RELATIVE EFFECTIVENESS OF USDA’S NONPRICE EXPORT PROMOTION INSTRUMENTS

The USDA’s Foreign Agricultural Service funds three types of activities to promote agricultural exports: consumer promotion, technical assistance, and trade servicing. These “instruments” are analyzed using an adaptation of Muth’s model. Results indicate that consumer promotion always increases the derived demand for the U.S. agricultural commodity, but that under certain conditions technical assistance and trade servicing can have a perverse effect. Applying the model to cotton promotion in Japan, the results suggest that, owing to cotton’s modest share of retail value, the current emphasis on consumer promotion may be misplaced. Specifically, it appears that producer returns can be enhanced by emphasizing technical assistance projects that save on the marketing input.