Trade Effects of Ensuring Export Discipline through Parallelism: The Case of Skim Milk

The purpose of this paper is to quantitatively analyze trade effects of ensuring export discipline through parallelism. A newly developed spatial equilibrium model includes export subsidies, exporting state trading enterprises (exporting STEs) and imperfect competition. The model is applied to international skim milk trade. The main results of the policy simulations are as follows. Firstly, skim milk trade has been distorted by export subsidies in the EU and exporting STEs in New Zealand and Canada. Secondly, the distortion might be greatly corrected by ensuring export discipline through parallelism. Thirdly, supported by the United States and Japan, which receive its benefits, the EU will keep advocating parallelism in the ongoing WTO agricultural negotiations