CHANGING CANADIAN GRAINS POLICIES: IMPLICATIONS FOR MONTANA'S GRAIN INDUSTRY

In Canada many changes have been made, and more are pending, to their grain transportation policies. This package of policy changes has two offsetting impacts on freight rates for Canadian grain producers. The removal of transportation subsidies on grain for export offshore has roughly doubled the cost of transporting grain for the Canadian producer. In addition, the change in pooling points will increase freight rates even more for producers in the eastern part of the prairies. Whether federally owned grain hopper cars are sold to the railways, or to an association of Canadian producers, the cost of the sale is likely to be born by producers through increased freight rates over a number of years. In addition, Canadian producers will bear the cost of investing in new cars, a cost that was previously born by the government. The combined impact of all of these changes is to more than double freight rates for producers in the western part of the Prairies, with larger freight rate increases for eastern Prairie producers. A number of other policy changes including rail line abandonment and car allocation procedures, and the privatization of CN railway, are likely to increase the responsiveness and efficiency of the rail system, and to reduce freight costs over the medium to long run. Changes in the elevator system, port privatization and the construction of high throughput country and terminal elevators are likely to increase the efficiency of the grain handling system. In addition, if the correct incentives for investment in grain hopper cars are adopted, it is possible that the shortage of hopper cars that has occurred in the past might be eased, further increasing the efficiency of the delivery system. The increased cost of exporting to offshore markets has increased the economic incentive for Canadian producers and grain companies to export to the U.S. market. However, due to control of exports by the Canadian Wheat Board, and their concern over the political consequences of large flows of grain to the U.S., those exports may not occur. The uncertainty surrounding the Wheat Board's actions may make it difficult for grain handling companies to anticipate trade flows and make adjustments to the infrastructure in the United States needed to accommodate increased grain flows. The large increase in freight rates occurred when grain prices were at high levels, dampening the impact of increased freight rates on Canadian producers. If all other factors remain equal, increased costs of that size are likely to result in a shift in the production patterns on the Prairies. The extent of adjustment will depend on the production alternatives facing Prairie producers. The large increase in freight rates prompted Canadian transportation specialists to re-examine the feasibility of transshipment of Canadian grain through U.S. ports. Shipping Prairie grain through Pacific North West ports was not found to be cost effective at this time. While the cost of shipping through the Gulf was found to be comparable to shipping through Canadian ports, institutional constraints are likely to prevent substantial transshipment. Some policy changes are likely to increase the viability of the Canadian rail transportation and handling and reduce the cost of shipping over time. However, it seems unlikely that these efficiency improvements will fully offset the large increase in transportation costs that Canadian grain producers have just experienced. This means that the increased economic incentive for some Canadian producers to ship to the U.S. market, compared to offshore markets, is likely to remain.trade, Canada wheat, Montana wheat, grain policies, Agricultural and Food Policy, F1,

MOVING TOWARD A SINGLE MARKET IS HARD: TRADE TENSIONS IN THE CANADIAN-U.S. CATTLE AND BEEF MARKETS

SPS (sanitary and phytosanitary agreement), technical barriers, U.S. cattle and beef trade, Canada cattle and beef, International Relations/Trade, F1,

ALTERNATIVES TO CURRENT TRADE REMEDY LAW WITHIN NAFTA

Economists have long criticized anti-dumping and countervailing duty processes. Analysis of current AD and CVD processes indicates shortcomings compared to a system of dispute resolution. Potential changes to current practices should first consider which of many possible goals the changes are trying to achieve. Both tweaking the current system and introduction of new processes are explored. It is proposed that consultations and good offices, such as used in the dispute resolution system of the World Trade Organization, should be considered.International Relations/Trade,

LOOKING TO THE FUTURE: CONFLICT AVOIDANCE AND RESOLUTION IN NAFTA'S AGRICULTURAL TRADE

trade disputes, trade remedy law, agricultural trade, NAFTA, beef industry, International Relations/Trade,

PREVALENCE AND REFORM OF STATE TRADING IMPORTERS IN WORLD GRAIN MARKETS

state trading enterprises, agricultural trade, world grain markets, International Relations/Trade, F1,

Options for World Trade Organization Involvement in Food Aid

WTO members have presented diverse positions on food aid issues to the current round of negotiations on agriculture. Some members desire increased disciplines on food aid, while others are adamant that the WTO needs to fulfill past promises and meet the current need to increase the food security of developing countries. Underlying this debate are questions about the role of the WTO in food aid issues. It is proposed that a new, more cohesive institution for food aid be adopted to partner with the WTO.agricultural trade, food aid, food security, WTO negotiations on agriculture, Food Security and Poverty, International Relations/Trade,

STRUCTURAL DEVELOPMENTS IN THE U.S. GRAINS SUBSECTOR

Industrial Organization,

INTEGRATION AND INTERDEPENDENCE IN THE U.S. AND CANADIAN LIVE CATTLE AND BEEF SECTORS

The live cattle and beef markets of Canada and the United States are well integrated and highly interdependent, but in an unequal fashion. This paper assesses the role of trade agreements and domestic policies in increasing market integration and analyses the impact of remaining barriers to integration. In this paper, we use integration in the context of forming or blending markets into a whole. When the Canada-United States Free Trade Agreement (CFTA) was implemented in 1989, tariffs on both live cattle and beef were reduced and within a few years many were eliminated. In 1996, the United States imported 1.5 million head of slaughter and feeder cattle from Canada, nearly a sixfold increase in the number of cattle imported prior to CFTA, which numbered 262,091 in 1987. However, live cattle imports are still extremely small compared to the U.S. market, with imports of live cattle in 1996 (carcass weight equivalent) constituting around 4 percent of U.S. beef consumption. The United States is a much more important market for Canada than vice versa, with 60 percent of Canada's beef exports destined to the United States in 1996, but only 16 percent of U.S. beef exports destined to Canada. As impediments to trade between Canada and the United States were removed, north-south trade increased. As the feedlot and packing industries in Alberta expand, it is anticipated that fewer Canadian slaughter cattle will be exported to the United States. In fact, U.S. feeder cattle may be exported to Alberta. Subsidies for beef producers in Canada have been significantly higher than for the United States, at times twice as high, although the level of support for beef and veal is lower than that for other commodities. Both the United States and Canada protect their domestic industries through tariffs, although this protection will decline moderately with the implementation of the 1994 Uruguay Round Agreement. Both countries subsidize their industries through provision of inspection services, research and advisory programs, and marketing and promotion programs; however, the importance of these government policies varies between countries. Canada has eliminated a number of programs previously used to assist the beef industry, including an insurance program, the National Tripartite Stabilization Program. The United States does not have a regular program of income support for stockgrowers. The United States does have several programs that promote beef exports. To the extent that export promotion programs result in higher U.S. market prices, they may also increase U.S. imports of live cattle and beef from Canada. Due to the large size of the United States market relative to Canada, it is commonly argued that cattle and beef prices are determined in the U.S. market, with Canadian prices reflecting differences in exchange rates and transportation costs. U.S. slaughter prices were found to be an extremely important determinant of Canadian slaughter prices. A weaker relationship was found between U.S. and Canadian barley prices. Mutual recognition of the equivalency of U.S. and Canadian meat grading systems has not occurred and this has ramifications for U.S.-Canadian trade in beef. Canadian packers are forced to sell beef at greatly reduced prices in the United States, resulting in lower boxed beef exports to the United States and higher exports of carcasses than would occur with grade equivalency. The same is true for U.S. packers. Because U.S. beef cannot be sold into the eastern Canadian market without a large reduction in price, the U.S. beef industry is deprived of a lucrative outlet for the lean beef that is preferred in eastern Canada. The increasing level of integration in Canadian and U.S. cattle and beef markets has been accompanied by a corresponding increase in their interdependence. Policymakers in both countries must recognize that domestic and export policies need to account for open borders between the two countries, limiting the choice of policies available to achieve a particular goal. Transportation costs will always limit the choice of packers that producers can sell to. However, within these bounds, a single market means that there are more choices for producers. The beef industries in both the United States and Canada are increasingly dependent on export markets, particularly the Pacific Rim. Both countries have a mutual interest in increasing access to third country markets. Integration of U.S. and Canadian live cattle and beef markets is well advanced, and it is perhaps the most integrated market of the major agricultural commodities. Supply management of the Canadian dairy, egg, and poultry industries and the implementation of high tariffs after the removal of quotas have prevented integration in those markets. For grains, marketing institutions and systems in Canada prevent complete market integration. For cattle and beef, the lack of trade barriers and relative unimportance of government intervention in the sector have facilitated movement toward a single market.live cattle trade, U.S. cattle and beef, Canadian cattle and beef, International Relations/Trade, F1,

The Antidumping Negotiations: Proposals, Positions and Antidumping Profiles

Negotiations over the rules governing the use of antidumping (AD) duties are occurring in both the World Trade Organization and the Free Trade Area of the Americas. Unfortunately, the goal of the negotiations is unclear, as some governments want to restrict the use of antidumping while others seek to maintain the ability of national governments to use antidumping measures. We hypothesize that members who desire to preserve the use of antidumping are active in initiating suits. To explore this hypothesis, we examine the positions taken by major actors in the negotiations, and their antidumping profiles. An antidumping profile includes data on a member's AD actions, including investigations and measures the member initiates, as well as investigations and measures against the member's exports.antidumping, FTAA negotiations, WTO negotiations, International Relations/Trade,

WHEAT-IMPORTING STATE TRADING ENTERPRISES: IMPACTS ON THE WORLD WHEAT MARKET

The U.S. is seeking further disciplines on STEs in upcoming WTO negotiations on agriculture. The prevalence and reform of state trading among wheat importers is examined. Behavior investigated across countries and over time includes domestic price stabilization, world price transmission, import levels and sources, and grain quality.International Relations/Trade,