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United States Export Subsidies in Wheat: Strategic Trade Policy or Expensive Beggar-Thy-Neighbor Tactic?

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  • Giovanni Anania
  • Mary Bohman
  • Colin A. Carter

Abstract

This paper examines the domestic and international impacts of the U.S. Export Enhancement Program (EEP) for wheat. EEP uses targeted in-kind subsidies to expand U.S. exports and was designed specifically to compete with subsidized exports from the European Community (EC). We argue EEP cannot be welfare-improving for the U.S., even considering strategic trade theory. We then model EEP as an in-kind, constrained, targeted export subsidy and determine its price, quantity, and budgetary effects. Empirical results show that no exporting country gains from EEP and that the intended loser, the EC, is only slightly harmed. We find the export subsidies generate only a small increase in U.S. wheat exports. EEP is an expensive program; based on our estimates for 1988, government cost of additional wheat exports under EEP reached $469 per metric ton.

Suggested Citation

  • Giovanni Anania & Mary Bohman & Colin A. Carter, 1992. "United States Export Subsidies in Wheat: Strategic Trade Policy or Expensive Beggar-Thy-Neighbor Tactic?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 74(3), pages 534-545.
    • Handle: RePEc:oup:ajagec:v:74:y:1992:i:3:p:534-545.
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    Cited by:

    1. Pall, Zsombor & Perekhozhuk, Oleksandr & Teuber, Ramona & Glauben, Thomas, 2011. "Wheat trade - does Russia price discriminate across export destinations?," IAMO Forum 2011: Will the "BRICs Decade" Continue? – Prospects for Trade and Growth 15, Leibniz Institute of Agricultural Development in Central and Eastern Europe (IAMO).
    2. Pinelopi Koujianou Goldberg & Michael M. Knetter, 1997. "Causes and Consequences of the Export Enhancement Program for Wheat," NBER Chapters, in: The Effects of US Trade Protection and Promotion Policies, pages 273-296, National Bureau of Economic Research, Inc.
    3. Fuller, Frank Harland, 1996. "The location of marginal production for value-added and intermediate goods: optimal policies and trade volumes," ISU General Staff Papers 1996010108000012147, Iowa State University, Department of Economics.
    4. Dahl, Bruce L. & Johnson, D. Demcey & Wilson, William W. & Gustafson, Cole R., 1995. "Credit Guarantee Programs in International Grain Markets: Background and Issues," Agricultural Economics Reports 23331, North Dakota State University, Department of Agribusiness and Applied Economics.
    5. Hyberg, Bengt & Smith, Mark & Skully, David & Davison, Cecil, 1995. "Export credit guarantees: The commodity credit corporation and US agricultural export policy," Food Policy, Elsevier, vol. 20(1), pages 27-39, February.
    6. Labson, B. Stephen & Rausser, Gordon C., 1992. "Modeling Phased Reduction of Distortionary Policies in the U.S. Wheat Market Under Alternative Macroeconomic Environments," Staff General Research Papers Archive 502, Iowa State University, Department of Economics.
    7. Ahmadi-Esfahani, Fredoun Z., 1994. "Wheat Marketing and Trade: Further Issues for Research - a Comment on Ryan," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 62(01), pages 1-7, April.
    8. Klein, Kurt K. & Storey, Gary, 1998. "Structural Developments In The Canadian Grains And Oilseeds Sector," Proceedings of the 4th Agricultural and Food Policy Systems Information Workshop 1998: Economic Harmonization in the Canadian\U.S.\Mexican Grain-Livestock Subsector; 16758, Farm Foundation, Agricultural and Food Policy Systems Information Workshops.
    9. Reimer, Jeffrey J. & Stiegert, Kyle W., 2006. "Evidence on Imperfect Competition and Strategic Trade Theory," Staff Paper Series 498, University of Wisconsin, Agricultural and Applied Economics.
    10. Diersen, Matthew A. & Wilson, William W. & Dahl, Bruce L. & Satyanarayana, Vidyashankara, 1997. "Additionality Of Credit Guarantees For U.S. Wheat Exports," Agricultural Economics Reports 23425, North Dakota State University, Department of Agribusiness and Applied Economics.
    11. Satyanarayana, Vidyashankara & Johnson, D. Demcey, 1998. "Credit Guarantee Programs And U.S. Market Share In Selected Wheat Import Markets," Agricultural Economics Reports 23284, North Dakota State University, Department of Agribusiness and Applied Economics.
    12. Reimer, Jeffrey J. & Steigert, Kyle W., 2006. "Imperfect Competition and Strategic Trade Theory: What Have We Learned?," Working Papers 201528, University of Wisconsin-Madison, Department of Agricultural and Applied Economics, Food System Research Group.
    13. Zsombor Pall & Oleksandr Perekhozhuk & Thomas Glauben & Sören Prehn & Ramona Teuber, 2014. "Residual demand measures of market power of Russian wheat exporters," Agricultural Economics, International Association of Agricultural Economists, vol. 45(3), pages 381-391, May.
    14. Young, Linda M. & Abbott, Philip C. & Leetmaa, Susan E., 2001. "Export Competition: Issues And Options In The Agricultural Negotiations," Commissioned Papers 14624, International Agricultural Trade Research Consortium.
    15. C. S. C. Sekhar, 2010. "Structure of the World Wheat Market: Some Implications for Strategic Trade Policy?," Journal of Quantitative Economics, The Indian Econometric Society, vol. 8(2), pages 142-158.
    16. Sheldon, Ian M. & Pick, Daniel H. & McCorriston, Steve, 2001. "Export Subsidies And Profit-Shifting In Vertical Markets," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 26(01), pages 1-17, July.
    17. Reimer Jeffrey J & Stiegert Kyle, 2006. "Imperfect Competition and Strategic Trade Theory: Evidence for International Food and Agricultural Markets," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 4(1), pages 1-27, September.
    18. Jeffrey D. McDonald & Daniel A. Sumner, 2003. "The Influence of Commodity Programs on Acreage Response to Market Price: With an Illustration Concerning Rice Policy in the United States," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(4), pages 857-871.
    19. Wilson, William W. & Yang, Seung-Ryong, 1994. "Impacts of Wheat Export Strategies on Market Shares," Agricultural Economics Reports 23387, North Dakota State University, Department of Agribusiness and Applied Economics.
    20. Scoppola, Margherita, 1995. "Multinationals and agricultural policy in the EC and USA," Food Policy, Elsevier, vol. 20(1), pages 11-25, February.
    21. Peterson, Jeffrey M. & Minten, Bart & de Gorter, Harry, 1999. "Economic Costs Of The U.S. Wheat Export Enhancement Program: Manna From Heaven Or From Taxpayers?," Working Papers 14578, International Agricultural Trade Research Consortium.

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