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Dairy Disputes in North America: A Case Study

Dairy Disputes in North America: A Case Study. Tom Cox University of Wisconsin-Madison Danny Le Roy The University of Lethbridge Ellen Goddard University of Melbourne. Introduction. Analyses of three disputes Comparison of US and Canadian dairy policy Summary.

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Dairy Disputes in North America: A Case Study

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  1. Dairy Disputes in North America: A Case Study Tom Cox University of Wisconsin-Madison Danny Le Roy The University of Lethbridge Ellen Goddard University of Melbourne

  2. Introduction • Analyses of three disputes • Comparison of US and Canadian dairy policy • Summary

  3. Comparison of US and Canadian Dairy Policies: Similarities • Dairy versus Total Agricultural Producer Support: OECD PSE Measures. • Border Protection: • TRQ’s: Quotas, Within and Over Quota Tariffs. • Export Subsidies. • Intervention Prices/Price Supports. • Classified Pricing. • Provincial versus Federal/California MMOs. • Regionalism !!!

  4. Comparison of US and Canadian Dairy Policies: Key Differences • Milk Production Quotas. • Basis for Two-Tiered Export Pricing via Class Vd/Ve. • Clever Way to “Buy Off” Pressure to Increase/Eliminate Quotas ??? • But, via WTO Ruling, Not Clever Enough !!! • Difference with US Classified Pricing ??? • US Pricing Not Targeted to Export Market !!! • Dynamic Growth versus Stagnant Quota Industry Implications ??? • Level of Protection and Domestic Pricing.

  5. OECD Producer Subsidy Equivalents (%)

  6. OECD Producer Subsidy Equivalents (%)

  7. GATT Increased Import (Quota) Access

  8. GATT Import Tariff Reductions

  9. GATT Reduced Subsidy Commitments

  10. US/Canada Intervention Prices

  11. Dairy Disputes • US typically initiates action against Canada • Ice cream and yoghurt • Conversion of import quotas to tariffs • Canadian classified pricing

  12. Ice Cream and Yoghurt • Background • CUSTA • Consumption trends • Action • Import Control List • GATT panel • Outcome • Import controls converted to tariffs

  13. Ice Cream and Yogurt • Evidence of the costs • Imports of Ice Cream into Canada 1994-98

  14. Ice Cream and Yoghurt

  15. Ice Cream and Yogurt • Evidence of Costs • Imports of yoghurt into Canada 1994-98

  16. Ice Cream and Yoghurt

  17. Tariffication • Background • CUSTA, NAFTA, GATT and WTO • Article XI.2.c • Action • Import quotas converted to tariffs • NAFTA challenge • Outcome • Tariffication conformed fully with NAFTA

  18. Tariffication • Evidence of costs • 1$ billion (United States Dairy Export Council) • Meilke, Sarker and Le Roy (1998) • Welfare gains (C$331 m) • gains to consumers and taxpayers larger than losses to producers

  19. Canadian Classified Pricing • Background • Levies to fund Canadian Exports • Special Milk Classes Scheme • Action • US, NZ claimed new CDN pricing system subsidizes exports (5d & 5e) • WTO panel • Outcome • Panel ruled in favour of the complainants • 5d/5e in violation of WTO Agreement on Agriculture Articles 9.1(a) and 9.1(c)

  20. Canadian Classified Pricing

  21. Canadian Classified Pricing

  22. Canadian Classified Pricing

  23. Canadian Classified Pricing

  24. Canadian Classified Pricing

  25. Canadian Classified Pricing

  26. Canadian Classified Pricing • Costs • Loss of millions in sales • through exports • domestic prices • Increase (maintain ???) US-Canada dairy trade tensions. • Increase quota management tensions • Need to decrease production (enforce quotas) • Or WTO legally increase exports • Rock and a hard spot ??? • US MMO relevance ???

  27. US Classified Pricing

  28. Canadian Classified Pricing

  29. US Classified Pricing

  30. US Classified Pricing

  31. US Classified Pricing

  32. US Classified Pricing

  33. Canadian Classified Pricing

  34. Summary • Policies similarities, differences • Case studies • Yogurt & Ice Cream • Tariffication • Special Class Pricing • Economic Evidence • Full World Dairy Sector Deregulation; US MMO Deregulation. • A US-Canada dairy trade liberalization: • work in progress ….

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