International trade in agricultural and food products : the role of state trading enterprises

140 Pages·1999·8.3 MB·English

by  Canada. Agriculture and Agri-Food Canada. Economic and Policy Analysis Directorate

1*1 Agriculture Canadian Agriculture Library
Canada BibliothequecanadiennedeI'agriculture
Ottawa K1A 0C5
WZ
3 1999
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International Trade in Agricultural
and Food Products: The Role of
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State Trading Enterprises
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Economic and Policy Analysis Directorate
Policy Branch
April 1999
l+l Agriculture and Agriculture et
Agri-Food Canada Agroalimentaire Canada
Digitized by the Internet Archive
in 2012 with funding from
Agriculture and Agri-Food Canada - Agriculture et Agroalimentaire Canada
http://www.archive.org/details/internationaltraOOcana
INTERNATIONAL TRADE
IN
AGRICULTURAL AND FOOD
PRODUCTS: THE ROLE OF
STATE TRADING ENTERPRISES
Agriculture and Agri-Food Canada
April 1999
INTERNATIONAL TRADE AGRICULTURAL AND FOOD PRODUCTS:
IN
THE ROLE OF STATE TRADING ENTERPRISES*
Dr. Michelle Veeman
University ofAlberta, Edmonton
Dr. Murray Fulton
University ofSaskatchewan, Saskatoon
Dr. Bruno Larue
Laval University, Quebec
This publication was made possible by way of contract between its authors and Agriculture and
Agri-Food Canada.
Any policy views, whether explicitly stated, inferred or interpreted from the contents of this
publication, should not be represented as reflecting the views of Agriculture and Agri-Food
Canada.
Economic and Policy Analysis Directorate
Agriculture and Agri-Food Canada
April 1999
To obtain additional copies, contact:
Information Production and Promotion Unit
Economic and Policy Analysis Directorate
Policy Branch
Agriculture and Agri-Food Canada
Ottawa, Ontario
K1A 0C5
Tel: [phone]
Fax: [phone]
E-mail: [email protected]
Electronic versions of EPAD publications are available on the Internet at www.agr.ca/-policy/epad.
Publication #: 1998E
ISBN#: 0-662-27644-2
Catalogue #: A22-189-1999E
Project #: 99025tp
Contract #: 01B04-7-CO-63 (Dept. Rep.: B. Paddock)
*Final revised report to Agriculture and Agri-Food Canada by M. Fulton, B. Larue and M. Veeman; November 15, 1998
Table Contents
of
Executive Summary v
Definition of State Trading Enterprises v
State Trading Enterprises and Market Power vi
Classification Scheme for State Trading Enterprises vii
Part I. Literature and Concept Review 1
1. Introduction 1
2. Reasons for STEs and Related Policy Interventions in Agriculture 4
3. STEs: What Are They and Why Are They of Concern? 6
3.1 Defining State Trading 6
3.2 Overview of Purpose, Functions, Powers and Effects of STE 10
4. Strategic Trade Policy 15
How
4.1 Effective is Strategic Trade Policy? 22
4.2 Illustrating Strategic Trade Policy by Some Simple Examples 23
5. Industrial Organisation Theory, Competition Policy, International
Trade and State Trading 26
5.1 Competition Policy and State Trading 26
5.2 Insights from the Literature on Industrial Organisation 26
5.3 What is Normal Commercial Practice for State Trading
Institutions? The Issues of Price Discrimination and Transparency 29
5.4 Some Issues Concerning Price Asymmetry and Procurement
Advantages of Export STE 31
5.5 Overview 32
Part II. Analyzing the Impact of STE Operating in International Trade 33
1. Introduction 33
—
2. Oligopolistic Trade Sectors Evidence and Theory 34
2.1 The Structure of the World Grain Trade 34
2.2 Proprietary Assets and Oligopolistic Structure 35
2.3 Proprietary Assets and Multinational Enterprises 36
2.4 Proprietary Assets and Price Discrimination 36
3. Analysing Export STE: Industrial Configurations in the Trade Sector 38
A
3.1 Comparative Analysis of Alternative Organizational Structures 39
3.2 Structure of the Trading Sector 39
3.3 Analysing Export STE: The Structure of the Theoretical and
Simulation Models 41
International Trade in Agricultural and Food Products: The Role of State Trading Enterprises
Table ot Contents
A
4. Analysing Export STE: Model of International Trade with a Trading Sector 43
A
4.1 Trade Model with Competitive Traders 43
4.2 A Trade Model with Oligopolistic Traders 43
5. A Model of International Trade with Export STE and Oligopolistic Traders 49
5.1 Small Country Case 49
5.2 Large Country Case 55
6. Export STE Simulation Model 58
7. Trade Distortions and Import STEs 62
8. Price Discrimination by an Import STE with Monopolized Production,
and Trade Liberalization 65
8.1 Introduction 65
8.2 Analysing the Use of Tariffs to Limit Market Access 66
8.3 Analysing Minimum Access Commitments 74
Summary
8.4 84
9. Implications of the Theoretical Analyses 85
Part III. International Trade in Agricultural and Food Products: The Role of
STEs: Some Criteria and Cases 87
Introduction 87
1.
2. Concepts for Categorizing STEs 87
3. Case Studies: Some Examples of STE 93
3.1 Indonesia: Badan Urusan Logistik (BULOG) 93
3.2 New Zealand: The New Zealand Dairy Board (NZDB) 95
3.3 The Japanese Food Agency (JFA) 95
3.4 The Australian Wheat Board (AWB) 96
3.5 The Canadian Wheat Board (CWB) 96
3.6 Korean State Mandated Imports 97
3.7 A Summary of Some Lessons from the Case Studies 97
4. Overall Summary of Part III 98
4.1 Recommendations for Further Study 99
Bibliography 101
Appendices
Appendix A: Mathematical Model of Private Traders with Market Power
A.l Introduction A-l
A.2 Graphical Models A-3
A.3 Simulation Model A-5
Appendix B: Measurement of Market Power: Lerner Indices B-l
International Trade in Agricultural and Food Products: The Role ofState Trading Enterprises
List of Tables
Parti
Table 1: First Illustration of Strategic Trade Policy Outcomes 24
Table 2: Second Illustration of Strategic Trade Policy Outcomes 25
Part II
Table 1 Potential Private Trader Market Structures 40
Table 2 Potential STE and Private Trader Market Structures 41
Table 3 Parameter Values for the Simulation Model 59
Table 4 Simulation Model Results: Comparison of Private Traders and
Domestic Pooling STE 60
Table 5: Simulation Model Sensitivity Results: Contestability 63
Part III
Table 6 List of Information Required to Categorize and Assess STE 90
Table 7 Information Required for Categorization and Assessment of STE 91
Table 8 The Proposed Typology of STE: Defining the Classifications 92
Table 9 Classification Typology for STE 93
Appendices
Table A. Trade Model Notation A-2
1:
Table A.2: Specification of Linear Farm Supply Curves and Processor
Demand Curves A-2
Table A.3: Specification of Linear Farm Supply Curves and Processor
Demand Curves When an STE is Operating in the Domestic Market A-7
Table A.A: Matrix Solution for the Simulation Model: Private Trader Case A-8
International Trade in Agricultural and Food Products: The Role ofState Trading Enterprises

List of Figures
MNE
Figure 1: International Trade Model With Oligopolistic in Export Trade:
Small Country Domestic Market 44
MNE
Figure 2: International Trade Model With Oligopolistic in Export
Trade Only 46
MNE
Figure 3: International Trade Model With Oligopolistic in Local and
Export Trade 48
MNE
Figure 4: International Trade Model with Oligopolistic in Export Trade:
Small Country Domestic Market 52
MNE
Figure 5: International Trade Model With Oligopolistic in Export Trade:
Small Country Domestic Market with STE 53
Figure 6: Welfare Effects of a Domestic STE: Small Country Case 54
MNE
Figure 7: International Trade Model With Oligopolistic in Foreign Country
and Price-Pooling STE in Domestic Country 56
Figure 8: The Effects of Tariff on the Domestic Demand Faced by the Monopolist 67
Figure 9: The Tariff-distorted Domestic Demand and Marginal Revenue Curves
Without and With an Export Market 70
Figure 10: The Profits of the Monopolist for Different Tariff Rates 72
Figure 11: The Monopolist's Production for Tariff Rates Ranging from to 100% 72
Figure 12: The Monopolist's export sales at tariff rates ranging from to 100% 72
Figure 13: Imports for Tariff Rates Ranging from to 100% 73
Figure 14: Welfare Levels (firm's profit + consumer surplus + tariff revenue) 73
Figure 15: Residual Domestic Demand Curves for R=0, 10, 30 and the export
demand curve 75
Figure 16: The Profits of the Efficient Monopolist who does not Control/have
Ownership of Imports 77
Figure 17: Exports When the Efficient Monopolist does not have Control/
Ownership of Imports 45° line=imports 77
Figure 18: The Domestic Price when the Efficient Monopolist does not have
Control/Ownership of Imports 78
International Trade in Agricultural and Food Products: The Role of State Trading Enterprises
Figure 19: Welfare when the Efficient Monopolist does not Control/Ownership
of Imports 78
MAC
Figure 20: The Effect of on the Marginal Cost of the Efficient Monopolist
who has Control/Ownership of Imports 80
Figure 21: Profits of the Efficient Monopolist who has Control/Ownership
of Imports 80
Figure 22: Welfare when the Efficient Monopolist has Control/Ownership
of Imports 80
Figure 23: The Cost-Inefficient Monopolist with Control/Ownership of Imports 81
Figure 24: The Profits of the Ineffficient Monopolist with Control/Ownership
of Imports 83
Figure 25: Imports and Exports when the Inefficient Monopolist has Control/
Ownership of Imports 83
Figure 26: The Domestic Price when the Inefficient Monopolist has Control/
Ownership of Imports 83
Figure 27: Welfare when the Inefficient Monopolist has Control/Ownership
of Imports 84