| Trade barriers for livestock and grain may be completely eliminated through the U.S.-Canada Free Trade Agreement. Real or physical trade models imply that specialization and welfare gains are associated with free trade. Mathematical programming methods were used to identify shifts in grain and livestock production, processing, shipment, and consumption for two Canadian regions and as many as four U.S. regions. The model was solved under various assumptions with respect to the timing of trade liberalization beginning with the initial provisions of the Free Trade Act in 1989, and extending into the next century for the realization of completely free trade. Model results indicate four major conclusions.;First, initial provisions of the Free Trade Act are unlikely to cause any significant impact on the grain and livestock activities of the regions. Beef production increased and hog production declined minutely in Eastern Canada with offsetting changes in hog and cattle production in the North Central region of the U.S.;Second, elimination of Canadian Import Licenses and the threat of U.S. quota imposition authorized by Section 22 may cause significant changes in regional livestock and grain production activities in the two nations. Initially, Canadian production of both hogs and beef were displaced. However, with further liberalization of trade, both Canadian regions increased hog and cattle numbers. Specialization in hog and cattle production also occurred in the North Central U.S.;Third, production of grain and livestock commodities declined in the Southwest and Plains regions of the U.S. for the long term trade liberalization scenario. Unused grain acreage existed in these regions. Grain production in Eastern Canada, Western Canada and the North Central United States regions increased. Because of their competitive advantage all crop land was utilized.;Fourth, beef and pork consumer welfare, as measured by consumer surplus, increased throughout the trade liberalization process. Consumer surplus increased only slightly by 0.62 percent for the FTA scenario. More liberalized trade scenarios generated increases in consumer surplus up to 12.4 percent. Producer surplus as measured by crop land values declined. |
