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State Trading Enterprises in a Differentiated Environment: The Case of Global Malting Barley Markets

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  • Fengxia Dong
  • Thomas L. Marsh
  • Kyle W. Stiegert

Abstract

The lack of transparency in the pricing and operational activities of state trading enterprises (STEs) has caused members of the World Trade Organization to express concern that certain countries' STEs might circumvent Uruguay Round commitments on export subsidies, domestic support, or market access. The purpose of this study is to examine the market structure of the differentiated world malting barley market in which two STEs (the Canadian Wheat Board and the Australian Barley Board) maintain jointly a very large share of the export market. In particular, this study focuses on the exclusive procuring and pricing policies used by both STEs to test if these intra-country mechanisms can generate leadership and shift rent from other exporting countries. A conceptual and empirical framework is also provided to test if STEs set their initial payments at optimal levels. The study suggests that two STEs and other exporting countries were in Cournot competition. While some distortionary impacts from the STE prepayment systems are possible, it does not appear to be a tool that either STE employs. Empirical results from the precommitment stage show that the two STEs did not set their initial payments low enough to maximize their profits.

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Bibliographic Info

Paper provided by Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University in its series Food and Agricultural Policy Research Institute (FAPRI) Publications with number 03-wp350.

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Date of creation: Dec 2003
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Handle: RePEc:ias:fpaper:03-wp350

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Related research

Keywords: malting barley; market structure; prepayment system; product differentiation; rent shifting; state trading enterprises (STEs).;

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  1. Stiegert, Kyle W. & Blanc, Jean-Pierre, 1997. "Japanese Demand For Wheat Protein Quantity And Quality," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 22(01), July.
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Cited by:
  1. Reimer, Jeffrey J. & Stiegert, Kyle W., 2006. "Evidence on Imperfect Competition and Strategic Trade Theory," Staff Paper Series 498, University of Wisconsin, Agricultural and Applied Economics.
  2. Paulus, Moritz & Trueby, Johannes & Growitsch, Christian, 2011. "Nations as Strategic Players in Global Commodity Markets: Evidence from World Coal Trade," EWI Working Papers 2011-4, Energiewirtschaftliches Institut an der Universitaet zu Koeln.
  3. Stiegert, Kyle W. & Wang, Shinn-Shyr, 2003. "Imperfect Competition And Strategic Trade Theory: What Have We Learned," Working Papers 14589, International Agricultural Trade Research Consortium.
  4. Biswajit Dhar, 2007. "Agricultural trade and government intervention - A persepctive from a developing country," STUDIES IN TRADE AND INVESTMENT, in: Studies in Trade and Investment - AGRICULTURAL TRADE - PLANTING THE SEEDS OF REGIONAL LIBERALIZATION IN ASIA, volume 60, pages 211-223 United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
  5. Flaming, Stephen & Marsh, Thomas L. & Wahl, Thomas I., 2007. "Farm-Level Price Formation for Fresh Sweet Cherries," Journal of Food Distribution Research, Food Distribution Research Society, vol. 38(2), July.
  6. Soregaroli, Claudio & Sckokai, Paolo, 2011. "Modelling Agricultural Commodity Markets under Imperfect Competition," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 116012, European Association of Agricultural Economists.

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