Bruno Larue

The Impact of Regulatory Heterogeneity on Agri-food Trade

We estimate the impact of regulatory heterogeneity on agri-food trade using a gravity analysis that relies on detailed data on non-tariff measures (NTMs) collected by the NTM-Impact project. The data cover a broad range of import requirements for agricultural and food products for the EU and nine of its major trade partners. We find that trade is significantly reduced when importing countries have stricter maximum residue limits (MRLs) for plant products than exporting countries. For most other measures, due to their qualitative nature, we were unable to infer whether the importer has stricter standards relative to the exporter, and we do not find a robust relationship between these measures and trade. Our findings suggest that, at least for some import standards, harmonising regulations will increase trade. We also conclude that tariff reductions remain an effective means to increase trade even when NTMs abound.

Welfare-maximizing and Revenue-maximizing Tariffs with a Few Domestic Firms

In this paper we compare the orthodox optimal tariff formula with the appropriate welfare-maximizing tariff when there are a few producing or importing firms. The welfare-maximizing tariff can be very low, voire negative in some cases, while in others it can even exceed the maximum-revenue tariff. The relationship between the welfare-maximizing tariff and the number of firms need not be monotonically increasing, because the tariff is not strictly used to internalize terms of trade externality. It is also used to manipulate cost asymmetries between producing and importing firms. Welfare-maximizing specific tariffs are never worse than their ad valorem counterparts.

Consumer Confusion Over the Significance of Meat Attributes: The Case of Veal

Animal scientists today can produce pale colored grain-fed veal, thus achieving a high quality grade, while averting concerns over unethical treatment of milk-fed calves and excessive antibiotic use in milk-fed veal production. It is feared, however, that consumers may reject pale cuts of veal labeled as Grain-fed. Random parameter logit analyses of data from repeated choice experiments conducted in six suburban supermarkets in Quebec (n = 1027) revealed that intrinsic color of veal meat and extrinsic labeling of production method may significantly influence product choice; however, the direction of effects were inconsistent across ethnic and non-ethnic consumers and between experienced and non-experienced consumers of veal meat. Price effects were significant, but with a positive mean and a large standard deviation, indicating that, for many consumers, price may act as an surrogate indicator of veal meat quality. Older freshness dates were significantly discounted. It thus appears that most consumers will not categorically reject pale veal meat with a grain-fed label.

Best Management Practices to Enhance Water Quality: Who is Adopting Them?

This study investigates the determinants affecting producers’ adoption of some Best Management Practices (BMPs). Priors about the signs of certain variables are explicitly accounted for by testing for inequality restrictions through importance sampling. Education, gender, age, and on-farm residence are found to have significant effects on the adoption of some BMPs. Farms with larger animal production are more apt to implement manure management practices, crop rotation, and riparian buffer strips. Also, farms with larger cultivated acres are more inclined to implement herbicide control practices, crop rotation, and riparian buffer strips. Belonging to an agro-environment club has a positive impact for most BMPs.

Factors Determining the Success or Failure of Canadian Establishments on Foreign Markets: A Survival Analysis Approach

This article uses the 1993–2000 Exporter Registry of Statistics Canada to study the factors conditioning the survival time of Canadian establishments on foreign markets. The probability of exit before 12 months is 42.2% and the median survival time is 20 months. The hazard of exit varies negatively with the relative size of the establishment, number of exported products and destinations, and the proportion of new entries into export episodes. Exporting to the US Eastern Seaboard represents a lower risk of exit than exporting to other US regions and any other destinations. Also, hazard rates vary across provinces and host industry. For example, belonging to an industry other than Manufacturing increases the risk of failure on foreign markets, except for Agriculture and Related Services as well as for Fishing and Trapping. Jean B, Sabuhoro is A/Deputy Director of Current and Structural Analysis at International Trade Canada in, Ottawa, (Ontario), Canada. Bruno Larue holds the Canada Research Chair in International Agri-Food Trade in the Department of Agri-Food Economics at Laval University in Quebec City (Quebec), Canada. Yvan Gervais is the Coordinator, Research and Analysis Project at Statistics Canada, Business and Trade Statistics Field in Ottawa, (Ontario), Canada. The views expressed in this article do not necessarily reflect the official position of International Trade Canada or Statistics Canada.

Import sensitive products and perverse tariff-rate quota liberalization

This paper shows that a Tariff-Rate-Quotas (TRQ) minimum access expansion can perversely trigger domestic price increases. Often, TRQs have prohibitive over-quota tariffs to mimic import-quotas, in providing minimum market access. In the WTOs Doha Round, it is likely that countries using TRQs will avoid aggressive tariff reductions if they increase the quota portion of TRQs. We show that when the import price lies between the unit cost of production and the price received by domestic upstream firms, an increase in import quota as a share of domestic production may cause an increase in the domestic retail price.

A gravity model to account for vertical linkages between markets with an application to the cattle/beef sector

A gravity model is developed to explain bilateral trade flows in primary and processed commodities within the same agri-food supply chain. It accounts for vertical production linkages, trade and domestic policies, and supply rigidities at the farm level. Our application focuses on cattle/beef trade flows between 42 countries. The estimated parameters of the model are used to simulate trade flows. We found large differences in the impacts of the full and partial liberalization scenarios. A parametric bootstrap procedure is used to generate confidence intervals around predicted trade liberalization outcomes.

Are Exports a Monotonic Function of Exchange Rate Volatility? Evidence from Disaggregated Pork Exports

Production and marketing lags in agri-food supply chains often force agricultural producers and food processors to commit to output targets before prices and exchange rates are realized. A theoretical model illustrates how the processors degree of risk aversion and domestic sales may cause the relationship between volatility of the exchange rate and exports to be non-monotonic. The relationship between exchange rate volatility and Quebec pork exports to the United States and Japan is investigated using linear and non-linear estimation methods. The results support the hypothesis that the relationship between exports and volatility is non-monotonic.

Import Sensitive Products and Perverse Tariff‐Rate Quota Liberalization (Produits Sensibles À La Concurrence De L'Importation Et Libéralisation Perverse Sous Contingents Tarifaires)

This paper shows that a Tariff-Rate-Quotas (TRQ) minimum access expansion can perversely trigger domestic price increases. Often, TRQs have prohibitive over-quota tariffs to mimic import-quotas, in providing minimum market access. In the WTOs Doha Round, it is likely that countries using TRQs will avoid aggressive tariff reductions if they increase the quota portion of TRQs. We show that when the import price lies between the unit cost of production and the price received by domestic upstream firms, an increase in import quota as a share of domestic production may cause an increase in the domestic retail price.

Smuggling and Bhagwati's Nonequivalence between Tariffs and Quotas

The authors extend Professor Bhagwatis analysis about the nonequivalence between trade policy instruments when domestic production is monopolized and the terms of trade are endogenous, by allowing for smuggling. They show that the dominance of the ad valorem tariff over the quota is not robust. Tariffication can lower welfare even when the level of illegal imports is quite small. However, tariffication with a specific tariff is always beneficial because the specific tariff dominates the ad valorem tariff and the quota with or without smuggling. Smuggling (or the threat) also tends to lower the second-best tariff/quota, and increases welfare when imports are restricted by a quota, but lowers it under a tariff. Copyright 2002 by Blackwell Publishing Ltd.