International Trade:

Long-Term Bilateral Grain Agreements and Grain Countertrade

NSIAD-89-91: Published: Apr 14, 1989. Publicly Released: Apr 14, 1989.

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In response to a congressional request, GAO reviewed long-term bilateral grain agreements (LBGA) and countertrade, focusing on: (1) foreign countries' use of LBGA and countertrade; (2) motivating factors for foreign countries to engage in such trade practices; and (3) the prospects for U.S. use of LBGA and countertrade to enhance grain exports.

GAO interviewed private organizations and foreign government officials involved with LBGA, and found that: (1) there was no evidence that countries participating in LBGA and countertrade increased their grain market shares, but there was a consensus that grain trade would have occurred regardless of the agreements; (2) foreign officials and grain traders believed that lack of enforcement limited LBGA effectiveness; (3) many countries discouraged grain use in countertrade because they believed that the negotiation process was long and could compromise their food security; (4) many officials believed that grain was not suited for countertrade because of its low profit margin and high price; (5) the prospects for U.S. use of LBGA and countertrade were limited, but the practices could help develop and reinforce U.S. trade and diplomatic relations; (6) it was unable to determine the worldwide extent of countertrade because of a lack of information on countertrade transactions; and (7) recent legislation could improve the quality of information collected on countertrade.

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