Good Point - Kevin Moffitt
USDA’s market development programs have impact
A recent study shows how successful the Market Access Program and the Foreign Market Development programs are and can be. It would be a shame if the funding for these programs were reduced in the upcoming Farm Bill. The United States Department of Agriculture has already begun holding listening sessions for the 2012 Farm Bill.
Two of the most successful public/private partnerships consistently funded in previous farm bills are the Market Access Program and the Foreign Market Development program. These programs have been instrumental in increasing U.S. agricultural exports worldwide.
The Foreign Agricultural Service of the USDA recently commissioned Global Insight, Inc., a respected private economic and financial firm, to analyze the effects of these two programs. The results demonstrated the varying and positive ways that the MAP and FMD programs help U.S. farmers through increased exports. This in turn can help support jobs not only in the local community but in complementary industries such as packaging, equipment, and transportation.
Using econometric models for bulk commodities and high-value products, Global Insight isolated the unique long-run trade impacts of market development. Their findings showed that the multiyear impact of the increase in market development expenditures during 2002–2009 by both industry and government is equal to $35 in agricultural export gains for each dollar spent. In addition, the total economic gain to the U.S. economy from increased market development activity is estimated to be an average of $1.1 billion annually from 2002–2009. So, these programs not only help the specific commodities involved, but also the U.S. economy as a whole, keeping and creating jobs in many sectors.
The programs were shown to help increase U.S. export market share, which rose from 18.6 percent in 2002 to 19.9 percent in 2009, with the value of trade rising from $90.5 billion to $96.1 billion. The programs are World Trade Organization compliant, which means that our trading partners, who also outspend the United States in providing government funds to increase their exports, cannot use these programs as a legal reason to raise their own barriers to trade.
Technical assistance and trade servicing (including trade policy support) accounted for most of USDA’s market development programs
at 60 percent, while consumer promotions accounted for only 20 percent.
Industry contributions to the program, when added to the current $234.5 million in government funding, bring the total level of funding to over $570 million per year. In addition, the program unites and commits a significant level of industry funding to engage in overseas market development activities that supplement but do not supplant the industry’s activities.
The study showed that a 50 percent ($280 million) decrease in government and industry spending in these market development programs would result in:
- A $8.9 billion decline in the U.S. share of rest-of-world imports from 2009-2018;
- A $5.92 billion (1.8 percent) drop in farm cash receipts and a $2 billion (2.6 percent) decline in net cash income from 2012-2018;
- A $44 billion decline in the value of farm assets because of the resulting reduced income and overall farm activity and an increase of $60 million in government farm income support payments due to lower commodity prices.
The report concludes that overall loss in economic benefits would be approximately 13.5 times greater than the savings taxpayers would see from not funding the programs and about 5.7 times greater than the combined cost reduction to taxpayers and cooperators.
This analysis clearly shows the benefit of the MAP and FMD programs, which provide a basis for coordinated U.S. market development efforts that would otherwise be fragmented, underfunded, or nonexistent. The programs provide an important marketing tool to help farmers compete in the increasingly competitive world economy.
Kevin Moffitt is chair of the U.S. Agricultural Export Development Council. USAEDC is a nonprofit private sector trade association acting as a catalyst between the approximately 80 groups that receive FMD and MAP funding and the U.S. Department of Agriculture’s Foreign Agricultural Service. More information can be found at www.usaedc.org. You can read Moffitt’s blog “Out of the Orchard” on the Good Fruit Grower Web site.