Agriculture and the WTO: Future Directions in the Grain and Oilseed Sectors

This paper examines the larger economic forces that shape multilateral trade agreements and concludes that further WTO trade reform in the grain and oilseed sectors will be difficult to achieve. The somewhat successful Uruguay Round had budget and internal reform pressure to assist the process. The United States currently has large budget surpluses, and efficiency effects from policy reform following the Uruguay Round have reduced the possible gains from further domestic reform. Without these pressures, further negotiated reform in the grain and oilseed sectors is a remote possibility. On the other hand, there are good prospects for a multilateral environmental agreement on climate change. Ratification of a climate change agreement could have a large impact on the grain and oilseed sectors as such an agreement would divert excess resources from food production.carbon sequestration, food security, grain, Kyoto Accord, oilseed, International Relations/Trade,

Agricultural Production and Productivity in Canada

Productivity Analysis,

Crop Research Incentives in a Privatized Industry: A Stochastic Approach

We model today's privatized crop research industry as a small number of firms, developing and selling differentiated products to heterogeneous producers. Crop variety research is modeled as a search process, which allows us to differentiate between applied and basic research and recognize research as a stochastic process. We use the framework to develop a number of propositions regarding private research incentives, the spillovers of knowledge, and the impact of public policy. The results suggest an underinvestment in research even when property rights have been established.search process, stochastic process, biotechnology, IPRs, applied R&D, basic R&D, imperfect competition, differentiated products, heterogeneous producers., Agribusiness,

AN ANALYTICAL AND EMPIRICAL ANALYSIS OF THE PRIVATE BIOTECH R&D INCENTIVES

The study examines the incentives and incidence of private R&D investment in the today's biotech industry. A three-stage search/imperfect competition model is developed to derive the optimal pricing and investment decisions of private firms and to develop conjectures about how these decisions are affected by exogenous factors. The analysis shows that basic public research "crowds in" applied private research while applied public research "crowds out" applied private research. The current technology level and the cost of the experimentation negatively affect private investment, while the price of the final product positively affects the private investment. Moreover, the greater the product heterogeneity, the higher the price charged with the same amount of R&D. Finally, the increase in IPR's and the firm's market size has a positive effect on the private firm's amount of R&D investment. These conjectures are tested empirically using data from the Canola research industry. The results of the empirical analysis strongly support the results derived from the theoretical model.Research and Development/Tech Change/Emerging Technologies,

STATE TRADING VERSUS EXPORT SUBSIDIES: THE CASE OF CANADIAN WHEAT

Canada and the United States have used different trade policies to support their wheat industries. Canada conferred sole export powers to the Canadian Wheat Board, allowing it to price discriminate among markets. The U.S. government has funded transfers to its wheat producers from taxpayers, instead, through export subsidies. This study compares these two ways of supporting producers in terms of their transfer efficiency and overall deadweight losses, the incidence on different domestic interest groups, and their consequences for third party traders. In the analysis we consider the implications of market power of wheat marketing firms for the comparison of policy alternatives in the context of the Canadian wheat industry.International Relations/Trade,

STATE TRADING ENTERPRISES AND REVENUE GAINS FROM MARKET POWER: THE CASE OF BARLEY MARKETING AND THE CANADIAN WHEAT BOARD

According to the U.S. General Accounting Office, the Canadian Wheat Board (CWB) is the largest state trading enterprise reporting to the World Trade Organization under article XVII requirements. This study estimates the market power exerted by the CWB in international barley markets. The analysis incorporates international price discrimination across markets for similar types of barley, the intertwining relationships between feed and malting barley markets, and producer behavior in the absence of the CWB. The CWB was able to capture an annual average of $72 million in additional revenue beyond the amount that would have been generated by purely competitive multiple sellers of Canadian barley during the period 1985-94.Marketing,

End-Use Certificates for Wheat: Trade-Distorting Administrative Barriers?

International Relations/Trade,

THE PROVISION OF RAIL SERVICE: THE IMPACT OF COMPETITION

Grain transportation is one of the most important economic issues for grain producers in the Northern Plains. The reliance on export markets and the long distances to port position means that transportation costs have a significant effect on the price received by farmers. In the prairie region of Canada, rail transportation is undergoing a major transformation that will affect the competitive positions of agriculture in both the United States and Canada and influence the direction of grain flows between the two countries. Rail rates are no longer legislated although a cap is still in place), restrictions on branch line abandonment have been lifted, and further deregulation of price and car allocation is being considered. Some parties, including the railways, argue that a completely deregulated system, similar to the U.S. system, is the only way to achieve transportation efficiencies. Other groups, supporting the status quo, argue that the regulation of rates is essential to control the monopoly power of the railways. There has been very little discussion of other policy options, with the exception of a limited discussion of nationalized railbeds. The U.S. experience provides a stark view of the likely outcome of deregulation. When railways are not faced with competition from other railways or from other forms of transportation such as barges, the evidence suggests railways will price freight services at or near truck competitive rates. Freight rates in Montana, where no effective rail and/or barge competition exists, are approximately twice those at Kansas City and Denver/Commerce City, where such competition exists. The current cost-based regulated rates in Western Canada are similar to those at Kansas City and Denver/Commerce City. Given similar distances to port and the existence of only two railways (and no likelihood of new entrants), deregulation in Western Canada is likely to result in freight rates closer to those in Montana than to the current regulated level. The increase in freight costs will result in transfers from producers to the railways, distort production incentives, and create losses elsewhere in the economy. While maintenance of a regulated freight rate structure would address the freight rate issue, other problems would result. The lack of price signals reduces incentives for industry participants to perform. Branch lines are less likely to be maintained in a regulated environment because railways may be unable to charge the extra amount necessary to make them viable. Railways may also disrupt the system - as a form of bargaining - to create pressure for deregulation. This report explores the option of the government encouraging entry into rail service provision. Just as telecommunication companies are required to allow competitors to use their phone lines, existing railways could be required to make their track and switching equipment available to rail operators who wish to run train service on a line, on the condition that the access price covers the infrastructure cost. The paper examines the case of the British railway system where the ownership of the track has been separated from the operation of the rail equipment and the provision of service, and explores the applicability of this model to grain transportation on the Great Plains. In Britain, ownership of the track rests with a company called Railtrack (although Railtrack was government-owned, it has been privatized). Railtrack leases access to thirty train operators for fees that are regulated by the Office of the Rail Regulator to cover maintenance costs and provide a return on investment. The thirty rail operators then compete to provide service to customers. This model and others similar to it need to be developed and articulated before they can be considered in the public policy forum. Nevertheless, given the importance of rail transportation to the grain industry in the Northern Plains, it is imperative that options such as these be investigated to address the very thorny issue of freight rate and entry regulation.barriers to entry, competition, grain handling, grain transportation, monopoly, railroads, regulation, Public Economics, K2, L1, L9, L5,

TRADE LIBERALIZATION AND INTERNATIONAL MERGER IN COURNOT INDUSTRIES: THE CASE OF BARLEY MALTING IN NORTH AMERICA

When free trade merges formally distinct non-competitive industries, welfare should increase. Additional incentives for mergers may reduce these gains from free trade. We show the importance of such arguments in an analysis of the malting barley industry in North America before and after the Canadian/U.S. free trade agreement.International Relations/Trade,

HARMONIZATION AND CONVERGENCE OF CANADIAN AND U.S. GRAINS AND OILSEEDS POLICIES: 1985-1996

Agricultural and Food Policy,