Opportunities To Reduce Costs and Maximize Balance of Payments Benefits Under Dollar Credit Sales of U.S. Agricultural Commodities Abroad

Published by the Government Accountability Office on 1971-09-23.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                                        UNITED STATES GENERAL ACC
                                                       WVASHINGTON,   D.C.    20548                  /‘
                                                                                      VI,                        i    ,
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          Dear   Mr.         Secretary:                 .

                 Recently      the Department        of Agriculture          and other       members
          of the Interagency          Staff   Committee         provided     us with       comments
          on a draft       of a proposed      report      entitled       “Oeunities ---_. _     to
          Reduce Costs        and Maximize      Balance       of Payments        Benefits      Under
          Dollar   Credit      Sales   of U.S.     Agricultural          Commodities        Abroad.”
          We have analyzed         the information          provided      and have made addi-                             1
  \       tional    inquiries      at the Department            of Agriculture.

                 On the basis         of our analyses            and inquiries,           we believe
          that   no additional          value     would    be derived         from proceeding
          with   a formal      report      on the matters           discussed        in the draft.
          Our review,       however,       highlighted         a  need    for    better      documen-
          tation   of,    and more information                on, the major          factors      forming
          the basis     for    decisions         on the terms         and conditions          for    com-
          modity   sales     agreements         with    foreign       governments.

                During        our review          we noted          that     certain        sales     agreements
        with     Brazil,        Korea,      Jordan,         and Afghanistan,                signed     during
        the period           1967 to 1969,             did not require              down payments             in dol-
        lars     or foreign         currency           as large        as appeared            to be feasible.
        Thus it appeared               that     the U.S.         balance        of payments           did not
        benefit       to the extent             which       otherwise         would       have been possible.
        However,         from    the comments             received         from      the members          of the
      I Interagency           Staff      Committee          and from discussions                  with      Depart-
        ment of Agriculture                 officials,           it     appears        that     more    stringent
        financial          terms    probably           could     not have been negotiated                       for
        these      sales.

                  Concessions       in the Korean        agreements         apparently        were
          necessary      to counter       more lenient         offers     by the Japanese.              In
          the Brazilian        agreements,        concessions         apparently        were needed
          to protect       the U.S.     share     of the wheat         market      against      increased
          competition.         Also U.S.      officials        believed       that    Afghanistan
          could     not afford      more stringent         financial        arrangements          and that
          Jordan     would    agree    only   to terms       as soft      as those       offered      to

                                                    50TH ANNIVERSARY         1921- 1971

        Nonetheless     we are concerned          that the above conclusions
cannot be drawn easily           from the minutes        of the Interagency
Staff    Committee     or from data in the Department's              files.       In
many instances       the initial        sales proposals      before     the Com-
mittee    contained     more stringent        financial    terms than those
finally    approved.      The minutes,        however,    contained       no infor-
mation as to why the terms subsequently                  were softened.        Fur-
thermore     the Department's        files    did not clearly       document
judgments      that harder     terms were not possible.

      We believe      that the Interagency            Staff   Committee        minutes
and the Department's        files       should clearly      reflect       and docu-
ment the expressed        positions        of the several       constituent        agen-
cies of the Committee          and the major considerations                 involved
in arriving     at decisions        concerning      the negotiation           of Public
Law 480 sales agreements.               In our opinion,       this    information
is needed to (1) assist           officials      in formulating         future     agree-
ments and (2) permit        objective        evaluations      of program manage-
ment.     The records     should show clearly            why decisions         and
judgments    were made.

        Department     officials       consider      it more appropriate         to
provide     documentation         in the files       of the Department's         Gen-
eral Sales Manager than in the minutes                     of the Interagency
Staff    Committee.        The officials        stated     that greater      emphasis
would be placed on having these files                    reflect     the major con-
siderations      leading      to an approved program.              We agree that
basic documentation           supporting      decisions       should be contained
in the Department's           files;    however,       we believe      that adequate
information      on the factors         considered       in arriving       at the po-
sitions     of the constituent          agencies       of the Interagency        Staff
Committee with respect              to each sales proposal           needs to be in-
cluded in the Committee's              minutes,

       Therefore      we suggest    that you take action        to ensure that
adequate     documentation      and information     are included      in the
Department's      files    and in the Interagency        Staff    Committee
minutes    to show the basis on which decisions               were reached by
U.S. officials        in carrying     out the Public     Law 480 sales pro-
gram.    When certain       considerations      or objectives      are deter-
mined to be overriding          and when greater      concessions     are deemed

necessary, explanations,  factual evidence, and reasons sup-
porting the final decision should be contained in the files
and in the minutes.
      Copies of this letter    are being sent to the Director,
Office of Management and Budget; the Secretaries     of State,
Commerce, and the Treasury;     the House Committee on Government        g,:/z
Operations;    the Foreign Operations and Government Information         1-yI2
Subcommittee, House Committee on Government Operations;        and
Representative    L. H. Fountain<
     We appreciate  the cooperation     provided   by your Depart-
ment during our review.

                                 Sincerely    yours,

                                      T LO.Jd?,ti+d~
                                 Director,    International   Division
The Honorable
The Secretary   of Agriculture   r.