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

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

productivity, and low-production costs. Such complementarities found in ESEA help explain the low-cost status of California, in that labor productivity becomes a significant factor in reducing COP only in large herds with high milk yields.

At the bottom line, the best managers in each region will be able to produce milk for the lowest cost possible given the constraints of input prices and technology for that region. CCA makes the complementarity between such skill and herd size clear by demonstrating that COP is lower for the larger herds in part because the larger the herd, the greater the premium for managerial skill. By definition, the rate of total-factor productivity growth reflects the intangible, or unexplained, aspects of production that cause production costs to fall over time. Whether through the adoption of new technologies, superior genetics or investments in human capital, competitiveness now is often created rather than endowed. Many of the socioeconomic variables used in ESEA support this conclusion. Although technical efficiency does not imply allocative efficiency, the two appear to be correlated as better managers tend to achieve both higher yields and lower costs.

Many policy implications follow from these general conclusions. First, any constraints to herd expansion should be avoided in order to realize economies of scale. Better managers will further reduce costs through optimizing their input allocations and adopting new technologies at a faster rate. Second, incentives to improve technical efficiency should be promoted. Management clubs, dairy seminars, cooperative education projects and, most importantly, pricing schemes that promote market sensitive production practices are all avenues to the improvement of production efficiency. With greater production efficiency, increases in milk yield, labor productivity and efficient capitalization will be sure to follow. Many analysts propose exhaustive lists of policy recommendations designed to aid Canadian dairy farmers. However, the central conclusion of these three perspectives is that reformation of one or two key areas, for example, the restoration of incentives for the best managers to enter dairy, will generate the necessary changes throughout the system. In each area, improvements are complementary and should be recognized as such.


Notes
1.
In the United States, California is an exception to this comparison as quotas on Class I milk have been used since 1969. However, unlike the case in Alberta, California fluid quotas are not mandatory -- only 42% of Class I milk was shipped under quota in 1994.
2.
In addition to these caveats regarding cost data at the farm level, questions arise concerning the effects of exchange rates and of public policy on land rents,

-115-

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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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