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The Political Economy of U.S. Export Subsidies for Wheat

In: The Political Economy of American Trade Policy

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  • Bruce Gardner

Abstract

During 1985-93 the U.S. Government provided $4.9 billion in subsidies to targeted foreign buyers of U.S. wheat under its Export Enhancement Program (EEP). The subsidies averaged $31 per metric ton, or about 25 percent of the U.S. price. The EEP generates a small gain to U.S. farmers, compared to its costs. Lacking a clear economic justification, the debate on the EEP indicates the following were the key factors in its political success: farmers and agribusiness have been unified in support of the program, and have excellent political channels through which to express their views; domestic users of wheat have not opposed the program; and the program received an initial boost because of its use of large government-owned wheat stocks, allowing it to be treated as budget neutral in Congress. An economic argument that carried political weight was that the EEP, by increasing the costs of the European Community's wheat export subsidies, would encourage them to negotiate joint U.S./EC subsidy reductions. In fact, the EC in 1993 did agree to multilateral subsidy reductions in the GATT, as well as reforming their own policies unilaterally. But it remains questionable whether this outcome justifies the EEP.

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This chapter was published in:

  • Anne O. Krueger, 1996. "The Political Economy of American Trade Policy," NBER Books, National Bureau of Economic Research, Inc, number krue96-1, October.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 8708.

    Handle: RePEc:nbr:nberch:8708

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    Cited by:
    1. Gardner, Bruce L., 2008. "Distortions to Agricultural Incentives in the United States and Canada," Agricultural Distortions Working Paper, World Bank 48573, World Bank.
    2. Gawande, Kishore, 2005. "The structure of lobbying and protection in U.S. agriculture," Policy Research Working Paper Series 3722, The World Bank.
    3. Sumner, Daniel A., 1995. "Farm Programs And Related Policy In The United States," Understanding Canada\United States Grain Disputes; Proceedings of the 1st Canada\U.S. Agricultural and Food Policy Systems Information Workshop - 1995, Farm Foundation, Agricultural and Food Policy Sy 16742, Farm Foundation, Agricultural and Food Policy Systems Information Workshops.

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