recent studies conclude that the 2002 Farm Act will have only a small in- cremental impact on world prices beyond the effects of the 1996 Freedom to Farm Act, high US wheat and corn subsidies draw considerable ire from NAFTA and other US trading partners. 14
Under the 2002 Farm Act, the United States continued its export subsi- dies through the Export Enhancement Program (EEP). Until June 1995, 80 percent of EEP aid was allocated to wheat products. Between 1995 and 2002, the United States gradually phased out the EEP, replacing it with various export subsidy programs that helped US wheat producers stay competitive in third-country markets.15 US dairy producers benefited from export subsidies under the Dairy Export Incentive Program, though the payments were only a modest $32 million in fiscal 2003.16 Besides EEP and the dairy program, the United States operates huge “food aid” pro- grams. In particular, the GSM-102 program provides $4.6 billion to sup- port agricultural exports (including wheat) to third-country markets. The GSM-102 program is part of the Export Credit Guarantee Program (GSM- 102 and GSM-103) that promotes wheat and other agricultural exports. The annual budget for this program totaled $5.7 billion in 2002.17 Some portion of these funds confers benefits akin to export subsidies and will likely be phased out under the terms of a prospective World Trade Orga- nization (WTO) accord on agriculture under negotiation in the Doha Round.
As a concession to its trading partners in the course of Uruguay Round negotiations, the United States withdrew its Section 22 waiver, which was adopted in 1955 and which allowed the United States to impose quotas
14. Studies estimate the 2002 Farm Act will have relatively small output effects, causing world prices to decline between 1.5 and 6 percent depending on the commodity. See Hath- away (2003). In particular, the extension of US export subsidies and country-of-origin label requirements were unpopular in Mexico and Canada, respectively. See Anson et al. (2003).
15. The US government maintains official allocations for wheat and grains under EEP but has not disbursed any of those funds since 1995. Currently, EEP funds only a few agricul- tural commodities: frozen poultry, table eggs, and vegetable oil. Interview with Debbie Seid- band, policy analyst, USDA Foreign Agricultural Service, Grain and Feed Division, March 5, 2003.
16. Under the 2002 Farm Act, the US government established a new dairy payment pro- gram, the Dairy Market Loss Payments. The program supports the income of small dairy producers by providing countercyclical payments as an incentive to increase production at the margin. Despite high tariff rates on overquota imports into Canada, US exports of dairy and dairy-containing products to Canada have more than tripled from $75.9 million in 1994 to $254.6 million in 2002. See Orden (2003) and Myles and Cahoon (2004).
17. Other export subsidy programs include the Supplier Credit Guarantee Program and the Facility Guarantee Program. Details about the breakdown of funding for wheat exports under the GSM-102 federal program are not available. However, in 2002, GSM-102 registra- tions totaled $3 billion for exports to 11 countries and six regions. See USDA (2002d).