The Import Demand for U.S. Burley Tobacco in European Markets

Michael Reed and Randall D. Schnepf

Journal of Agricultural and Applied Economics, 1982, vol. 14, issue 1, 141-145

Abstract: One of the chief complaints against the federal tobacco program is that it sets prices too high relative to foreign tobaccos: most foreign burley tobaccos are priced between one-third and one-half the price of U.S. burley. Critics feel that if the government program were changed so that burley production could increase, prices would be lower, and more burley tobacco would be consumed. Production increases could bring about two beneficial effects. First, U.S. burley tobacco would be more competitive in overseas markets, and, therefore, exports could increase. Second, U.S. imports of foreign burley could decrease. This study examines the validity of the first argument; its main objective is to evaluate the elasticity of demand for U.S. burley tobacco in European markets. Of course, the more price elastic is the demand for U.S. burley in these European markets, the more exports will expand if U.S. prices are lowered. Evidence is also provided on the growth potential of these foreign markets.

Date: 1982
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