Implications of the Multilateral Trade Agreement for Canadian Agriculture: A Computable General Equilibrium Evaluation

This study evaluates the impacts of the Uruguay Round Agreement (URA) on Canadian agriculture in a single-country general equilibrium framework. For this purpose a computable general equilibrium model of the Canadian economy that involves six agricultural and two non-agricultural sectors was constructed and calibrated on 1991 data. To assess whether Canadian agriculture benefits from the URA, two sets of anticipated changes in world prices, taken from studies of the global effects of the URA, were introduced into the model exogenously. The simulation experiments show that the minimum increases in world prices from global studies are too small to offset the negative effects on agriculture of the reductions in tariffs, export subsidies and domestic support. However, if world prices were to change by the maximum level of global projections, Canadian agricultural producers gain from the URA. The sectors that benefit the most are wheat, other grains, and processed foods, for which production and exports increase appreciably. Imports of milk and poultry products increase substantially and livestock sector imports also increase. Labour and capital demand increase in agriculture, particularly in the wheat and other grains sectors. The highest increase in factor returns in agriculture is for agricultural land. Since the export prices applied above are exogenously determined, a third experiment is conducted to determine the extent of the world price changes for agricultural exports that would offset the negative effects on sectoral domestic production of the URA policy commitments. This would require world prices that are about eleven per cent higher than in the base period for wheat and about ten per cent higher for other grains. The greatest increase in prices--by nearly thirteen per cent--would be required for the milk and poultry sector. More modest changes in world prices for the other agricultural sectors are needed to offset the impacts of the reductions in sectoral support necessitated by the URA. Most of these price changes lie within the ranges of world price projections from studies of the global effects of the URA.International Relations/Trade,

NON-PARAMETRIC APPROACHES TO ENVIRONMENTALLY SENSITIVE ANALYSIS OF ECONOMIC PERFORMANCE: TECHNICAL CHANGE AND PRODUCTIVITY GROWTH IN THE CANADIAN PULP AND PAPER INDUSTRY, 1959-1994

This study proposes non-parametric techniques for environmentally sensitive analysis of economic performance. The techniques are implemented using Canadian pulp and paper industry data covering the period from 1959 to 1994. The results indicate that productivity improvement has been more successful than conventional measures would suggest.Environmental Economics and Policy, Production Economics, Research Methods/ Statistical Methods,

GATT Liberalization and World Grain Markets: Potential and Constraints for Western Canada

International Relations/Trade,

Agricultural Production and Productivity in Canada

Productivity Analysis,

Conserving Water in Irrigated Agriculture: The Economics and Valuation of Water Rights

The effective management of water resources in Alberta is crucial to sustainable agriculture, industrial development, and environmental management. The historical water allocation mechanism, administrative apportionment, has been viewed in recent years as ineffective and cumbersome. Accordingly, the revision of the Water Act in 1996, included an attempt to improve the efficiency of water allocation. By making the transfer of water rights possible, the revised Act provides many new options for water use and flexibility. The implications of transferable water rights in Alberta water policy must be carefully considered in order to determine the viability and suitability of such a system in the provincial context. This project examines some of the economic aspects of transferable water rights and the potential for effective water allocation by way of transfers in an Alberta setting. As a major part of this project, a hedonic price model, focusing on land values in southern Alberta, was constructed based on similar models, which have been used elsewhere to value water rights or agricultural products. The hedonic approach to market analysis uses the relationship between the price of land and the attributes of the land, such as water availability, soil quality and location, to explain differences in land prices. In this process, the hedonic model is used to estimate the implicit marginal price or value of each land attribute -- in our case, the marginal value of irrigation water. This value will provide us with an indirect estimate of the value of water rights in the region studied. An advantage of the technique is that it estimates the value that farmers express for irrigation water in the market place for land. Such values, then, give us an indication of the anticipated prices, which might prevail for water rights in southern Alberta. The focus of the study was an area of southern Alberta encompassing the counties of Wheatland, Newell, Cypress, Forty Mile, Taber, Warner, Lethbridge and Vulcan and the irrigation districts of Western, Eastern, St.Mary's, Taber, Lethbridge Northern, and portions of Raymond. Information was collected on the physical and economic characteristics of 230 land parcels, which were sold in this region in 1993 and early 1994. A crude comparison of the value of irrigated agricultural land and non-irrigated agricultural land in the sample reveals that irrigated land was worth, on average, $325 more per acre than non-irrigated land. In the ensuing analysis, it was estimated that the value of a parcel of land was determined largely by the buildings on it, the number of acres in the parcel, the proximity of the parcel to a major city (in this case Calgary or Lethbridge), and by the availability of irrigation water. In the hedonic model, the coefficient values of the variables included represent the marginal impact of each of these characteristics on land prices holding all other things constant. For example, the value of water rights represents the average difference between land values of farms that have access to irrigation and farms that do not. This study estimated that every dollar of improvements to farm buildings translates to a one cent increase in the per acre price of the land parcel, where the addition of one extra acre of land to a land parcel lowers the price per acre by$5.17 per acre. Land prices were seen to increase with the proximity of the parcel to large cities. Similarly, the results of the preferred model indicate that the implicit value of having access to irrigation water in southern Alberta is approximately $190 per acre, or, using the conventional estimate that irrigating one acre of land requires 1.5 acre feet of water, this translates to$126 per acre foot of irrigation water. Accordingly, it is revealed that the existence of water rights adds approximately 35% to the value of non-irrigated land. Since this value represents the implicit amount farmers are willing to pay for access to water, it could also be construed as an indirect measure of the value of water rights. From these results, it is reasonable to conclude that water rights do have a measurable impact on land values. Accordingly, proper incentives may be needed to ensure that water is used efficiently and not incorrectly treated as a relatively free or cheap good. One possible method of policy reform to achieve such a system would be the institution of a system of transferable water rights, permitting water to be traded, or effectively sold, at its market price or scarcity value. Further work was done to determine the potential effects of transferable water rights on the Eastern Irrigation District in southern Alberta. Farm budget information was used to gather information and create twelve representative farm types whose financial performance was analysed using linear programming with increasing water quantity constraints. The resulting productive water values were then used to imply potential reallocations of water among farm types and cropping systems. Analysis of the data gathered revealed that all representative farms faced downward sloping demand functions for water. The overall value of water for a 1% reduction ranged from $8 to$250 per acre foot, with the lowest value belonging to largely pasture operations and the highest value attributed to specialty crop producers. This large range in water values for the region indicates that there is sufficient heterogeneity within the EID to accommodate a transferable rights system. Further analysis of the data reveals that the implementation of a transfer system would result in water being transferred to specialty crop producers and the acreage devoted to specialty crops would increase. Small irrigated pasture operations and cereal crop producers would be the first to give up their water allocations under a transfer system. The analysis indicates that there is considerable potential for economic gains from water trade within this district, the main constraint being the market limitations to expanded specialty crop production. Using these two major studies and other sources, this report concludes with a brief evaluation of the economic advantages, disadvantages and other issues involved in instituting a system of transferable water rights in Alberta. Experience elsewhere, primarily in Australia and the western United States, strongly suggests that transferable water rights, despite some drawbacks and problems of implementation, can be a very worthwhile water policy tool. Now that such tradable water rights are permissible under the revised Water Resources Act of 1996, it is recommended that a pilot project involving transferable water rights be instituted in a water short basin or sub-basin in southern Alberta once a water management plan for that basin is completed.Resource /Energy Economics and Policy,

Household Livelihoods, Marketing And Resource Impacts: A Case Study Of Bark Products In Eastern Zimbabwe

An IES Working Paper.The bark of Warburgia salutaris, locally known as muranga, is a medicine of great traditional significance in Zimbabwe. However, trees of this species are at or near extinction in the wild in Zimbabwe. In this paper, the economics of the re-introduction of this rare medicinal species in some relatively moist, high altitude sites in south-eastern Zimbabwe are examined. The analysis builds on the information base provided by a recent pilot project of Warburgia re-introduction, as well as on market price data from a survey of current medicinal bark markets and on assumptions regarding the prospective future production and use of Warburgia leaves and bark by farmers and healers. The economic analysis, strongly suggests that expanded Warburgia production, at least on a small scale, in the remote, hilly region of southeastern Zimbabwe is very economically attractive and conducive to improving rural incomes and livelihoods of small-holders. This conclusion holds true in private feasibility terms, for both small-scale farmers and healer-growers, and in terms of social cost benefit analysis wherein seedling subsidies are removed.Funding for the study was provided by Canadian International Development Agency (CIDA) through the Agro-forestry Southern Africa project and the World Wide Fund for Nature (WWF) People and Plants Initiative

The Economics Of Production Of A Rare Medicinal Species Re-Introduced In South-Eastern Zimbabwe - Warburgia Salutaris.

The bark of Warburgia salutaris, locally known as muranga, is a medicine of great traditional significance in Zimbabwe. However, trees of this species are at or near extinction in the wild in Zimbabwe. In this paper, the economics of the re-introduction of this rare medicinal species in some relatively moist, high altitude sites in south-eastern Zimbabwe are examined. The analysis builds on the information base provided by a recent pilot project of Warburgia re-introduction, as well as on market price data from a survey of current medicinal bark markets and on assumptions regarding the prospective future production and use of Warburgia leaves and bark by farmers and healers. The economic analysis, strongly suggests that expanded Warburgia production, at least on a small scale, in the remote, hilly region of southeastern Zimbabwe is very economically attractive and conducive to improving rural incomes and livelihoods of small-holders. This conclusion holds true in private feasibility terms, for both small-scale farmers and healer-growers, and in terms of social cost benefit analysis wherein seedling subsidies are removed

Development, Productivity, and Sustaining Natural Capital

"The elimination of hunger, the reduction of poverty, and the wiser management of natural capital remain as critical, but elusive, objectives of society worldwide. In this Address, the issues of development, productivity, and the use of natural capital are explored and important linkages among these three areas are drawn. A special challenge is the identification of the conditions under which the productive base of a nation or region would increase on a sustainable basis, enhancing well-being of its citizens over time. Policy reforms are identified, which would help to ensure that development is more sustainable, that productivity growth is adequate and appropriate, and that natural capital, particularly its critical components, is managed more wisely." Copyright (c) 2008 Canadian Agricultural Economics Society.