EMPLOYMENT, WELFARE AND DISTRIBUTIONAL EFFECTS OF A UNILATERAL CHANGE IN SUGAR TRADE POLICY: THE UNITED STATES AND THE STATE OF HAWAII

The purpose of this work was to measure the economic efficiency and the distributional impacts to the nation's and Hawaii's, a major producing region, resources of a unilateral removal of tariff and quota protection for the United States' sugar industry.;The Baldwin and Mutti approach to measuring the efficiency of such a removal was adopted: the benefits were the removal of the deadweight loss and the (transitional) costs were the present values of resource opportunity costs incurred during the movement of resources from the import competing industries to alternate uses. These costs occur because of factor price rigidities and factor immobilities.;Because of the land extensive nature of agricultural (sugar) production, the transitional cost of land was included in addition to the human resource costs. The transitional cost of capital was not included.;The transitional cost of human resources was the earnings that could have been earned in the first post-displacement employment while initially unemployed. An econometric analysis of a sample of former sugar employees was used to estimate these costs. The transitional cost for land was based on the experience in Hawaii. The terms of trade effect was included and three different discount rates were used for a sensitivity analysis.;The results indicate that the benefits exceed the costs and satisfy the Scitowsky welfare criteria. Thus a return to free trade in sugar is very likely to raise the level of general welfare.;The interindustry distribution of impacts and the distribution of welfare effects between consumers and producers for both the nation and Hawaii were discussed as were the employment effects and total social costs for Hawaii. The reemployment of sugar lands and land-complementary capital did little to mitigate the impacts of the removal of sugar trade protection for Hawaii.;Possible uses of compensation funds to assist the "losers" in a major domestic producing region such as Hawaii were discussed in case a political decision was made to convert potential compensation into actual compensation.;The distribution of private costs and the interrelationships among its determinants were analyzed in the appendices.