We extend previous modelling approaches to identify domestic price effects of export controls. We allow for smooth transition between free-trade price transmission regimes and those under export restricting regimes, using a smooth transition cointegration (STC) approach, rather than the more common assumption that regime changes are abrupt. Our approach has the advantage that the switch in the price transmission regime may be induced not only by an actual but also by an expected policy change. Results confirm the gradual nature of the transition between the regimes, which reflect trader heterogeneity and wheat storage decisions. We find that the STC approach outperforms alternative model approaches in terms of both regime classification and goodness of fit, when explaining Ukrainian domestic wheat prices under export controls. In particular, application of the Markov-switching error correction model (MSECM) to the same data generates results which do not reflect any identifiable economic reality (in contrast to Gotz et al., 2013).

Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomieVolume 62, Issue 1 p. 1-5 Presidential Address Growing Complexity and Greater Sophistication in Agriculture Jean-Philippe Gervais, Jean-Philippe Gervais [email protected] Farm Credit Canada/Financement agricole Canada, 1655, Boulevard Alphonse-Desjardins, bureau/suite 180, Levis, QC, G6V 0B7 CanadaSearch for more papers by this author Jean-Philippe Gervais, Jean-Philippe Gervais [email protected] Farm Credit Canada/Financement agricole Canada, 1655, Boulevard Alphonse-Desjardins, bureau/suite 180, Levis, QC, G6V 0B7 CanadaSearch for more papers by this author First published: 06 March 2014 https://doi.org/10.1111/cjag.12034Citations: 3Read the full textAboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onEmailFacebookTwitterLinkedInRedditWechat Citing Literature Volume62, Issue1March 2014Pages 1-5 RelatedInformation

Relatively few models exist that allow for regime-dependent spatial price equilibria. This paper focuses on temporary export restrictions during international commodity price peaks. Theory suggests that export restrictions have price insulating effects and lead to multiple spatial equilibria between domestic and world market prices. Our analysis is unique in that it tests for linear versus non-linear cointegration within a smooth transition cointegration model. Applying this model to the wheat export quota in Ukraine shows that the domestic wheat price was stabilised approximately 30% below the international wheat price during the two recent price spikes. From a global point of view, the domestic wheat price in Ukraine would have increased to the same degree if no country had engaged in price insulating behaviour worldwide from 2006 to 2008.

Only few models exist which allow for a regime-dependent spatial price equilibrium. This paper focuses on the price insulating effects of export restrictions. The theory of a Walrasian equilibrium and the spatial price equilibrium theory suggest that export restrictions lead to multiple spatial equilibria between the domestic and the world market price. Our analysis is unique in testing for linear versus non-linear cointegration within a smooth transition cointegration model. The application to the wheat export quota in Ukraine shows that the domestic wheat price was stabilized about 30% below the international wheat price during the two recent price booms. We trace back the increased speed of adjustment in the closed trade regime to increased price information flows and heightened information attention when prices are volatile and high. From a global point of view, the domestic wheat price in Ukraine would have increased to the same degree, if no country had engaged in price insulating behaviour 2006-2008 worldwide.

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.

Developing Countries (DCs) have remained firm in the current WTO negotiations regarding their demand for significant agricultural trade liberalization. This stance has undoubtedly delayed the conclusion of the Doha Round and one might wonder whether DCs are not depriving themselves from valuable gains from trade by holding out. In line with the theory of second best, we show that too little liberalization could be immiserizing for DCs through numerical simulations of a three-country theoretical trade model of primary agricultural commodities and processed foods. Our model departs from most other models by accounting for vertical linkages and by linking welfare outcomes to parameterized supply-side rigidities at the farm level, which imply that primary goods cannot be substituted costlessly across export destinations, and imperfect substitution between processed foods. While in simpler models DCs can get larger welfare gains from multilateral tariff reductions than from domestic support reductions, our simulations show that this instrument ranking can be reversed. Under a wide range of parameter values, the DC would support a trade agreement only if the latter calls for ambitious tariff cuts. This outcome is consistent with the positions of DCs in the current round of multilateral negotiations over agriculture.

We propose an empirical trade model to test for structural change and dynamic effects induced by free trade agreements for the Canadian and US economies. We estimated a translog Gross National Product (GNP) function along with output and factor shares and tested for structural change (abrupt or gradual) which is endogenously determined by the data. After this, we estimated Stolper-Samuelson (SS) and Rybcynski (R) elasticities, and assessed the stability of their sign and magnitude link to the structural change. The null hypothesis of no structural change is soundly rejected for both countries. For Canada, we found gradual structural change that started prior to the implementation of CUSTA and lasted for several years. In the US case, we found evidence of an abrupt structural change occurring in 1995, a year after NAFTA came into force. More interestingly, several SS and R elasticities experienced sign reversals and a magnification effect over the different sub-periods, implying that the categorization of goods in terms of friends or enemies of labour and capital changed during the transition.

The imposition of cheese compositional standards by the Canadian authorities has created divisions within the Canadian dairy industry and has motivated criticisms from several of Canadas trade partners. The standards impose minimum limits on the percentage of casein coming from fluid milk. We develop a theoretical model to investigate the implications of Canadas compositional cheese standards while accounting for Canadas trade policy. We illustrate why a type of cheese that is not directly impacted by the standards might be the most affected. We show that the standards can decrease the domestic demand for milk or the value of imports. Our empirical investigation identified breaks in the processes determining import unit values shortly before or shortly after the beginning of the implementation of the standards.

This paper investigates the influence of inventories in explaining the magnitude of price transmission. The empirical strategy consists of two distinct steps. First, the flexible non-linear framework of Hamilton is used to investigate the influence of inventories on price transmission. The procedure detects significant non-linearities and suggests that the price transmission elasticity is increasing in the level of the farm price and decreasing in the ratio of inventories to sales. This evidence leads to specific functional forms for the price transmission and target inventory equations which are estimated in a second step. The estimation procedure accounts for potential simultaneity between sales at the wholesale level and the wholesale price. Our results suggest that price transmission is lower (higher) when inventories are below (above) a target which is function of domestic sales.

Animal disease outbreaks trigger import restrictions that penalize exporting countries where the outbreak originates. However, significant increases in sales for the remaining exporters are likely to be observed only once the importer is confident that the outbreak is localized and contained. In March of 1997, Japan imposed an import ban on Taiwanese pork. At the time, Taiwan was supplying 41% of Japan's pork imports. The authors rely on the framework developed by Goldberg and Knetter (1999) and implement a generalized method of moments procedure to estimate the inverse residual demand elasticities of the current three largest exporting countries: United States, Canada, and Denmark. Structural change was investigated by adapting Qu and Perron's (2007) methodology that endogenizes the break dates. The authors found that foreign exporters were delayed by 2 years in making adjustments after Taiwan's exit. The ban on Taiwan's exports made the U.S. residual demand more inelastic and reinforced the case for U.S. market power. Denmark's reduction of market power may be due to their export product mix. [EconLit citations: L11; Q13]. © 2010 Wiley Periodicals, Inc.

This article investigates the impacts of decoupled and coupled program payments on farmland rental contract choices for a subset of U.S. crop farms using a principal-agent model. We consider cash and share contracts as well as hybrid contracts, which represent an increasingly prominent feature of U.S. agriculture. The conceptual framework suggests that restrictions on payments between contracting parties are ineffective and induce an offsetting contractual rearrangement. Empirical results from a multinomial logit model confirm that government support programs have large, significant effects on contract choices and that these effects vary by types of programs.

Increased concentration at the retail, food processing and farm input manufacturing levels has brought increased attention to patterns in retail-to-farm price spreads. Most studies documenting asymmetric price transmission focus on nonlinear error correction processes, as opposed to the current study which analyses potential nonlinearities in the long-run relationship between the farm and retail prices. The null hypothesis of nonlinearity in the long-run relationship between farm and retail prices in the US hog/pork supply chain is rejected in favour of a Smooth Transition Cointegration (STC) framework. The STC framework predicts downward price stickiness in retail prices. The predicted residuals of the nonlinear model are used to investigate whether it is possible to disentangle nonlinearity in the long-run price relationship from nonlinearity in the adjustment towards the long-run equilibrium. The results underline the importance of testing for linearity in the long-run price relationship before modelling nonlinearity in short-run dynamics.

We outline new data on non-tariff measures (NTMs) in agricultural trade collected as part of the NTM-Impact project. The data cover product and process standards, conformity assessment measures, and country requirements for the EU and 10 other countries. We create a Heterogeneity Index of Trade (HIT) regulations to aggregate data on different measures, and estimate the impact of regulatory heterogeneity on trade using a gravity framework. Our results suggest that differences in standards reduce trade in beef and pig meat, but have little impact on trade in other agri-food products.

The authors derive a gravity framework that is compatible with the existence of reference prices for agricultural commodities. A commodity-specific gravity equation, estimated with Poisson pseudo-maximum likelihood and threshold Tobit estimators, is used to investigate the effects of regional trade preferences for meat commodities. The predictions indicate that European Union (EU) tariff-free access and North American Free Trade Agreement (NAFTA) nontariff provisions are the main types of preferences that substantially promoted intraregional trade. In addition, the trade creation effects of the Mercado Común del Sur (MERCOSUR) and Andean Community of Nations (ANDEAN) are generally the result of nontariff preferences. Moderate trade diversion effects occurred in the case of the EU, NAFTA, and MERCOSUR. [Econ Lit classification: F14, F15, Q17]. © 2011 Wiley Periodicals, Inc.

Country of Origin Labelling (COOL) regulation has been applied in the United States meat sector since October 2008. The industry must label beef, lamb and pork (ground meat and muscle cuts) sold through retail outlets according to its country of origin. The labelling requirements create differentiation at the retail level and may impose additional costs on producers, processors and retailers in the U.S. and elsewhere. The purpose of this analysis is to investigate whether there has been structural change in U.S. import demand for Canadian hog/pork products. Given that COOL has been in place for a limited period of time, we implement statistical procedures that are robust to structural change occurring at the end of the sample. We find evidence that COOL has impacted U.S./Canada slaughter hog trade flows. While Canadian feeder hog prices appear to have declined concurrently with the introduction of COOL, statistical hypothesis testing found little evidence of structural change for feeder hog trade flows that could be associated with COOL. (This abstract was borrowed from another version of this item.)

We propose an empirical trade model to test for structural change and dynamic effects induced by free trade agreements for the Canadian and US economies. We estimated a translog Gross National Product (GNP) function along with output and factor shares and tested for structural change (abrupt or gradual) which is endogenously determined by the data. After this, we estimated Stolper-Samuelson (SS) and Rybcynski (R) elasticities, and assessed the stability of their sign and magnitude link to the structural change. The null hypothesis of no structural change is soundly rejected for both countries. For Canada, we found gradual structural change that started prior to the implementation of CUSTA and lasted for several years. In the US case, we found evidence of an abrupt structural change occurring in 1995, a year after NAFTA came into force. More interestingly, several SS and R elasticities experienced sign reversals and a magnification effect over the different sub-periods, implying that the categorization of goods in terms of friends or enemies of labour and capital changed during the transition.