TRANSPARENCY AND EXPORT SUBSIDIES IN INTERNATIONAL WHEAT COMPETITION

Export subsidies and price transparency will be areas of critical importance in the forthcoming round of World Trade Organization (WTO) negotiations. This paper provides a review and discussion of issues relating to export subsidies and transparency in international wheat trade. Among other topics, the paper addresses the escalation in U.S. and EU producer subsidy equivalents (PSEs) for wheat since 1996, EU export restitutions, export credit guarantee programs, and price transparency and price discrimination, specifically as they relate to State Trading Enterprises (STEs).As the United States develops its strategy for trade negotiations, several points should be considered. First, the European Union continues to subsidize its wheat much more intensively than other wheat exporters. EU export restitutions overshadow most of the other `policy distortions' which might be drawn into negotiations over wheat trade. Second, there will likely be pressure for new international disciplines on export credit guarantee programs. This is of critical significance for the United States, given the recent importance of sales under GSM programs, and features which may make these programs more effective than those employed by competing exporters. U.S. wheat producers would lose if the United States were forced to curtail its use of export credit guarantees.Conceptually, the topic of price transparency can be understood in the context of bidding games with asymmetric information. As such, it probably is not of great significance to international trade; for example, `lack of transparency' (e.g., by the Canadian Wheat Board) may impute an advantage of less than $1-2/mt in bidding competition. Lack of transparency is also linked to concerns about hidden subsidies and the potential for evading international disciplines. Past investigations of the Canadian Wheat Board have turned up little evidence of unfair pricing, while highlighting the difficulty of defining `cost of acquisition' where Board transactions are concerned. Finally, while an ability to practice price discrimination is an advantage enjoyed by STEs, that is not prohibited under the WTO.