Impact of Agricultural Subsidies on US Exports to Mexico and Canada: Case Study of Selected Agricultural Products

Abstract

This paper addresses the question of how agricultural subsidies influence the US exports of six agricultural products to Canada and Mexico. Time span is from 1996 to 2005. The dollar values of export data of six agricultural products - corn, wheat, cotton, rice, barley, grain sorghum - are pulled from United States Department of Agriculture. Therefore, amount of subsidies paid for each crop in each year throughout the time period are gathered from the Environmental Working Group. US agricultural raw material exports as percentage of total merchandise exports (USAGREX), GDP, GDP per capita, population variables are obtained from World Development Indicators database and IMF. Utilizing these variables, regression analysis was conducted resulting in the followings: Subsidy is positively and significantly associated with exports. Every one percent increase in the subsidy leads to approximately 0.8 percent increase in the exports. One percent increase in USAGREX will increase exports approximately 1.6 percent. GDP of US is negatively, GDP of other countries positively impacting exports however they economically do not imply significance. GDP per capita and population variables are of no relevance.