Agricultural Trade: Changes Made to Market Access Program, but Questions
Remain on Economic Impact (Letter Report, 04/05/99, GAO/NSIAD-99-38).

Pursuant to a congressional request, GAO reviewed the Department of
Agriculture's implementation of legislative reforms to the Market Access
Program (MAP) and their impact on program participation.

GAO noted that: (1) as directed by Congress, the Foreign Agricultural
Service (FAS) implemented operational changes to MAP; these changes have
affected program participation and distribution of funds; (2) since
fiscal year (FY) 1994, FAS has increased the number of small businesses
participating in MAP to promote brand-name products as well as small
businesses' share of program funds; (3) as required by statute, FAS
prohibited direct assistance for brand-name promotions to large
companies beginning in FY 1996; (4) this prohibition does not apply to
cooperatives and certain associations; (5) also, beginning in FY 1998,
FAS prohibited indirect assistance to large companies; (6) FAS
implemented a graduation requirement that will affect about a quarter of
the small businesses with brand-name promotions totalling $4.3 million
in FY 1999, as well as the number of MAP brand-name promotions conducted
in individual country markets; (7) this graduation requirement also
could have affected about half of the cooperatives; however, in December
1998, FAS chose to use its statutory authority and waive the graduation
requirement for all cooperatives, citing special considerations; (8)
since FY 1995, FAS has required all participants to self-certify that
MAP funds supplement, not supplant, their activities to develop new
foreign markets for their products; (9) while FAS regularly verifies
that the participants and the companies they fund have completed their
certification statements, FAS' Director of Compliance Review Staff
reports that it is difficult to ensure that these funds are additional
because it is hard to determine what would have been spent in the
absence of MAP funds; (10) also, this requirement has had no apparent
impact on program participation; (11) questions remain about the overall
economic benefits derived from MAP funding; (12) FAS estimates of MAP's
macroeconomic impact are overstated because they rely on a methodology
that assumes that the resources used were not employed prior to the
funding; (13) GAO noted that this is inconsistent with Office of
Management and Budget cost/benefit guidelines; and (14) in addition, the
evidence from market-level studies is inconclusive regarding MAP's
impact on specific commodities in specific markets.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  NSIAD-99-38
     TITLE:  Agricultural Trade: Changes Made to Market Access Program,
	     but Questions Remain on Economic Impact
      DATE:  04/05/99
   SUBJECT:  Agricultural programs
	     Agricultural products
	     Commodity marketing
	     Agricultural industry
	     Economic analysis
	     International trade
	     Sales promotion
	     Small business assistance
	     Program graduation
	     Agricultural cooperatives
IDENTIFIER:  USDA Market Access Program

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Cover
================================================================ COVER

Report to Congressional Requesters

April 1999

AGRICULTURAL TRADE - CHANGES MADE
TO MARKET ACCESS PROGRAM, BUT
QUESTIONS REMAIN ON ECONOMIC
IMPACT

GAO/NSIAD-99-38

Agricultural Trade

(711359)

Abbreviations
=============================================================== ABBREV

  CRS - Compliance Review Staff
  FAS - Foreign Agricultural Service
  MAP - Market Access Program
  MPP - Market Promotion Program
  NEC-63 - Research Committee on Commodity Promotion
  NICPRE - National Institute for Commodity Promotion Research and
     Evaluation
  OMB - Office of Management and Budget
  SBA - Small Business Administration
  TEA - Targeted Export Assistance
  TPCC - Trade Promotion Coordinating Committee
  USDA - U.S.  Department of Agriculture

Letter
=============================================================== LETTER

B-281456

April 5, 1999

The Honorable Charles Schumer
United States Senate

The Honorable Steve Chabot
The Honorable Eddie Bernice Johnson
The Honorable Ron Kind
The Honorable Marty Meehan
The Honorable Rob Portman
The Honorable Edward Royce
House of Representatives

This report responds to your request that we examine the U.S. 
Department of Agriculture's (USDA) implementation of legislative
reforms to the Market Access Program (MAP) and their impact on
program participation.  Since 1986, MAP has provided funds to
nonprofit organizations and commercial firms to help support their
promotions of U.S.  agricultural products in overseas markets.\1 The
Foreign Agricultural Service (FAS), an agency of USDA, administers
this program and estimates that there are substantial economic
benefits associated with MAP.  Over the years, some Members of
Congress have questioned MAP's long-term economic returns to the
taxpayer and expressed concerns about program
operations--specifically that large corporations were using MAP to
support their brand-name promotions and that there were no
requirements for companies to graduate from the program.  In
addition, there was concern that these federal dollars were
displacing private sector expenditures already planned for market
development activities.\2

In response to these concerns, Congress enacted legislative reforms
beginning in fiscal year 1993 that, among other things, directed FAS
to (1) give small businesses priority when funding MAP promotion of
brand-name products in foreign markets and, with certain exceptions,
prohibit direct assistance to large companies; (2) establish a
graduation requirement by limiting to 5 years the amount of time MAP
funds can be used to promote brand-name products in a single market;
and (3) require each recipient to certify that any federal funds
received supplement, not supplant, its expenditures for promotions in
foreign markets.\3 As requested, this report provides information on
and analysis of FAS' implementation of each of these requirements. 
It also responds to your request that we review assessments of the
economic benefits of MAP. 

--------------------
\1 MAP has had two predecessors.  In 1996, MAP replaced the Market
Promotion Program, which was established in 1990 to replace the
Targeted Export Assistance program authorized in 1985. 

\2 See International Trade:  Changes Needed to Improve Effectiveness
of the Market Promotion Program (GAO/GGD-93-125, July 7, 1993) and
International Trade:  Effectiveness of Market Promotion Program
Remains Unclear (GAO/GGD-93-103, June 4, 1993). 

\3 The Omnibus Budget Reconciliation Act of 1993 (P.L.  103-66, sec. 
1302, Aug.  10, 1993) and the Federal Agriculture Improvement and
Reform Act of 1996 (P.L.  104-127, sec.  244, Apr.  4, 1996). 

   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

As directed by Congress, the Foreign Agricultural Service implemented
operational changes to the Market Access Program; these changes have
affected program participation and distribution of funds.  Since
fiscal
year 1994, FAS has increased the number of small businesses
participating in MAP to promote brand-name products as well as small
businesses' share of program funds.  As required by statute, FAS
prohibited direct assistance for brand-name promotions to large
companies beginning in fiscal year 1996.  This prohibition does not
apply to cooperatives and certain associations.  Also, beginning in
fiscal year 1998, FAS prohibited indirect assistance to large
companies (excluding cooperatives and certain associations). 

Furthermore, FAS implemented a graduation requirement that will
affect about a quarter of the small businesses with brand-name
promotions totaling $4.3 million in fiscal year 1999, as well as the
number of MAP brand-name promotions conducted in individual country
markets.  This graduation requirement also could have affected about
half of the cooperatives; however, in December 1998, FAS chose to use
its statutory authority and waive the graduation requirement for all
cooperatives, citing special considerations. 

Since fiscal year 1995, FAS has required all participants to
self-certify that MAP funds supplement, not supplant, their
activities to develop new foreign markets for their products.  While
FAS regularly verifies that the participants and the companies they
fund have completed their certification statements, FAS' Director of
Compliance Review Staff reports that it is difficult to assure that
these funds are additional because it is hard to determine what would
have been spent in the absence of MAP funds.  Also, this requirement
has had no apparent impact on program participation. 

Questions remain about the overall economic benefits derived from MAP
funding.  FAS estimates of MAP's macroeconomic impact are overstated
because they rely on a methodology that assumes that the resources
used were not employed prior to the funding.  We note that this is
inconsistent with Office of Management and Budget (OMB) cost/benefit
guidelines.  In addition, the evidence from market-level studies is
inconclusive regarding MAP's impact on specific commodities in
specific markets. 

   BACKGROUND
------------------------------------------------------------ Letter :2

In fiscal year 1997, Congress allocated $90 million for MAP to
support the overseas promotion of agricultural goods such as grains,
cotton, forest products, fruits, nuts, seafood, meat, alcoholic
beverages, and processed goods.\4 (See fig.  I.1 in app.  I for MAP
appropriations since fiscal year 1986.) During fiscal year 1997, FAS
provided MAP funds directly to 65 participating organizations
consisting of 54 nonprofit agricultural trade associations,
5 nonprofit state regional groups,\5 2 state agencies, and 4
agricultural cooperatives.\6 (See app.  I, table I.1, for a list of
fiscal year 1997 MAP participating organizations and their budgets). 

MAP funds can be used to support both generic promotions and
brand-name promotions.  In fiscal year 1997, about 76 percent of
MAP's budget supported generic promotions, with the remaining funds
supporting brand-name promotions.  Generic promotions are undertaken
by nonprofit trade associations, state regional groups, and state
agencies to increase demand for a specific commodity with no emphasis
on a particular brand, for example, U.S.  peas and lentils, catfish,
and cotton.  Brand-name promotions, on the other hand, are conducted
by companies and cooperatives to establish consumer loyalty for their
brand-name products.  Trade associations and others using MAP funds
to support generic promotions must contribute at least 10 percent of
the promotion cost; entities using MAP funds to support brand-name
promotions must make a minimum 50 percent contribution. 

In order to receive MAP funds, participating organizations must
submit, and FAS must approve, marketing plans specifically describing
the manner in which MAP assistance will be expended.  Under these
plans, the MAP funds may be spent by participating organizations
themselves (direct) and/or redistributed to entities that have
applied to participating organizations for MAP assistance (indirect). 
In fiscal year 1997, there were 453 individual companies and 20
cooperatives that indirectly received assistance for brand-name
promotions.  These companies and cooperatives applied for MAP funds
through 19 participating organizations. 

Eligible MAP expenses include production and distribution of
advertising and promotional materials (for example, posters, recipes,
and brochures); in-store and food service promotions; product
demonstrations; and fees for participation in exhibits.  Funds used
to support generic promotions may only be spent on the generic
aspects of a campaign rather than on any promotional material or
advertising that specifies a single company or brand.\7

MAP supported generic and brand-name promotions in 100 countries
during fiscal year 1997; 10 country markets accounted for 65 percent
of the funds (see app.  I, fig.  I.2, for top country markets).  With
regard to the MAP brand-name program, a total of 475 companies and
cooperatives received assistance in fiscal year 1997.  The amount of
MAP funds awarded to each ranged from $1,500 to $2.6 million;
however, almost half of the awards were in amounts less than $25,000
(see app.  I, table I.2, for size of fiscal year 1997 MAP awards). 

FAS' Strategic Plan 1997-2002 contains estimates of the economic
impact of FAS foreign market promotion programs, including MAP.  This
plan fulfills the requirement established under the Government
Performance and Results Act of 1993 (Results Act) (P.L.  103-62)
whereby federal agencies must prepare strategic and annual
performance plans covering the program activities set out in the
agencies' budgets.  For purposes of conducting cost/benefit analyses
of government programs, OMB has established guidelines.\8

--------------------
\4 At the time of our review, the most current year with complete MAP
data with company detail available was fiscal year 1997.  A fiscal
year represents the year for which the MAP funds were authorized and
allocated; however, these funds may have been expended the following
fiscal year depending on the recipient's marketing year. 

\5 State regional groups are associations of state Departments of
Agriculture. 

\6 These agricultural cooperatives are agricultural producer
companies that market and sell the production of individual growers. 

\7 Any activity that involves two or more companies is considered a
generic promotion as long as MAP funds are not used on items that
identify the company, and all other companies had equal opportunity
to participate in the promotion. 

\8 See "Guidelines and Discount Rates for Benefit-Cost Analysis of
Federal Programs," OMB Circular A-94 (Washington, D.C.:  Oct.  29,
1992). 

   MAP BRAND-NAME PROMOTIONS
   TARGET SMALL BUSINESSES
------------------------------------------------------------ Letter :3

Since fiscal year 1994, FAS has significantly increased the number of
small businesses participating in MAP's brand-name program as well as
their share of MAP funds.  In fiscal year 1996, as required by
statute, FAS discontinued providing direct assistance to large
businesses other than cooperatives and certain associations, which by
law are eligible to receive this assistance for brand-name promotions
regardless of size.\9 In fiscal year 1998, FAS eliminated MAP funding
for brand-name promotions by large companies entirely, by prohibiting
their indirect participation in the brand-name program. 

--------------------
\9 The prohibition on direct MAP assistance for brand-name promotions
does not apply to cooperatives, nonprofit trade associations, and
Capper-Volstead associations (P.L.  104-127, Apr.  4, 1996). 

      SMALL BUSINESS SHARE OF MAP
      BRAND-NAME ASSISTANCE HAS
      INCREASED
---------------------------------------------------------- Letter :3.1

Congress enacted legislation in 1993 directing FAS to give priority
to small businesses when allocating MAP funds for brand-name
promotions
(P.L.  103-66).  FAS requires businesses that are applying for
brand-name assistance to certify that they are a small-sized entity
based on their own assessment using the Small Business
Administration's (SBA) criteria.\10 Since fiscal year 1994, FAS has
increased the number of small businesses participating in MAP's
brand-name program and raised the total amount allocated to small
businesses while decreasing the total amount allocated to large
companies.  The number of small businesses participating in the MAP
brand-name program increased from 312 to 370 between fiscal
years 1994 and 1997.  Also, the share of MAP brand-name program funds
allocated to small businesses increased from 41 percent to 61
percent, and the share allocated to large companies decreased from 35
percent to 16 percent during that period (see fig.  1).  During the
same period, the share allocated to cooperatives remained about the
same, around 23 percent.\11

   Figure 1:  MAP Brand-name
   Allocations by Type of
   Recipient, Fiscal Years 1994
   and 1997

   (See figure in printed
   edition.)

Note:  The fiscal year 1994 allocation represents expenditures
amounting to $26.1 million, and the fiscal year 1997 allocation
represents a budgeted amount of $29 million.  The figures in
parenthesis represent the total number of companies or cooperatives. 

Source:  USDA. 

According to FAS officials, these results have been achieved by
conducting presentations throughout the United States encouraging
small companies to promote their products overseas.  In addition, FAS
has provided state regional groups with additional funds to expand
their outreach activities.  We estimate there were 145 first-time
recipients of MAP funds for brand-name promotions in fiscal year
1997.\12 Our analysis of FAS data shows that these first-time
recipients included 2 cooperatives, 125 small businesses, and 18
large companies. 

--------------------
\10 The thresholds for establishing company size under SBA's criteria
depend on the type of business and are based on either the maximum
number of employees or annual receipts.  Under 13 C.F.R.  part 121,
SBA established criteria to classify companies as small businesses
for each industry according to their Standard Industrial
Classification codes.  For example, agricultural producers cannot
exceed a production value of $500,000, and most types of wholesalers
cannot have more than 100 employees.  In calculating a firm's number
of employees or annual receipts, the SBA criteria require that all
affiliated companies, whether parent or subsidiary, foreign or
domestic, are included. 

\11 Of the 22 cooperatives that received MAP assistance in fiscal
year 1997, 3 cooperatives had annual receipts or total employees that
would place them within the SBA criteria for small businesses. 

\12 Our classification of a recipient as a first-time recipient is
based on the fact that a recipient had not received brand-name
program funds for fiscal years 1994-96.  This methodology may
overstate the number of first-time recipients if any had received
funding in prior years; however, detailed company information is not
available for earlier years to determine whether these recipients
received brand-name funds before 1994. 

      CHANGES TO MAP BRAND-NAME
      ALLOCATIONS BASED ON
      RECIPIENT SIZE
---------------------------------------------------------- Letter :3.2

Legislation enacted in 1996 prohibited FAS from providing direct
assistance for brand-name promotions to companies that are not
recognized as small business concerns under the Small Business Act. 
Nonprofit trade associations, Capper-Volstead associations,\13 and
cooperatives were specifically exempted from this prohibition.  As a
result, FAS ended direct assistance to six large companies that had
received direct assistance in fiscal year 1995.  One of these large
companies continued to receive MAP funds indirectly for brand-name
promotions in fiscal years 1996 and 1997 by applying through two
state regional groups. 

While the 1996 legislation prohibits only direct assistance to large
companies, FAS recently decided to prohibit large companies
(excluding cooperatives and certain associations) from receiving MAP
brand-name funds indirectly through the trade associations, state
regional groups, and state agencies.  Fiscal year 1997 was the last
year that FAS allowed large companies to participate, either directly
or indirectly, in the MAP brand-name program.  Consequently, 83 large
companies that had received MAP brand-name assistance in fiscal year
1997 were expected to be eliminated from the brand-name program in
fiscal year 1998.\14 Large businesses can still take part in MAP's
generic promotions.  According to FAS officials, their decision to
entirely eliminate large companies from the allocation of MAP funds
for brand-name promotions responded to criticisms that MAP
represented "corporate welfare" and recognized that small businesses
need greater assistance in exporting. 

--------------------
\13 The Capper-Volstead Act (7 U.S.C.  sec.  291) authorizes persons
engaged in the production of agricultural products to act together in
association for the purpose of processing, preparing for market,
handling, and marketing such products.  The act establishes a
qualified immunity for such associations from the antitrust laws. 
The act applies to growers and processors of fruit, dairy products,
trees, and general agricultural products.  Nonprofit agricultural
cooperatives, as well as cooperatives having capital stock, can
qualify as associations under the act. 

\14 Fiscal year 1998 data was not available at the time of our review
and, therefore, we could not confirm that large companies did not
receive MAP assistance for brand-name promotions in fiscal year 1998. 

   GRADUATION AFFECTS BRAND-NAME
   PROMOTIONS, BUT WAIVERS REDUCE
   IMPACT
------------------------------------------------------------ Letter :4

FAS first issued regulations in fiscal year 1995 to implement the
statutory direction to establish a graduation requirement for MAP
participants.  These regulations limited assistance to 5 years per
specific branded product per single market.  They were later revised
to limit assistance to 5 years per company per country market.  Our
projection, based on FAS data, suggests that the graduation
requirement could affect half of the cooperatives and about a quarter
of the small businesses that used MAP funds in fiscal
year 1997 to promote their brand-name products.  These entities face
the prospect of losing MAP assistance for approximately 40 percent of
their current promotions, totaling $9.2 million in fiscal year 1999. 
However, FAS used its statutory authority in December 1998 and waived
the graduation requirement for all cooperatives.  The effect of this
decision reduced the impact of the graduation requirement on program
participation to $4.3 million, affecting only brand-name promotions
conducted by small businesses. 

      GRADUATION REQUIREMENT
      APPLIES TO ALL COMPANY
      PRODUCTS IN A SINGLE COUNTRY
---------------------------------------------------------- Letter :4.1

To implement the graduation requirement, FAS established regulations
in February 1995 limiting a company or a cooperative to 5 years of
MAP assistance per "single market" per "specific brand product."\15
FAS first applied the graduation requirement to companies receiving
assistance for brand-name promotions in fiscal year 1994.  While FAS
officials recognize that many market segments can exist within a
single country (for example, a particular geographic region, target
audience, or demographic group), the rule defines "single market" as
a "single country" to reduce the administrative burden on both the
participant and FAS as well as to eliminate the need for
interpretation.  Under the 1995 regulations, FAS had discretion to
determine whether two or more brand-name products were substantially
the same product or different products.  Some participants requested
that FAS use its discretion to more narrowly define the term "single
product." For example, representatives from an almond producers'
cooperative told us that they thought they should be able to follow a
5-year MAP promotion of their brand-name almonds in frozen yogurt in
a particular country with a MAP promotion of their almonds in ice
cream because they would be promoting a different type of brand-name
product. 

FAS revised the regulations in June 1998\16 to limit each company to
no more than 5 years of MAP funding for brand-name promotions per
country.\17 According to FAS officials, the new regulation simplifies
program administration and allows FAS to share its resources more
effectively with a wider variety of U.S.  exporters and markets. 
After 5 years of assistance in a country, FAS officials told us, a
company should have established itself in that market and be able to
finance 100 percent of its market development costs.  Upon graduating
from these markets, companies are not excluded from the MAP program,
because they can receive funds for brand-name promotions in other
countries or take part in MAP's generic program.  FAS officials hope
that the graduation requirement might encourage companies to enter
new and promising markets that have been previously ignored. 

--------------------
\15 7 C.F.R.  1485.14(d)(2), Federal Register, Vol.  60, No.  21
(Feb.  1, 1995), p.  6366. 

\16 7 C.F.R.  1485.14 (d)(2), Federal Register, Vol.  63, No.  105
(June 2, 1998), p.  29940. 

\17 A company is limited to a total of 5 years of MAP assistance
(consecutive or nonconsecutive) for its promotions in a particular
country beginning with fiscal year 1994 allocations.  Fiscal year
1998 is the first year any company would graduate from a particular
country market, meaning the company will have to continue its
promotion without MAP assistance in fiscal year 1999. 

      GRADUATION AFFECTS MANY
      COMPANIES AND COUNTRY
      MARKETS
---------------------------------------------------------- Letter :4.2

Our projection of FAS data suggests that 11 of the 22 cooperatives
(50 percent) and 87 of the 370 small businesses (24 percent) that
received MAP funds for brand-name promotions in fiscal year 1997
could be affected by the 5-year graduation requirement in fiscal year
1999.\18 These
11 cooperatives and 87 small businesses conducted a total of 445
brand-name promotions in fiscal year 1997, of which an estimated 183
of these promotions (or 41 percent) would not qualify for MAP funding
in fiscal year 1999 if there were no waivers to the graduation
requirement.\19

The graduation requirement could impact MAP brand-name promotions in
some country markets more than in others (see table 1).  Almost
two-thirds of MAP's $29 million budget for brand-name promotions
supported company and cooperative promotions in nine countries in
fiscal year 1997.  Our analysis estimates that 7 percent of the
companies and cooperatives with brand-name promotions in Korea and
Taiwan could graduate from MAP assistance in fiscal year 1999
compared to the approximately 25 percent share of companies and
cooperatives that face graduation in Japan, the United Kingdom, and
Canada.  However, some country markets will not be as significantly
affected by the graduation requirement; for example, 65 percent of
the companies and cooperatives conducting MAP-assisted brand-name
promotions in the People's Republic of China were using the program
for the first time in that country in fiscal
year 1997. 

                                     Table 1
                     
                     Country Markets With Largest MAP Brand-
                          name Budgets, Fiscal Year 1997

                      Number of companies in fiscal year
                                     1997
                      ----------------------------------
                                  First-time recipients   Companies projected to
                                       in country\a       graduate in FY 1998\b
                                  ----------------------  ----------------------
Coun
try           Budget
mark         FY 1997       Total
ets    (in millions)      number      Number     Percent      Number     Percent
----  --------------  ----------  ----------  ----------  ----------  ----------
Japa            $5.0         160          74          46          36          23
 n
Unit             2.9         118          44          37          31          26
 ed
 Kin
 gdo
 m
Cana             2.3         111          40          36          30          27
 da
Hong             1.9          71          36          51          14          20
 Kong
Germ             1.8         123          67          54          19          15
 any
Mexi             1.5          77          39          51          12          16
 co
Peop             1.0          72          47          65           0           0
 le's
 Rep
 ubl
 ic
 of
 Chi
 na
Taiw             1.0          55          30          55           4           7
 an
Repu             1.0          54          34          63           4           7
 blic
 of
 Kor
 ea
--------------------------------------------------------------------------------
Legend:
FY=fiscal year

Note:  In this table, the number of companies represents the total
number of companies and cooperatives. 

\a We projected the number of companies and cooperatives that used
MAP funds for brand-name promotions for the first time in fiscal year
1997 based on the observation that they had not received MAP funds
for fiscal years 1994-97. 

\b We projected the number of companies and cooperatives that will
have received MAP brand-name assistance for 5 years based on funding
history for each country (that is, the company or cooperative
received MAP assistance for fiscal years 1994-97, and we assume they
will receive funds in fiscal year 1998). 

Source:  Our analysis of USDA data. 

To study the long-term impact of the graduation requirement on MAP
participation, we analyzed the top 10 cooperatives and small
businesses that received MAP brand-name funds in fiscal year 1997. 
Our analysis estimates that 9 of the 10 recipients would graduate
from at least one country market in fiscal year 1998.  In addition,
four recipients would face the prospect of graduating from at least
half of their country markets in fiscal year 1998 (see table 2).  For
example, International American Supermarkets is expected to graduate
in fiscal year 1998 from seven of its nine Middle Eastern markets. 
In addition, this company is expected to graduate from its remaining
two country markets in fiscal year 2000.  International American
Supermarkets has received over $3.1 million (in 1997 dollars) since
1989 to promote grocery products in these markets. 

                                     Table 2
                     
                      Small Businesses and Cooperatives With
                     Largest MAP Brand-name Awards in Fiscal
                     Year 1997 and Projected Graduations From
                                 Country Markets

                                                Number of country markets
                                          --------------------------------------
                                                    Projected graduations from
                                                              MAP\a
                                                  ------------------------------
                                  Budget

Compan          Commodity     allocation   Total
y name  Type    types            FY 1997   FY 97    FY98    FY99    FY00    FY01
------  ------  ------------  ----------  ------  ------  ------  ------  ------
Sunkis  Coop    Fresh citrus  $2,594,000       5       5       0       0       0
t
Grower
s

Blue    Coop    Almonds,       1,419,000       9       4       2       0       3
Diamon          pistachios
d

Welch   Coop    Grape juice      740,000       6       2       3       0       1
Foods

Sunswe  Coop    Prunes           616,000       3       3       0       0       0
et

IntlAm  Small   Bakery,snack     475,000       9       7       0       2       0
SupMkt          s,vegs
s

ASB     Small   Snack food       350,000       2       1       1       0       0
Group
Intl

Ocean   Coop    Cranberries      320,000       3       1       0       1       1
Spray           & products,
                fresh
                grapefruit

Herman  Small   Confectioner     265,000       6       2       1       1       2
Goelit          y
z

Org     Small   Log cabins       250,000       1       0       0       1       0
Log
Cabin
Homes

Wente   Small   Wine             250,000       9      \4      \2      \1      \2
Bros
--------------------------------------------------------------------------------
Legend:
FY=fiscal year

Note:  These top 10 recipients received 25 percent of the brand-name
budget. 

\a We projected the number of countries the company is expected to
graduate from based on funding history (that is, the company received
MAP funds for a certain country for fiscal years 1994-97, and we
assume that it will receive funds in fiscal year 1998). 

Source:  Our analysis of USDA data. 

--------------------
\18 Fiscal year 1998 data was not available at the time of our study,
so we projected the number of companies and cooperatives expected to
graduate from certain country markets in fiscal year 1998 based on
their funding history for each country.  In other words, if a company
received 4 consecutive years of MAP funds for a certain country
(fiscal years 1994-97), we assumed it will receive funds for the same
country in fiscal year 1998. 

\19 The graduation requirement does not apply to those companies,
cooperatives, and trade associations receiving MAP funds for generic
promotions, which represented 76 percent of the total MAP program
budget in fiscal year 1997.  Trade associations that receive MAP
funds to support their generic promotions face no restrictions on the
number of years they can receive assistance in a country.  For
example, since 1986 almost $87.2 million in MAP funds has been spent
by one trade association for the generic promotion of U.S.  meat in
Japan, with annual MAP expenditures ranging between $3.9 million and
$18.8 million (in 1997 dollars).  Similarly, over $15 million in MAP
funds has been spent by one trade association on the generic
promotion of U.S.  wine in the United Kingdom, with annual MAP
expenditures ranging between $614,000 and $4.7 million (in 1997
dollars). 

      WAIVERS REDUCE IMPACT OF
      GRADUATION REQUIREMENT
---------------------------------------------------------- Letter :4.3

The impact of the graduation requirement was reduced when FAS decided
in December 1998 to waive the graduation requirement for all
cooperatives.  While the legislation encourages graduation, it also
gives the Secretary of Agriculture authority to waive the graduation
requirement and extend MAP brand-name assistance beyond 5 years for a
particular company if it is determined that further assistance is
necessary to meet the objectives of the program.  According to FAS'
Deputy Administrator for Commodity and Market Programs, FAS extended
MAP assistance to all cooperatives for brand-name promotions beyond
the 5 year limit for two reasons:  (1) some cooperatives represent
the interests of thousands of individual growers and (2) some
cooperatives represent a large share of U.S.  production and could be
viewed as trade associations that promote a generic product.\20

We estimated that absent a waiver, small companies and cooperatives
with promotions totaling $9.2 million would have graduated in fiscal
year 1998.\21 However, the potential impact of the graduation
requirement was reduced to $4.3 million when FAS waived the
requirement for all cooperatives.  The lower figure represents 15
percent of the $29 million MAP budget for brand-name promotions, or
about 4 percent of MAP's total budget of $118.8 million in fiscal
year 1997. 

Of the 11 cooperatives that could have been impacted by the
graduation requirement in fiscal year 1999, 4 of them have been in
some country markets since the program's inception.  For example, our
projections indicate that Sunkist and Blue Diamond Growers would
graduate from 9 of their 14 country markets in 1998 if FAS had not
waived the graduation requirement.  Sunkist has received a total of
$70.6 million in program funds to promote fruit in five countries,
and Blue Diamond has received $27.4 million to promote almonds in
four countries between 1986 and 1997 (in 1997 dollars).\22

--------------------
\20 Among cooperatives participating in MAP, the number of producers
in a cooperative and its market share vary greatly.  For example,
Sunkist has total sales over $1 billion in 1997, represents nearly
60 percent of the domestic market for navel oranges, and is owned by
6,500 citrus farmers in California and Arizona.  Land O'Lakes Food
Ingredients with sales at $3 billion represents over 300,000
producers in 30 states organized in local cooperatives.  However,
other cooperatives represent a smaller number of growers.  For
example, Bard Valley Medjool Date Growers Association with sales of
$13 million has
9 growers, and Naturipe Berry Growers has 50 grower associates and
sale revenues of $72 million. 

\21 Fiscal year 1998 data was not available at the time of our study,
so we projected the amount of funds that could potentially be
released as a result of the graduation requirement by (1) estimating
the number of companies expected to graduate from certain countries
in fiscal year 1998 (see fn.  18) and (2) assuming that the amount of
MAP funds they would have received in fiscal year 1998 would be the
same as the amount the company received for the country promotion in
fiscal year 1997. 

\22 Since 1986, Sunkist has received the following amounts of MAP
funds (1997 dollars) for these country markets:  Canada, $7 million;
Hong Kong, $11.8 million; Japan, $42.1 million; Malaysia, $4.8
million; and Singapore, $4.9 million.  Blue Diamond Growers received
the following amounts of MAP funds for these country markets (1997
dollars):  India, $437,000; Japan, $19.8 million; Korea, $6.3
million; and Thailand, $838,000. 

   DIFFICULT TO VERIFY THAT MAP
   FUNDS SUPPLEMENT RECIPIENT
   EXPENDITURES
------------------------------------------------------------ Letter :5

Beginning with the fiscal year 1994 budget allocations, participants
that receive MAP funds directly from FAS must certify that the
assistance supplements, not supplants, their own funding for foreign
market development (the concept of "additionality").  Furthermore,
trade associations, state regional groups, and state agencies must
assure that applications for indirect MAP assistance include
completed and accurate certification statements.  The certification
requirement is meant to ensure that MAP funds do not substitute for
promotional expenditures recipients would have otherwise undertaken
with their own funds.  According to FAS officials, no recipients have
been disqualified from the program because they failed to meet the
certification requirement. 

FAS' Compliance Review Staff (CRS) regularly audits the participants
that receive direct MAP funding and verifies that these participants
and the recipients they fund have completed their certification
statements.  To determine whether MAP assistance (generic or
brand-name) has not supplanted a participant's foreign market
development expenditures, the Director of CRS told us that they
review the participant's foreign market development budget and verify
that it is spending at least as much as it spent the previous year. 
CRS also considers variations in a recipient's promotional strategies
within a country and in new markets.  According to the Director, CRS
reviews supporting documentation each year for about 5 percent of all
indirect recipients (15-20 companies and cooperatives).  The Director
reported that it is difficult to verify whether MAP funds supplement
a participant's own funds for foreign market development activities
because it is hard to determine what a participant would have spent
in the absence of MAP funds. 

According to FAS officials, they have no evidence based on the CRS
audits that any participant has falsely certified regarding
additionality.  Nonetheless, a private consulting firm has been hired
to review the effectiveness of MAP, and one component of the work
plan includes a section that addresses the issue of whether MAP funds
supplement or supplant the funds of MAP participants.  FAS officials
expect this project to provide the best analysis to date on the topic
of additionality. 

   ECONOMIC BENEFITS OF MAP
   UNCLEAR
------------------------------------------------------------ Letter :6

FAS officials continue to attribute substantial macroeconomic and
market-level benefits, including increased income and employment, to
MAP.  Specifically, FAS estimates that the cumulative effect of MAP
expenditures since 1986 is $5 billion of additional agricultural
exports in 1997 which, in turn, FAS says generate 86,500 jobs and $12
billion in additional economic activity.\23 This estimate is based on
the projected impact of $1.25 billion (1997 dollars) of spending
between 1986 and 1997 on consumer food export promotion through MAP
(including an estimated $5 million per year in Foreign Market
Development Program expenditures). 

Our review of the recent estimates of MAP's impact on the
macroeconomy and the methodology used to derive them suggests that
the benefits attributed to MAP by FAS are overstated.  The model FAS
used to generate these estimates assumes that all of the resources
(land, labor, and other inputs) associated with additional
agricultural exports would be unemployed in the absence of government
market promotion efforts.\24 As we previously reported, this approach
is inconsistent with OMB cost-benefit guidelines, which instruct
agencies to assume that resources would be fully employed, and leads
to an overstatement of benefits of the program.\25

In addition, FAS continues to assume that all of the market
development efforts subsidized through MAP funding are in addition to
what the private sector would do in the absence of the government
program efforts.  This position differs from the view of the Trade
Promotion Coordinating Committee (TPCC).\26 In its 1998 annual
report, the TPCC concluded that government agencies currently do not
have the means to measure whether exports would have taken place
without government intervention and that the results of studies of
net economic effects of export promotion are speculative. 

FAS officials directed us to academic studies that they identified as
demonstrating the positive effect of MAP on agricultural exports.\27
We examined the relevant studies of MAP's impact in specific markets
and found that they reveal mixed results.  Of the studies that
estimate MAP's impact on agricultural exports in specific foreign
markets, all report positive benefits in one or more of the targeted
markets, but most of these studies also report that MAP funding
failed to influence exports in other targeted markets.  Moreover,
caution should be used in interpreting the benefits ascribed to MAP
in these studies, since the studies that report positive effects from
MAP funding employ a methodology that results in an upward bias on
the estimated benefits (see app.  II for a more detailed review of
these studies).  Thus, it is difficult to generalize about the impact
of MAP based on the results of these market-level studies. 

FAS officials responsible for developing agency strategic and
performance plans in accordance with Results Act requirements are
undertaking steps to redesign performance measures as a basis for
developing market-level strategies.  FAS recently requested the
National Association of State Departments of Agriculture to develop
performance measures in order to improve the system for evaluating
MAP's effectiveness in selected markets and for assessing the overall
impact of the program.  The goal of this initiative is to develop a
more effective mechanism for allocating MAP program resources through
new market-level studies.  This initiative provides an opportunity
for FAS to overcome the limitations of existing studies by carrying
out a more rigorous analysis of the impact of the program.  This new
approach is reinforced by a direction in a recent Appropriations
Committee conference report that the Secretary of Agriculture produce
a comprehensive analysis of the economic impact of MAP.\28

--------------------
\23 Foreign Agricultural Service Strategic Plan:  1997-2002
(Washington, D.C.:  USDA/FAS, 1997), p.  7.  The Foreign Market
Development Program, also known as the Cooperator Program, provides
funds to nonprofit associations to help develop export markets and
promote U.S.  agricultural commodities--typically bulk (wheat, corn,
soybeans) or generic products.  Historically, USDA's contribution to
this program has averaged approximately $30 million a year. 

\24 The methodology used by FAS is developed in Evaluating the
Effectiveness of the Market Promotion Program on U.S.  High-Value
Agricultural Exports, FAS Staff Paper 1-95 (Washington, D.C.:  Feb. 
1995). 

\25 For another discussion of the assumptions in the FAS model, see
U.S.  Agricultural Exports:  Strong Growth Likely, But U.S.  Export
Assistance Programs' Contribution Uncertain (GAO/NSIAD-97-260, Sept. 
30, 1997).  See also OMB Circular No.  A-94.  The circular states: 
"Generally, analyses should treat resources as if they were likely to
be fully employed." When the economy is near or at full employment,
government promotion activities largely reallocate production,
employment, and income between sectors and are therefore less likely
to generate additional economic activity. 

\26 The National Export Strategy:  Staying the Course, Trade
Promotion Coordinating Committee, Sixth Annual Report to the U.S. 
Congress (Washington, D.C.:  TPCC, Oct.  1998).  The TPCC was
established by the President under authority of the Export
Enhancement Act of 1992 (P.L.  102-429).  Members of the TPCC include
representatives from government Departments and agencies such as the
Departments of Agriculture, Commerce, and State; the Small Business
Administration; the Overseas Private Investment Corporation; and the
U.S.  Trade Representative.  The TPCC is responsible for coordinating
the development of the trade promotion polices and programs of the
U.S.  government and establishing a set of priorities for federal
activities in support of U.S.  exports. 

\27 Specifically, FAS officials directed us to studies carried out by
the Research Committee on Commodity Promotion (NEC-63) and the
National Institute for Commodity Promotion Research and Evaluation
(NICPRE), which are both university-affiliated organizations that
carry out research in agriculture and related fields.  The majority
of studies of MAP-funded promotions in specific markets have been
carried out under the auspices of these organizations. 

\28 See the Conference Report on the Omnibus Consolidated and
Emergency Supplemental Appropriations Act, 1999 (P.L.  105-277, Oct. 
21, 1998).  The report directs the Secretary of Agriculture to
"produce a report on the MAP which should include an analysis of the
costs and benefits of the program for compliance with OMB Circular
A-94; estimate the impact of MAP on the agricultural sector, on
consumers, and other sectors of the economy in the United States;
assess the relation between the priorities and spending levels of
programs carried out under MAP and the privately funded market
promotion activities undertaken by participants in the programs; and
evaluate the additional spending of participants and the amount of
export additionality resulting from the MAP."
H.  Conf.  Rept.  No.  105-825, 105th Cong., 2d Sess.  (1998), p. 
989-90. 

   AGENCY COMMENTS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :7

We obtained oral comments from FAS on a draft of this report.  FAS
said that it agreed with the report's presentation of the operational
changes to MAP that FAS has implemented in response to legislative
direction. 

However, FAS officials disagreed with the report's conclusion that
their economic analyses tended to overstate MAP's macroeconomic
benefits.  They said that FAS uses a standard USDA methodology to
convert MAP's estimated export impacts to "supported employment"
effects.  These multipliers are taken from the input-output model of
the U.S.  economy developed and updated each year by USDA's Economic
Research Service.  They also said that they recognize that their
methodology is not consistent with OMB Circular A-94 guidance that
"generally, analyses should treat resources as if they were likely to
be fully employed." FAS officials said they believe that OMB's
guidance is unrealistic and unduly restrictive.  FAS analysis assumes
slack (less than fully employed) resources, especially labor.  FAS
officials cite evidence of labor unemployment as proof of slack
resources in the U.S.  economy.  FAS officials state that their
estimate of the number of jobs supported by MAP is small compared to
the total number of new jobs created each month in the U.S.  economy
and this reinforces their belief that OMB's full employment
assumption is unrealistic for a small program like MAP.  Furthermore,
FAS officials note that USDA is not the only government agency that
uses employment multipliers to estimate the macroeconomic benefits of
exports. 

We note that the guidelines in OMB Circular A-94 apply to all
agencies of the executive branch and for any analysis used to support
government decisions to renew programs such as MAP.\29 We believe
that the guidelines provide a sound basis on which to evaluate
programs such as the MAP and their contributions to the national
economy. 

FAS also provided some technical comments and, where appropriate,
they have been incorporated. 

--------------------
\29 The OMB Circular A-94 guidelines "apply to any analysis used to
support Government decisions to initiate, renew, or expand programs
or projects which would result in a series of measurable benefits or
costs extending for three or more years into the future." Some
decisions are exempted from the scope of the circular concerning: 
water resource projects, the acquisition of commercial-type services
by government or contractor operation, and federal energy management
programs. 

   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :8

To report on actions FAS took to implement legislative reforms
enacted by Congress in the mid-1990s, we reviewed MAP legislation and
regulations.  We also interviewed and collected documents from FAS
officials from the Commodity and Marketing Programs Division who are
responsible for the management and oversight of MAP, as well as
officials from FAS' Compliance Review Staff and USDA's Office of
Inspector General.  In addition, we interviewed and gathered
documents from five MAP participants to understand how different
types of program participants (that is, trade associations, state
regional groups, and cooperatives) participated in the program.  Our
review of the program relied on data from fiscal years 1986 to 1997. 
At the time of our review, fiscal year 1998 data on company
participation in the MAP brand-name program was not available.  A
fiscal year represents the year for which the MAP funds were
authorized and allocated; however, these funds may have been expended
the following fiscal year depending on the recipient's marketing
year.  For the years of available data, we analyzed actual
expenditure data, with the exception of fiscal year 1997, because
only budget data was available at the time of our review.\30 We did
not verify the accuracy or completeness of the electronic data. 

To determine the impact of FAS' implementation of legislative reforms
to give priority to small-sized businesses when funding the MAP
brand-name program in fiscal years 1994 and 1997, we analyzed changes
in the number and shares of small businesses participating in MAP's
brand-name program.  We also examined the size of the 22 cooperatives
participating in the brand-name program for fiscal year 1997 by
comparing the SBA criteria--the same criteria used by companies to
qualify themselves as small-sized businesses for MAP brand-name
funds--to data obtained from business references and other sources on
the total number of employees and annual sales for each
cooperative.\31

To determine the impact of the graduation requirement on MAP
participation, we projected the number of companies and their
promotions that might be affected.  Fiscal year 1998 data was not
available at the time of our review, so we estimated the number of
companies and cooperatives expected to graduate from certain country
markets in fiscal year 1998 based on their funding history for each
country.  To estimate the amount of funds expected to be released due
to the graduation requirement, we assumed the amount of MAP funds
these graduating companies and cooperatives would have received in
fiscal year 1998 would be the same as the amount they received for
the country promotion in fiscal year 1997.  Our review of graduation
did not include any consideration of the number of years that trade
associations, cooperatives, and companies had received MAP funds to
support their country-specific generic promotions; this was outside
the scope of our review. 

To determine the impact of the legislative requirement that MAP
participants certify that MAP funds supplement, not supplant, their
expenditures for promotions in foreign markets on MAP participation,
we interviewed FAS officials responsible for the management and
oversight of MAP, including representatives from FAS' Commodity and
Marketing Programs Division and Compliance Review Staff.  We also
reviewed compliance reports and other documents provided by the
Compliance Review Staff.\32

In order to provide a review of the economic impact of MAP, we
focused our analysis on those studies that estimated or analyzed the
economic impact of MAP and its predecessors (the Market Promotion
Program and the Targeted Export Assistance program).  We revisited
some of the studies that were analyzed in a prior review of all FAS
export promotion programs as well as more recent estimates by FAS of
the program's economic impact. 

In our review of studies of MAP's impact on U.S.  agricultural
exports and related effects on employment and gross national product,
we performed two tasks.  First, we relied on our previous analysis of
FAS' methodology for estimating effects from MAP funding on
agricultural exports, employment generation, and income effects and
compared this methodology with OMB guidelines for cost-benefit
analysis.  We spoke with FAS officials charged with the development
and implementation of the 1993 Government Performance and Results
Act-mandated strategic and annual performance plans to gather their
opinion of the applicability and reliability of FAS estimates and
methodology.  Also, we considered the methodology FAS used to derive
its macroeconomic estimates from the perspective of standard economic
analysis of the effects of subsidies on the target sector and related
sectors.  In addition, we also reviewed how the TPCC reported
benefits of MAP and other export promotional spending in its annual
National Export Strategy. 

Second, to obtain evidence on the impact of MAP on sectoral exports,
we reviewed analyses provided to us by FAS as well as other
applicable research analyses from academic publications of the impact
of the program on particular markets.  When reviewing these studies
for the current analysis, we focused on both the findings of economic
impact and the methodology used to derive results.  The available
studies focused on MAP-funded generic promotions.  We synthesized
this information to present an overview of the impact of MAP funding
on exports and the U.S.  economy.  We spoke to officials at FAS and
the National Association of State Departments of Agriculture, which
is collaborating with FAS in developing performance indicators for
the MAP program, and we reviewed the National Association of State
Departments of Agriculture's Request for Proposal for an evaluation
project for MAP. 

We conducted our work at FAS in Washington, D.C., and completed
telephone interviews with representatives from three trade
associations, one cooperative, and one state regional group located
throughout the United States. 

We performed our review from January 1998 to December 1998 in
accordance with generally accepted government auditing standards. 

--------------------
\30 Program data included statistics on the allocation of MAP funds
by participant, company, country, and type of MAP promotions, that
is, generic or brand-name. 

\31 Whenever possible, we used data from Dunn and Bradstreet
(Bethlehem, PA:  1998); otherwise, we used data from Standard &
Poor's (New York, NY:  1998) and the Standard Directory of
Advertisers (New Providence, NJ:  1998). 

\32 This review of documentation included compliance reports for 10
MAP participants, audit schedules for fiscal years 1993-97, and
accomplishment reports for fiscal years 1994-96. 

---------------------------------------------------------- Letter :8.1

As agreed with your offices, we will send copies of this report to
Senator Richard G.  Lugar, Chairman, and Senator Tom Harken, Ranking
Minority Member, Senate Committee on Agriculture, Nutrition, and
Forestry; Representative Larry Combest, Chairman, and Representative
Charles W.  Stenholm, Ranking Minority Member, House Committee on
Agriculture.  We are also sending copies of this report to the
Honorable Daniel Glickman, Secretary of Agriculture.  We will also
make copies available to others on request. 

This review was done under the direction of JayEtta Z.  Hecker,
Associate Director.  If you or your staff have any questions
concerning this report, please contact Phillip Thomas, Assistant
Director, at (202) 512-9892.  Major contributors to this report are
listed in appendix III. 

Benjamin F.  Nelson, Director
International Relations and Trade Issues

STATISTICS ON PARTICIPATION IN THE
MARKET ACCESS PROGRAM
=========================================================== Appendix I

Since its inception in 1986, the Market Access Program (MAP) and its
predecessors, the Targeted Export Assistance program (TEA) and the
Market Promotion Program (MPP), have provided funds to commercial
firms and nonprofit organizations to support the promotion of U.S. 
agricultural goods in foreign markets.  TEA was first authorized in
1985 to reverse a decline in U.S.  agricultural exports and to
counter the unfair trade practices of foreign competitors.\1 Only
those commodities adversely affected by unfair foreign competitor
practices were eligible for assistance.  When Congress reauthorized
the program in 1990, it was renamed the Market Promotion Program, and
assistance was no longer restricted to commodities adversely affected
by unfair competitor practices.\2

In 1993 Congress initiated three major program changes.  The first
directed that the Foreign Agricultural Service (FAS) give small
businesses priority in the allocation of MAP funds for brand-name
promotions.  The second change established a graduation requirement
with a 5-year limit on the use of MAP funds to promote a "specific
branded product" in a "single market" unless FAS determines that
further assistance is deemed necessary to meet program objectives. 
The third change was a requirement that each participant certify that
MAP funds supplement its foreign market development expenditures.\3

With the Market Promotion Program's 1996 reauthorization, Congress
changed the program name to MAP, and, among other things, prohibited
direct assistance to companies that are not recognized as small
business concerns under the Small Business Act, except for
cooperatives and certain associations.\4 The 1996 reauthorizing
legislation also capped annual funding for MAP at $90 million for
fiscal years 1996-2002 (see fig.  I.1 for annual MAP appropriations,
fiscal years 1986-97). 

   Figure I.1:  Annual MAP
   Appropriations, Fiscal Years
   1986-97

   (See figure in printed
   edition.)

Note:  The budget for MAP in fiscal year 1997 was $118.8 million
(this figure includes the 1997 annual appropriations plus carryover
from the prior year). 

Source:  U.S.  Department of Agriculture (USDA). 

Table I.1 presents a list of all participants who received MAP funds
directly during fiscal year 1997 along with the amount of MAP funding
they were allocated and the percent they spent on generic and
brand-name promotions.

                                    Table I.1
                     
                      MAP Participants and Budgets--Generic
                         and Brand-name--Fiscal Year 1997

                                                1997       Percent       Percent
Participant                               MAP budget       generic    brand-name
--------------------------------------  ------------  ------------  ------------
Trade Associations
Almond Board of California                  $504,043           100             0
American Brandy Association                  230,000            66            34
American Forest & Paper Association        7,568,704           100             0
American Jojoba Association                  200,000           100             0
American Indian Trade and Development         75,318           100             0
 Council
American Seafood Institute/Rhode             637,249            58            42
 Island Seafood Council
American Sheep Industry Association          170,000           100             0
American Soybean Association               2,373,422           100             0
Asparagus USA                                258,103           100             0
California Agricultural Export Council       611,787           100             0
California Cling Peach Growers               798,931           100             0
 Advisory Board
California Kiwifruit Commission              158,000           100             0
California Pistachio Commission              979,103            91             9
California Prune Board                     2,563,500            76            24
California Strawberry Commission             508,567           100             0
California Table Grape Commission          2,348,272           100             0
California Tree Fruit Agreement              774,664           100             0
California Walnut Commission               2,593,772           100             0
Cherry Marketing Institute                   165,292           100             0
Chocolate Manufacturers Association        1,695,376            12            88
Cotton Council International               9,753,438           100             0
Hop Growers of America                       125,000           100             0
Kentucky Distillers Association              847,952            60            40
Mohair Council of America                     75,000           100             0
National Dry Bean Council                    728,469           100             0
National Honey Board                         144,382            67            33
National Peanut Council                    1,155,000           100             0
National Potato Research & Promotion       1,674,984           100             0
 Board
National Renderers Association               286,967           100             0
National Sunflower Association               999,958           100             0
New York Wine and Grape Foundation           152,814            79            21
North American Blueberry Council              92,000           100             0
North American Export Grain                  194,950           100             0
 Association
Northwest Wine Promotion Coalition           280,664           100             0
Oregon Seed Council                          197,858           100             0
Oregon-Washington-California Pear          1,065,813           100             0
 Bureau
Pet Food Institute                           991,030           100             0
Raisin Administrative Committee            2,444,619            91             9
Texas Produce Export Association             123,930           100             0
The Catfish Institute                        309,905           100             0
The Popcorn Institute                        502,077           100             0
USA Dry Pea & Lentil Council                 577,918           100             0
USA Fresh Sweet Cherry Promotion             858,020           100             0
USA Poultry and Egg Export Council         3,952,570            78            22
USA Rice Federation                        3,497,075           100             0
USA Tomato (CA FL tomatoes)                  653,396           100             0
US Apple Association                         505,548           100             0
US Dairy Export Council                    1,934,781           100             0
US Feed Grains Council                     3,945,878           100             0
US Livestock Genetics Export, Inc.         1,077,468            75            25
US Meat Export Federation                  9,875,166            98             2
US Wheat Associates                        2,278,750           100             0
Washington Apple Commission                3,198,266           100             0
Wine Institute                             4,454,000            59            41
State regional groups
Eastern US Agricultural & Food Export      4,287,219            25            75
 Council (USEAFEC)
Mid-America International Agri-Trade       6,378,167            16            84
 Council (MIATCO)
National Association of State                600,000           100             0
 Departments of Agriculture (NASDA)
Southern United States Trade               4,336,616            23            77
 Association (SUSTA)
Western US Agricultural Trade              6,989,000            19            81
 Association (WUSATA)
State agencies
Alaska Seafood Marketing Institute         2,569,203           100             0
Florida Department of Citrus               4,498,525           100             0
Cooperatives
Blue Diamond Growers                       1,375,000             0           100
Ocean Spray International, Inc.              319,848             0           100
Sunkist Growers, Inc.                      2,593,546             0           100
Welch Foods Inc. (National Grape             664,261             0           100
 Cooperative)
================================================================================
Total                                   $118,781,134            76            24
--------------------------------------------------------------------------------
Source:  USDA. 

The 10 country markets with the largest MAP budgets in fiscal year
1997 represent all countries that had MAP generic and brand-name
promotions totaling $2 million or more (see fig.  I.2). 
Approximately 65 percent (or $77 million) of the total $118.8 million
in MAP funds was budgeted for promotions in these markets in fiscal
year 1997.  The remaining 35 percent of the MAP funds was budgeted
for generic and brand-name promotions in 90 other country markets. 

Approximately $2.2 million of the MAP budget in fiscal year 1997
supported efforts conducted in the United States that underpinned
foreign market development activities.  About 32 percent of the
budget covered administrative costs expected to be incurred by four
state regional groups for such items as rent, salaries, and supplies. 
Approximately 17 percent of the funds were budgeted for anticipated
travel expenses by staff from seven trade associations and three
state regional groups.  Another 28 percent supported activities such
as demonstrations, media, public relations, promotions, and trade
shows.  The majority of these funds supported preparations at the
largest food export trade show in the United States. 

   Figure I.2:  Country Markets
   With Largest MAP Budgets,
   Fiscal Year 1997

   (See figure in printed
   edition.)

\a Due to rounding, this amount does not reflect the $8,000 of MAP
funds supporting one brand-name promotion in the United States. 

   Source:  Our map based on USDA
   data.

   (See figure in printed
   edition.)

A total of 475 recipients participated in the MAP brand-name program
in fiscal year 1997.  Four cooperatives (Sunkist, Welch Foods Inc.,
Ocean Spray, and Blue Diamond) received MAP funds for brand-name
promotions directly from FAS.\5 All other companies and cooperatives
applied indirectly to FAS for MAP funds for brand-name promotions
through trade associations, state regional groups, and state
agencies.  The amount of brand-name assistance awarded to each
recipient ranged from $1,500 to $2.6 million; however, almost half of
the awards were in amounts less than $25,000 (see table I.2).

                                    Table I.2
                     
                     Size of MAP Brand-name Awards by Type of
                           Recipient, Fiscal Year 1997

                                      Large           Small
                                    companies       companies      Cooperatives
                                  --------------  --------------  --------------
                                          Percen          Percen          Percen
Size of award                     Number       t  Number       t  Number       t
--------------------------------  ------  ------  ------  ------  ------  ------
Below $25,000                         37      45     187    51 6       2       7
$25,000-$99,999                       35      42     126      34       8      36
$100,000-$299,999                      9      11      55      15       3      14
$300,000 and over                    2\a       2     2\b       1     5\c      23
================================================================================
Total                                 83     100     370   101\d      22     100
--------------------------------------------------------------------------------
\a Large company awards amounted to $440,000 and $597,874. 

\b Small company awards amounted to $350,000 and $475,000. 

\c Cooperative awards amounted to $319,848, $616,000, $740,261, $1.4
million, and $2.6 million. 

\d Greater than 100 percent due to rounding. 

Source:  Our analysis of USDA data. 

--------------------
\1 The Food Security Act of 1985 (P.L.  99-198, sec.  1124, Dec.  23,
1985). 

\2 The Food, Agriculture, Conservation, and Trade Act of 1990 (P.L. 
101-624, sec.  1531, Nov.  28, 1990). 

\3 The Omnibus Budget Reconciliation Act of 1993 (P.L.  103-66, sec. 
1302, Aug.  10, 1993). 

\4 The Federal Agriculture Improvement and Reform Act of 1996 (P.L. 
104-127, sec.  244, Apr.  4, 1996). 

\5 Two of these cooperatives, Welch Foods Inc.  and Blue Diamond,
also received MAP funds for brand-name promotions indirectly through
state regional groups. 

REVIEW OF MARKET-LEVEL STUDIES OF
MAP
========================================================== Appendix II

The studies that analyzed the effect of MAP and its predecessor
programs were for the most part carried out under the auspices of
university-affiliated institutes and organizations.  Nine
universities are affiliated with the National Institute for Commodity
Promotion Research and Evaluation (NICPRE).  NICPRE is an offshoot of
the Research Committee on Commodity Promotion (NEC-63), which is a
component of the land grant committee structure to coordinate
research in agriculture and related fields. 

FAS officials identified a number of market-level studies published
by NICPRE and NEC-63 that they said showed MAP's economic benefits to
agriculture through increased exports and market shares for specific
commodities.  Our review found that the studies provide mixed
evidence of a positive impact of MAP-funded promotions at the
market-level unit of analysis.  The studies also vary in terms of
their functional forms, assumptions, and independent variables.  Some
models are more completely specified in that they include variables
measuring income, the prices of substitute and complementary goods,
exchange rates, and long-term trends.  However, others lack one or
more of these important variables, raising the possibility of biased
estimators due to model misspecification.\1 The presentation of the
econometric estimation of the models also varies.  Some studies are
rigorous, while others fail to present complete diagnostics of the
model performance. 

Few studies show an unambiguously positive effect of government
promotional activities on exports.  For example, a study of the
effects of FAS-funded promotions for U.S.  red meat (pork, veal, and
beef) in the Pacific Rim countries showed a positive result in the
case of South Korea and insignificant results for the other three
countries included in the analysis.\2 Also, an analysis of the
effects of government-funded promotions of meat in Japan showed a
positive influence on the demand for U.S.  beef but found no evidence
that advertising and promotion expenditures had an expansionary
effect on the demand for U.S.  pork and poultry products.\3

Additionally, a number of the market-level studies that find positive
effects associated with government-subsidized programs are incomplete
in their analysis and result in an upward bias on the estimated
effects of MAP-funded promotions.  They exclude factors that could
permit program administrators to assure that the impact is positive
even after accounting for increased costs.  Most studies only
calculate the expansion of exports associated with a dollar input of
MAP advertising.  For example, one study finds that "$1,000 spent in
Japan yields an increased revenue of approximately $5,850" (the
cumulative effect after 40 years) for U.S.  walnut producers.\4 This
and similar types of estimates that report "gross returns" do not
consider the production and transportation costs of these additional
exports and thus fail to determine whether the promotion has positive
net economic returns.\5 Also, as one study notes, it is not always
possible to take into account the potentially large advertising and
promotion expenditures made by private firms, which would reduce the
computed increase in exports attributed to Market Access Program
efforts.\6

It should be added that only a few of these studies take into account
the effects of promotional activities on other agricultural exports
or on market shares of competitor countries.  Advertising and
promotion of U.S.  brand-name and generic products can have
considerable spinoff effects (sometimes called "halo effects"), both
positive and negative, for related products and competitor firms
and/or countries.  A study of U.S.  apple exports to Singapore and
the United Kingdom found that while U.S.  government-subsidized
marketing and advertising had a positive impact on the U.S.  market
share and value of exports to the United Kingdom, U.S.-funded
promotions in Singapore mainly benefited the foreign competitors in
the market.  According to that study, which FAS officials cite as
evidence of successful MAP funding, Chilean and French apple
producers would be the main beneficiaries of the MAP promotions in
Singapore, experiencing increases in export shares 3 to 10 times
greater than the U.S.  producers.\7 This result shows the importance
of taking into account both direct and indirect effects and
concomitant advertising by other U.S.  firms and sectors and by major
competitors.\8

In summary, the market-level studies that we reviewed revealed mixed
results and do not allow generalization about MAP's impact on
agricultural exports.  Estimations revealed both positive and
insignificant effects associated with MAP promotional spending.  In
some cases, the methodology employed results in an upward bias on the
estimated effect of MAP.  Also, the effects on other U.S. 
agricultural markets or on the agricultural exports of competitor
nations are unclear. 

--------------------
\1 See the discussion by Karen Z.  Ackerman and Shida Rastegari
Henneberry in "Economic Impacts of Export Market Promotion,"
Commodity Promotion Policy in a Global Economy, Proceedings of a
Symposium (Arlington, VA:  Oct.  22-3, 1992). 

\2 See Cong Tru Le, Harry M.  Kaiser, and William G.  Tomek, "Export
Promotion and Import Demand for U.S.  Red Meat in Selected Pacific
Rim Countries," NICPRE 97-04 (Ithaca, NY:  Cornell University, Sept. 
1997). 

\3 See Allison Comeau, Ron C.  Mittelhammer, and Thomas I.  Wahl,
"Assessing the Effectiveness of MPP Meat Advertising and Promotion in
the Japanese Market," NICPRE 96-10, R.B.  96-20 (Ithaca, NY:  Cornell
University, Dec.  1996).  In contrast, Shida Rastegari Henneberry and
Marco De Brito, "An Analysis of the Effectiveness of U.S.  Non-Price
Promotion Programs:  The Case of Red Meats in Japan," in Promotion in
the Marketing Mix:  What Works, Where and Why, Proceedings from the
NEC-63 Conference, Toronto, Canada (Apr.  28-29, 1994) found evidence
that the Market Promotion Program expenditures increased exports of
beef offal to Japan, but there was no evidence of its supporting
increased exports of pork or of other cuts of beef. 

\4 See Kenneth R.  Weiss, Richard D.  Green, and Arthur M.  Havenner,
"Walnuts in Japan:  A Case Study of Generic Promotion under the
USDA's Market Promotion Program," in Agricultural Commodity Promotion
Policies and Programs in the Global Agri-Food System, Proceedings
from the NEC-63 Conference, Cancun, Mexico (May 26-27, 1996). 

\5 See also "An Analysis of the Effectiveness of U.S.  Non-Price
Promotion Programs:  The Case of Red Meats in Japan," and Karen
Halliburton and Shida Rastegari Henneberry, "The Effectiveness of
U.S.  Nonprice Promotion of Almonds in the Pacific Rim," Journal of
Agricultural and Resource Economics, Vol.  20, No.  1 (July 1995). 

\6 "Assessing the Effectiveness of MPP Meat Advertising and Promotion
in the Japanese Market."

\7 Timothy Richards, et al., "A Two-Stage Analysis of the
Effectiveness of Promotion Programs for U.S.  Apples," in
Agricultural Commodity Promotion Policies and Programs in the Global
Agri-Food System, Proceedings from the NEC-63 Conference, Cancun,
Mexico (May 26-27, 1996). 

\8 The importance of this effect is demonstrated in a study that
analyzed the effects of U.S.  and Canadian expenditures in research
and advertising and found that the "results suggest that Canadian
producers would be better off giving C$100,000 to the U.S.  generic
advertising campaign" due to spinoff effects of U.S.  advertising on
the demand for Canadian beef in the United States.  See Daniel
Sellen, Ellen Goddard, and Stephen Duff, "Returns from Research and
Advertising in the North American Hog and Pork Industry," in Economic
Analysis of Research and Promotion, Proceedings from the symposium
sponsored by Agricultural Research and Development and NEC-63, New
Orleans, LA (Mar.  21-22, 1997). 

MAJOR CONTRIBUTORS TO THIS REPORT
========================================================= Appendix III

NATIONAL SECURITY AND
INTERNATIONAL AFFAIRS DIVISION,
WASHINGTON, D.C. 

Phillip J.  Thomas
Emil E.  Friberg, Jr.
Kimberly M.  Gianopoulos
Rona H.  Mendelsohn
Samantha C.  Roberts

OFFICE OF THE GENERAL COUNSEL,
WASHINGTON, D.C. 

Ernie E.  Jackson

OFFICE OF THE CHIEF ECONOMIST,
WASHINGTON, D.C. 

Daniel E.  Coates

SAN FRANCISCO FIELD OFFICE

Christine M.  Broderick
May M.  Lee

*** End of document. ***