Agricultural Trade:

Long-Term Bilateral Grain Agreements With the Soviet Union and China

NSIAD-89-63: Published: Mar 22, 1989. Publicly Released: Mar 22, 1989.

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In response to a congressional request, GAO reviewed long-term bilateral grain agreements with the Soviet Union and China.

GAO found that: (1) the agreements with the Soviet Union and China have created some stability in the U.S. and international grain markets, but China has significantly increased its grain production in an era of worldwide grain oversupply; (2) China favors purchasing grain outside of the agreement and has not entered into any new agreements since 1984; (3) the Soviet Union favors using the agreement to meet its grain import needs; (4) U.S. grain exports to the Soviet Union from 1984 through 1988 totalled about 23.6 million metric tons of wheat valued at $2.8 billion, and about 36.1 million metric tons of corn valued at about $4.2 billion; (5) U.S. and Soviet officials attributed price as the principal reason why Soviet purchases of wheat were below the agreement minimums; and (6) as of January 31, 1989, the Soviet Union purchased 2 million metric tons of wheat through the Department of Agriculture's Export Enhancement Program (EEP). GAO also found that: (1) during a 4-year period, China purchased about 20.8 million metric tons of U.S. wheat valued at about $3.3 billion, and about 3.5 million metric tons of corn valued at about $409 million; (2) China purchased less U.S. grain than the agreement minimum during 2 years because of increased Chinese grain production and the price and quality of U.S. grain; and (3) China purchased about 7.2 million metric tons of wheat under EEP in 1988.

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