IS EXPORT DEMAND INHERENTLY
UNSTABLE?
Clayton’s premise is that exports are inher-
ently unstable. I believe a strong case could be
made for the converse. It is difficult for me to
believe that the excess demand curve for U.S.
exports is more inelastic than the domestic de-
mand curve. In general, I believe foreign demand
to be more elastic than U.S. demand. Further-
more, the broader the market, the more elastic it
becomes to any single country, thus, I see no
reason why export markets are inherently more
unstable. Of course, government actions, as
D. Gale Johnson has pointed out, may be such
that they destabilize the market, or cause the
elasticity of price transmission to diverge greatly
from unity (Bredahl et al.).
WHAT CAUSES THE INSTABILITY?
Clayton spends little time discussing the
causes of instability: he deals mostly with its ad-
verse consequences. However, he indicates that
the U.S. is a “residual supplier,” which appar-
ently causes the U.S. to suffer greater export
VariabiHty than поп-residual suppHers suffer. He
does not present any evidence to support this
contention, nor does he draw a multi-country
supply-demand diagram and use it to define a
residual supplier and contrast it with a non-
residual supplier.
Clayton does not test whether crops with ex-
panding exports have significantly greater vari-
ability than do those with stagnant exports, al-
though he implies that they do.
As suggested by equation (1), there are many
factors that could contribute to increased export
variability: inflation, flexible exchange rates,
more erratic weather, shift from government-
assisted to commercial exports, decline in grain
stocks, and fickle U.S. and Soviet government
policies. Certainly, government is a major cul-
prit. The U.S. has imposed five grain embargoes
in the past decade and is currently threatening
another. Probably two-thirds of all grain trade
involves government as either the buyer or seller
or both (Seevers). Furthermore, agricultural
trade has basically been sold down the river in
the international trade negotiations. The trade
liberalizations negotiated during the Tokyo/
Geneva Round represent less than 5 percent of
U.S. exports (Houck).
Contrary to Clayton, I do not see how export
instability problems, which are to a great extent
caused by fickle and misguided government poli-
cies, “might be handled entirely within the pri-
vate sector.” I am not arguing that government
should either take over or keep out of grain trade
completely. Rather I argue for more rational be-
havior of what governments do and undo. My
interpretation of the new farm bill is that the Sec-
retary of Agriculture has broader discretional au-
thority than before and that future embargoes
will be extensive and not selective. I only hope
that this added discretion and future embargoes
will be used to stabilize rather than to destabfiize
and to promote rather than to prevent U.S. ag-
ricultural exports.
IS THE MAJOR PROBLEM LIKELY TO BE
TOO VOLATILE EXPORTS?
I am much less optimistic about export growth
than is Clayton. I believe the problem will be too
slow rather than too fast export growth. Last
year at these same meetings, I argued that U.S.
domestic grain demand in the 1980s would grow
very slowly and that foreign demand would
slacken as well. I sti∏ beheve that there is a dis-
tinct possibility of recurring grain surpluses. The
projected record grain carryovers, the Secre-
tary’s January 29 announcement of a 10 percent
feed grain and 15 percent wheat acreage reduc-
tion programs, and the 11 percent drop in exports
so far this fiscal year suggest to me that grain
shortages for Southern livestock and poultry
producers is not the most pressing problem.
I do not have sufficient information for critical
evaluation of Clayton’s concern about the delete-
rious effects of expanded exports on the South’s
natural resource base. He does not cite sufficient
data nor give any references that would help me
become better informed. My impression is that
little is known about the physical extent or eco-
nomic significance of erosion and resource deple-
tion; I suspect there is Httle hard evidence linking
erosion to exports.
I am most reluctant to suggest that the South
disregard her comparative advantage, unless and
until we have more hard evidence on resource
depletion and its causes and consequences.
CONCLUSION
Although my remarks have been critical and
nihilistic, I do not want to convey a totally nega-
tive impression of Clayton’s paper. It certainly
stimulated my thinking and raised a number of
new questions. That, of course, is what an in-
vited paper should do.
I am more concerned about the prospect of the
lack of export growth than the lack of export
StabiHty. I do not beheve we have adequate mea-
sures of the sources of export instabiHty nor the
connection, if any, of instabiHty to export growth
and welfare. I do believe that export growth is
absolutely fundamental to the future of Southern
agriculture and is a high priority research area.
40