U.S. Agricultural Exports

The Federal Agriculture Improvement and Reform Act of 1996 significantly changed domestic agricultural policy in the United States. Although the government will continue to provide farmers with income support during the next five years, the legislation significantly reduces the government's role in regulating the production of bulk commodities, such as wheat and corn, and gives farmers greater flexibility to respond to changing domestic and international market conditions. This report assesses (1) the way in which the act will likely affect U.S. agricultural exports and (2) the continued relevance of U.S. agricultural export assistance programs.

GAO noted that: (1) agricultural experts generally expect that FAIR's domestic policy reforms will modestly contribute to increased U.S. agricultural exports; (2) the extent to which FAIR's domestic reforms increase exports is dependent on the degree to which farmers add additional land to production and use FAIR's planting flexibility to respond to international and domestic market conditions; (3) much of the forecasted growth in U.S. agricultural exports is expected to come from: (a) the anticipated rise in income levels in East and Southeast Asian nations and other regions; and (b) the liberalization of agricultural markets brought about by the 1994 Uruguay Round trade agreements, which brought agriculture under multilateral disciplines for the first time, and by unilateral policy changes of other nations; (4) FAIR's domestic policy reforms remove a primary benefit associated with most U.S. export assistance programs--the exporting of surplus stocks generated by domestic price supports; (5) nevertheless, program proponents maintain that U.S. agricultural export assistance programs have continued relevance because they benefit the overall U.S. economy, benefit the U.S. agricultural sector, counter competitor nations' agricultural export programs, and promote U.S. trade negotiating objectives; (6) program performance under past conditions may not always be helpful in predicting future program relevance because of changing conditions in the global trading environment, such as Uruguay Round trade liberalization, or the potential for commodity supply and price volatility; and (7) nevertheless, using applicable economic research and expert opinion, GAO's review provides an indication of these programs' future contribution in four key areas: (a) with regard to the U.S. economy, no conclusive evidence exists that these programs have measurably expanded aggregate employment and output or reduced the trade and budget deficits; (b) concerning the U.S. agricultural sector, while U.S. agricultural export assistance programs may provide some income and employment benefits to the sector, there is limited evidence of these benefits; (c) regarding competitor nations' programs, the lack of transparency in these nations' agricultural export assistance efforts makes it difficult to conclusively determine how effectively U.S. export programs counter these foreign practices; and (d) concerning U.S. trade negotiating objectives, there are widely divergent views about the amount of leverage these programs provided in the past.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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