ADDITIONALITY OF CREDIT GUARANTEES FOR U.S. WHEAT EXPORTS; SUMMARY

The value of credit guarantee programs has recently been called into question. Credit guarantees are important marketing tools in the world wheat market, both to develop new markets and to compete in existing markets. This study examines the additionality of export credit guarantees. Empirical demand models were developed and estimated using pooled data among importing countries. Models were estimated for each of the principal exporting countries providing export credit guarantees: the United States, Canada and France. Additionality of credit guarantees were also contrasted to the Export Enhancement Program. Positive additionality was found for CCC guarantees, indicating that the GSM programs have resulted in additional exports that would not have occurred without the programs. Additionality was not constant across exporters. Additionality was estimated at 12.6 MMT for credit guarantees and 19 MMT for EEP. The U.S. results, when considering costs of the programs, indicate that the CCC subsidy (from guarantees), on a per dollar of subsidy basis, provides about four times more additionality than EEP. These results cast doubt on the price subsidy equivalence of guarantees. The subsidy implied in Canadian credit has a significant and negative effect on U.S. wheat exports. The magnitude of the coefficient is larger than the magnitude of the CCC guarantee subsidy. In the Canadian demand model, the effect of the CCC subsidy is insignificant. The results suggest that Canada's guarantee program does more to displace U.S. sales than it does to help Canadian sales. Further, as a whole CCC guarantees offset Canadian guarantees and outperform COFACE guarantees.