State Trading Enterprises

The Uruguay Round of multilateral trade negotiations, conducted from 1986 to 1994 under the auspices of the General Agreement on Tariffs and Trade (GATT), resulted in a variety of "disciplines" intended to liberalize agricultural trade. Such trade in some GATT countries is directed through entities called "state trading enterprises." Some U.S. agricultural producers are concerned that state trading enterprises may operate in ways that bypass these disciplines. This report is one in a series that GAO plans to issue on the nature of state trading in other countries and the treatment of state trading enterprises in GATT and by the new World Trade Organization. GAO discusses (1) GATT members' reporting of state trading enterprise activities from 1990-94, (2) Uruguay Round results contained in GATT 1994 that related to state trading enterprises, (3) Uruguay Round results contained in the Agreement on Agriculture that relate to state trading enterprises, (4) the potential for an increase in state trading enterprises under GATT and the World Trade Organization, and (5) U.S. efforts to monitor the activities of other nations' state trading enterprises with respect to requirements of GATT and the World Trade Organization.

GAO found that: (1) some information on STE in GATT member countries has been obtained through the notification process, but only about 21 percent of the member countries complied with the reporting requirement between 1980 and 1994; (2) GATT and WTO officials attributed the noncompliance to definitional problems, the lack of a systematic review of STE notifications, and the overall burden and the low priority that some member countries assigned to GATT reporting; (3) WTO officials plan to evaluate the questionnaire used to collect information about STE in order to improve member countries' compliance with the reporting requirements; (4) the Uruguay Round Agreement on Agriculture requires member countries to reduce market access restrictions, export subsidies, and internal support and report on how they complied with these commitments, beginning in 1996; (5) while countries like Russia and China are undertaking privatization efforts to move toward more market-oriented economies, the role of STE in GATT and WTO will likely increase if these countries become members of GATT and WTO; and (6) the U.S. Trade Representative is responsible for monitoring STE activities and their compliance with Uruguay Round commitments, while the Foreign Agricultural Service and the Foreign Commercial Service are responsible for monitoring STE activities in the countries where they are located and reporting on STE activities as needed.