The purpose of this paper is to quantitatively analyze the trade effects of ensuring export disciplines through parallelism. A spatial equilibrium model is developed that includes export subsidies, exporting state trading enterprises (exporting STEs), and imperfect competition. The model is applied to the international skim milk trade. The main results of the policy simulations are as follows. First, the skim milk trade has been distorted by European Union (EU) export subsidies and exporting STEs in New Zealand and Canada. Second, the distortion may be substantially corrected by ensuring export disciplines through parallelism. Third, the EU will continue to advocate parallelism in ongoing WTO agricultural negotiations with support from the United States and Japan, which receive the benefits from such successful negotiations.

View full abstract