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Export Subsidies And The Gains From Trade Liberalization: The Case Of Canada-U.S. Durum Wheat Trade

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  • Alston, Julian M.
  • Carter, Colin A.
  • Gray, Richard
  • Sumner, Daniel A.

Abstract

Following the 1989 Canadian-U.S. Free Trade Agreement sales of Canadian wheat to the United States have grown rapidly, resulting in political confrontations and several trade disputes. The economic basis of the conflicts has revolved around the trade effects of other farm policies. The existence of other farm policies modifies the size and distribution of the gains from trade, and makes implementing a free trade agreement difficult, but may still permit increased trade volume and mutual benefits from freer trade. In the case of durum wheat, Canada is likely to gain from increased access to the U.S. market, especially because the U.S. export subsidy program raises U.S. domestic prices and this makes it attractive for Canada to sell into the United States, rather than to third markets. In theory, given its export subsidy policy and internal farm programs, the United States might gain or lose from more imports. An empirical analysis suggests that, given the U.S. policy of subsidizing durum exports to third countries, the United States would be better off as a result of restricting durum wheat imports from Canada in a normal year. However, in a year such as 1993/94, where weather-damaged U.S. durum is a poor substitute for Canadian durum, closing the border would result in U.S. welfare losses overall.

Suggested Citation

  • Alston, Julian M. & Carter, Colin A. & Gray, Richard & Sumner, Daniel A., 1994. "Export Subsidies And The Gains From Trade Liberalization: The Case Of Canada-U.S. Durum Wheat Trade," 1994 Annual Meeting, August 7-10, San Diego, California 271419, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  • Handle: RePEc:ags:aaea94:271419
    DOI: 10.22004/ag.econ.271419
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    References listed on IDEAS

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    1. Giancarlo Moschini & Karl D. Meilke, 1992. "Production Subsidy and Countervailing Duties in Vertically Related Markets: The Hog-Pork Case Between Canada and the United States," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 74(4), pages 951-961.
    2. Markusen, James R., 1981. "The distribution of gains from bilateral tariff reductions," Journal of International Economics, Elsevier, vol. 11(4), pages 553-572, November.
    3. Julian M. Alston & Colin A. Carter & Vincent H. Smith, 1993. "Rationalizing Agricultural Export Subsidies," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 75(4), pages 1000-1009.
    4. Stallings, David A., 1990. "Increased Protection in the 1980's: Exchange Rates and Institutions," 1990: The Environment, Government Policies, and International Trade Meeting, December 1990, San Diego, CA 50885, International Agricultural Trade Research Consortium.
    5. Johnson, Paul R., 1971. "Studies In The Demand For U. S. Exports Of Agricultural Commodities," Department of Economics and Business - Archive 259733, North Carolina State University, Department of Economics.
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    Cited by:

    1. Johnson, D. Demcey & Wilson, William W., 1995. "Competition And Policy Conflicts In Canada-U.S. Barley Trade," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 20(01), pages 1-18, July.

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