguay Round, Guatemala changed a phytosanitary provision that had increased the cost of U.S. cotton, making it uncompetitive with cotton from other countries. To educate Guatemalan officials about the quality of U.S. cotton and the thoroughness of USDA cotton inspection procedures, FAS organized a training program for Guatemalan plant health officials. Cotton Council International's sponsorship of trade team exchanges and technical assistance have also helped U.S. exporters capture 90 percent of the Guatemalan cotton market with exports valued at $42 million in the 1995/96 marketing year.

Feed grains: In the Philippines, U.S. corn exporters registered about $66 million in sales for the 1995/96 marketing year, capturing 75 percent of this once-closed market. The U.S. Feed Grains Council played a key role through its market development and trade servicing activities.

Fruit: The California Table Grape Commission's technical assistance was invaluable to U.S. government negotiators in their successful efforts to gain access to the Korean fresh table grape market in 1996 and to resolve subsequent sanitary and phytosanitary barriers. U.S. grape exports for the first 10 months of 1996 were valued at $1.3 million and are expected to grow substantially in the future as the U.S. industry works to develop the market.

The Agreement also opened the Korean market for oranges in 1995. U.S. exporters registered sales of $5.3 million in 1995, a figure that rose to $13.6 million in 1996. The U.S. agricultural office in Korea is projecting significantly higher sales for 1997.

Processed Products: Tariff cuts for processed products, in some cases substantial, provided for in the Uruguay Round Agreement are expected to help boost the United States' competitive position in markets around the world. This is especially true in markets where consumers are increasingly looking for convenient, ready-to-eat food products. For example, Thailand will cut in half its tariffs on french fries, potato chips and other processed potato products. The National Potato Promotion Board, a MAP participant, has broadened its promotion activities to higher-valued items such as speciality and battered/coated fry products, resulting in significant new sales. For example, U.S. frozen french fry exports to Thailand have shown steady growth, increasing from $2.2 million in 1994 to more than $4.4 million in 1996.

These are just some of the gains that have come about as a result of the Uruguay Round Agreement and the willingness of U.S. agricultural exporters to devote the time and resources to develop these opportunities -- a task that may take years, but one that pays good dividends when trade agreements are concluded. The Agreement represents real progress toward creating a trading environment where markets, not governments, determine the production and marketing decisions of farmers and exporters. But this Agreement is only the beginning of a process to achieve fairer trade -- it is by no means the end. In 2000, we will continue the reform process and will begin negotiations for continuing the process of progressive reductions in support and protection, building on the successes of the Uruguay Round.

Bilateral Trade Issues

We also realized notable accomplishments with some of our bilateral trading partners. Working with other U.S. government agencies, we encouraged European Union (EU) and Japanese officials to decide the issues surrounding genetically modified organisms using scientific arguments. As a result, the EU approved Round-Up Ready soybeans and BT corn, and Japan approved seven new genetically modified products.

Working with USDA's health and safety agencies and the USA Poultry and Egg Export Council, we were able to preserve our largest and fastest growing markets for poultry, resolving disputes with Russia and China. Following the discovery of Karnal bunt in the southwest U.S. wheat crop, FAS, working closely with other USDA agencies, the U.S. Wheat Associates and several state wheat commissions, overcame a significant threat to U.S. exports by successfully negotiating with 33 countries and the EU on alternative phytosanitary certification procedures to keep U.S. wheat exports flowing to these countries. These markets traditionally take half of U.S. wheat exports, representing $2-$3 billion in annual U.S. sales.

Overseas Offices

Overseas, FAS field offices support USDA programs and the U.S. agricultural export drive in 95 locations around the globe. These offices continue to function as the "eyes and ears" for U.S. agricultural exporters, and the thousands of attache reports that they prepare each year are now available to the widest possible audience almost instantly via the Internet.

FAS has moved aggressively to adjust overseas staff in line with the Department's Long-Term Agricultural Strategy. Over the past decade, we have increased staff in the Pacific Rim and Latin America, and decreased staff in Europe. In addition, the number of foreign national staff employees working primarily on market development activities has been increased by about 5 percent.

Domestic Outreach

Domestically, FAS expanded its outreach and information efforts to educate U.S. businesses about the tremendous potential of the international marketplace. A key part of this effort is the location of export advisors at the State level -- at the California, Colorado, and Oregon State Departments of Agriculture and the Iowa State Office of USDA's Farm Service Agency.

FAS has joined forces with cooperators and MAP participants such as the American Hardwood Export Council and the American Seafood Institute, and with local entities such as State departments of agriculture across the country to sponsor export seminars for small and new-to-export business. We have enlisted the local expertise of banking institutions to help explain financing options, both those supported by FAS and other financing tools, and have asked other Federal agencies such as APHIS to help explain foreign country import requirements. The goal of these and other activities is to excite small companies about the opportunities opening to them in export markets and to educate them to ensure their initial forays into international trade are successful.

Last July, FAS, in conjunction with the Farm Service Agency, conducted outreach efforts in 47 states plus Puerto Rico. These outreach efforts were an outgrowth of the Global Attache Conference that was held July 15-19, 1996. The states hosted export events that were attended by one of USDA's 50 diplomats serving as agricultural attaches or trade officers worldwide. The events included farm and plant tours, along with an FAS presentation explaining the importance of agricultural exports to the national and local economy, global opportunities, and USDA services and programs. Over 2,000 people attended the events, bringing together producers, bankers, agribusinesses, exporters, freight-forwarders, university officials, and Federal, State and local government officials.

Cooperation and Development

In fiscal 1996, the Cochran Fellowship Program provided training in the United States for nearly 700 participants from 44 countries. A number of Cochran participants have furthered U.S. trade initiatives by, for example, assisting in resolving sanitary and phytosanitary issues in Korea, Mexico, and Indonesia. Participants from Russia, Uzbekistan, Cote d'Ivoire and China purchased U.S. agricultural commodities as a result of contacts made during their training. Many of these purchases were first-time sales to new international customers and could result in future sales as well. In addition, former Cochran participants have influenced policy within their countries. The privatization of state-collective farms and rural land mortgage systems in Russia, for example, are being implemented by former Cochran participants.

FAS' Scientific Cooperation Program supports efforts to improve the competitiveness of U.S. farmers by developing new food and fiber products; developing novel processing technologies for safe, convenient, value-added products; and developing technologies that create new products from residuals, byproducts, and wastes generated by food and agricultural production and processing operations. So far in this fiscal year, the Program has awarded 35 research projects and 15 exchange visits involving 40 different countries and representing a wide range of U.S. universities and USDA agencies. Priority subjects covered include trade barriers and phytosanitary issues, food safety, exotic diseases and pests, and biological control.

Through our programs of technical assistance, research, and training, we've conducted over 2,200 activities in over 90 countries around the world. These activities helped to enhance the competitiveness of U.S. agriculture, preserve our natural resources, and assist countries in enhancing their national food security. As part of our key role in the international effort to increase global food security, FAS led the U.S. government's intensive interagency efforts in preparation for the World Food Summit that brought world leaders to Rome last November. In partnership with the U.S. private sector and non-government organization (NGO) communities, we will continue to play an important role by following through on the U.S. commitments made as a result of the Summit.

Export Programs

Our export programs and services continue to play a key role in supporting U.S. exporters in overseas markets. FAS constantly seeks to refine and expand all of its export programs to meet changing demands of the international marketplace and keep pace with the competition. We are seeking continued budget support for these programs, which will allow us to continue to improve these export tools and reach out to additional potential exporters.

Our export credit guarantee programs provide assistance to U.S. exporters in emerging markets where the financial markets provide insufficient credit and international competitors are offering credit or subsidized commodity prices. Exporters using GSM-102 and GSM-103 export credit guarantee programs registered sales totaling $3.2 billion for 18 countries and 5 regional markets in 1996. Mexico, our third largest export market, was the largest export credit guarantee program last year with U.S. sales totaling $1.4 billion -- or over 27 percent of our exports to Mexico. Mexico's credit repayments are fully on schedule. For 1997 we anticipate total GSM export credit guarantees to be about the same or slightly higher than the fiscal 1996 level.

We have launched a new export credit guarantee program -- a supplier guarantee program -- designed to help expand exports of processed and other high-value products. Under this program, which is a component of GSM-102, the Commodity Credit Corporation (CCC) guarantees a portion of the risk of default by an importer on short-term credits, up to 180 days, extended by a U.S. exporter. A $50 million program has been authorized for exports to Mexico, a $10 million program for Guatemala, and a $35 million program for Southeast Asia. Programs are also being developed for Latin and Central America and the Caribbean. Since this is a new activity, we are undertaking an extensive outreach effort to both overseas and U.S. audiences to expand the understanding of this activity. We are confident this program will help us further increase our exports of these products.

Another new program to be carried out under GSM-102 authority will be a facilities guarantee program. We anticipate publishing an interim final rule this spring for this program.

In addition, our food aid authorities--P.L. 480, Title I and Food for Progress--provided about 1.2 million metric tons of food assistance with a program value of about $370 million to 27 countries during fiscal year 1996.

In 1997, funding for P.L. 480, including the Titles II and III grant programs, totals over $1 billion and provides about 3.2 million metric tons of commodity assistance. This amount is sufficient to provide for anticipated programming needs and to more than meet our 2.5-million-ton commitment to the international Food Aid Convention. Within FAS, we are seeking to improve the market development impact of Title I, particularly by working with private sector entities as authorized by the Federal Agriculture Improvement and Reform Act of 1996.

In the Market Access Program, we continue to hone our allocation procedures, particularly with respect to participant contributions and export performance, to target resources more effectively to those programs offering the best prospects for success and to encourage increasing private sector contributions. The success of these efforts is in part reflected in the growth in U.S. participant and industry contributions as a share of government costs. Participant and industry contributions rose from 48 percent in 1994 to almost 54 percent in 1995, the most recently completed year. In addition, as directed by Congress, 70 percent of the resources allocated for brand promotion has been awarded to small companies or cooperatives.

Among the more promising developments in fiscal 1996 was the virtual suspension of global export subsidies, which mask market signals and distort trade. The restrained use of the Export Enhancement Program (EEP) in 1996 allowed U.S. exporters to market their products unaffected by government actions. We don't consider that current world market conditions warrant the use of subsidies by anyone. In general, U.S. supplies are relatively tight and we are exporting what we have available without the need to use subsidies. Unfortunately, the responsible restraint by the United States has been tested by renewed EU subsidization, which began in September 1996. We must be ready to protect our agricultural trade interests including the resumption of EEP, if necessary, and, therefore, have requested full funding of the EEP for 1998.

U.S. dairy exporters sold nearly 48,000 metric tons of cheeses, nonfat dry milk and whole milk powder with the help of the Dairy Export Incentive Program (DEIP) in fiscal 1996

CHALLENGES AHEAD

As you can see, 1996 was a busy year, and 1997 and 1998 promise to be just as busy as we work to build prosperity for America's farmers and ranchers. On the trade policy front, we have set our sights on 2000, when multilateral negotiations for continuing the process of progressive reductions in agricultural support and protection will be initiated. This year, we will begin to set the U.S. objectives and goals for agriculture for those negotiations.

We will also continue to place high priority on the important work done in international organizations that contribute to U.S. farm exports. This includes science-based standard setting by the Codex Alimentarius Commission, the International Plant Protection Convention and the International Office of Epizootics.

Bilaterally, the accession of China to the WTO is a top priority. We will work to ensure that we reach a commercially meaningful agreement with the Chinese, and we must resolve several outstanding sanitary and phytosanitary issues.

In addition to China, we also face both short- and long-term sanitary and phytosanitary issues with other countries as well. We continue to work with our trading partners through the WTO and bilaterally to address these concerns and to ensure that such import restrictions are based on sound science.

Another critical area is the trade treatment of biotechnology products. New developments in biotechnology have the potential to increase food production, lower farming costs, improve food quality and safety, and enhance environmental quality. However, the benefits for both farmers and consumers will not easily be realized without greater transparency and efficiency in the approval process.

We also continue to address issues with our partners in the North American Free Trade Agreement (NAFTA). The road is not always smooth, and a number of contentious issues remain to be addressed. Work also continues with Congress to develop fast-track legislation to begin the process by which Chile will join the NAFTA.

With our export assistance programs, we face the constant challenge of ensuring that our programs help exporters compete in the constantly changing world marketplace. For example, we are currently reviewing our operational requirements for the GSM programs, seeking ways to expand the programs' benefits to U.S. agriculture. As I noted earlier, we expect to launch another new export credit guarantee program -- the facilities guarantee program -- later this year. This program is designed to provide guarantees for the sale of capital goods and services that are used for the improvement or establishment of agricultural facilities in emerging markets.

We are seeking to improve the market development impact of Title I, particularly through agreements with private sector entities as authorized by the Federal Agriculture Improvement and Reform Act of 1996.

Our work with developing countries will also be challenging. These countries are important to U.S. agricultural interests now and will become even more so as we move into the next century. Two dollars out of every five that U.S. farmers earn overseas come from developing country markets, and these markets are where the biggest growth opportunities lie for U.S. agriculture. So what are we doing to focus on them? We will follow up the work begun at the World Food Summit. In addition, we will continue to use all the tools available to us--the Cochran Fellowship program, scientific exchanges and collaborative research, for example--to help ready American agriculture for the next century.

But in the end, we believe that open markets and expanded trade offer the best and surest ways to economic growth and prosperity. But just as we have targeted markets for export growth, so have other exporters, and we will continue to face stiff competition around the globe.

FAS recently completed an annual review of the export promotion activities of 22 countries that account for our major competition. The study found that just like the United States, many of our competitors have announced ambitious export goals and are reorienting their export programs to attract larger numbers of small- and medium-sized firms to exporting. The EU and other countries assist their producers and small businesses to develop foreign markets through activities similar to our Market Access Program (MAP) and Foreign Market Development (FMD) Program. Market promotion by EU countries is estimated at $350.2 million in 1995/96, with slightly less than half of that amount provided by EU-member governments. The rest of the funds comes from producer boards and other fees. Australia, Canada, and New Zealand have strong national government promotion agencies and rely heavily on their statutory marketing boards to carry out market development activities for producers of specific agricultural products.

In addition to market promotion activities, the EU also carries out an extensive subsidy program. Of the $9 billion budgeted by the EU in 1996 for export subsidies, over 85 percent was for exports of high-value products such as fresh and processed fruits and vegetables, wine, dairy products, and meat and meat products.

As our study shows, our competitors are not standing still. We in the United States can not stand still either. Our Long-Term Trade Strategy and the FAS Strategic Plan we are developing in accord with the Government Performance and Results Act will provide the blue print that we are and will continue to follow to identify and meet our export goals. We must continue to work aggressively to meet the competitive challenges facing us now and in the future.

FAS BUDGET REQUEST

The challenges I just described illustrate why I believe FAS must continue to play a prominent role in export expansion. Today's budget realities mean that government must be leaner and more efficient, but the era of a responsive and responsible government is not over. While there are things that government can't or shouldn't do, there are many legitimate public needs that only government can meet. Whether it's working to resolve trade disputes, supporting the American private sector as it battles in export markets against foreign competitors flush with funds from their national treasuries, or educating potential exporters, FAS has a vital role to play.

Mr. Chairman, in the current year FAS is continuing the aggressive approach to achieving our fundamental objective of increasing U.S. agricultural exports by 50 percent by the year 2000. With the resources provided by this Committee, FAS is expanding market development activities, including the Cooperator Program and our domestic outreach efforts, to facilitate the entry of small and medium sized producers into the export market.

Overseas, FAS is moving aggressively to adjust overseas staff in line with the Department's Long-Term Agricultural Strategy. We have recently opened an office in Hanoi, a new Agricultural Trade office in Indonesia, and an Agricultural Trade Office for the Caribbean region in Miami, Florida. Within the next few months we will open an Agricultural Trade Office in Moscow and an office on the U.S./Mexico border. By this summer, we will have augmented American staffing in Tokyo, Seoul, Geneva, and Moscow. The number of foreign national staff employees working primarily on market development activities has been increased by about 5 percent.

While maintaining necessary activities in mature markets, we will continue to look for ways that we can strengthen USDA's presence in areas of the world that are experiencing the most rapid development and changes.

We believe the future offers continued opportunity for the expansion of U.S. agricultural exports. Strengthening our ability to compete globally has the direct payoff of increased farm income for America's farmers and ranchers and the continued economic development of rural communities.

The world marketplace is intense and our competitors are upping the stakes. For example, in fiscal year 1996, FAS expenditures for all activities: export promotion, trade servicing, FAS personnel and operating costs -- everything -- was less than the European Union spent that year just to subsidize its barley exports.

Mr. Chairman, the FY 1998 FAS budget proposes a direct funding level of $150.9 million and 885 staff-years, an increase of $15.4 million above FY 1997 funding levels. The activity structure of the FY 1998 FAS budget reflects implementation of the Government Performance and Results Act and transition to a performance-based management system. In this regard, FAS has adopted a new budget activity structure that incorporates the policy objectives of USDA's Long-term Agricultural Trade Strategy.

Significant proposals by policy objective include:

-- Strategic Outreach and Market Intelligence: The 1998 President's budget proposes that funding for the operating costs of the CCC Computer Facility and other, related FAS information Resources Management costs, which in the past have been funded through a reimbursable agreement with CCC, shall be funded through the FAS appropriation. This change will shift funding for these activities from mandatory to the more appropriate category of discretionary spending. Also, future funding for these activities will no longer be subject to the annual limitation on CCC reimbursable agreements established by provisions of the 1996 Farm Bill.

The total of the Computer Facility and other IRM costs is estimated at $9.7 million in 1998. The budget provides increased funding of $4.0 million to partially meet these costs; the remaining $5.7 million will be met through a reduction in marketing programs carried out through the ATOs and increased cost-share contributions by participants in the Cooperator Program.

--Market Access: The budget includes an increase of $500,000 to implement a systematic process to review, identify, and catalog technical barriers to trade and other technical requirements that limit export opportunities for U.S. agricultural products in the top 30 U.S. export markets. The review will lead to recommendations for overcoming the identified barriers to expanded U.S. agricultural exports to these markets These markets account for the majority of U.S. agricultural export trade. The catalog will include codified and non-codified information from the various governmental agencies regulating or affecting imports in these major markets.

-- Long-term Market Development: The 1998 President's budget proposes that technical assistance activities carried out under the Emerging Markets Program and authorized by section 1542(d) of the 1990 FACT Act be funded through FAS appropriations rather than through CCC funds made available to FAS under a reimbursable agreement. This change shifts the costs of these activities from mandatory to discretionary spending, but funding will remain at the currently authorized level of $10 million annually, which corresponds to provisions of its authorizing statute.

The budget also includes new provisions to address the difficulties in accurately estimating and funding wage and price increases associated with the operations of our overseas Counselor, Attache and Trade Offices. First, the budget provides an advance appropriation of $3 million for FY 1999 to fund documented wage and price increases and/or exchange rate losses incurred during fiscal year 1998. Second, in conjunction with the advance appropriation, the budget proposes that funds appropriated to FAS in fiscal year 1998 be available for obligation through September 30, 1999.

Export Programs

Mr. Chairman, the commercial export programs we administer are expected to grow in importance as the market-opening provisions of the Uruguay Round Agreement are implemented. Our program proposals provide the tools to meet these new sales opportunities, tempered by the need to reduce Federal spending.

For the export credit guarantee programs, the budget proposes a total program level of $5.7 billion. This includes $5.3 billion for the GSM-102 program and $400 million for the GSM-103 program. As part of the GSM-102 program, the budget includes $350 million for supplier credit guarantees and $100 million for our new facilities financing guarantees. We are continuously looking at ways to use this guarantee authority to meet changing market needs.

To provide a partial offset for a high priority supplemental appropriations request for the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), a $50-million rescission of budget authority is proposed for P.L. 480, Title. I. This proposal will reduce the Title I program level by $60 million and estimated commodity shipments by 200,000 metric tons. This proposed reduction does not change the country allocations already announced.

For 1998, the budget provides a total program level of $990 million for P.L. 480 foreign food assistance, a reduction of $57 million from the revised estimate for 1997. The reduction in P.L. 480 funding proposed for 1998 will occur in the Title I program; funding for Titles II and III will remain largely unchanged from 1997 enacted levels. The 1998 request level is expected to provide total estimated shipments of P.L. 480 commodities of 3.2 million metric tons, unchanged from the revised tonnage estimate for 1997.

The 1998 President's budget shifts the budget and expenditures for the P.L. 480 Title I credit sales program from the International Affairs Function (Function 150) to the Agriculture Function (Function 350) of the Federal budget. Provisions of both the 1990 and 1996 Farm Bills have redirected the focus of the Title I credit sales program to place far greater emphasis on its market development objectives With these changes, the importance and role of the Title I program in the Department's overall long-term market development strategy has increased. As a result, the Department strongly believes that the Title I program should be managed and budgeted as a part of a consistent package of agricultural export programs. Because all other USDA export programs are included in the Agriculture Function of the budget, the Title I program should be included in that Function as well. In addition, this shift in Title I to the Agriculture Function will not affect the overall level of U.S. foreign food aid efforts because Title I program activities will continue to contribute to U.S. international food aid commitments.

For the Market Access Program, the budget proposes a program level of $90 million for fiscal 1998, the maximum program level authorized by the FAIR Act, and unchanged from FY 1997.

For our subsidy programs, the proposed levels for EEP and DEIP allow for changed market conditions and provide the necessary tools to respond to other governments' actions. Program activities in fiscal year 1996 were much lower than in previous years due to world market conditions. The budget provides $500 million for EEP, the maximum level established by the 1996 Farm Bill and $89 million for DEIP in anticipation of higher sales under this program.

This concludes my statement, Mr. Chairman. I will be glad to answer any questions.

 


Last modified: Thursday, October 14, 2004 PM