and Harry de Gorter*

Current agricultural trade negotiations under the auspices of the World Trade Organization (WTO) call for an elimination of export subsidies. But the current language on export subsidies in the Uruguay Round Agreement on Agriculture omits an important implicit export subsidy in the form of price discrimination with or without revenue pooling. In either case, the export subsidy can be called ‘consumer only financed’. Two recent high profile trade disputes brought before the WTO concluded that price discrimination with or without price pooling constituted an export subsidy (WTO, 1999, 2004). As a result, both Canadian dairy and EU sugar export subsidies were deemed to be above that scheduled in the Agreement on Agriculture (AOA). The WTO rulings based their decision on cross-subsidization as defined by Tangermann (1997) where price support within quotas has the effect of covering fixed costs while above-quota production can be sold even if the price received for it covers only marginal cost of production. Tangermann (1997) also includes the export subsidy effect of revenue pooling in his definition of cross-subsidization. In this paper, we develop a general theoretical framework that identifies the elements of export subsidies with or without revenue pooling. In cases were there is no revenue pooling, w