Abbassi, Abdessalem and Larue, Bruno (2011): Trade liberalization and inter-provincial dumping in a spatial equilibrium model: the case of the Canadian dairy industry.
This is the latest version of this item.
Download (180Kb) | Preview
The paper introduces imperfect competition in a spatial equilibrium model of provincial dairy markets to analyze the welfare impacts of trade liberalization. Our model accounts for output restrictions at the farm level and the potential presence of market power at the processing level. Our model builds on the reciprocal dumping model of Brander and Krugman (1983) because processing firms from different provinces compete with one another in several provinces. Simulations reveal that welfare in the Canadian dairy sector could increase by as much as $1 billion per year if aggressive tariff cuts were made while moderate liberalization plans would yield annual gains of $234.5 million. Even large producing provinces like Quebec and Ontario gain from trade liberalization. In comparison, a perfect competition model yields more modest welfare gains in the range of $15.6 million and $34.5 million. Finally, we show that the switch in the sign of the transport cost-welfare relation identified by Brander and Krugman (1983) occurs at transport costs that are too high to be policy-relevant.
|Item Type:||MPRA Paper|
|Original Title:||Trade liberalization and inter-provincial dumping in a spatial equilibrium model: the case of the Canadian dairy industry|
|Keywords:||Supply management, Canadian dairy sector, imperfect competition, bilateral dumping|
|Subjects:||F - International Economics > F1 - Trade
L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance
|Depositing User:||ABDESSALEM ABDESSALEM|
|Date Deposited:||21. Apr 2011 12:07|
|Last Modified:||12. Feb 2013 00:16|
Abbassi, A.; Bonroy, O. and Gervais, J-P. 2008, Dairy Trade Liberalization in Canada, Canadian Journal of Agricultural Economics 56: 313-335.
Baldwin, R. and P. Krugman, 1988, Market Access and Competition: A Simulation Study of 16k Random Access Memories. In R. Feenstra, ed., Empirical Research in Industrial Trade, MIT Press, Cambridge, MA.
Barichello, R. and L. Zhang, 2008, Measuring Water in the Tariff with TRQs Imposed: Dairy Products in Canada. Paper presented at NAREA/CAES Workshop on Domestic and International Agricultural Policy, Quebec City, June 29, 2008
Bouamra-Mechemache Z.; J.P. Chavas; T. Cox and V. Réquillart 2002, EU Dairy Policy Reform and Future WTO Negotiations: A Spatial Equilibrium Analysis, Journal of Agricultural Economics 53: 4-29.
Bouamra-Mechemache, Z., Jianyu Y. and Réquillart V. 2005, Imperfect Competition in a Spatial Model of the European Dairy Industry. 89th EAAE Seminar, Modelling agricultural policies: state of the art and new challenges., Parma, Italy, February 2005. EDIM Working paper 01/2005.
Brander J. and Krugman P. 1983, A ‘Reciprocal Dumping’ Model of International Trade, Journal of International Economics 15: 313-21.
Chavas, J.P., T. L. Cox, T. L. and E. Jesse. 1998. Spatial Allocation and the Shadow Pricing of Product Characteristics. Agricultural Economics 18: 1-19.
Cox, T. L., and J-P. Chavas. 2001. An Interregional Price Discrimination and Domestic Policy Reform in the U.S. Dairy Industry. American Journal of Agricultural Economics 83: 89-106.
Doyon, M., C. Brodeur, and J-P. Gervais. 2006. Imputing Dairy Producers’ Quota Discount Rate Using the Individual Export Milk Program in Quebec. Current Agriculture, Food & Resource Issues 7: 120-130.
Feenstra, R.C., J.R. Markusen, and A.K. Rose. 2001. Using the Gravity Equation to Differentiate Among Alternative Trade Theories. Canadian Journal of Economics, 34:430-447.
Friberg R. and Ganslandt M. 2008, Reciprocal Dumping with Product Differentiation. Review of International Economics 16: 942 - 954
Furtan, W. E. and B. M. van Melle. 2004. Canada’s Agricultural Trade in North America: Do National Borders Matter? Review of Agricultural Economics 26: 317-331.
Goddard, E. and A. Amuah. 1989. The Demand for Canadian Fats and Oils: A Case Study of Advertising Effectiveness. American Journal of Agricultural Economics 71: 741-749.
Hashimoto H., 1984, A Spatial Nash Equilibrium Model. In Spatial Price equilibrium: Advances in Theory, Computation and Application. Papers presented at the 31st North American Regional Science Association Meeting held at Denver, Colorado, USA, Edited by P. TP. Herker, Springer.
Helliwell, J. F., and G. Verdier. 2001. Measuring Internal Trade Distances: A New Method Applied to Estimate Provincial Border Effects in Canada. Canadian Journal of Economics 34: 1024-1041.
Huff, K., K. D. Meilke and R. Amedei. 2000. Canada-US Chicken Trade: An Evaluation Five Years into the Uruguay Round Agreement on Agriculture. Canadian Journal of Agricultural Economics 48: 421-432.
Kawaguchi T., N. Suzuki and H.M. Kaiser, 1997, A Spatial Equilibrium Model for Imperfectly Competitive Mild Markets, American Journal of Agricultural Economics, 79: 851-859
Larivière, S. and K. D. Meilke. 1999. An Assessment of Partial Dairy Trade Liberalization on the U.S., EU–15 and Canada. Canadian Journal of Agricultural Economics 47: 59-74.
Larue, B., J.-P. Gervais and S. Pouliot, 2007, Should TRQs be Liberalized to Look more like Quotas? Implications for Trade Liberalization under a Supply-Management Policy. North American J. of Economics and Finance, 18:247-261.
Levallois, R., and J-P. Perrier. 2001. Problématique de l’expansion de l’entreprise laitière dans le contexte de l’an 2001 : Quota ou exportation ? Working paper Agri-gestion Laval, Laval University, Quebec.
Meilke, K. D., R. Sarker and D. G. LeRoy. 1998. The Potential for Increased Trade in Milk and Dairy Products between Canada and the United States Under Trade Liberalization. Canadian Journal of Agricultural Economics 46: 149-170.
Melvin, J. and R. Warne. 1973. Monopoly and the Theory of International Trade. Journal of International Economics 3:117-134.
Meyer C., Duteurtre G. 1998. Milk equivalent and yield of milk products: Calculation methods and use. Revue d’élevage et de medicine véterinaire des pays tropicaux 51: 247-257.
Moschini, G. and D. Moro. 1993. A Food Demand System for Canada. Technical Report No. 1/93, Policy Branch, Agriculture and Agri-Food Canada, Ottawa.
Nelson C. H. and McCarl Bruce A., 1984, Including imperfect competition in spatial equilibrium models, Canadian Journal of Agricultural Economics, 32: 55-70.
Organisation for Economic Cooperation and Development (OECD). 2006. Agricultural Policies in OECD Countries: At a Glance – 2006. Paris.
Samuelson, P. A. 1952. Spatial Price Equilibrium and Linear Programming. American Economic Review 42: 283-303.
Suzuky, N., Kaiser, H. M., Lenz, J. E., and O.D. Forker, 1994, An analysis of US dairy policy Deregulation Using an Imperfect Competition Model, Agricultural and Resource Economics Review 23: 84-93.
Takayama, Y. and G. G. Judge, 1971. Spatial and Temporal Price and Allocation Models, North Holland Publ. Co., Amsterdam.
U.S. Government Accountability Office (U.S. GAO). 2004. Information on Milk Prices, Factors Affecting Prices and Dairy Policy Options. Report to Congressional Requesters. Washington DC.
U.S. Government Accountability Office (U.S. GAO). 2009. Agriculture Concentration and Agricultural Commodity and Retail Food Prices. Briefing for Congressional Staff. Washington DC.
Veeman, M. and Y. Peng. 1997. Canadian Dairy Demand. Project Report 97-03, University of Alberta.
WTO. 2010. http://www.wto.org/english/news_e/news10_e/agng_03mar10_e.htm (accessed on March 22,2010).
Yang C. W., Hwang M. J. and Sohng S. N., 2002, The Cournot Competition in the Spatial Equilibrium Model, Energy Economics 24: 139-154.
Available Versions of this Item
- Trade liberalization and inter-provincial dumping in a spatial equilibrium model: the case of the Canadian dairy industry. (deposited 21. Apr 2011 12:07) [Currently Displayed]