The effect of imports on the Australian pig industry

In 1990 the Australian Government relaxed restrictions on the importation of pigmeat from Canada. In response to declining producer prices and their consequent effect on profitability, the Australian pig industry raised concerns with the Australian Government that the decline in producer price was due to lower priced imports from Canada and this was seriously injuring the industry. This paper attempts to identify the factors affecting changes in the market equilibrium of the pig industry in Australia. The results suggest that prior to 1990 pig producer prices were relatively stable and producers could be confident of being able to predict market movements. After 1990 there is a structural break which has induced volatility in pig producer prices, not only making producer decisions more difficult, but removing any long-run equilibrium relationship. Unlike previous studies, this report has found a significant relationship between import volumes and import prices and domestic production and domestic prices at all levels of the marketing chain except retail prices. The results indicate that import volumes and prices do not have a negative effect on retail prices. This implies that the assumed benefits of trade liberalisation, resulting from a reduction in consumer price, have not occurred.