Trade Policy and Environmental Quality: The Case of Export Subsidies

Abstract

The United States and the European Union both employ export subsidies to stimulate wheat trade and to increase their competitiveness in world markets. The environmental consequences of these policies are being questioned. We stimulate reducing or removing export subsidies for wheat from the United States and the EU using a multicountry partial equilibrium model, and we analyze the impact of export subsidy policy reform on nitrogen fertilizer and other chemical use. Our findings indicate that the U.S. EEP program cannot be blamed for environmental degradation in terms of nitrate leaching, while EU wheat subsidies make only a small contribution to nitrate pollution.