Regulation and Protectionism under GATT: Case Studies in North American Agriculture

By Andrew Schmitz; Garth Coffin et al. | Go to book overview

some other objective (that is freer trade, unweighted domestic welfare, or global welfare). In fact, such an outcome seems likely in many cases, as our empirical examples illustrate.

The key general lesson from this analysis is that, when designing trade agreements that restrict policies of individual governments, care should be taken to recognize the endogenous nature of policy determination, and things should not be taken as given when they are not. In the context of multinational agreements, rules should be chosen with due regard to incentive compatibility if the objective is to force policies to adjust towards freer trade and enhanced domestic and global social welfare. In a GATT agreement that imposes few restrictions on domestic policy use, and partial restrictions on instruments used at the border, there is ample scope for perverse outcomes and good reason to expect them to proliferate.


Notes
1
The CUSTA took effect on January 1, 1989. The United States, Mexico, and Canada signed NAFTA on December 17, 1992, and it took effect on January 1, 1994. The Uruguay Round Agreements established the new WTO which replaced GATT. Negotiations for the new GATT/WTO Agreement were concluded in Marrakesh on April 15, 1994 and the agreement is to be implemented in 1995.
2
In practice, what seems to happen in some cases is that the domestic production quota is fixed and a price is established using a cost-of-production formula, with the import quota being chosen aiming to clear the market at the predetermined price. At this stage of the analysis, the question of how the import and domestic quotas are chosen is put aside and, regardless of how they are chosen, it is the total availability that determines price.
3
The same outcome could be derived from a self-willed government (SWG) model, in which the government actively maximizes an objective function, or from a clearinghouse government (CHG) model in which the government is passive and the policy is driven by competition among groups (for example, see Alston and Carter 1991).
4
With some other combinations of welfare weights, not shown in the figure, domestic (and global) welfare rises initially but eventually falls as the MAR percentage progressively increases.

References

Alston, J. M., and C. A. Carter. 1991. "Causes and Consequences of Farm Policy". Contemporary Policy Issues IX: 107-121.

Alston, J. M., and J. Spriggs. 1994. "Endogenous Policy and Supply Management in a Post-GATT World". Invited paper presented at the conference on "Supply Management in Transition Towards the 21st Century, " Macdonald Campus of McGill University, Ste-Anne-de-Bellevue, Québec, Canada (revised January, 1995).

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Regulation and Protectionism under GATT: Case Studies in North American Agriculture
Table of contents

Table of contents

  • Title Page iii
  • Contents v
  • Acknowledgments vii
  • About the Editors and Contributors ix
  • Section One - Overview of the Effects of Gatt 1
  • 1 - Itroduction: Trade and Regulations in Transition 3
  • References 18
  • 2 - Post-Gatt Assessment of the World Marketplace 20
  • Notes 35
  • 3 - Consequences of Tariffication 37
  • References 50
  • 4 - Supply Management Under Minimum Import Access Requirements 51
  • Notes 62
  • References 62
  • 5 - Imports into Canada: Why Have They Remained Low? 64
  • Notes 76
  • References 77
  • Section Two - Case Studies of Gatt's Effects 79
  • 6 - Regulation -- the Us Dairy Industry 81
  • References 94
  • 7 - Cost Competitiveness in the Canadian and Us Dairy Industries 96
  • Notes 115
  • References 116
  • 8 - Supply Management and Vertical Coordination: the Role of Cooperatives 118
  • Notes 126
  • References 127
  • 9 - Value-Added Economic Potential 128
  • Notes 145
  • References 146
  • 10 - Tobacco Supply Management: Examples from the United States and Australia 147
  • References 158
  • 11 - Gatt and the Us Peanut Market 160
  • Notes 178
  • References 179
  • 12 - The Us Sugar Industry: the Free Trade Debate 180
  • Notes 199
  • References 201
  • Section Three - Regulation and Supply Management 203
  • 13 - Supply Management Canadian Style 205
  • Notes 221
  • References 223
  • 14 - Power Relationships in the Political Process 226
  • Notes 241
  • References 244
  • 15 - Provincialism: Problems for the Regulators and the Regulated 245
  • References 267
  • 16 - Provmcial Versus Centralized Pricing: Protectionism and Institutional Design 269
  • References 283
  • 17 - Venturing into the Political Market 284
  • Notes 296
  • 18 - Vertical and Horizontal Coordination 299
  • Notes 312
  • References 313
  • 19 - Will the Supply Management Cartel Stand? 314
  • Notes 330
  • References 330
  • About the Book 332
  • Index 333
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