A Review And Analysis Of The Export Enhancement Program

The United States (US) Export Enhancement Program (EEP) was introduced in May 1985 with the goal of alleviating the agricultural sector's financial stress, through a restoration of export performance. Recently, the objectives of the policy have become more political in nature. The EEP is now considered to be an important means to pressure the European Community (EC) into offering concessions at multilateral trade negotiations. Under the EEP, payment inkind of export subsidies are authorized for selected or "targeted" markets. The EEP sales are supposed to be additional to commercial sales and should displace subsidized EC exports. Trade theory indicates that targeted export subsidies can be welfare increasing for the subsidizing country, but are likely to cause disruptions in international trade flows, and may reduce world prices. The effectiveness of using export subsidies to increase export volume is reduced when other exporters retaliate. Many other factors may affect the performance of the EEP, including import demand elasticity, importer behavior, and market supply and demand conditions. The EEP has not significantly increased US export or market share. The effectiveness of the program been limited because the EC increased its use of export restitutions in response to the EEP. Oth er agricultural exporters strongly oppose the EEP, and the policy has caused diplomatic tension between the US and other agricultural porters. This negative side-effect of the EEP acted to undermine the US position at international trade talks. When the EEP comes up for reauthorization in 1995, policymakers will need to reexamine this policy to determine if it is an essential element of US agricultural trade policy. If it continues to perform as it did during the 1985-1990 period, legislators should consider eliminating the policy.