WELFARE EFFECTS OF AGRICULTURAL TRADING BLOCS: THE SIMULATION OF A NORTH AMERICAN CUSTOMS UNION
By: Kennedy, P. Lynn; Hughes, Karol W.
Kennedy, P. Lynn; Hughes, Karol W., WELFARE EFFECTS OF AGRICULTURAL TRADING BLOCS: THE SIMULATION OF A NORTH AMERICAN CUSTOMS UNION, Journal of Agricultural and Resource Economics, Volume 23, Issue 1, July 1998, Pages 99-109
Agricultural trade liberalization among the three North American Free Trade Agreement (NAFTA) signatories is modeled using a political preference function. The model distinguishes among Canada, Mexico, the United States, and a politically passive rest of the world. Through the use of intracountry compensation, the analysis shows that, from an agricultural perspective, economic integration is in the best interest of the group as a whole, although not in the best interest of individual countries. More specifically, of the agricultural production sectors, Canadian dairy, Mexican corn, and U.S. beef producers suffer the greatest losses from the formation of North American customs union.