Empirically Analyzing the Impacts of U.S. Export Credit Programs on U.S. Agricultural Export Competitiveness

The objective of this paper is to examine how the terms and conditions of
officially supported export credits are likely to affect the import demands of importing
countries. According to the United Nations Conference on Trade and Development
(UNCTAD) (1976), besides providing domestic benefits, export credits also provide
significant benefits to the importing countries by enabling them to import necessary
goods and services even though they do not have hard currencies at hand to pay fully in
cash. Abraham (1990) shows that export credits such as subsidized buyer credit and
official development assistance provide favorable financing conditions to importers,
which induce the importers to demand more of the export good. Alternatively, many
studies pointed out that an export credit could generate an additionality to importing
countries, which would result in increasing volume of trade. At the same time the world
price is not necessary depressed as in the case of a direct export subsidy (Baron, 1983;
Smith and Ballanger; 1989, Diersen, 1995; OECD, 2000, Young et al., 2001). The
problem we address is economically significant since if the additionality exists, then the
more restrictive terms and conditions of officially supported export credits which the
WTO is trying to discipline based on their implicitly subsidized components will have
more adverse impact on the importing countries. To meet its objective, the paper is
organized as follows. Section 1 provides a brief background on the functioning of export
credit programs and the ongoing negotiations at the WTO. Section 2 provides the
derivation of the theoretical model. Section 3 provides a brief description of data sources
used and the empirical model. Section 4 presents the empirical results. Lastly, section 5
concludes.

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