Perspectives on agricultural export state trading enterprises in the WTO trade negotiations

The purpose of this paper is to summarize issues relevant for export state trading enterprises and identify an analytical framework to analyze their effects on welfare and trade. The authors analyze the effects of a hidden export subsidy through price pooling and compare the trade and welfare effects to the ideal of competitive markets. They highlight the differences in the comparative results if the benchmark is instead a private imperfect competitor(s). Similarly, they analyze the effects state trading enterprises (STE) exercise in market power through price discrimination only (with no price pooling). Then, STE issues relevant to competition policy in agricultural markets are discussed. Next, the authors summarize the factors necessary to be considered in constructing an analytical framework for an STE. Finally, suggestions are offered for policy improvements as well as amendments to World Trade Organization on STEs that may limit their potential detrimental effects on competition and trade distortions and help monitor them.