MSU Agricultural, Food, and Resource Economics
Dissertations, Theses and Plan B Papers -- Abstract
, Chris. A Review and Analysis of the Export Enhancement Program
Plan B Paper,
Major Professor: Weber.
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 has been limited because the EC increased its use of export
restitutions in response to the EEP. Other 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.