Agricultural Trade

Changes Made to Market Access Program, but Questions Remain on Economic Impact Gao ID: NSIAD-99-38 April 5, 1999

Since 1986, the Market Access Program has provided funds to nonprofit organizations and commercial firms to help promote U.S. agricultural products overseas. The program is run by the Foreign Agricultural Service, part of the Department of Agriculture. Over the years, some Members of Congress have questioned the program's long-term economic returns to the taxpayer and voiced concerns about program operations--specifically that large corporations were using the program 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. In response, Congress has the Foreign Agriculture Service to (1) give small businesses priority when funding the promotion of brand-name products in foreign markets and, with some exceptions, prohibit direct assistance to large companies; (2) establish a graduation requirement by limiting to five years the amount of program funds that 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. This report provides information on and analyzes the Foreign Agricultural Service's implementation of each of these requirements. It also reviews assessments of the program's economic benefits.

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.

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