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The impact of EU export subsidy reductions on U.S. dairy exports

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  • Andrew Muhammad

    (Department of Agricultural Economics, Mississippi State University, P.O. Box 5187, Mississippi State, MS 39762)

  • Richard L. Kilmer

    (Food and Resource Economics Department, University of Florida, P.O. Box 110240, Gainesville, FL 32611-0240)

Abstract

In this article, we consider the impact of European Union (EU) export subsidy reductions on the U.S. dairy trade. We assume reductions of 36% similar to the 1995 World Trade Organization agreement. The price substitutability between U.S. and EU dairy products is estimated using a Rotterdam-type production model. Past analyses have suggested that EU export subsidy reductions will increase U.S. dairy exports because the removal of EU subsidies will raise EU export dairy prices, rendering U.S. dairy products more competitive on world markets. This is partially true for nonfat dry milk, where our projections indicate an increase of 4.6% in U.S. exports. U.S. cheese, butter, and whey exports, on the other hand, rise by only 0.2, 0.1, and 0.2%, respectively. The main reason for the relatively modest gains is that the U.S. and EU dairy products are independent, not substitutes, for one another in a majority of the countries studied. [JEL classifications: Q17, Q18, F53] © 2008 Wiley Periodicals, Inc.

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File URL: http://hdl.handle.net/10.1002/agr.20179
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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Agribusiness.

Volume (Year): 24 (2008)
Issue (Month): 4 ()
Pages: 557-574

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Handle: RePEc:wly:agribz:v:24:y:2008:i:4:p:557-574

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Web page: http://onlinelibrary.wiley.com/journal/10.1002/(ISSN)1520-6297

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  1. Bruce A. Blonigen & Wesley W. Wilson, 1999. "Explaining Armington: What Determines Substitutability Between Home and Foreign Goods?," Canadian Journal of Economics, Canadian Economics Association, vol. 32(1), pages 1-21, February.
  2. Washington, Andrew A. & Kilmer, Richard L., 2002. "The Derived Demand For Imported Cheese In Hong Kong," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IAMA), vol. 5(01).
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  7. Washington, Andrew A. & Kilmer, Richard L., 2002. "The Production Theory Approach To Import Demand Analysis: A Comparison Of The Rotterdam Model And The Differential Production Approach," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 34(03), December.
  8. Beach, Charles M & MacKinnon, James G, 1979. "Maximum Likelihood Estimation of Singular Equation Systems with Autoregressive Disturbances," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 20(2), pages 459-64, June.
  9. Berndt, Ernst R & Savin, N Eugene, 1975. "Estimation and Hypothesis Testing in Singular Equation Systems with Autoregressive Disturbances," Econometrica, Econometric Society, vol. 43(5-6), pages 937-57, Sept.-Nov.
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  11. repec:jaa:jagape:v:36:y:2004:i:3:p:549-558 is not listed on IDEAS
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