Mary Bohman

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

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

Domestic Farm Policy and the Gains from Trade: Reply

469 per metric ton.

Domestic Farm Policy and the Gains from Trade: Comment

A general equilibrium model is used to demonstrate that, in the presence of domestic subsidies, trade can be welfare reducing relative to autarky. McDonalds comment claims that trade is always welfare improving with domestic production subsidies. He states that, when deriving a no-gains-from-trade point with production subsidies, Schmitz, Sigurdson, and Doering (SSD) (1986, 1988) and Anania and Bohman (AB) mistakenly confuse the overall welfare effects of a production subsidy with the welfare effects of free trade. First, we show that AB made the correct welfare comparison using a partial equilibrium model and then extend the results using a general equilibrium model.

Rent Seeking and International Commodity Agreements: The Case of Coffee

Schmitz, Sigurdson, and Doering (SSD) argue that domestic and trade policies can lead to negative gains from trade. They derive the no-gains from trade position when the importing country restricts trade and the exporter seeks to maintain its volume of exports by subsidizing production. They extend their results to the case where the exporter imposes production subsidies, a price support, and a setaside program. SSD analyze the world wheat market and argue that current programs in wheatexporting countries may cause negative gains from trade.