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

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

11
GATT and the US Peanut Market

R. R. Rucker, W, N. Thurman, and R. B. Borges


Abstract

In the United States, peanut sales for edible use are restricted by a federal quota system, and imports are virtually banned. The Uruguay Round of the General Agreement on Tariffs and Trade (GATT) has obvious importance for producers of such a commodity. We analyze the probable effects of GATT and related agreements on trade in peanut butter between Canada and the United States, on the US peanut trade and on the welfare of US peanut producers. We argue that a GATT side agreement, which halts growth in US imports of Canadian peanut butter, will increase the demand for US-grown peanuts and decrease any treasury costs associated with the US peanut program. We conclude that the primary effect of GATT on US markets will be an increase in raw peanut imports, which will reduce the demand for US-grown peanuts. The net effect of such increased imports on growers will depend upon how US policymakers respond. If there is no response in the aggregate quota or support price, this aspect of GATT will serve mainly to increase costs to the US Treasury. If there are policy responses, as seems likely, then we forecast the annual loss in peanut producer surplus will be in the range of $10-$18 million, which translates into less than one cent per pound of quota peanuts produced. Further, possible expansion in foreign demand for US peanuts as a result of secondary GATT effects may reduce (or even reverse) these losses.


Introduction

In Canada the production of such agricultural commodities as dairy, poultry and tobacco is regulated through the assignment of production quotas to individual producers. In the United States the only two major agricultural commodities whose production are limited by similar production quotas are tobacco and peanuts. In both Canada and the United States there are

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