Global implications of national price policies on the wheat market: Quantitative assessment of world market effects

Abstract

Price policy instruments are common political measures to influence the supply and export of agricultural products. Different price policies have thus different influence on national agricultural markets. These policies can also influence the world market and third countries provided that the exporting country places a high share of its production on the world market. Using a Cobb-Douglas market model we quantitatively assess global implications of national price policies in the EU-27, Russia, and the US (as leading wheat exporting countries) on the world market price for wheat and on welfare, foreign exchange, and producer surplus in third countries. The results prove that increasing protectionist price policies in the EU-27, Russia, and the US would only slightly influence the welfare in third countries. This policy would however bring about a higher decrease of foreign exchange and producer surplus in third countries.