Specifically, the 2002 Farm Bill allows export subsidies to offset “a trade restriction or commercial requirement that adversely affects a new technology .” As Hudson points out, this may open up EEP to many new agriculture products not covered in earlier years. The DEIP subsidizes exports of milk powder, cheese, and butter. These dairy products, unlike the products that are eligible for the EEP, are subject to federal dairy price support, creating a gap between domestic prices and world market prices. The price support is administered by the Commodity Credit Corporation, which pays “bonuses” to exporters to compensate these firms for the differential between prevailing international market prices and artificially high domestic prices. The stated intention of the program is to develop export markets for U.S. dairy producers in markets where dairy is subsidized. In 2001, so-called bonuses of $1.76 million were awarded for U.S. cheese exports and $6.8 million was paid to U.S. non-fat dry milk exporters . These low figures, far below WTO ceilings, reflect the fact that relatively little of the dairy output from most U.S. producers is actually exported. Perhaps 5 percent of volume is exported, with most going to Mexico . Butter and butter oil lost DEIP funding in 2001 and 2002 due to high domestic prices and a fragile butter market, while similar market conditions eliminated support for whole milk powder those same years . As shown in table 2, DEIP awards to California producers vary widely from year-to year, depending on world market prices,garden pots ideas though the bulk of export subsidy payments consistently goes to non-fat dry milk .Table 3 lists California companies and trade associations receiving recent MAP assistance, including national or regional trade associations of which California producers are members.
While all $28 million shown in Table 5 does not flow solely to California producers and their trade associations, at least $15 million does benefit California producers through the MAP program.4 This amount alone is approximately 15 percent of the entire MAP budget in 2001 , meaning that California receives more than 15 percent of the MAP budget. Since California accounts for about 15 percent of U.S. agricultural export revenues but receives more than 15 percent of the MAP budget, it benefits disproportionately from MAP funds. FMD differs from MAP in that FMD’s stated goal is to target long-term development of overseas markets for generic commodities through trade associations rather than the promotion of individual brand products by companies. According to FAS/USDA, FMD gives preference to non-profit U.S. agricultural and trade groups that represent an entire industry or have a nationwide scope and is intended to support the export of value-added products to emerging markets . The FMD is also supposed to support a wider variety of marketing activities than MAP, allowing applicants to submit a marketing plan describing the world market for the given commodity, a marketing budget, and those promotional activities the trade association will undertake. In the latest Farm Bill, Congress increased annual funding for this program from $27.5 million to $34.5 million annually . Trade associations pertinent to California agriculture that received FMD funding in 2001 are listed in Table 4 . However, because FMD targets trade associations of a national scope, only one trade association included in the table represents solely California producers.The new TASC program is targeted at specialty crops, which are important to California. The program, funded at $2 million per year through 2007, is intended to subsidize the cost of activities such as seminars, field surveys, pest and disease research, and pre-clearance programs that may lower phytosanitary and technical barriers to trade for specialty crops .
Peanuts, sugar, and tobacco are not eligible for support. Like the MAP, this program is open to private firms as well as non-profit trade associations, suggesting that it will be vulnerable to the same criticism that MAP has faced. Table 5 lists California organizations that will receive TASC funding in 2002.Export subsidy programs like EEP and DEIP are constrained by current WTO commitments, and the California Farm Bureau Federation has taken the position that they should be phased out entirely as part of on-going WTO negotiations . However, the CFBF’s position with respect to the MAP and FMD programs is vastly different. There seems to remain a consensus in California agriculture that these programs deserve further and increased funding . Despite political support in California for export promotion programs, whether MAP and FMD actually benefit California’s international competativeness remains unclear. FAS claims benefits from these programs using a methodology that the General Accounting Office has called faulty and inconsistent with Office of Management and Budget guidelines . A 1997 study of agricultural export programs sponsored by the GAO finds that there is no conclusive evidence that these programs benefit the aggregate economy . Agricultural export programs “reallocate production, employment, and income between sectors” rather than increasing total economic activity . The original justification for these programs was to support the export of government grain stocks created by domestic subsidy programs which have since been reformed. Another stated purpose, to counter agricultural subsidies in competitor countries, remains an objective of MAP. However, the GAO finds that it is difficult to effectively target MAP funds to achieve this goal because foreign subsidies are not readily identifiable. Perhaps the most problematic element of MAP, and potentially of the TASC, is that even if it successfully increases exports of assisted commodities to targeted markets there is evidence that this is often to the detriment of unassisted products.
For example, proponents of MAP point to a projected increase of $5.30 over 40 years in walnut exports to Japan for every $1.00 spent on walnut promotion. However, another study found that while every dollar spent on walnut promotion increased walnut exports by $1.42, it actually reduced the exports of eight other horticultural products by $3.57 per dollar spent, resulting in a net reduction in U.S. agricultural exports for every dollar spent by $2.15 . Studies on meat exports to Japan are also mixed, with some concluding positive findings for beef promotion with no positive effects for pork or poultry, while others only find statistically significant increases for U.S. exports of beef offal. While the targeted overseas markets may purchase more of the targeted commodity, agricultural export programs merely benefit certain U.S. exports by displacing others and do little to increase the American share of the world agricultural market . Halliburton and Henneberry also conclude that there is little economic evidence that export promotion programs are effective. Economic theory predicts that programs like the MAP are not cost-effective uses of public budgets, and thus it is not surprising that it is difficult to find economic evidence in favor of the MAP. If the private benefits of marketing efforts exceed their cost, then firms should find it profitable to undertake these efforts without government assistance. Government assistance uses taxpayers’ money to underwrite marketing efforts with high costs relative to benefits. While well-known arguments are made for government support for investments that have “externalities” associated with them, that is,30 litre plant pots benefits that accrue to many groups whether they pay the cost of the investment or not. However, the marketing of name-brand agricultural products is not likely to be such an investment.In the 2002 Farm Bill, Congress mandated country-of-origin-labeling for fresh and frozen food commodities such as meats, fish, fruits and vegetables, and peanuts.5 The new law is an amendment to the Agricultural Marketing Act of 1946 and will impose new traceability responsibilities of uncertain magnitude on suppliers at all stages of the food marketing chain. As a result, COOL has been met with heated reactions within the food and agriculture industry, and its implementation has recently been delayed by several years. In this section we describe the COOL legislation, and suggest that current practices in the meat-packing industry will make implementation difficult. We also discuss the economics of COOL and the conditions under which this regulation could increase the profits of domestic producers. This outcome is by no means assured. Benefits to society as a whole from COOL are even less likely. As we discuss, the logic of revealed preference predicts that if consumers were prepared to pay for country-of origin information amounts in excess of the cost of providing this information, voluntary labeling schemes would be adopted.
After discussing the economics of COOL, we turn to political economy issues and review various interest groups’ lobbying positions at the time the 2002 Farm Bill legislation was passed. We next consider the international trade implications of COOL which is likely to act as a non-tariff trade barrier. Whether the rule would, if implamented, be challenged in the World Trade Organization remains unclear.The commodities that COOL applies to include muscle cuts of beef, lamb, and pork, ground beef, lamb, and pork, wild and farm-raised fish and shellfish, fresh and frozen perishable agricultural commodities , and peanuts. Under previous law, there were country-of-origin labeling requirements, but these mostly applied at the wholesale level . Shrink-wrapped packages of apples had to convey country of origin to the customer at the supermarket, while a crate of imported pears only had to indicate its country of origin to the retailer receiving the package, who by placing the pears in a bin, had no obligation to inform his/her customers of the pears’ origin. Similarly, imported meat that underwent processing in the U.S. was not required to be labeled for retail sale unless that meat was received in the exact form in which it would be sold to the consumer. The new regulation covers both domestic and imported food commodities and requires that retailers inform retail consumers of country of origin for the covered commodities. Thus, the number of businesses that must comply with COOL . Public comment was solicited during development of the program, and the Secretary was to release mandatory labeling requirements by September 30, 2004. However, as of December 2003, a House-Senate conference committee delayed mandatory compliance with COOL for all products except farm-raised and wild fish until September 2006. Strong opposition to COOL by producers and retailers is largely responsible for the postponement of this regulation. A review of the voluntary guidelines released in October reveals the complexity of the situation. According to Federal Register 67-198, to qualify for a “United States Country of Origin” label, beef, lamb, or pork must come from an animal exclusively born, raised, and slaughtered in the United States. For beef, an animal may be born and raised in Alaska or Hawaii and transported through Canada for up to 60 days before slaughter in the United States to merit a U.S. origin label. Fish and shellfish labeled as U.S. origin must come from farmed product hatched, raised, harvested, and processed in the United States or from wild seafood harvested in U.S. waters or aboard a U.S. flagged vessel and processed either on said vessel or in the United States. Seafood labels must also indicate whether the product is farmed or wild. Peanuts and perishable agricultural commodities must be exclusively produced in the United States for U.S. origin distinction. The exception made for beef from Alaska and Hawaii demonstrates some of the complications inherent in characterizing meat as the product of one country or another. Before slaughter and sale, an animal may pass through multiple countries and therefore cannot be labeled as the product of a single country. In Federal Register 67- 198, AMS addresses the problem of multiple origins, but an abundance of fine distinctions that a producer or retailer must consider indicates a potential for difficult and inconsistent labeling. For example, ground beef normally contains meat from more than one animal and thus could include beef from both the U.S. and another country. The new law will require the processor to verify the origin of each animal and determine the proportion used of each so that the label can reflect country of origin by prominence of weight. Thus, a label reading “From Country X, Slaughtered in the United States; Product of Country Y; and United States Product” would classify a product primarily from cattle born and raised in Country X but slaughtered in the U.S. followed by imported Country Y beef trimmings and beef trimmings of U.S. origin .