Agricultural Trade:

Government Support Calculations Under the U.S.-Canada Free Trade Agreement

RCED-90-210: Published: Aug 8, 1990. Publicly Released: Aug 17, 1990.

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GAO reviewed methods used to calculate levels of government support under the U.S.-Canada Free Trade Agreement, focusing on the accuracy of the 1989 government support calculations for U.S. wheat.

GAO found that: (1) to measure the level of government support, the agreement includes a formula that measures the amount of producer revenue derived from government policies; (2) the U.S. government support calculations for wheat were composed of 13 categories of direct and indirect support; (3) with one exception, there were no material discrepancies in the calculation of the 1989 U.S. government support totals for wheat, but there were several opportunities to adjust state expenditures data to more precisely show how much state governments were supporting their agricultural sectors; (4) state expenditures represented a relatively small portion of government support, and in crop year 1989 state expenditures totalled $106 million, representing approximately 2 percent of government transfers to U.S. wheat producers; (5) some government support calculation adjustments would either increase or decrease state expenditures; (6) when two countries' government support calculations were close, those adjustments could affect whether a country was required to lift its grain import restrictions; (7) agricultural organizations funded by user charges and check-off fees earned interest on some of their funds, primarily because they often received total funding at the beginning of the fiscal year and earned interest until they spent the money; (8) states often issued public debt to fund certain projects, some of which could be related to agriculture; and (9) state agricultural budgets did not report some state contributions to funds for some state agricultural employees.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The Census Bureau provided USDA with adjustments to the 1990 calculations that resulted in a reduction of about $550 million in the Bureau's reported state budget expenditures. These adjustments reduced the calculated amount of government support for wheat by $24.3 million in crop year 1988 and $20.8 million in crop year 1989. The Census Bureau provided USDA similar adjustments for this year.

    Recommendation: Given the potential importance of even small changes in the U.S. government support calculations to the lifting of Canadian import restrictions for grain, the Department of Agriculture (USDA) and the Census Bureau should jointly identify a cost-beneficial method for adjusting the Census Bureau's report of state budget expenditures for agriculture that would show more precisely how much state governments are supporting their agriculture sectors.

    Agency Affected: Department of Agriculture

  2. Status: Closed - Implemented

    Comments: The Census Bureau provided USDA with adjustments to the 1990 calculations that resulted in a reduction of about $550 million in the Bureau's reported state budget expenditures. These adjustments reduced the calculated amount of government support for wheat by $24.3 million in crop year 1988 and $20.8 million in crop year 1989. The Census Bureau provided USDA similar adjustments for this year.

    Recommendation: Given the potential importance of even small changes in the U.S. government support calculations to the lifting of Canadian import restrictions for grain, the Department of Agriculture (USDA) and the Census Bureau should jointly identify a cost-beneficial method for adjusting the Census Bureau's report of state budget expenditures for agriculture that would show more precisely how much state governments are supporting their agriculture sectors.

    Agency Affected: Department of Commerce: Bureau of the Census

 

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