Trade and Regulations in Transition
A considerable amount of confusion exists over what the General Agreement on Tariffs and Trade (GATT) has accomplished. Have a large number of winners and losers emerged from the agreement? As expected, sectors that could potentially incur large losses from free trade fought hard to defeat GATT. In many cases they won, an outcome predicted by several, including Schmitz ( 1988 and 1994). Statements abounded such as, "GATT is fine for other sectors, but don't let it apply to ours" The fact that many sectors within North American agriculture were able to maintain the protectionist web is not surprising. Significant sums of money were spent on lobbying politicians to defeat GATT and other free trade arrangements, such as the North American Free Trade Agreement (NAFTA) and the Canada-United States Free Trade Agreement (CUSTA).
The overall purpose of this book is to present the major impacts that GATT will have on US and Canadian agriculture; less attention is given to NAFTA and CUSTA. Particular emphasis is placed on US dairy, sugar, peanuts, tobacco and Canadian supply-managed commodities -- industries in which protectionism has prevailed in the presence of the new agreements. In spite of the "free trade" rhetoric, trade disputes have arisen between Canada and the United States in all of these industries -- disputes tied to GATT, CUSTA, NAFTA and the US Farm Program. In showing why protectionism prevails, we examine in some detail Canadian supply management institutions and political design, along with US sugar policy. Under the economics of rent-seeking, many producers of Canadian supply-managed commodities seem to fare better than they do under open market conditions. This book also discusses whether the supply management cartel will likely persist, at least for the short run, in view of the new rules imposed by GATT.