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The dubious success of export subsidies for wheat

  • Agricultural Science
  • Economics
  • Political Science


The Bubious Success of Export Subsidies for Wheat 38 Cletus C. Coughlin and Kenneth C. Carrarn Cletus C. Coughlin is a senior economist and Kenneth C. Carraro is an economist at the Federal Reserve Bank of St. Louis. Thomas A. Pollrrrann provided research assistance. The authors also would like to thank Kenneth W. Bailey for providing data and helpful suggestions. The Dubious Success of Export Subsidies for Wheat N MAY 15, 1985, the U.S. Depan’tment of Agr- culture intm’oduced an export subsidy program called the Expomt Enhancement Pi-ogram (EEP). The progr’amnn’s mnnaimn goal is to increase U.S. agri- cultur-al expor-ts.’ ‘The pr’ogr-am also is intemnded to induce European Community EC) r-eductions in agr-icultural subsidies during the cun’r-ent r-ound of nnultilateral tr’ade negotiations under- the Gener-al Agm’eennemnt on Tar ifs amnd Trade (GAiT). Although the EI3P focuses on exports and trade pohicies~it is a direct outgrowth of the donnestic fan-mn policies of tine United States amnd the Euro- pean Community. i’he above-market pm-ice guam-an- tees of tinese policies have resulted imn surplus production. ‘To dispose of these surpluses, many governments have chosen to subsidize agricultural expom’ts! Tinis paper exannines the EEP’s primnnamy goal of expamnding exports in the context of disposing of gover-nment-owned wheat, Other research is used to compar-e the cost of i-educing wheat stocks via tine EEP with the cost of sinnply destroying the wheat, Although this paper focuses on wheat, clnneflybecause wheat has accounted for the bulk of EEP activity, the economic pm’inciples used hem-c camn be generalized to similar’ progr-ams for’ other- commodities, The secondary goal of influencing EC far-nn pol- icy is amnalyzed in the frannework of the current m’ound of GAIT talks, In 1985, the United States proposed that all tr’ade- and pm-oduction-distorting subsidies be ehinnimnated over a 10-year’ period. Other gr-oups, including tine EC and the Cairns ‘U.S. Department of A

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