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

Author

Listed:
  • 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.

Suggested Citation

  • Andrew Muhammad & Richard L. Kilmer, 2008. "The impact of EU export subsidy reductions on U.S. dairy exports," Agribusiness, John Wiley & Sons, Ltd., vol. 24(4), pages 557-574.
  • Handle: RePEc:wly:agribz:v:24:y:2008:i:4:p:557-574
    DOI: 10.1002/agr.20179
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    References listed on IDEAS

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    1. 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 459-464, June.
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    More about this item

    JEL classification:

    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations

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