The Not-So-Simple Economics of Production Quota Buyouts

Schmitz, Andrew; Haynes, Dwayne J.; Schmitz, Troy G.

doi:10.1017/aae.2016.5

Cited by 9 publications

(3 citation statements)

References 35 publications

(48 reference statements)

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“…Canada did something similar in that provincial quota were determined on the basis of the industrial (butter fat) quota allocated to it by the Canadian Milk Supply Management Committee and the demand for fluid milk at the provincial level. Both Canada and the EU failed to take into account the relative efficiency (marginal costs of production) across regions and, in Canada's case, continues to do so (Schmitz et al., 2016). The main difference between the EU's dairy quota regime and that of Canada related to the export market.…”

Section: A Review Of Supply Management In Canada's Dairy Sectormentioning

confidence: 99%

Reforming Canada's dairy supply management scheme and the consequences for international trade

McLachlan

Kooten

2022

Canadian J Agri Economics

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Following Carter and Mérel (2016), we explore the export benefits of reforming supply management (SM) in Canada's dairy sector. A trade model with ten regions and five dairy product categories is developed and used to examine the potential benefits of opening international markets to Canadian dairy products. In addition to a baseline, three scenarios are compared—one with SM in place but with Canada able to export freely. Two other scenarios assume SM is eliminated and there is complete free trade, but with high‐ and low‐cost structures. Findings indicate that, in the high‐cost scenario, domestic consumers gain from lower prices as the domestic supply and exports fall compared to the status quo, but producers are less well off. However, under a low domestic cost structure, Canada becomes a major exporter of milk, with both producers and consumers gaining from free trade. This scenario assumes that domestic producers take advantage of economies of scale, enabling them to compete in international markets. Appropriate policies will be required to reform the quota regime, while minimizing the harm done to dairy farmers.

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Section: A Review Of Supply Management In Canada's Dairy Sectormentioning

confidence: 99%

Reforming Canada's dairy supply management scheme and the consequences for international trade

McLachlan

Kooten

2022

Canadian J Agri Economics

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“…Academic agricultural economists provide little help as there is no agreement on the methodology to be used to determine compensation. While compensation in the case of concessions given in trade agreements has received less attention, the compensation that might be required from the abandonment of the supply management policy has received considerable attention, but with little consensus on methods or results—examples include Barichello, Cranfield, and Meilke (); Busby and Schwanen (), Grant, Barichello, Liew, and Gill (); Nogueira, Barichello, Baylis, and Chouinard (); Schmitz and Schmitz (); Schmitz, Haynes, and Schmitz (); Schmitz, Haynes, and Schmitz (); Van Kooten (); and Vercammen and Schmitz (). Given the complexity of the Canadian dairy market under supply management, determining the appropriate compensation is challenging as it deals with future counterfactuals, future income streams, appropriate discount rates, the post change equilibrium, and, in the case of concessions arising from trade agreements establishing the ceteris paribus conditions so that the changes that can be attributed to the concessions can be isolated from those arising from other factors over lengthy phase in periods.…”

Section: Compensationmentioning

confidence: 99%

Agriculture in the United States, Mexico, Canada Agreement: Agreeing to keep things pretty much the same

Kerr

2019

Canadian J Agri Economics

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North American Free Trade Agreement (NAFTA) was referred to by U.S. President Trump as one of the worst trade deals ever made. Given this billing, one might have expected the result of its renegotiation to be a major change to the trading relationship between the United States and Canada. The new United States, Mexico, Canada Agreement (USMCA), however, retains a great deal of its predecessor. This is particularly true for agricultural trade. Canadian market access into the United States remains virtually unchanged. No major domestic regulatory changes were agreed to by Canada. While there were concessions made on market access for U.S. products into Canada's heavily protected sectors where the supply management policy applies, they do not appear to threaten the system. While the value of the compensation has not yet been announced, compensation for losses that will be suffered by farmers producing under supply management is agreed in principle. The USMCA is an agreement to keep things pretty much the same.

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“…To account for the large increase in the price of lumber, therefore, the demand function must have shifted outwards to a degree that seem unreasonable and could, perhaps, be explained to some extent as the result of speculation. This is an issue for future research (see Schmitz et al, 2016 ).…”

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confidence: 97%

COVID-19 impacts on U.S. lumber markets

Kooten

Schmitz

2022

Forest Policy and Economics

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The Covid-19 pandemic led to an unprecedented increase in the U.S. price of softwood lumber by more than 300%. The reasons for this increase have been attributed to constraints on supply caused by pandemic-induced labor shortages, and increased demand for lumber caused by a Covid-19 related boom in domestic real estate and home improvements. In this paper, we examine the effect that these factors might have had on the increase in prices and the related changes in the welfare of U.S. lumber manufacturers and downstream users of lumber. We examine three cases where the demand function shifts outwards: (1) the lumber supply function remains unchanged; (2) the U.S. lumber supply function and that of its trading partners shifts inwards; and (3) U.S. lumber producers restrict output at its pre-Covid level. Overall, we find that U.S. producers gained between $0.7 and $8.0 billion per quarter as a result of the pandemic, while downstream processors gained $639 million. We argue, however, that the ultimate consumer of the downstream products that require lumber as an input (housing construction, furniture) might well be worse off as surplus lost as a result of reduced expenditures on commodities and services restricted by Covid-19 are not quite recovered when spending switches to lumber-related commodities.

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The Not-So-Simple Economics of Production Quota Buyouts

Cited by 9 publications

References 35 publications

Reforming Canada's dairy supply management scheme and the consequences for international trade

Reforming Canada's dairy supply management scheme and the consequences for international trade

Agriculture in the United States, Mexico, Canada Agreement: Agreeing to keep things pretty much the same

COVID-19 impacts on U.S. lumber markets

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