Analysis of Exchange Rate Linked Subsidies for Non-price Export Promotion: The Case of

An equilibrium displacement framework was developed to evaluate the effect of exchange rate linked subsidies for non-price export promotion for US cotton. Study results show that an increase in promotion expenditure increased the dollar value and producer welfare of cotton growers. The gross gain to the domestic cotton producers from the exchange-rate linked subsidy scheme was positive. These evidences support exchange rate linked subsidies for US cotton export promotion. Key words: export promotion, exchange rate linked subsidies, gross gain, producer welfare The Foreign Agricultural Service (FAS) administers the Foreign Market Development Program (FMD) and the Targeted Export Assistance Program (TEA) to promote US agricultural commodities in overseas markets. In addition, the United States Department of Agriculture (USDA) supports a number of other export promotion programs and accounts for a substantial share of the total federal government funding on export promotion programs. Researchers have analyzed and reported the positive impacts of export subsidy (Duffy and Wohlgenant,1991), non-price export promotion ( Solomon and Kinnucan, 1993; Kinnucan, Duffy, and Ackerman, 1995), and generic advertisement (Miao, 2000) on cotton export demand. In spite of substantial research work in the area of non-price export promotion and export subsidy in cotton and other agricultural commodities