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Trade Adjustment

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Criticism is mounting about the cost and effectiveness of agricultural policies in wealthy countries, and their implications for trade and international relations. A major barrier to the reform of support policies is the belief that this would impose an unreasonable adjustment burden on farmers and others employed in the food and agricultural sector.

Economic research is ongoing regarding the nature and magnitude of the adjustments that would result from agricultural policy reform, the ability of those involved in food and agriculture to adapt, and the potential contribution of existing or new public programs in facilitating adjustment.

Economic Analysis in Disputes over Trade Remedy and Related Measures in Agriculture, with Examples from Recent Cases

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By Daniel A. Sumner, Richard C. Barichello, and Mechel S. Pagi

The use of antidumping, countervailing duties and safeguards and protection measures that are again issues for negotiation in the current World Trade Organization trade negotiations. In addition, disputes related to domestic agricultural subsides are gathering attention as the Uruguay Round Peace Clause expires. This paper considers the application of economics in some high profile agricultural cases. Domestic subsidies for agriculture remain high in many countries, which may make countervail, subsidy and serious prejudice cases more common. At the same time, given fluctuation of farm prices, limited short-term control over farm output and with many farms supplying most agricultural markets, the economic logic of dumping and antidumping is even more troublesome when applied to agricultural commodities.

This paper reviews the role of economic analysis and how the law and economics interact in agricultural antidumping, countervail, safeguard, subsidy, serious prejudice, and cases. The paper reviews where economic analysis enters or does not enter and how some legal concepts may differ from the logic applied by most economists. Measurement of the degree of subsidy, the amount of dumping, and the effects of subsidies are considered. In addition, the paper considers issues related to measurement of losses to the affected home country industry from imports, again with reference to how agriculture may differ from traditional cases applied to manufacturing products. Finally, the paper considers how the spread of the use of trade remedy procedures may affect the economic implications for reform, again with particular reference to agriculture.

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Policy and Management Lesson for Dairy Exporters and Investors in Foreign Dairy Food Businesses – What Did We Learn in the Past Decade?

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By W.B. Dobson

Possibilities for substantial additional opening of world dairy markets appear limited in the near term. U.S. policymakers have few incentives to push for more open U.S. markets. EU policymakers must decide what to do about domestic dairy policies–especially how to include Eastern European countries under the CAP–before they will be positioned to consider substantial further liberalization of Union dairy trade policies.

Australia’s dairy industry experienced unique circumstances that created strong pressures for deregulation and a push for dairy export expansion. The U.S., EU, and Canada face no similar pressures for deregulation.

The WTO panels’ decisions regarding Canada’s Class 5 pricing system have had chilling effects on proposals such as the U.S.’s Class IV dairy export program and two-tier export programs advocated by the Danes.

The New Zealand Dairy Board’s decision to adopt strategies that will increase the Board’s direct investments in foreign dairy companies and use milk produced in other countries to expand the firm’s sales reflects in part a lack of optimism on the part of New Zealanders about further opening of world dairy markets.
Management Lessons

Officers of many dairy-food companies point to Nestle as a model to be emulated in the sale of highly differentiated dairy-food products. In particular, Nestle’s practices show how a firm can capitalize on size advantages and operate successfully in both developed and developing economies.

The New Zealand Dairy Board (NZDB) and Kerry Group/PLC provide examples of what can be accomplished mainly by superior management.

The NZDB has been able to cling to monopoly exporting and long- established exporting practices in part because it has had superior management.

Cooperatives in many countries point to Irish cooperative/public limited companies – especially the Kerry Group/PLC – as examples of what can be accomplished by converting to a cooperative/public limited company. An important lesson from Kerry Group’s experience is to not attribute too much of the firm’s success to Kerry’s decision to convert to a cooperative/public limited company. Kerry’s success is mostly a tribute to good management.

Food Master’s experience in Kazakhstan, the Ukraine, and Moldova underscores the difficulties of operating dairy-food businesses (and probably many other businesses) in the Former Soviet Union. The company’s businesses appear to be operating in what Michael Porter and Warren Buffett describe as unattractive industries.

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Agricultural Biotechnology in Developing Countries: Will it be Technology Transferred Through the Market or Piracy?

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By Robert Tarvydas, James Gaisford, Jill Hobbs, William Kerr

Failure to enforce intellectual property rights in developing countries has become a major international issue. The most visible expression of this was the inclusion of the Trade Related Aspects of Intellectual Property (TRIPs) provision in the GATT Uruguay Round. However, developing countries have expressed concern regarding the patent protection of agricultural inputs, citing food security, anti-competitive behavior and environmental problems. The exact boundaries of intellectual property protection for biotechnology have yet to be determined. Even if domestic legislation provides protection, a question still arises whether governments will actively enforce intellectual property laws.

This paper develops a model which is sufficiently broad to examine cases where countries may choose not to extend intellectual property protection as well as cases where countries include protection for agricultural biotechnology in domestic intellectual property legislation but have a choice whether or not to enforce.

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