Exporters who were satisfied with Prior Approval outnumber those dissatisfied by about three to one, with the response about the same through all sizes of firms. The exporting firms repeated this favorable view of Prior Approval in their response to another question. When asked how effective, in terms of the national interest, Prior Approval was, the firms answered as follows:

A final question posed to the exporters concerns the impact of Prior Approval in four specific areas. Although the responses are generally mixed, the most common answer in each case is that Prior Approval had no effect. The results are shown in the following:

Besides simple modifications to the Export Sales Reporting System, we asked the exporters about various levels of involvement in the agricultural export market that the U.S. Government might wish to consider. Among these are different kinds of Prior Approval Systems, export allocation schemes, and national grain reserve policies. Many of the programs represent a more active market role for the Government than the monitoring now being done, while others are similar to action that has been taken by the U.S. in the past. When asked to rank, in order of preference, ten forms Government involvement in the export market might take, the exporters responded as follows:

Exporters' preferences for Government involvement

Average rank

1. An export sales reporting system similar to the one currently in operation

2. 1

2. A voluntary temporary prior approval system.

3.8

3. An export sales reporting system with the requirement to submit written explanations for contract decreases__.

4.9

4. A voluntary permanent prior approval system___.

4.9

5. A mandatory temporary prior approval system-

5.0

5.9

6. An agricultural commodity reserve system--

7. An export sales reporting system with the requirement for penalties to be assessed against exporters unable to reasonably justify contract decreases in writing--

8. A mandatory permanent prior approval system_

9. An export licensing system---.

10. A producers' licensing system--‒‒

6. 3

6. 4

7.5

8.2

We have included the average rankings to demonstrate the relative strength of the exporters' preferences. The Export Sales Reporting System as presently operated is strongly preferred over all the others, with 86 of the 143 firms who responded placing it first. Similarly, a voluntary temporary Prior Approval System is a solid second choice.

The rankings reflect, in addition, a preference in most cases for the minimal necessary Government involvement. For example, the firms favor a voluntary Prior Approval System over a mandatory one and a temporary rather than a permanent one. They prefer the Export Sales Reporting System as it is to one with written explanations for contract decreases and would like the addition of penalties for unjustifiable decreases even less.

The exporters' preference for the present Export Sales Reporting System is, furthermore, not simply a choice among evils. Earlier we mentioned the firms' strong belief in the U.S. Government's need for an export sales reporting system. A second question we asked concerns the Government's need to monitor agricultural exports routinely so as to permit intervention when it is felt to be in the national interest. About 64 percent of the exporters who expressed an opinion believe there is such a need, while only 23 percent say no. Large exporters overwhelmingly say yes. No significant difference of opinion on this issue appears among the various commodity groupings. The results follow:

Two final questions on alternative programs involve different export allocation schemes and national grain reserve policies. Were the U.S. Government to implement an allocation program in the face of a short supply situation like the 1973 soybean shortage, exporters would prefer to see the allocation based on quotas by country or region than to have export licenses sold or distributed on any basis. The exporters' preferences are shown in the following table.

Distribute export licenses to domestic producers on the basis of production histories.
Sell export quota licenses to exporters at auction..

11

5.6

3.6

In the event that the U.S. adopts a national grain reserve policy, however, exporters disagree widely on the types of management control systems they would favor. The different systems and the numbers of firms favoring each are shown below. EXPORTERS' PREFERENCES AMONG GRAIN RESERVE SYSTEMS

The surveyed exporters are generally satisfied with USDA's Export Sales Reporting System (ESRS) as it is presently operated. For example, most of the exporters

Believe the U.S. Government needs a monitoring system to prepare for commodity shortages,

Feel ESRS has met the provisions of the act that established it,

Think ESRS has at least moderately achieved its objective of providing accurate, timely, and reliable export statistics,

Find the weekly export sales reports useful for market development and intelligence purposes,

Have little problem with the actual reporting requirements,

Claim that ESRS has not affected their export sales volumes, and

Prefer ESRS over other forms of U.S. Government involvement in agricultural export markets.

In a somewhat different vein, many of the exporters feel that the publication of the export reports has to some extent influenced agricultural commodity prices and has given at least a minor advantage to foreign buyers in export contract negotiations. Also, most exporters think that the reports would be more useful if additional information on contract destinations, decreases, and shipment dates were included.

We pursued the subject of contract decreases (i.e., cancellations, modifications, or delivery deferrals), in an attempt to measure the overall extent of decreases and the characteristics of contracts that are likely to be decreased. Using data obtained from 48 firms in the survey, we calculated a 21 percent rate of decrease in the total volumes of contracts to export wheat, corn, rice, soybeans, and soybean oil, cake and meal in the 1973/74 marketing year. Given the unusual market events and Government actions that took place in that period, we view this rate as not at all surprising. The exporting firms attributed over 90 percent of their decreases to one of the following four reasons:

Disadvantageous price changes

Contracting for maximum rather than probable needs

Overcontracting in anticipation of the imposition of controls

Hedging to protect a market position

Further analysis revealed that basis contracts (those with no specifically stipulated price) were much more frequently decreased than fixed price contracts and that unknown destination contracts were less solid than those with known destinations. About half of the decreases, moreover, were made by firms against contracts with their own affiliates.

Part of the survey dealt with the roles that the U.S. Government has played in the past and might consider for the future in agriculural export markets. The exporters were asked first about three recent Government actions-the soybean embargo in 1973, the renegotiations of Soviet wheat and corn sales in 1974, and the Prior Approval System in 1974 and 1975. Both the embargo and the renegotiations resulted in the forced cancellation of some outstanding export contracts, while Prior Approval was mainly a voluntary, pre-contractual review of large volume sales. Exporters expressing an opinion were generally dissatisfied with the first two actions, but satisfied with the third.

As for future forms of U.S. involvement, the exporters also appear to prefer a minimal Government role. Were Prior Approval reestablished, for example, the firms would want it to be temporary instead of permanent, and voluntary rather than mandatory. Although they accept the fundamental need for monitoring itself, the exporters oppose modifications to the existing Export Sales Reporting System that would step up the Government's involvement. Specifically, more firms are against than are for the public disclosure of export sales contract terms, even on an aggregated basis. They are in opposition, furthermore, to being required to submit written explanations for their contract decreases and even more opposed to the assessment of penalties for unjustifiable contract decreases.

Although only 72 percent of identifiable exporters participated in the survey, the participants were found to represent, in terms of sales and exports, almost all of the agricultural export industry. As such, the survey results extend, we believe, to the industry as a whole.

U.S. GENERAL ACCOUNTING OFFICE SURVEY OF EXPORTING FIRMS

INSTRUCTIONS

All exporters who have filed export sales reports with the Foreign Agricultural Service of the U.S. Department of Agriculture are being surveyed to determine their attitudes and opinions on the Export Sales Reporting System and other past, present, and potential short-supply management systems. Please read the following questions and answer each one as frankly and completely as possible. If a question does not apply to your firm, simply cross it out and go on to the next question. In responding to specific items in this questionnaire, please:

1. Consider only U.S. origin agricultural commodities, specifically those identified in Appendix I of the Export Sales Reporting Regulations.

2. Respond as if all alternative actions mentioned could be implemented under existing legislation.

3. Respond to questions on the Export Sales Reporting System as it currently operates. Please don't be influenced by the initial “start-up" problems or early revisions and modifications unless the questions are specifically about the original or early system.

4. Assume normal market conditions unless the question directs you to consider certain specific abnormalities.

5. Consider an export to be defined as a shipment of a commodity from the United States to (a) a destination outside the United States or (b) any territory or possession of the United States. The commodity shall be deemed to have been exported on the date of the applicable export carrier onboard bill of lading or the date the commodity is received for shipment, as specified on the bill of lading; in the case of a commodity received for shipment in a lash barge or containerized van if a through on-board bill of lading is issued for shipment to (a) a destination outside the United States or (b) any territory or possession of the United States.

Please feel free to add any additional comments you may have at the end of the questionnaire.

4. Is your firm a subsidiary or affiliate of another corporation?

Yes Ο Νο

If Yes, please provide the name and address of the parent corporation or company.

Name
Address

Zip Code

5. Does your firm export U.S. origin agricultural commodities to any organizations that are either (a) your parent organization or partially or wholly owned affiliates or subsidiaries thereof or (b) partially or wholly owned affiliates or subsidiaries of your firm? (Check one.)