system within the Agriculture and Consumer Protection Act of 1973. We hope to consider today ways to strengthen and improve this system.

As the Committee on Agriculture and Forestry begins its work to consider the extension of basic farm legislation, agricultural export policy is certain to be a topic of considerable concern.

This review by the General Accounting Office can provide a basic reference for the formulation of policies related to farm exports.

The time has come to clarify the policy guidelines governing the intervention of the federal government in the marketing of farm commodities.

Our producers are rightly concerned over inconsistent and sporadic restraints on export sales. And consumers are confused over conflicting reports on export sales and their impact on food prices.

Policies hastily conceived and inconsistently applied can only do more damage than good. We must, therefore, provide some assurance to producers, domestic consumers and foreign customers that the rules affecting agricultural exports will be fairly and evenly applied.

Today, we are pleased to have before us Mr. J. Kenneth Fasick, Director of the International Division of GAO, to discuss the findings under this study. We welcome Mr. Fasick and look forward to his comments.

STATEMENT OF HON. ROBERT DOLE, A U.S. SENATOR FROM KANSAS

Mr. Chairman, I do hope that the testimony we are about to receive is taken in proper perspective. There has been a tendency in the past to either accept totally or dismiss totally GAO's reports. There has not been a middle ground. GAO is a good source of information, but it is only one source. Other sources must be utilized in order to obtain a total picture of any given situation.

The farmers of this nation are the most productive in the world. They have continued to expand production in response to increased world-wide demand. Exports of our agricultural products have made it possible to import a wide variety of products. Such things as television sets, automobiles, stereos, spices, and oil are imported products we accept as common necessities and way of life. Much of their cost is paid for by balanced trade in agricultural exports.

Our farmers respond to one basic motivation ... profit! They have responded to this motivation since the nation was founded 200 years ago. It is a good system. When profits subside, the farmer grows another commodity which will make a profit. He always hopes for the year in which he has a bumper crop of a commodity that is in short supply . . . that has a good demand and thereby a high price. I maintain this is healthy and is the basis for the advancement we have made in this nation. I certainly hope we in Congress shall take no action that would take away this profit motive from our farmers . . . or any other segment of the economy.

When dealing with export policy, the discussion frequently centers around politics, economics, furtherance of national goals or assuring adequate domestic supplies. What is frequently lost sight of is that we in the U.S. do not live under a Government controlled agricultural system as do most nations of the world. Choices that have to be made, have to be made within the constraints of our market oriented system. The freedoms of capitalism are the foundation of our agricultural as well as our industrial system, and should be interfered with only for the most pressing reasons.

Discussions about export policy invariably center around the seven largest grain exporting firms. However, a proper appreciation of this area must encompass the entire grain marketing chain, beginning with the farmer. We are not dealing with a clear black and white situation. Agriculture is always subject to nature. Changes in the weather, floods, and droughts, have profound effects on output and therefore on exports.

This conclusion has been amply demonstrated the past 5 years through increased worldwide demand . . . and the resulting increased farm prices. American farmers have responded by increasing production to fill this increased demand... not out of humanitarian concern to feed the world . . . but out of a genuine desire to improve their income . . . to make a profit!

Farmers have voiced their outrage at the export controls imposed the past two years (prior approval reporting in 1974 and voluntary restraints in 1975) because these controls lowered the price they received for their crops.

I have prepared some charts showing the effects of market prices on the prices paid to farmers these actions have had. I have opposed these controls, for they

go far beyond the authorities of the Export Administration Act with regard to how such controls can be implemented. I have offered amendments to that Act which were considered but not included by the Senate Banking, Housing, and Urban Affairs Committee. I shall renew my efforts to prohibit future use of these controls when the Export Administration Act Extension (S. 3084) is considered by the Senate in August.

In the face of these controls, however extra-legal they may be, I am still proud of the system we have. And I distrust any effort for the government to look over the shoulder and control our farmer's business. Any government controlled grain reserve would serve as a ceiling on grain prices. Any export controls, other than those in the current Export Administration Act would serve as a ceiling on grain prices.

I shall look forward to hearing the witnesses today and am particularly interested in how they came about making this study, their conclusions and recommendations.

Senator HUDDLESTON. As chairman of the Subcommittee on Agricultural Production, Marketing, and Stabilization of Prices, which, along with the Subcommittee on Foreign Agricultural Policy, has scheduled these hearings, I want to welcome Mr. Fasick, who is the Director of the International Division of GAO, and the associates with him that are here to present their report.

STATEMENT OF J. KENNETH FASICK, DIRECTOR, INTERNATIONAL DIVISION, GENERAL ACCOUNTING OFFICE, ACCOMPANIED BY PHILLIP J. THOMAS, INTERNATIONAL AFFAIRS SPECIALIST AND PROJECT MANAGER; WILLIAM M. EDMONDSON, ASSISTANT DIRECTOR, AND JOHN MILGATE, ASSOCIATE DIRECTOR

Mr. FASICK. I would like to introduce my associates, Mr. Chairman. Senator HUDDLESTON. Very good.

Mr. FASICK. On my right is Mr. Phil Thomas, who has been the project leader on a number of projects involved in this subject area. On his right is Mr. Mack Edmondson, assistant director in our Division.

On his right is Mr. John Milgate, an associate director in our Division.

I would like to preface my statement this morning with again a description of where we stand in terms of the so-called report.

We are in the process of preparing a report based upon a study that we have been making of the actions taken since the 1972, 1974, and 1975 grain sales and a number of other subjects.

We really have not completed that report yet, and our testimony today is based on some of our observations that we have arrived at to date in connection with our work.

My point is it is indeed a preliminary statement on the status of this particular study we are making.

Senator HUDDLESTON. Very good.

Mr. FASICK. We are pleased to appear before you to discuss our current review of executive branch management of Russian grain sales, agricultural export reporting, and related export policy issues. Our field work is completed, and we are preparing a draft report for executive branch comment. A final report will be issued to the entire Congress later this year.

Before I go into the details of our review, I would like to place my testimony in perspective by briefly summarizing its major thrust. As you know, we have conducted a number of reviews of the agriculture export situation since 1972 when the Russian grain sale and a worldwide change in food supply helped to focus the Nation and the world's attention on one of the great challenges currently facing the country-allocating the Nation's precious food resources to maximize varying domestic and international objectives.

Our most recent review and the one upon which my testimony today is drawn from, focuses on a key element of food resource allocationfood export policy and, more specifically, executive branch management of the Russian grain sale, export reporting, and related policy issues.

Our reviews of the issues reveal fundamental problems in our Nation's food export policy machinery:

Our agricultural reporting system fails to yield accurate and timely data on projected foreign demand-a necessary input to aid policymakers in exercising measures to mitigate the effects which large lump-sum purchases have on domestic supply and prices.

Current export policies, which are part of a broader agricultural supply management system, are less than complete, lack cohesion, and