Effects of income growth and tariffs on the world salmon market

Abstract

The effects of income growth and tariffs on salmon prices, production, and trade flows are analysed using total elasticities derived from an equilibrium displacement model of the world salmon market. Results suggest the total income elasticity in world trade for salmon is about one, which means imports worldwide will grow at about the same pace as world income. However, owing in part to policies that restrict supply response, not all exporters will share evenly in this growth, with UK producers benefiting the most and Norwegian producers the least. Within importing countries, imports are more responsive to income growth than is domestic production, which means protectionist pressures are apt to increase with affluence. US tariffs on imports from Norway and Chile are counterproductive in that they reduce world imports with little effect on the US price. Norway's feed quota reduces the efficacy of US tariffs, makes imports less responsive to income, and increases price volatility. Hence, quota elimination may yield producer benefits in excess of producer losses associated with a lower world price.