oversight

International Trade: Soviet Export Data

Published by the Government Accountability Office on 1990-07-18.

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

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    /   .’
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                 United States
GAO              General Accounting Office
                 Washington, D.C. 20648

                 National Security and
                 International Affairs Division

                 B-239716

                 July 18, 1990

                 The Honorable Lloyd Bentsen
                 Chairman, Committee on Finance
                 United States Senate

                 Dear Mr. Chairman:

                 As you requested, this briefing report provides information on Soviet
                 exports which may be useful in evaluating the impact of the trade
                 agreement between the United States and the Soviet Union signed in
                 June 1990. This agreement, which is awaiting congressional approval,
                 would grant the Soviet Union “most-favored-nation” (MFN) trade status.

                 This report (1) provides data on Soviet exports to the United States and
                 the rest of the world, (2) compares the similarity between leading Soviet
                 exports to the United States and other selected countries, (3) provides
                 data on tariff rates for U.S. imports from the Soviet Union, and (4) com-
                 pares them to rates for countries granted MFN trade status.

                 An examination of Soviet trade data shows that the bulk of Soviet
                 exports to the world are natural resources and semiprocessed goods,
                 rather than manufactured goods. Fuel products, for example, have
                 accounted for over half of the Soviet Union’s total exports in recent
                 years.

                 Although the United States has not granted the Soviet Union MFN status,
                 the commodities the United States imports from the Soviet Union are
                 generally similar to those imported by countries that have offered the
                 Soviet Union MFN status. This suggests that the types of commodities the
                 Soviet Union will export to the United States, if granted MFN status, will
                 probably not differ significantly from those exported at present. There
                 is also a similarity between the commodities that the United States
                 imports from the Soviet Union and those imported by countries with
                 nonconvertible currencies, such as India and East European countries.
                 This suggests that, even in the absence of granting MFN status, there is a
                 possible opportunity for the Soviet Union to divert trade from these
                 “soft” currency countries to the United States or West European coun-
                 tries for hard currency earnings.

                 Although the Soviet Union does not have MFN status, U.S. tariff rates on
                 Soviet imports are generally very low, primarily because the bulk of
                 Soviet exports are nonmanufactured goods that traditionally have low


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                                                                    ,

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B239716




tariff rates. More than half of Soviet exports enter the United States
duty free. The average tariff rate, on a trade-weighted basis, for the
remaining Soviet exports on which duties do apply is 9.9 percent, com-
pared to an average tariff rate on dutiable products for MFN countries of
6.2 percent. Granting MFN status to the Soviet Union would reduce the
average tariff rates by 4.7 percent. The drop in tariff rates for most
dutiable products is quite small and would probably not be enough to
encourage a large increase in Soviet exports of these products. However,
for some commodity groups, like plywood, paper and paperboard, and
machinery, the tariff rate differentials between MFN and non-MFN are
substantial, and additional Soviet exports may be forthcoming.



Appendix I provides information on Soviet exports to selected countries.
Appendix II includes information on tariff rates on U.S. imports from
the Soviet Union. Appendix III shows Soviet exports as reported by the
United Nations and the Central Intelligence Agency. Appendix IV con-
tains a description of our objectives, scope, and methodology.

As agreed with your office, we will distribute this briefing report to
other congressional offices and will make it available to additional inter-
ested parties upon request.

Please contact me at (202) 2754812 if you or your staff have any ques-
tions concerning this briefing report. Other major contributors to this
briefing report are listed in appendix V.

Sincerely yours,




Allan I. Mendelowitz, Director
International Trade, Energy, and Finance Issues




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Contents


Letter
Appendix I                                                                                                         6
Soviet Exports to       Leading Soviet Exports
                        Soviet Trade Patterns
                                                                                                                   6
                                                                                                                   9
SelectedCountries
Appendix II                                                                                                      12
Tariff Rates on US.     U.S. Tariff Rates on Leading Soviet Exports                                              12
Imports From the
Soviet Union
Appendix III                                                                                                    20
Soviet Exports as
Reported by the CIA
and GAO Estimates
Using U.N. Data
(1984-86)
Appendix IV                                                                                                     21
Objectives, Scope,and
Methodology
Appendix V                                                                                                      23
Major Contributors to   National Security and International Affairs Division,
                             Washington, D.C.
                                                                                                                23
This Report
Tables                  Table I. 1: Leading Soviet Exports to Selected Countries                                 8
                        Table 1.2: Trade Pattern Similarity for Leading Soviet                                  10
                            Exports to Selected Countries
                        Table II. 1: U.S. Imports and Their Tariff Rates for                                    13
                            Leading Soviet Exports to the World
                        Table 11.2:MFN and Non-MFN Tariff Rates on Leading                                      16
                            U.S. Imports From the Soviet Union




                        Page 4                                   GAO/NSJ.AD-90-299BR   International       Trade
Contenta




Table 11.3:MFN and Non-MFN Tariff Rates on U.S.                                 18
    Imports From the Soviet Union With the Highest
    Rates




Abbreviations

CIA        Central Intelligence Agency
MFN        Most-Favored-Nation
SITC       Standard International Trade Classification
U.N.       United Nations


Page 5                                   GAO/NSIAD-90.ZOSBR   International   Trade
Appendix I

Soviet Exports to SelectedCountries


                 The bulk of Soviet exports to the world are natural resources and other
                 nonmanufactured goods. The similarity between Soviet export trade
                 with the United States and with industrialized countries that offer the
                 Soviet Union MFN trade status suggests that granting the Soviet Union
                 MFN trade benefits will probably not result in a major change in the
                 types of products the Soviet Union exports to the United States. How-
                 ever, there is a possible opportunity for the Soviet Union to divert some
                 of its exports from countries with nonconvertible currencies to the
                 United States or West European countries for hard currency earnings.


                 Table I.1 shows the average annual dollar value of the leading Soviet
Leading Soviet   exports during the late 1980s to the United States, to other selected
Exports          countries, and to all countries reporting trade data to the United Nations
                 (UN.). The data are based on reports of imports from the Soviet Union
                 by its trading partners.l Only three East European countries-Czecho-
                 Slovakia, Hungary, and Poland-report      their trade to the U.N. Therefore,
                 the estimate of Soviet exports to all reporting nations understates total
                 Soviet exports. The total 3-year average of $39.5 billion of exports to
                 reporting countries represents 43 percent of total Soviet exports for the
                 same period reported by the Central Intelligence Agency (cIA).~

                 The 35 leading commodity groups cited in table I. 1 account for 75 per-
                 cent of Soviet exports to the world. The amount of each country’s Soviet
                 imports covered by these 35 groups ranges from a low of 42 percent for
                 reporting East European countries, to a high of 97 percent for India.

                 Fuel products-petroleum,     natural gas, and coal-are the Soviet
                 Union’s major exports, accounting for 54 percent of total exports. For
                 each of the selected countries, one or more of these fuel products are
                 among the country’s top four imports from the Soviet Union. Other raw
                 materials and semiprocessed goods, such as wood products, cotton, pre-
                 cious stones, ferrous and nonferrous metals, and inorganic elements,
                 account for most of the Soviet Union’s remaining leading exports. How-
                 ever, the Soviet Union also exports manufactured goods, including

                 ‘Imports am usually reported on a cost, insurance, and freight basis. Data availability differed for the
                 selected countries. The data are based on a 3-year average of trade to ensure that normal trade pat-
                 terns are represented. The averages are based on the most recent data available for each country or
                 region.

                 2Questions have been raised regardll the overall methodology used to estimate the value of Soviet
                 production, including its exports We are currently investigating this issue. Appendix III compares
                 U.N. and CIA reported data on Soviet exports for developed, less developed, and Communist
                 countries.



                 Page 6                                                   GAO/NSIAD-90-209BR       International   Trade
Appendix I
Soviet Exports   to Selected Countries




motor vehicles, chemicals, electric and nonelectric machinery, and tele-
communications equipment.




Page 7                                   GAO/NSIAD-90-209BR   International   Trade
                                                                                                                                                              .
                                                                          Appendix I
                                                                          Soviet Export41 to Belected C4wntrien




Table 1.1: Leadlna Soviet Ex~ortr                           to Selected    Countrlea   (Late 198Od
Dollars
   .I in thousands
           ._...__-. ..- .._
                                                                                                                  West                           Eastern
             Commodity group                                              World     USA Canada        Japan   Qermany      France      India    Europe’
             All~.-.-.
             __. commodities
                     ..____.. .~.__                                 $39,530,870 $522,798  $18,315 $1,979,008 $3,994,871 $2547,648 $1,492,393 $14,140,825
(1)                  332-Petroleum              products              8,501,608  128,999    2,219    107,826    816,753    566,428   572,359   1,375,387
(2)                  331-Crude petroleum. etc.                        8.183.946    8.359         l     6.119    562.232    575.330   645.388   1.163.857
                                                                                                            l                                l
(3)                  341-Gas (natural and manuf.)
 ‘.-:.-..-__-.---__-_-..
                                                                      4,009$x7          *        *              350,518    937,600               737,589


(4) .____.._         321 -Coal,
                            -._._--..- coke, briquettes                 674,705         l        l   319,652     21,189     14,261           *      20,513
(5)                  243-Wood (shaped)
:. ’ _ _.. ..___ - -.._ --..-!-               ’     ’
                                                                        589.035      617         l    20.615     99.903     43.925           *      10.518
(6)                  242-Wood (rough)                                   581:163         *        l   464,184        ‘304       ‘296          t         4:004
(7)                  732-Road motor vehicles                            574,912      489      633        304     35,799     58,351       784     228,867
(8)
._- . -- ____        561   --Fertilizers
                                -_ .-_-.-... (manuf.)                   558,618   36,330    2,291     18,735         596     7,689    40,304     216,140
(9)
..-.--__-            263-Cotton
                              -______ ---_                              445,329       44       53     47,374     43,249     49,027           l    191,803
(10) 667-Pearls, precious, semiprec.                                    436,014      896        6     46,921     56,007          22         4               *
    . - .._.-------.-..
(11) 513-lnorg. elemnts, oxides, etc.                                     426,740      84,881         120          5,066      6,498      2,611         21          58,815
(12) 281-Iron oreconcentrates
L....-----
                                                                          405,786             l         *               l       610          l           l        454,082
                                                                                                                        *         *          *           l
(13). . .351_.-_.           -Electric
                                --         energy                         3571058             *          l                                                        320,213
(14) 719-Machines,                              nonelec., nesb            355,737          65        230          993        6,443       4,669    110,029          67,492
(15) 681 -Silver, platinum, etc.                                          333,422      99,632        725      343,923       55,955      12,139        776                *
 _...-._.____--~
(16)
--~_- 512-Organic          .-.-.--          chemicals                     301,000      19,052          15           9,610    39,294     17,851      3,095          36,285
(1       7)
----- ~-_._--        262-Iron        and    steel scrap                   299,870             l          *         48,081    10,603         70         68             114
(18) 684-Aluminum                                                         291.750       2.774            l         99.556    10.672     14.136      7.155          28,089
                                                                                                                                                         l
(19) 671-Pig iron, etc.
:.-z--,-,-L
                                                                          233,368       8,843          15          64,992    28,076      3,669                    177,751
(20) 251 -Pulp and waste paper                                            215,161        ho              l          1,847    36,729     29,063           *         69,298
(21)
__...                515~Radioactive material, etc.
           --...--l____-_--.                                              206,811       9,133          48           4,683   141,259     73,099           *            730
(22)
L-L-...
                     718-Maths.            for SIXI. inds.                197,450         328         105              12     5,450        101      8,639         139,203
(23)
----.---             71  l-Power         machinery     (nonelec.)         1931489         180          59             110     1,026        329      7,334         181,309
(24)
 II----.--.---       031 -Fish (fresh, presvd.)                           167,211       1,722         963         148,066       380      1,544           *            231
(25) 683-Nickel                                                           146.103          22           *          44,940   130,049     22,545      7.809                *
(26)
A -.:-----. 715-Metalworking
                        ___      machinery                                1391605         598       1,612           61814     61179      2,117      6,304          90,800
(27)
--_-        641 -Paper    and paperboard                                  135,687       6,898            l             67    23,256        375     31,627          47,299
(28)
_-____----  712-Agricultural   machinery                                  125,922       6,494       1,592              18       431      1,122        117          79,304
(29)
--          631 -Veneers, plywood, etc.                                   110,288       2,751         733          25,543     6,650      7,391          1          19,025
(30)
~-______-   724-Telecommunications       equip.                           109,522         267            *             59     6,402      1,130         57          91,656
(31) 212-Fur skins (undressed)                                            108,457      17,069       2,172           8,383    22,133      6,032           *               *
(32) 729-Electrical
A.- .:.-----.---~---.   machinery,
                        .          nes                                    104,028         975          29             408     2[762      11220       5,799        71,924
(33)  672-Iron,
--_-_- --.-      stl. (primary forms)                                      95,926       2,684            l            103     8,182      1,500          39          2,195
(34) 231 -Rubber (crudesvnthetic)                                          95.420         167          20           3,872    lo,61 1     1,903          23        53,569
                                    ”                                                                                                                        (continued)




                                                                          Page 8                                                GAO/NSIAD-W2OBBR International      Trade
                                                   Appendix I
                                                   Soviet Exports    to Selected Countries




                                                                                                          West                                     Eastern
        Commodity          group _____--             World          USA     Canada            Japan   Germany      France       India              Europe’
(35) __._674~lrn.,
          ...I_.. .._^..stl.(plate,sheet)
                         .__ ._..--.-~~             90,842              *             l          565      6,220        720        755                60,300
        Total (selected         commodities)   $29,801,827   $440,431       $13,840       $1,849,442 $2,552,421 $2,458,285 $1,448,487           $8,001,242
        Percent     of total Soviet exports          75.39          84.24     74.48           93.45       63.89          96.49         97.06           42.44
                                                   Notes: Soviet exports are the trade partners’ reported imports from the Soviet Union. There are
                                                   248 three-digit Standard International Trade Classification (SITC) Revision 1 commodity groups. Export
                                                   figures for each country are 3year averages for the latest available years: 198688 for the United States,
                                                   West Germany, and Japan; 1985-87 for Canada, France, Hungary, and Poland; 198385 for India; 1983,
                                                   1984, and 1986 for Czechoslovakia; and 1984-86 for the world. These latter years were chosen to calcu-
                                                   late world totals because many countries had not yet reported their 1987 and 1988 trade figures,

                                                   An * denotes less than $500.
                                                   aEastern Europe data include only trade reported by Czechoslovakia,    Hungary, and Poland
                                                   bNes denotes not elsewhere specified.
                                                   Source: UN. trade data at the three-digit SITC Revision 1 level



                                                   An examination of current Soviet export trade patterns to selected coun-
Soviet Trade Patterns                              tries may provide some insight into possible short-term prospects for
                                                   Soviet exports to the United States and other countries. Table I.2 pro-
                                                   vides a summary figure to compare trade pattern similarities for
                                                   selected pairs of countries. The correlation coefficient3 is computed for
                                                   bilateral trade in the leading 35 Soviet export commodities in table I. 1
                                                   for each pair of countries. The correlation coefficient ranges from + 1.OO
                                                   to -1.00. A coefficient value of +l.OO implies an exact similarity between
                                                   the two countries’ trade patterns; 0.00 implies no similarity or associa-
                                                   tion in trade patterns; and -1 .OOimplies an exact inverse relationship or
                                                   pattern of similarity. Nations with a high correlation coefficient with
                                                   the United States are those with similar trade patterns. For example, the
                                                   correlation coefficient between Soviet exports to the United States and
                                                   Canada is 0.46. This indicates a stronger similarity in trade patterns
                                                   between the Soviet Union’s leading commodity exports to Canada and
                                                   the United States than is implied by the 0.25 coefficient between the
                                                   United States and Japan.




                                                   “The correlation coefficient computes the relative association between two series of numbers. It is not
                                                   proof of causation.



                                                   Page 9                                                    GAO/NSIAD-90-209BR       International   Trade
                                                   Appendix I
                                                   Soviet Exports    to Selected Countries




Table 1.2: Trade Pattern Similarity          for Leading Soviet Exports to Selected Countries
                                                    United                                     West                                                         Eastern
- -~-.- .-.- _.._....-.-...                         States      ..~~-Canada        Japan   Germany                   France               India             Europe
United States
__--.-._I.__-_        ___._~_-..-                      1.oo
                                         ..__...~---_____-..             0.46        0.25       0.50                     0.24               0.43                0.40
Canada                                                     .             1.oo        0.00       0.23                     0.08               0.24                0.22
--__-          -"- __-.---__...-.
Japan                                                       .               .         1.00      0.00                   -0.07-___          -0.02               -0.11
---__.-.-            .._.._..
                           -.-___.---..--___-_-.-          _-__~--__--____
West  Germany                                               .               .            .      1.oo                     0.83               0.88                0.90
----     _.__. .-. .. .-...-.-...-. --___- - -._ _-- .___...   -.-_.-- __-____.___-
France                                                      .               .            .          .                    1.oo               0.61                0.82
_-- ___.__ --.._ .-_---.__~
India                                                       .               .            .          .                       .               1 .oo               0.86
Eastern Europe                                              .               .            .          .                       .                   .               1.oo
                                                   Note: The correlation coefficient is used as an indicator of trade pattern similarity for the leading 35
                                                   Soviet exports to the respective pairs of countries. A value of 1 .OOis exact similarity, 0.00 is no similarity,
                                                   and -1 .OOindicates an exact inverse relationship.


                                                   There are many possible reasons for differences in trade patterns among
                                                   nations. First, different nations have different formal trade relation-
                                                   ships with the Soviet Union. For example, the United States does not
                                                   offer the Soviet Union MFN trade status, while Canada, Japan, West Ger-
                                                   many, and France do. Second, India and the East European countries
                                                   have bilateral trade agreements with the Soviet Union, which allow for
                                                   payment of Soviet exports in nonconvertible “soft” currencies, although
                                                   the Soviet Union is apparently trying to require payment in “hard” cur-
                                                   rencies such as the dollar, Deutsche mark, or yen, from its export
                                                   customers.

                                                   The type and amount of goods a country imports from the Soviet Union
                                                   depends on both the country’s demand and available supply from the
                                                   Soviet Union. Countries with similar standards of living, geographic
                                                   location, and resource endowments may be expected to have roughly
                                                   similar net demands for Soviet exports. Since these countries are buying
                                                   from the same supplier, one would expect a positive correlation coeffi-
                                                   cient, indicating similar trade patterns. For most pairs of countries,
                                                   including India and Eastern Europe, this appears to be the case. How-
                                                   ever, Japan has a trade pattern dissimilar to most of the selected coun-
                                                   tries, probably because of its relative scarcity of natural resources. For
                                                   example, the correlation coefficient for Japan and West Germany is
                                                   0.00, indicating no similarity in trade patterns; the -0.11 coefficient for
                                                   Japan and Eastern Europe suggests a small inverse association in, trade
                                                   patterns.

                                                   This analysis of similarities in trade patterns cannot provide a definitive
                                                   assessment of how U.S.-Soviet trade patterns may look if the United



                                                   Page 10                                                       GAO/NSIAD90-209BR          International     Trade
Appendix I
Soviet Exports   to Selected Countries




States grants the Soviet Union MFN trade status, The dramatic changes
in the political and economic environments in Eastern Europe and the
Soviet Union will probably affect Soviet export trade. Some key factors
that will affect Soviet exports, for example, will be internal price reform
and realistic foreign exchange rates.

If the United States grants MFN status to the Soviet Union, the reduced
U.S. import tariffs may result in an increase in Soviet exports to the
United States. However, because of rigidities in Soviet production and
domestic shortages of goods, the Soviet Union will probably not be able
to substantially expand its total volume of exports in the short term. An
increase in exports to the United States or other developed countries
may result from the Soviet diversion of current export trade rather than
from any substantial expansion of exports. If the Soviet Union is inter-
ested in earning hard currency, it probably will not divert exports from
Western countries like France, Japan, or West Germany to the United
States. It may be more willing, depending on political considerations, to
divert exports for which it receives payment in nonconvertible
currencies.

Table 1.2 indicates a positive similarity in export trade patterns from the
Soviet Union to the United States and India and Eastern Europe, respec-
tively. This suggests a possible opportunity for trade diversion from
these soft currency countries to the United States. Such a trade diver-
sion, however, may affect the volume of exports to the United States
rather than the product composition of trade. Similarly, there is a pos-
sible opportunity for trade diversion to some West European countries
like France and West Germany. Because of their geographic proximity,
West European nations may be more attractive markets for the Soviet
Union to divert exports to than the United States. However, this analy-
sis cannot possibly determine whether such an export diversion would
have a greater effect on Western Europe or the United States.




Page 11                                  GAO/NSL4Ih9O-209BR   Intemational   Trade
                                                                                            .
Appendix II

Tariff RateSon U.S.Imports From the
Soviet Union

                      Although the Soviet Union does not have MF'N trade status, U.S. tariff
                      rates on Soviet imports are generally very low, primarily because the
                      bulk of Soviet exports are nonmanufactured goods. Granting MFN status
                      to the Soviet Union would reduce the average tariff rates on dutiable
                      products by less than 6 percent. This drop in tariff rates would probably
                      not be enough to encourage a significant increase in Soviet exports to
                      the United States.


                      An examination of U.S. tariff rates on Soviet imports may be useful in
US. Tariff Rates on   assessing the possible effects of granting MFN status to the Soviet Union.
Leading Soviet        Table II. 1 shows the average imputed U.S. tariff rates for the 35 leading
Exports               Soviet exports to the world, as cited in table I. 1. The average imputed
                      tariff rate is computed as a ratio of calculated duties collected to all
                      imports, both dutiable and duty free. The average imputed tariff rate
                      can be interpreted as an additional percentage cost increase added to the
                      average commodity group price.

                      Column 3 in table II.1 shows the relative importance of imports from the
                      Soviet Union to total U.S. imports for each commodity group. For five
                      commodity groups, the Soviet share of U.S. imports is greater than
                      1 percent, with the highest being 10 percent for fur skins. For most
                      groups, however, the Soviet share is less than 1 percent. Even if the
                      Soviet Union doubles these exports to the United States, it probably
                      would not significantly affect market shares or prices for these com-
                      modity groups. In general, exporters with such low market shares do not
                      have the ability to substantially affect prices.




                      Page 12                                 GAO/NSIAlMO-209BR   International   Trade
                                                                                    Appendix II
                                                                                    Tariff Rates on U.S. Imports   From the
                                                                                    Soviet Union




Table 11.1:U.S. Imports and Their Tariff Rates for Leading                                         Soviet Exports to the World (1986-88)
Dollars in thousands
                                                                                                                                Sovie;;;;r;          $   Average    tariff rate on total
                                                                                                             U.S. imports                                        imports from
                                                                                                              from Soviet                 impoit;        Soviet Union       MFN countries
            Commodity group                                                                                         Union               (percent)            (Percy{
          .w “.                      . ..- .._- . -                                                                      (2)                    (3)                              (perce;:l
            All commodities                                                                                        $522,798                   0.12                 4.44                  3.64
(1)         332-Petroleum                   products                                                                128,999                   1.oo                 1.63                  0.92
(2)
.   I
            331-&ude                 petroleum. etc.                                                                  8.359                   0.03                 2.14                  0.60
                                                                                                                           *
                                                       -.




(3)         341 -Gas (natural and manuf.)                                                                                                     0.00                    -a                 0.00
(4)         321 --Coal, coke, briquettes                                                                                   *                  0.00                 0.00                  0.00
(5)         243LWood        _ (shaped) ..-~-.                                                                           617                   0.02                 6.93                  0.00
(6)         24%-Wood (rough)                                                                                               *                  0.00                    -                  0.00
(7) ..732--Road motor vehicles                                                                                          489                   0.00                 3.14                  1.87
(8)
I. :    -..
            561 -Fertilizers
                  ._. -     ___...__
                                           (manuf.) _-_-
                                        - .L--.-..!
                                                                                                                     36.330                   3.73                 0.00                  0.00
(9) __263-Cotton..~          -_. ..._ -._                                                                                44                   0.40                 5.30                  0.49
(10) 667-Pearls,        ..-           precious,
                                         --__-.. semiprec.
                                    -.....                                                                              896                   0.02                 3.70                  0.12
(11) 513~lnorg. elemnts,              .._---._- oxides                                                               84,881                   3.99                 0.31                  1.99
(12) 281 -Iron ore, concentrates                       ..._..---.---       --
                                                                                                                            l                 0.00                         -                    0.00


(13)        351--Electric              energy                                                                               *                        -                     -                           -
     .“_^ .” ..- *                ---..---          --
(14) 719-Machines,               nonelec., nesb                                                                          65                   0.00                 40.87                        3.49
(15) 681~Silver, platinum, etc.                                                                                      99,632                   5.44                  0.00                        0.01
(16) 512-Organic               chemicals
                       -..-_ ___-                                                                                    19,052                   0.40                  3.93                        6.86
(17) 282-Iron
          ._..._-_-.~_and steel scrap                                                                                       l                 0.00                  0.00                        0.00


(18) 664-Aluminum                                                                                                     2,774                   0.09                  4.22                         1.18
(19) 671-Pig iron, etc.                                                                                               8,843                   1.05                  5.98                         1.74
(20) 251 -Pulp  _ . and waste paper                                                                                     160                   0.01                  0.00                         0.00
(21) 515~-Radioactive
               . . -.-. .I_ material                                                                                  9.133                   0.77                  4.89                         0.05
(22) “‘7i8-Maths _           for spcl. inds.
                             ____                                                                                      ‘328                   0.01                 35.00                         3.00
(23) .^71~.l-Power
             .._.”_._”      math.
                    -.....~._.      (nonelec.)                                                                          180                   0.00                  1.17                         1.52
(24) 031 -Fish fresh, presvd.                                                   -                                     1,722                   0.04                  0.42                         0.25
(25) 683-Nickel                                                                                                          22                   0.00                  1.78                         0.30
(26) 715-Metalworking      ---.-.math.
          ..^_ .-- .. .- _...                                                                                           598                   0.02                 30.31                         4.00
(27) 641 -Paper and paperboard                                                                                        6,898                   0.10                 29.52                         0.39
(28) 712-Agricultural         math.                                                                                   6,494                   0.34                  0.00                         0.23
(29) 631 -Veneers, plywood,   ___- etc.                                                                               2,751                   0.23                 46.70                         4.90
(36) .724-Telecomm. equip.                                                                                              267                   0.00                 26.80                         5.12
(31) 212-Fur
        _..__     skins
                   “^_ (undressed)
            _- . .._                                                                                                 17,069                   9.87                  0.00                         0.14
(32) 729-Electrical       machinery,nes                                                                                 975                   0.01                 28.35                         1.70
(33) 672-lronstl.      (primary forms)                                                                                2,684                   0.37                  9.07                         4.74
(34) 231 -Rubber (crude, synthetic)                                    -                                                167                   0.01                  0.78                         0.04
                                                                                                                                                                                         (continued)



                                                                                    Page 13                                                   GAO/NSIAD-90-209BR               International   Trade
                                                               Appendix II
                                                               Tariff Rates on U.S. Imports    From the
                                                               Soviet Union




                                                                                                            Sovie\i;;r;     if      Average    tariff rate on total
                                                                                          U.S. imports                                      imports from
                                                                                           from Soviet                impo;td       Soviet Union       MFN countries
        gmmodity              group                                                              Union              (percent)           (percent)
“. ...._ .-...... _......... .- -._...-.._.~....~. -... -_- .~--_..-.- -..... - -______              t2)           -      of;                   (4)          (perce8
(35) 674~lrn, stl. (plate, sheet)                                                                      *                                      0.00                  5.74
        Total (selected commodities)                                                          $440.431                    0.19                1.79                  1.94
        Percent    of total Soviet exports       to the United     States                          04.24
                                                               Notes: Trade provisions for which the Soviet Union is not eligible, such as the General System of Prefer-
                                                               ences and the Caribbean Basin Initiative, are excluded in computing the average MFN tariff rate.

                                                               An Indicates imports valued at less than $500
                                                                   l


                                                               aA dash denotes number is not meaningful.
                                                               “Nes denotes not elsewhere specified.
                                                               Source: U.N. trade data at the three-digit SITC Revision 1 level. Average tariff rates-calculated duties
                                                               collected as a percent of total (customs value) imports-are   based on US. Department of Commerce
                                                               data.


                                                               The average imputed tariff rates for commodity group imports from the
                                                               Soviet Union and countries granted MFN status are presented in columns
                                                               4 and 5 of table II. 1, respectively. For some commodity groups, such as
                                                               plywood and machinery, the non-MFN Soviet tariff rates are in the 25- to
                                                               50- percent range. In general, however, the average rate on Soviet
                                                               imports is much lower. The average tariff rate for all Soviet exports to
                                                               the United States is 4.4 percent.’ For the leading commodity groups,
                                                               which account for 84 percent of the total Soviet exports to the United
                                                               States, it is 1.8 percent. This compares to the average tariff rate for MFN
                                                               countries of 3.6 percent for all commodities, and 1.9 percent for these
                                                               selected commodities.

                                                               Granting the Soviet Union MFN status would lower the average tariff
                                                               rate for all exports (both dutiable and nondutiable) by less than 1 per-
                                                               cent. This decrease in prices would probably be too small to encourage a
                                                               large increase in Soviet exports; and, as noted in appendix I, granting
                                                               MFN status would not have a very strong influence on the types of prod-
                                                               ucts that the United States would import from the Soviet Union. How-
                                                               ever, for some commodity groups, like plywood, paper and paperboard,
                                                               and machinery, the tariff rate differentials between MF’N and non-Mm
                                                               are substantial, and additional Soviet exports may be forthcoming.

                                                               Table II.2 presents the value of imports and comparable ad valorem
                                                               equivalent tariff rates for the leading U.S. imports from the Soviet

                                                               IThe average tariff rate is weighted using actual values of U.S. imports from the Soviet Union. Since
                                                               the Soviet Union may export few or no commodities with high tariff rates, this weighting procedure
                                                               may underestimate the non-MFN tariff rate facing the Soviet Union.



                                                               Page 14                                                    GAO/NSIAD-BO-209BR       International   Trade
    Appendix II
    Tariff Rates on U.S. Importa   From the
    Soviet Union




    Union during the 1987-89 period. An ad valorem equivalent tariff rate is
    computed as a ratio of calculated duties collected to total dutiable
    imports. The 35 leading commodity groups account for 97.7 percent of
    all U.S. imports from the Soviet Union (column 2). As shown in column
    3,53.7 percent of all imports from the Soviet Union entered the United
    States duty free. The average ad valorem equivalent tariff rate for the
    remaining dutiable imports from the Soviet Union is 9.9 percent (column
    4). This compares to an average tariff rate of 5.2 percent (column 5) for
    dutiable imports from all MFNcountries. The difference between non-MFN
    and MFNtariff rates is greater for the 35 leading commodity groups. The
    non-MFN Soviet Union’s average tariff rate for the 35 leading commodi-
    ties is 9.3 percent, compared to the average tariff rate of 1.9 percent for
    MFNcountries.




.




    Page 15                                   GAO/NSIADM-209BR   International   Trade
                                                                                       Appemdix II
                                                                                       Tariff Rates on U.S. Imports       From the
                                                                                       Soviet Union




Table 11.2:MFN and Non-MFN Tariff Rates on Leading                                                        U.S. Imports From the Soviet Union (1987-89)
Dollars in ._
            thousands
              .._ .~. .._~.-...-- .-.. -- .._. -
                                                                                                                                                           Rate on dutiable imports
                                                                                                                     Imports from     Duty free share     Soviet Union    MFN countries
               Commodity group                                                                                       Soviet Union            (percey;~
               (1)                                                                                                              (2)                           (perceY4             (perce3
               Ail commodities                                                                                            $554,324               53.65              9.93                 524
(‘!. _-       .-334-011             -(not
                                       .._ crude)  __- ..___       from   ---~petrol. & bitum. min.                        167,996                0.00              1.45                 1.10
(2). 661-Silver, platinum & other platinum group metals                                                                    125,179              100.00              0.00                 6.30
(3) ~Sii-Inorganic..I-w_~- chemical                        . ..___.           elements, oxides, halogen                     56,380               98.66             23.75                 3.81
(4)            333-&ude                      oil    from
                                                       _.._
                                                                   petroleum
                                                                    .._..--
                                                                                        or bituminous min.                  21.978                0.00              1.66                 0.59
!5) .28&-%Jonferrous base                                       2         metal
                                                                            -----     waste & scrap, nesa                   19,987               97.05             16.00                 2.88
(6) ‘t 12-Alcoholic beverages                                                                _I__.                          18,879                0.79             63.47                 2.91
(‘7) 212-Furskins, raw                                                                                                      16.809              100.00              0.00                 8.00
!8! 525~Radioactive   . - --_......-.- --_.-.-              and associated
                                                                         _.-__-              materials           -          16,175               88.00             25.00                 4.00
(9) 562-Fertilizers  ”             ..                 (except
                                                     ..-       ----_- crude)                                                14,699              100.00              0.00                 3.10
(10)’ 511 -Hydrocarbons & specified derivativesnes                                                                          13,219              100.00              0.00                 8.50
iiij 671-Pig iron, iron & steel powd.                                                                                       11,068                0.00              5.25                 2.34
(12)
  ._._ -..._-..896-Works  _              .-. of art, collectors’ pieces, and antiques                                        9,595               99.99             33.37                 3.61.
(13) 722-Tractors                    . .~~ (0th. than mechanical handling equipment)                                         8,288              100.00              0.00                 2.19
(14)
: _.652-Cotton            ._ .I...___..       fabrics, woven (not
                                             --.-----                                . narrow or spec. fabric)               5,800                0.00             16.05                 9.25
(15) 634-Veneers,       -. ._-.-_ ._~.-~-           plywood,                 particle      bd., 0th. wood                    5,532                0.00             35.96                 6.37
(16) 037-Fish/crustaceans/molluscs/aq.                ..---                                      invbrte.                    3,131                9.56             29.75                 9.05
(17) 931 -Special--.-- transactions                   ..-_____ --                 &  commod.                                 2,657               99.72              5.56                 0.95
(18) 672-Iron or steel primary                                        ~~-_      forms & semifinishrprod.
                                                                            . I_-_--                                         2,599               61.95             20.02                 4.37
(19)
   .-          684-Aluminum
               _.     . _I --.~-.~..                                                                                         2,203               82.06             10.50                 3.30
(20) 512-Alcohols,   __               ._ . -...      phenols,
                                                          ..- ...__ ----.-  etc. & halogenated, deriv.                       1,895                0.00             27.42                 8.95
(21) ._689-Misc...-                        nonferrous
                             ~~~.~--.-.---.---.-___~_____I__              base       metals for metallur.& cer.              1,890               73.05             19.52                 6.89
(22) 036-Crustaceans,                                           etc.                                          .-             1,692              100.00              0.00                 7.41
(23) 666-Pottery                                                                                                             1,683                0.00             69.86                 9.03
(24) 692-Printed matter                                                                                                      1,413               96.54             14.05                 2.97
(i&j 664-Glass                                                                                                               1,360                0.00             18.62                 5.78
(26) 277-Natural abrasives, nes                                                                                              1,242               99.45              0.00                 1.41
(27 j. ‘bj5--ijsh,‘d;led,-salted,orin         _.--.. ..---_----__ brine; smoked fish                                         1,196                0.00             28.14                 2.83
(28) 950-Coins, including gold: proof and pres. sets                                                                         1,053              100.00              0.00                 0.00
(29)
 :. ._~L_
               263-Cotton
                _... .- ._.. ._..       -.
                                               textile fibers
                                              .--.-_-___-
                                                                                                                               986                0.00              4.86                 3.95
(30) 776-Thermionic,                                        cold cathode, photocathode valves                                  906                8.21             35.00                 5.67
(31)
.___.-.        523-Metallic
         - .___.   ..-__..-...-_-.-~-...-----__--salts          and peroxysalts of inorganic acid                              902               24.47              5.28                 3.14
                                                                                  -_____
132)
1.._. .!-.-.-
               287-Ores                    &   concentrates
                     _-.-. .-......__ - ..-._...-      --
                                                                                   of base metals, ----
                                                                                                        nes                    900              100.00              0.00                 5.32
(33) 984-Est. of low valued items                                               -~-    elig. for  informal  en!.               826               45.28              0.00                 0.00
                                                    7-p
(34)..__.667-Pearls,
                 _....... ..__.
                             - ...__.. .._    pr&ious
                                                    -_.-                & semiprecious                                         737               76.23             10.20                 2.34
                                                                                                                                                                                 (continued)




                                                                                       Page 16                                                    GAO/NSIAIWO-209BR    International   Trade
                                                           Appendix II
                                                           TarM Rater on U.S. Imports      &urn the
                                                           Soviet Union




                                                                                                                                 Rate on dutiable import8
                                                                                     Imports from       Duty free share         Soviet Unlon    MFN countries
       Commodlty group                                                               Soviet Union
.._.   (1)
        .^.. ..- .._..- .. . - .-..-.---.                                                         (2)          (perce$ I            (perc8z 1             (perce(n: 1
(35)   665-Glassware                                                                             698                 0.00                54.47                  10.97
                              -_     .-,_ -~-.
       Total (35 le8ding commodity               groupa)                                  $541,551                 54.00                  9.31                   1.91
       Percent      of total U.S. imDorts from the Soviet Union                                97.70

                                                           Note: Commodity groups are at the three-digit SITC Revision 3 level. Tariffs on Soviet imports are
                                                           assessed at the non-MFN rate.
                                                           BNes denotes not elsewhere specified.
                                                           Source: Compiled from U.S. Department of Commerce trade data.


                                                           As shown in table 11.2,the average tariff rates on Soviet exports are
                                                           already quite low, primarily because the bulk of Soviet exports are nat-
                                                           ural resources and semiprocessed goods, commodities with low tariff
                                                           rates compared to manufactured goods. More than half of Soviet exports
                                                           enter the United States duty free (see column 3).

                                                           Table II.3 presents U.S. imports from the Soviet Union with the highest
                                                           ad valorem equivalent tariff rates. The 35 commodity groups with the
                                                           highest tariff rates account for 4.2 percent of US. imports from the
                                                           Soviet Union. The amount of high tariff goods that enter the U.S. market
                                                           is quite small. This may be due to the high tariff rates. Three of the
                                                           groups-alcoholic    beverages, pottery, and glassware-are among the
                                                           leading US. imports from the Soviet Union shown in table II.2 and
                                                           account for 92 percent of the dollar value of the imports included in
                                                           table 11.3.About 1 percent of the imports shown in table II.3 enter the
                                                           United States duty free. The average non-Mm Soviet tariff rate for these
                                                           imports is 64 percent, compared to an average tariff rate of 11.9 percent
                                                           for MFN countries. These commodities are primarily manufactured or
                                                           processed goods. Textiles account for 11 of the 36 groups. Lower tariff
                                                           rates under MFN may cause the Soviets’ export of these products to the
                                                           United States to increase as well as other manufactured goods that the
                                                           Soviet Union does not currently export to the United States.




                                                           Page 17                                                   GAO/NSIADgO-2OBBR        International     Trade
                                                                               Appendix II
                                                                               Tariff Rates on U.S. Imports   From the
                                                                               Soviet Union




Table 11.3:MFN and Non-MFN Tariff Rates on U.S. lmoorts From the Soviet Union With the Hiahest Rates (1987-89)
Dollars in thousands       ..--- ~----
                                                                                                  Rate on dutiable imports
                                                                               Imports from      Soviet Union    MFN countries
       emmodity     group                                                       Soviet Union
                                                                                          69         (perceY4         (perce$

          All commodities                                         -                                                      $554,324             9.93                   524
(1)       122-Tobacco, mfg.                                                                                                     3           143.60                 43.86
(2)       542-Medicaments      (including veterinary medicaments)                                                               8           134.74                   5.26
(3)       515-Organ.-inorganic     & heterocyclic compounds etc.                                                              127           121.56                   7.51
(4)       269-Worn clothing & other textile articles; rags                                                                      2            93.01                   2.38
(5)         tiV--Specral                        yarns, special textile fabrics, etc.                                             1           80.12                   8.42
(6)         897-Jewelry,                           goldsmiths’ & silversmiths’ wares                                           40            79.94                   7.18
                                                                                                                                                                     --
(7)         813-Lighting                          fixtures and fittings, nesa                                                   5            78.63                   6.87
(8)          553-Perfumery,                                cosmet. or toilet prep., ext. soaps                                 80            76.87                   4.95
(9)         845-Articles                        of apparel of textile fabrics, nes -                                          119            76.79                 20.99
(10) 884-Optical                               goods, nes                                                                       7            73.69               -- 6.90
                                                                                                      -                          *           72.33                 23.87
(11) 843-Mens’ or boys’ coats, jackets, text., knit
(12) ..-844-Womens’ _.._.-__-..-.-...-_-or girls’             ---- coats, capes, etcTextile, knit                               5            71.99                 22.53
(13)        696-Cutlery                                                                                                         2            71.80                   8.83
 : .-.. L..     _. .I _. --    ._.-.... L-.      .._” .---..

(14) 846-Clothing                                  accessories, of tex., ex. babies’                                            8            70.26                  13.33
(15) 666-Pottery                                                                                                            1,683            69.86                   9.03
(16)_ . 894-Baby
             .._ --     -.__   ._ _.^.
                                        carriages,
                                           -.-__
                                                                  toys, games, and sporting goods                             338            67.89                  5.78
(17) 746-Ball or roller bearings                                                                                               24            66.34                  8.91
                                                                                        -
(18)                                                                                                                          369            64.41                  3.67
- --. ._885-Watches --_.-.-..----.- and clocks
(19) 112-Alcoholic beveraaes                                                                                               18.879            63.47                  2.91
(20) 841-Mens’ or boys’ coats, jackets, text., not knit                                                                        58            56.71                20.65
(21) 654-Woven fabrics of text. mat., not cotton or manmade                                                                    11            56.19                14.11
(22)._-..._ 842-Women/girls’                                   coats, capes, text. fabric, not knit                            95            55.90                17.40
            i_...   .-._-..- .-. .._..          ----_-.---
(23)        665-Glassware                                                                                                     698            54.47                10.97
     .-;.-..-.-- -_-..”_-..--__.-- --~
(24) 514-Nitrogen-function                                          compounds                                                  28            53.04                  9.36
(25).‘. 893-Articles.                             nes.        of  plastics                                                     69            49.33                  4.35
                                                                                                                                                                    -.
                     “. . .._-.. -.-. -:              - 2’-
(26) 871I -Optical                             instruments                                                                     11            47.41            ____.7.67
                             .-..I.“..._...___           -- .-- _..---and apparatus, nes
(27) 872-Inst. & appls., nes, for medical, dental purposes                                                                     15            46.53                  6.00
(28) .659-Floor coverinas. etc.                                                                                               112            45.50          -___    6.59
(2$.-058-Fruit,                         prsvd., fruit preparations (excl. --               fruit jc.)                          21            45.40                  5.20
                                                                                                                                *
(30) 749-Nonelectric                                         parts & accessories of machry., nes                                             44.89              --.--4.04
(31) 658-Made-up                                    articles of textile materials, nes -                                       49            44.46                  9.46
(32) 699-Manufactures                                           of base metal, nes                                             79            43.77                  5.26
(33) 891- -Arms                         and           ammunition                -                                              39            43.39                  4.65
                             ---.---.--
(34) 848-Apparel
              ____ _-.-..--~-_                   @cl.         act.   ext.  textile; hdgear, all mat.                           25            42.19                  6.59




                                                                               Page 18                                       GAO/NSIADQO-20QBR   International    Trade
                                                           APPnalJr Il
                                                           l&lffRatm    on US. Importa    lMm    the
                                                           Soviet Union




                                                                                                                                 Rate on dutiable imports
                                                                                                          Import8 from          Soviet Union    MFN countries
           gmmodity          group                                                                        Soviet Unig
.-___.- -..-____...-._-__.--                                                                                                        (perce(n311            (per ceil
(35) 766-Trailrs                                                                                                       3                 41.44                   3.25
 ,-...-..-_--.._--...----._- & semi-trailrs; 0th. veh. not mechan.   propld.
           Total (relected commodity groupr)                                                                    $23,014                  63.55                  11.88
       Percent    of total U.S. imports    from the Soviet     Union                                                 4.15
                                                           Notes: Commodity groups are at the three-digit SITC Revision 3 level. Tariffs on Soviet imports are
                                                           assessed at the non.MFN rate.

                                                           An indicates imports are valued at less than $500.
                                                               l


                                                           ‘Denotes not elsewhere specified.
                                                           Source: Compiled from U.S. Department of Commerce trade data.




                                                           Page 19                                                   GAO/NSLAIW%299BR          International     Trade
Appendix III

Soviet Exports as Reportedby the CIA and
GAO EstimatesUsing U.N. Data (1984 - 86)

Dollars   in millions
                                                                                                                                                   -
                                         Number of countries                Average export                                          Export estimates
                                         reporting to the U.N.              estimatsN W&I!                  Average CIA                 a8 percent of
Country    grouping
   ..- .._._..___._
               -~-.                       1984     1985    1986                      . .               export estimates                CIA estimates
Developed       countries                   27       27        27                     $25,053                     $22,581                          110.95
Less developed          countries           66       57         41                        2,391                    12,548                           19.05
Communist        countries                   4        2          3                      12,087                     56,786                          21.29
                                                                                                                                                     -
Total                                       97       96         71                    $39.531                    $91.915                           43.01
                                                                         (Percent   of ihe total)
Developed       countries                                                                 63.38                       24.57
Less ..I
      developed
       .-._.__-.._--___-countries
                            ._...__---                                                     6.05                       13.65
Communist countries                                                                       30.58                       61.78
                                              N0tes:U.N. trade data are based on reports of imports from the Soviet Union by its trading partners. Not
                                              all countries report their trade data to the United Nations. This is particularly true for Communist coun-
                                              tries. Bulgaria, Cuba, and East Germany are three countries with substantial trade with the Soviet Union
                                              that do not report their trade figures. This may explain some of the differences in the estimates of Soviet
                                              exports using the U.N. and CIA data.

                                              Imports are usually reported on a cost, insurance, and freight basis. This overstates the free-on-board
                                              value of exports. The International Monetary Fund’s International Financial Statistics estimates the cost,
                                              insurance, and freight/free-on-board  factor at 4.5 percent for developed countries and 10 percent for
                                              less developed countries.

                                              The data reported by the CIA are official Soviet statistics using the U.S. dollar exchange rates for the
                                               Soviet foreign exchange ruble as announced by the State Bank of the Soviet Union. Exports are
                                               reported free on board. Average exports are for the 3 years 1984-86.
                                              aDoes not total 100 percent because of rounding.
                                               Source: U.N. trade data computer tapes; Directorate of Intelligence, CIA, Handbook of Economic StatIs-
                                              -tics, 1989, p. 159.




                                              Page 20                                                    GAO/NSIAD-90.209BR        International   Trade
wndix   IV

dbjectives, Scope, and Methodology


               In developing this briefing report, our objectives were to (1) provide
               data on Soviet exports to the United States and the rest of the world,
               (2) compare the similarity between leading Soviet exports to the United
               States and other selected countries, (3) provide data on tariff rates for
               U.S. imports from the Soviet Union, and (4) compare them to rates for
               countries granted MFN trade status.

               We obtained information on Soviet exports from reports of imports from
               the Soviet Union by its trading partners. This information is compiled by
               the U.N. However, because only three East European countries report
               their trade to the U.N., the estimate of Soviet exports to all reporting
               nations understates total Soviet exports.’

               We used U.N. trade data at a three-digit SITC Revision 1 commodity group
               classification level to construct comparable Soviet export trade to the
               United States, other selected countries, and all reporting countries. For
               table II. 1, we used a U.N. trade concordance to match SITC Revision 1
               trade groups with SITC Revision 2 tariff rates computed from Depart-
               ment of Commerce trade data. Tables II.2 and II.3 report imports for
               35 three-digit SITC Revision 3 commodity groups from a total of 263 com-
               modity groups.

               We used a 3-year average of trade to ensure that normal trade patterns
               were represented. US. trade figures included in tables I.1 and II.1 cover
               the 1986-88 period, while those in tables II.2 and II.3 are for the
               1987-89 period. These are the most recent data available for each
               country or region. We reported information for the leading 35 com-
               modity groups out of a possible 248 groups.

               We obtained information on U.S. tariff rates, the Soviet share of total
               U.S. imports, and the share of US. imports that is duty free from U.S.
               trade data reported by the Department of Commerce. For all the tables
               in appendixes I and II, the commodity codes and descriptions are those
               provided in the 17.~.or U.S. computer trade databases.

               We computed the average tariff rates as a ratio of calculated duties col-
               lected, divided by the value of U.S. imports using data from the U.S.
               trade computer database maintained by the Department of Commerce.
               This is a trade weighted average tariff rate with actual import values

               ‘East European and Communist countries that do not report their trade to the United Nations include
               Albania, Bulgaria, Cambodia (Kampuchea), Cuba, East Germany, North Korea, Laos, Mongolia,
               Romania, the Soviet Union, and Vietnam.



               Page 21                                               GAO/NSLAD-90-209BR      International   Trade
Appendix Iv
Objectives, Scope, and Methodology




used as weights. Since high tariff rates may reduce the quantity of
goods imported, this weighting procedure may underestimate the
average tariff rate if there are many high tariff items. The average
tariff rates on imports from the Soviet Union and countries granted MFN
may not be fully comparable at the three-digit commodity group leve1.2
In tables 11.1,11.2,and 11.3,the percentage composition of individual
goods in the MF’N group may differ from the percentage composition of
Soviet imports in a corresponding group. This may result in weighting
the average commodity group tariff rates differently.3 On the other
hand, if the Soviet Union begins to diversify its exports if it is granted
MFN status, the three-digit MFN tariff rate may approximate the tariff
rate for future Soviet exports.

We conducted this review from February through May 1990 in accor-
dance with generally accepted government auditing standards. As
requested, we did not seek formal agency comments on this report.




“Average tariff rates can be compared at the individual commodity level at which the tariff rates are
established. For a comparison of tariff rates between the groups, the relative percentage composition
in the MFN group should correspond with that in the Soviet group. In all cases, the MFN tariff rate
must be less than or equal to the non-MFN rate for an individual commodity.
“For example, 99 percent of Soviet imports of inorganic elements shown in table II.1 enter the United
States duty free. The average tariff rate for the remaining 1 percent is 24.6 percent. For MFN
imports, 66 percent enter duty free, and the average tariff rate on the remaining dutiable imports is
4.6 percent. Although the non-MFN Soviet tariff rate is higher, the different percentage composition
weightings result in a lower average tariff rate of 0.31 percent for imports from the Soviet Union
compared to 1.99 percent for imports from MFN countries.



Page 22                                                 GAO/NSIAD-90-20BBR      International   Trade
&pndix     V

Major Contributors to This Report


                        JamesMcDermott, Assistant Director
National Security and   Elizabeth Sirois, Project Manager
Internatonal Affairs    Bruce Kutnick, Senior Economist
Division,
Washington, D.C.




(488646)                Page 22                              GAO/NSIADW2OBBlt Intmnational Trade