International Trade:

Alternative Trading Practices for International Grain Trade

NSIAD-87-90BR: Published: Mar 17, 1987. Publicly Released: Apr 22, 1987.

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In response to a congressional request, GAO: (1) provided information concerning the nature, extent, and structure of long-term bilateral grain agreements and countertrade; (2) listed the advantages and disadvantages of employing such policy trading tools; and (3) analyzed and compared selected U.S. and foreign experiences with these agreements and countertrade in the international grain market.

GAO found that: (1) countries whose governments are directly involved in agricultural production and marketing are the most extensive users of long-term bilateral grain agreements; (2) three principal U.S. grain competitors have government-affiliated enterprises that play a major role in their grain trade; and (3) despite a slight decline since 1985, due to an oversupply of grain in the world market, major U.S. competitors' use of long-term bilateral grain agreements remains an important aspect of international grain trade. Although the United States has opposed such agreements because they represent a significant non-competitive trade practice, it entered into agreements with the Soviet Union and the People's Republic of China. GAO also found that: (1) from 1976 to 1981, minimum grain quantities under these agreements represented less than 10 percent of total U.S. grain exports; (2) since 1981, the percentage increased, but this occurred during a period of overall decline in U.S. grain exports; and (3) due largely to Soviet purchases, bilateral grain exports under these agreements reached 19 percent of total grain exports. The Department of Agriculture informed GAO that it has not initiated any pilot barter projects because of: (1) a requirement that it initiate the barter with a less-developed country with limited foreign exchange and a U.S.-required strategic mineral; (2) a lack of coordination between involved agencies; and (3) problems in identifying the appropriate combination of eligible countries and acceptable commodities.

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