International Trade:

Changes Needed to Improve Effectiveness of the Market Promotion Program

GGD-93-125: Published: Jul 7, 1993. Publicly Released: Jul 27, 1993.

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Pursuant to a congressional request, GAO reviewed the Foreign Agricultural Service's (FAS) administration of the Market Promotion Program (MPP), focusing on whether: (1) MPP funds increase commercial participants' promotional expenditures; (2) FAS has criteria for the length of time firms can remain in the program; (3) FAS has criteria for foreign firms' participation; (4) FAS has encouraged small firms' participation in the program; and (5) FAS considers a product's domestic content and processing in awarding MPP funds.

GAO found that: (1) FAS has no mechanism for ensuring that MPP funds are used to increase promotional activities; (2) there is evidence that commercial firms have substituted MPP funds for promotional expenditures; (3) FAS has no criteria for ending firms' participation in MPP; (4) FAS opposes limiting the length of time successful participants can remain in the program, but it does phase out firms with ineffective promotional activities; (5) FAS has no criteria for foreign firms' participation in MPP; (6) foreign firms receive a significant proportion of MPP funds despite congressional guidance that MPP funds go to U.S. firms; (7) FAS believes that foreign firms can help create demand for U.S. products in foreign markets, but they may do so at the expense of U.S. firms trying to compete in those foreign markets; (8) FAS does not collect data on firms' size and cannot determine if it has met Congress' recommendation that it encourage participation by small, medium-sized, and new-to-export firms; (9) FAS has developed criteria for using domestic content and processing in funding MPP recipients, but it has relied on unverified information for its funding decisions; and (10) FAS believes Congress needs to clarify its guidance for MPP.

Matter for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: The agency's formal response to this recommendation is pending approval and signature by the Office of the Secretary of Agriculture. The prior draft response was revised to reflect planned actions that have since been implemented. According to the Foreign Agriculture Service representative, the current draft response continues to disagree with the need to change the current practice regarding the participation of foreign firms and provides their rationale for this position.

    Matter: If Congress believes that the current structure of MPP needs more explicit legislative direction, it may wish to make its desires more explicit by amending the program's authorizing legislation.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Section 1302 of the Omnibus Reconciliation Act of 1993 states that USDA should require, beginning with fiscal year 1994, that each MPP participant certify that any federal funds received supplement, but do not supplant, private or third-party participant funds or other contributions to program activities.

    Recommendation: In order to ensure that MPP funds are used most effectively, the Secretary of Agriculture should direct the Administrator, FAS, to require that MPP funds be used to increase expenditures for foreign market development activities over those that would take place without MPP support.

    Agency Affected: Department of Agriculture

  2. Status: Closed - Implemented

    Comments: Section 1302 of the Omnibus Reconciliation Act of 1993 states that the Secretary of Agriculture should not provide assistance under the program to promote a specific branded product in a single market for more than 5 years unless the Secretary determines that further assistance is necessary in order to meet the objectives of the program.

    Recommendation: In order to ensure that MPP funds are used most effectively, the Secretary of Agriculture should direct the Administrator, FAS, to develop criteria on the maximum length of time commercial firms can continue to receive MPP funds for a particular market.

    Agency Affected: Department of Agriculture

  3. Status: Closed - Implemented

    Comments: USDA's response stated that it changed its administrative processes to address concerns related to the participation of foreign firms in the program. Specifically, USDA explained that U.S. firms are given preference to foreign firms in the MPP allocation process. In addition, MPP rules and regulations now require the MPP applicants to provide justification for the proposed participation of foreign commercial entities in their branded promotion program.

    Recommendation: In order to ensure that MPP funds are used most effectively, the Secretary of Agriculture should direct the Administrator, FAS, to define the conditions under which foreign firms will be allowed to participate in the program to ensure that U.S. firms are not adversely affected.

    Agency Affected: Department of Agriculture

  4. Status: Closed - Implemented

    Comments: Section 1302 of the Omnibus Reconciliation Act of 1993 states that in providing assistance for branded promotion, the Secretary of Agriculture should give priority to small-sized entities. The act referred to the standards issued by the Small Business Administration as the criteria as to what is a small entity. However, the act did not specify a dollar or percentage target amount for small entities.

    Recommendation: In order to ensure that MPP funds are used most effectively, the Secretary of Agriculture should direct the Administrator, FAS, to establish criteria and procedures for the allocation of program funds to small and new-to-export firms.

    Agency Affected: Department of Agriculture

  5. Status: Closed - Implemented

    Comments: FAS has revised program regulations in a manner that is generally responsive to GAO's recommendation. FAS is considering additional program regulation reforms responsive to GAO's recommendation.

    Recommendation: In order to ensure that MPP funds are used most effectively, the Secretary of Agriculture should direct the Administrator, FAS, to require that MPP applicants submit and that FAS periodically evaluate the accuracy of the support for: (1) statements regarding the U.S. content of brand-name products to be promoted with MPP funds; and (2) the extent of the brand-name products' U.S. processing.

    Agency Affected: Department of Agriculture

 

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