International Trade:

U.S. Efforts to Counter Competitors' Tied Aid Practices

T-GGD-95-128: Published: Mar 28, 1995. Publicly Released: Mar 28, 1995.

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GAO discussed the tied aid practices of the United States and its major competitors, focusing on the: (1) adverse effects of foreign tied aid programs on U.S. exports; and (2) effectiveness of U.S. efforts to mitigate these potential adverse effects. GAO noted that: (1) foreign competitors' tied aid practices can cause trade distortions, adversely affect economic development policy decisions, and put U.S. exporters at a competitive disadvantage; (2) the United States may have lost up to $1.8 billion per year because of U.S. competitors' tied aid practices between 1988 and 1991; (3) the greatest impact of competitors' tied aid practices on the United States involves losses in potential long-term business opportunities and reduced access to certain overseas markets; (4) U.S. trade policy has generally opposed tied aid and dissuaded U.S. competitors from using it; (5) the United States has negotiated multilateral agreements within the Organization for Economic Cooperation and Development to restrict the use of tied aid and established a Tied Aid Capital Projects Fund so that the Export-Import Bank can counter tied and untied aid that could be harmful to U.S. interests; and (6) although U.S. efforts seem to have reduced competitors' tied aid practices, these efforts have not been in effect long enough for an adequate analytical assessment of their impact.

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