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

  • 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)

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

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  1. Alexandre Gohin & Patrice Gautier, 2005. "The Phasing out of EU Agricultural Export Subsidies: Impacts of Two Management Schemes," Economie Internationale, CEPII research center, issue 101, pages 5-27.
  2. 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.
  3. Murphy, Elizabeth A. & Norwood, F. Bailey & Wohlgenant, Michael K., 2004. "Do Economic Restrictions Improve Forecasts?," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 36(03), December.
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  5. Meng Zhou & Andrew M. Novakovic, 1996. "Exporting to China: Possibilities and challenges for US dairy industry," Agribusiness, John Wiley & Sons, Ltd., vol. 12(1), pages 1-13.
  6. 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.
  7. 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).
  8. repec:jaa:jagape:v:36:y:2004:i:3:p:549-558 is not listed on IDEAS
  9. Davis, George C. & Jensen, Kimberly L., 1994. "Two-Stage Utility Maximization And Import Demand Systems Revisited: Limitations And An Alternative," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 19(02), December.
  10. Lopez, Rigoberto A. & Pagoulatos, Emilio & Gonzalez, Maria A., 2006. "Home bias and U.S. imports of processed food products," The North American Journal of Economics and Finance, Elsevier, vol. 17(3), pages 363-373, December.
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