By Philip C. Abbott and Linda M. Young

Export competition emerged as one of the three pillars upon which agricultural trade liberalization was built in the Uruguay Round Agreement on Agriculture (URAA). This pillar not only addresses direct export subsidies, believed to be one of the most distortionary policy instruments applied to agricultural trade, but also institutional relationships under which implicit export subsidies may arise. Food aid, officially supported export credit, and exporting state trading enterprises are key institutions examined in this area. Export taxes, export promotion activities, and certain domestic policy arrangements which may be equivalent to export subsidies are also addressed in World Trade Organization (WTO) Doha Round negotiations, in a variety of venues.

Both country proposals to the WTO for the Doha Round and the Harbison proposal address unfinished business from the URAA. In the area of export competition, the Harbison proposal calls for gradual elimination of export subsidies (over nine years for developed countries) and sets disciplines for officially supported export credit, food aid, and exporting state traders.

Each of the substantive areas in export competition addressed by the Harbison proposal has become largely a one-country issue. The EU utilizes over 90 percent of the remaining direct export subsidies. Nearly all of the measured subsidy component of the many officially supported export credit programs arise from the long-term U.S. GSM programs. Food aid issues focus on U.S. P.L. 480 Title I programs that are given as loans rather than grants, and for which one objective is market development. State trading focuses on U.S. disputes with the Canadian Wheat and Dairy Boards.

While issues may center on single country programs, the WTO must write rules that are applicable to all members. Writing such rules has in the past evidenced some weakness in this approach. Strict rules may eliminate some beneficial institutions or practices. Food aid can help the hungry poor or finance development projects. Export credit can break liquidity constraints and lead to additional imports. State trading remains a popular alternative mechanism to implement domestic agricultural policy. Alternatively, the problem program may innovate slightly to avoid strict rules and continue to pursue its prior farm policy objectives.

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