International Trade:

Soviet Agricultural Reform and the U.S. Government Response

NSIAD-91-152: Published: Jun 28, 1991. Publicly Released: Jul 30, 1991.

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Pursuant to a congressional request, GAO reported on: (1) recent Soviet agricultural reforms; and (2) the U.S. government's response to these reforms.

GAO found that: (1) the overall objective of the Soviet Union's agricultural strategy was to improve the quality and quantity of food available to its citizens by restructuring investments, streamlining the bureaucracy, and improving economic incentives; (2) Soviet food reforms focused on supply rather than demand factors, which has increased productivity but has worsened the balance in the food economy; (3) key problems plaguing Soviet agriculture include confusion about the direction of reform, bureaucratic resistance, little autonomy for farmers contending with serious supply problems, serious infrastructure problems in transportation, storage, and processing, persistent risk-averse behavior of farm workers, the inability to introduce workable price reform, and monetary imbalances in the overall Soviet economy; (4) the Soviet Union continues to import huge quantities of grain and other agricultural commodities in spite of its agricultural reforms; (5) the United States has entered into long-term bilateral grain agreements with the Soviet Union to minimize market disruptions, stabilize U.S. domestic prices, promote an orderly expansion of trade between the two countries, and enlarge an agricultural export market with a potentially large customer; and (6) U.S. government officials and private-sector analysts question the advisability of offering export credit guarantees to the Soviet Union in light of its human rights violations, its collapsing economy, and its deteriorating creditworthiness.

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