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

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

types of quotas to milk processors. One quota pool is based on historical allocation of milk for the dairy year, prior to the signing of the new agreement. The quota holder captures rents associated with the historic base, and farmers have an incentive to join cooperatives to obtain any excess profits associated with historic base quotas held by cooperatives. The other quota pools are designed to increase the flexibility of the system and the access to milk for new firms. To the extent that these markets are profitable, cooperatives give farmers access to associated rents through vertical integration.

Another factor that increases incentives for Québec farmers to join cooperatives is that, similar to British Columbia, the original shipper of milk retains financial ownership of milk delivered by farmers. Milk is then transferred to the processor that holds the output quota. Different from British Columbia, milk transfers from cooperatives to private firms are observed and vice versa. Transfers from private firms to cooperatives are not explained by our model and indicate a need for further research.


Conclusions

As a whole, supply management regulations appear to be favorable to dairy cooperatives. However, individual aspects of regulations can have either positive or negative effects on the incentives for farmers to form cooperatives. If public policymakers believe that cooperatives provide positive benefits to the dairy sector, then they should be careful not to remove regulations that favor cooperatives while leaving in place other regulations that decrease the incentives to form cooperatives.


Notes
1.
Authorship is jointly shared. Research is funded through the Social Sciences and Humanities Research Council ( SSHRC) of Canada and the University of British Columbia Humanities and Social Sciences (UBC-HSS) research grants. We would like to thank conference participants and editors for their helpful comments.
2.
Sexton and Iskow ( 1988) discuss economic reasons for the formation of cooperatives.
3.
The analysis does not take into account the subsidy paid to farmers as this is not affected by milk allocation policies or the existence of processing cooperatives.
4.
The milk classes are: Class 1, fluid; Class 2, cottage cheese, yogurt and sour cream; Class 3, cheese; Class 4, canned evaporated milk, condensed whole milk and condensed skim milk; Class 5, fresh or sterile milk sold in Yukon, Northwest Territories or export; Class 6, nonfluid manufactured products sold in Yukon, Northwest Territories or export; Class 7, manufacture of nonfat milk powder and butter.
5.
The milk marketing board makes a fixed payment to the firm that transfers

-126-

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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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