The influences of Western Hemisphere economic integration on food and agricultural sectors: A computable general equilibrium analysis

Western Hemisphere (WH) market integration reduces or eliminates trade barriers among member countries, providing more open markets and freer movement of investment capital across national boundaries. This research identified the influence of market integration on agricultural trade and production in the WH, using the computable general equilibrium model, Global Trade Analysis Project (GTAP). The GTAP model enabled a simulation of trade liberalization as a proxy for market integration, and provided data on sectoral and macroeconomic changes as a result of unilateral and regional trade liberalization. Results were generated in terms of changes in domestic output, exports and imports for nine sectors.;Five policy scenarios (E1-E5) were analyzed based on the simulation of unilateral liberalization of agricultural policies by the U.S., Canada, and Mexico, regional liberalization by the member countries of the NAFTA (the U.S., Canada, and Mexico), and Western Hemisphere trade liberalization. Two analyses of the simulations were performed, a fixed and a variable investment allocation. The results of the variable investment allocation, which equilibrates expected rates of return across regions, were consistent with economic theory.;Results of the GTAP analysis suggest that from a U.S. perspective, the sectors that will gain exports include beverages and tobacco while imports within this sector remain virtually unchanged. For the processed food products, food and feed grains, and livestock and wool sectors, the analysis suggests that imports to the U.S. will increase while exports decline. The removal of trade barriers that results from market integration stimulates increased trade as well as changing the direction of trade. U.S. output in the processed rice sector remains virtually unchanged, but imports and exports increase. Canada also experiences an increase in trade in the livestock and wool, beverages and tobacco, and manufacturing and services sectors, with small changes in output levels. The largest changes in the direction of trade in Canada are an increase in exports of processed rice, and an increase in imports of milk products. For Mexico, exports of grains and livestock and wool increase while imports within these sectors remain stable. The processed food products sector within Mexico is stable with changes in imports and exports nearly balanced on a percentage basis.