T. G. Schmitz and Skinner
This chapter analyzes the economic implications of a major production increase by Ontario chicken producers on the Canadian broiler industry. An economic, spatial oligopoly model of Canada is developed that estimates trade flows and the economic benefits accruing to provincial producers as well as to consumers. The model shows that a major increase in the supply of broilers from Ontario would cause economic losses to accrue to producers in all provinces if the current supply management system remains intact. On the other hand, this policy could force retaliatory action on the part of other provinces that would cause a breakup of the national supply management cartel. Under a new regime in which marketing boards from each individual province compete with each other for a share of the Canadian market, Ontario producers could accrue additional economic benefits if they could act as a leader in the industry. In this scenario, producers in the prairie provinces would also accrue economic benefits while producers in British Columbia, Québec and the Maritime provinces would suffer losses.
The elimination of Article XI of the General Agreement on Tariffs and Trade (GATT) and the replacement of nontrade barriers with tariff-rate quotas 1 has caused concern for the future of supply management. However, as Schmitz, de Gorter and Schmitz ( 1996) discuss elsewhere in this volume, Canadian supply-managed industries will not face legal repercussions from international players in the industry in the near future because of the minimum access rule under the new GATT agreement. The