Premium
An Evaluation of the Canada‐U.S. Wheat Agreement of 1994
Author(s) -
Carter Colin A.,
MacLaren Donald
Publication year - 1997
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.2307/1244413
Subject(s) - limiting , tariff , welfare , government (linguistics) , economics , international trade , international economics , trade war , free trade agreement , agricultural economics , political science , free trade , market economy , law , mechanical engineering , linguistics , philosophy , china , engineering
The U.S. government notified the GATT in 1994 that it intended to increase tariff rates on wheat and barley imported from Canada. This threat of increased permanent protection resulted in Canada voluntarily agreeing to restrict wheat sales to the United States. Why would Canada agree to this outcome which would lead to a welfare loss? The payoffs to each country associated with alternative trade war outcomes are estimated. We find that welfare, as measured by equivalent variation, falls in both countries, although Canada was better off limiting exports than becoming engaged in a trade war with the United States.