OECD Threatens GSM Program

April 12, 2001

Sens. Tom Harkin (D-IA) and Max Baucus (D-MT) have called on Secretary of Agriculture Ann Veneman and Treasury Secretary Paul O'Neil not to accept a proposal for the United States to greatly weaken USDA's general sales manager (GSM) agricultural export credit guarantee program. The senators say the threat comes during the Organization for Economic Cooperation and Development (OECD) meetings now going on in Paris. The OECD proposal would essentially eliminate the long-term GSM-103 program, cut roughly in half the time allowed for repayment of other GSM credit and increase premiums and fees for GSM credit guarantees.

"Considering the huge advantage the European Union (EU) already has over the U.S. in subsidizing agricultural trade, it would be unwise for the U.S. to make unilateral concessions that can only diminish our ability to compete with European ag exports," said Harkin. "I am very concerned that the substantial U.S. concessions which are being discussed at the Paris talks will put us at a greater disadvantage to the EU, which already spends billions every year subsidizing exports."

The GSM export credit guarantee programs are a critically important part of U.S. efforts to facilitate agricultural exports, the senators said. For fiscal 2000, the GSM programs supported $3.8 billion in export credit, but the actual federal outlays were only a fraction of that amount at $200 million. By contrast, the EU alone spends about $6 billion a year on direct export subsidies, and foreign governments spend some $230 million a year on market promotion -- not counting various other export subsidizing policies.

An OECD proposal will nullify the operation of portions of U.S. law authorizing export credit guarantees and will, in fact, require amendments to U.S. law. Furthermore, any agreement in the OECD is certainly subject to reopening in World Trade Organization (WTO) negotiations. Hence, the U.S. could agree to weaken the GSM program substantially in the OECD negotiations -- without significant reciprocal concessions -- and then be called upon to make further substantial GSM program concessions in both the OECD and the WTO, according to Harkin and Baucus.

"The proposed changes to the GSM export credit guarantee programs would have substantial long-term consequences for our nation's agricultural exports and very significant ramifications for future agricultural trade negotiations," said Harkin. "The United States cannot afford to accept this proposal and should instead work for a better deal, and obtain adequate concessions before changing our programs."