fail to provide the flexibility necessary to meet both domestic and international objectives and changing food supply and demand conditions. Current policy implementation is fragmented, often ill-timed, and generally suffers from an absence of rational decisionmaking based upon a preselected policy use formula.

Senator HUDDLESTON. I think we are going to have to hold up right there and maybe Senator Humphrey will be here within a minute. I have to leave now in order to make it to the floor in time.

So we will stand in recess.

[A short recess was taken.]

Senator HUMPHREY [presiding]. I will not take the time of the subcommittee to read my opening statement since it has been placed in the record. I think it will state its own case.

Are you now reading your statement, Mr. Fasick?

Mr. FASICK. I am, sir, yes.

Senator HUMPHREY. All right.

You are Mr. Fasick?

Mr. FASICK. Yes.

On my right, if I may introduce them, is Phil Thomas, project leader on many of our projects in our area; Mack Edmondson, assistant director, and John Milgate, associate director.

I could repeat the first page or so.

Senator HUMPHREY. No; it is not necessary. I have had a copy of your statement.

You know of the tremendous importance of the agricultural exports

to our economy.

I might just add they represent a very substantial part of our agricultural income. Therefore, export policies may be one of the most important parts of total overall national agricultural policy. Those of us who have been very disturbed over the intervention of the Government in matters relating to export, feel, speaking for myself, that there is a total lack of policy and it is all on an ad hoc basis. Oftentimes the export policy, as it relates to agricultural commodities, is dictated by other considerations rather than supply, that is domestic supply, or even domestic price.

I am sure that from my point of view, at least, that was the situation that took place in the past year in the instance of the embargo on exports to the Soviet Union and the delay of exports to Poland. So since my position is rather well known, I think I should listen to your views.

Mr. FASICK. Very good, sir.

Along the same lines, the last point I was making was, in effect saying that the Agriculture Department does not have preconsidered plans in connection with export contingencies or export policy, and I think it is in line with your remarks.

Although an export reporting system has been in operation for a few years, the system fails to provide reliable prospective sales data early enough to allow policymakers the time or confidence to make timely decisions.

USDA requires only contract data to be reported-data which is often dramatically altered before shipments are made and reported too late to provide an early-warning indicator. To correct this fault, we suggest the Congress evaluate the following alternatives:

Require exporters to justify contract changes to the Government. Senator HUMPHREY. You have the word "importers" here.

Mr. FASICK. I appreciate you noticing that. The same is true in the next insert.

Senator HUMPHREY. I understand.

Mr. FASICK. This may reduce modifications substantially and thereby increase data reliability.

Require exporters to advise the Government of their intent to negotiate contracts at an early stage in negotiations. This would help satisfy the early warning need;

Require additional information on contacts to include classification of foreign buyers, disclosure of pricing terms, exact destinations, and other provisions. This information would greatly improve foreign demand data reliability.

As you know, Mr. Chairman, I am just summarizing to get the thrust of the statement. I will get into the details of each of these issues later.

Current Government policy is more of a response to changing demand rather than an integrated formula for responding effectively to changing conditions and explicit objectives. Despite the virtues of a free market approach to economic policy, Government intervention is warranted and practiced extensively.

What is clearly needed is an agricultural policy framework that contains a series of criteria designed to satisfy specific output objectives with the flexibility to change when conditions change. Who should get what, when, and why are the critical questions such a framework should address. This would allow consideration of a number of different policy actions which would be appropriate under different conditions.

With no fewer than 26 Federal agencies having been involved in agricultural policymaking, and despite a recent reorganization in our policymaking structure, there is still uncertainty regarding how and when major policy options should be implemented.

With improved data reliability and an integrated supply management policy, a mechanism to effectuate policy action needs to be constructed. This is the "how" question in the decisionmaking system. In sum, we believe that a national agricultural policymaking system should contain these essential elements:

An early warning system of food demand;

A flexible policy framework that satisfies specific objectives;
A structure and procedure for implementing policy action.

Having provided this summary statement, I would now like to discuss these points and our past activity in greater detail.

Senator HUMPHREY. Particularly those latter two, which are rather general, that is a flexible policy framework that satisfies specific objectives, what does that mean, and a structure and procedure for implementing policy action, what does that mean?

An early warning system of food demand is understandable.

Mr. FASICK. I think it really ties into a need for the Department and all agencies involved in agricultural exporting to anticipate a reasonable number of different contingencies and conditions that would exist and have preplanned decisions or action plans on the shelf so they can be pulled off.

This, I think, would alert the producer, the exporter, and the buyer a little bit more with what the policy of the U.S. Government would be under different circumstances.

Today this is not done.

We have been reviewing agricultural exports since the Russian grain sales of 1972 and have issued a number of reports to the Congress on agricultural exports and supply management and discussed their implications before congressional committees. I would like to submit for the record a schedule of these reports.

Senator HUMPHREY. We will incorporate them in the record. [The reports referred to follow:]

GAO REPORTS ON AGRICULTURAL EXPORTS AND RELATED MATTERS

1. July 9, 1973, "Russian Wheat Sales and Weaknesses in Agriculture's Management of Wheat Export Subsidy Program," B-176943.

2. February 12, 1974, "Exporters' Profits on Sales of U.S. Wheat to Russia," B-176943.

3. March 22, 1974, "Impact of Soybean Exports on Domestic Supplies and Prices," B-178753.

4. April 29, 1974, "U.S. Actions Needed to Cope with Commodity Shortages," B-159652.

5. July 30, 1974, "Information Concerning Reports of a Possible Wheat Shortage," B-176943.

6. September 6, 1974, "Increasing World Food Supplies-Crisis and Challenge," B-159652.

7. December 30, 1974, "Alleged Discriminations and Concessions In The Allocation of Railcars to Grain Shippers," B-114824.

8. April 11, 1975, "The Agricultural Attache Role Overseas: What He Does and How He Can Be More Effective for the United States," B-133160.

9. April 21, 1975, "The Overseas Food Donation Program-Its Constraints and Problems," B-159652.

10. August 27, 1975, "What The Department of Agriculture Has Done and Needs To Do To Improve Agricultural Commodity Forecasting and Reports," RED76-6.

11. June 24, 1975, "Improvements Needed in Regulation of Commodity Futures Trading," B-146770.

12. February 12, 1976, "Assessment of the National Grain Inspection System," RED-76-71.

13. March 3, 1976, "Agriculture's Implementation of GAO's Wheat Export Subsidy Recommendations and Related Matters," ID-76-39.

14. March 26, 1976, "Grain Reserves: A Potential U.S. Food Policy Tool," OSP-76-16.

15. May 28, 1976, "Grain Marketing Systems in Argentina, Australia, Canada, and the European Community; Soybean Marketing System in Brazil," ID-76–61. Mr. FASICK. In these reports and in our appearances before congressional committees, including the Senate Agriculture Committee in March 1973, we expressed concern over the Government's management of agricultural exports.

Our Russian wheat report of July 9, 1973, expressed concern over domestic and international consequences of large grain purchases by nonmarket economies, particularly the Soviet Union, and recommended that the Secretary of Agriculture:

First. Complete a systematic evaluation of the former wheat export subsidy program;

Second. Establish a reporting system in cooperation with private exporters;

Third. Develop a cohesive export policy.

Senator HUMPHREY. Out of those two, at least No. 2, there was a reporting system developed, and whether it is adequate or not is another question.

Mr. FASICK. That is right, sir.

In addition to following up on these 1973 Russian wheat report recommendations, our current review included assessments of the Government's agricultural export reporting system, international forecasting capability, and supply management policy. We also reviewed the circumstances surrounding the 1974 and 1975 sales of U.S. grain to Russia, including the long-term purchasing agreement between the two countries.

Massive sales of U.S. grain to the Soviet Union in these years had a considerable impact on U.S. and world economies. Following these sales, an unprecedented era of tight supplies, high prices, and general market uncertainty emerged. Although a variety of supply and demand variables has contributed to the unstable market situation that has prevailed over the past 3 years, Soviet grain purchases have had a destabilizing effect on agricultural markets worldwide.

Some of the more significant domestic impacts of these market changes include the:

Recognition of the interrelationship between domestic and international economic policy;

Elevation of agriculture to a high priority in formulating and ex

Promotion of interagency decisionmaking in the agricultural policy

area;

Support of a market-oriented approach to resolving agricultural policy issues;

Recognition of the need for accurate, timely, reliable, and complete export data;

Depletion of U.S. and world grain stocks;

Increased U.S. agricultural exports and public recognition of the impact of high exports on domestic commodity and food prices; Repeated Government entrance into the export market to impose voluntary and mandatory short-supply export controls;

Establishment of formal and informal long-term grain purchasing agreements between the United States and other countries; Improvement in the U.S. balance of trade;

Decreased availability of commodities for concessional food and feed grain exports to developing countries;

Need for a better system of forecasting events that will affect the availability of agricultural commodities.

Senator HUMPHREY. I think we should possibly add to that list the disruption of our livestock and dairy economy.

Mr. FASICK. Indeed, that is another impact it has had.

The Soviet grain purchases also aroused controversy over the Government's management of such exports. In response, the United States signed a long-term purchasing agreement with the Soviet Union in October 1975 to help mitigate the effects of the Soviet's periodic entry into the U.S. agricultural economy. Some of the pros and cons of this agreement will be discussed or addressed later in my statement.

In response to a recommendation by the Senate Permanent Investigations Subcommittee, and at the request of other Members of Con

gress, we have followed up on recommendations made in our 1973 Russian wheat report to determine actions taken by the executive branch to improve the management of agricultural exports.

On March 3, 1976, we issued our first followup report entitled "Agriculture's Implementation of GAO's Wheat Export Subsidy Recommendations and Related Matters." We found that:

One. Agriculture had not evaluated the former subsidy program; Two. Agricultural officials contended that there was no need to systematically evaluate the former subsidy program-which was suspended in September 1972-nor to subsequently develop a new standby program because they believe the tight wheat supply and high demand situation existing since 1972 would continue, precluding the need to reestablish an export subsidy;

Senator HUMPHREY. I hope they are right.

Mr. FASICK. Third. Agriculture's policy provides no adequate policy alternatives for disposing of surplus wheat; and

Fourth. Current Federal investigations of U.S. grain inspection practices raised the question of recovering Federal subsidy payments on grain exports.

Based on our findings and continuing concern for better program management, we recommended that the Secretary of Agriculture: (1) conduct an evaluation of the former subsidy program, and (2) initiate appropriate action to insure that any future program will be effective and efficient.

We also suggested to Congress that it might wish to reexamine the entire subject of agricultural export subsidies and to determine whether legislation should be considered as a means for insuring a more effective and efficient subsidy program, should one become necessary in the future.

In a recent response to our recommendations, the Department of Agriculture restated its position that it had no intention of reinstating any subsidy program. Should one become necessary in the future, Agriculture has responded that it will make a thorough review of the former program to determine necessary changes.

We believe our conclusions and recommendations are still valid since the uncertainties of agricultural production and demand may cause surpluses to materialize which could trigger needed Government actions.

Again, Mr. Chairman, I think this is the type of thing that we have in mind as we will later discuss when we talk about a supply management policy, the need for one.

Although we all agree it would be desirable not to have to resort to a subsidy system again, I think it important to have plans for such systems as well as other systems on the shelf in case they are needed.

Senator HUMPHREY. I would hate to have the Department of Defense as negligent about the possibilities of an aggressor taking action as the Department of Agriculture seems to be about the possibilities of something unusual developing in our supply situation."

Mr. FASICK. That is an excellent comparison.

The Joint Chiefs of Staff in our Department of Defense have a number of contingency plans, depending on circumstances that could arise.