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Reforming Canada's Dairy Sector: USMCA and the Issue of Compensation

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  • G. Cornelis van Kooten

Abstract

Supply management (SM) in Canada's dairy sector was an obstacle to the successful renegotiation of the North American Free Trade Agreement. Reform of agricultural SM regimes in sugar, peanuts, tobacco, and dairy in various jurisdictions are reviewed, and an analytic framework is developed to investigate how Canada might eliminate its dairy quota regime while not overcompensating producers. Compensation based on quota values amount to $5.9 billion if untargeted, but only $2.9 billion if targeted; in contrast, theoretically correct estimates of the loss that dairy producers would face range from $0.2 to $1.9 billion. Such costs are low enough not to impede the elimination of supply management.

Suggested Citation

  • G. Cornelis van Kooten, 2020. "Reforming Canada's Dairy Sector: USMCA and the Issue of Compensation," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 42(3), pages 542-558, September.
    • Handle: RePEc:wly:apecpp:v:42:y:2020:i:3:p:542-558
    DOI: 10.1093/aepp/ppy038
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    1. Brennan A. McLachlan & G. Cornelis van Kooten, 2022. "Reforming Canada's dairy supply management scheme and the consequences for international trade," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 70(1), pages 21-39, March.

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