Export Credits: The Effectiveness of the 1987 Agreement to Control the Use of Tied Aid Credits Under the Arrangement on Guidelines for Officially Supported Export Credits

GAO reviewed the 1987 agreement between industrialized countries to decrease the use of tied aid credits and increase the minimum grant element level to 35 percent by July 15, 1988. GAO found that preliminary information from the Organization for Economic Cooperation and Development (OECD) in December 1988 indicated that the grant element level for most concessionary financing offers since July 1988 was about 35 percent, but the number of tied aid credit offers actually increased. GAO also found that the increase in tied aid offers may reflect: (1) countries' greater adherence to the agreement's reporting requirements; (2) donor countries' continued willingness to subsidize exports, even with the more costly requirements; and (3) reduced market opportunities in which tied aid offers compete. In addition, GAO found that: (1) U.S. exporters believe that the United States was largely responsible for their lack of competitiveness in certain markets because it did not have a tied aid credit program; and (2) OECD and U.S. officials believe that further international agreements concerning export financing are not likely in the near future.