Modeling dynamic adjustment in Japanese livestock markets under trade liberalization

Abstract

The dynamic adjustment of Japanese livestock markets is analyzed under three alternative import policies: the 1988 Japanese Beef Market Access Agreement (BMAA), the tariffication proposal to the General Agreement on Tariffs and Trade (GATT) negotiations, and the complete liberalization of Japanese beef import policies. Modeling problems associated with these policies include the change from a quota to a tariff and the choice of a tariff reduction path. A proposed formula for the adjustment path of the tariff reduction is designed to buffer the transfer of world price volatility while achieving the goal of reducing trade barriers;Problems associated with the incorporation of meat demand systems derived from utility-maximizing behavior into livestock policy models are examined. These problems include complementarity, issues of aggregation, levels of substitutability, and estimation problems. The changes in the degree of producer supply responsiveness under alternative policies are also discussed. An econometric model of the Japanese livestock industry is then used to simulate the impact of the BMAA, the GATT tariff reduction proposal, and the complete liberalization of beef imports from 1988 to 1997;The projected levels of beef imports under the alternative import policies suggest that the potential market for beef in Japan will be over 1.6 million mt by 1991 and over 2 million mt by 1997. During the transition phase of the BMAA, beef imports are projected to increase to the quota level each year. During the post-transition phase, an additional 20 percent tariff provision will be invoked. Beef imports are projected to increase by over 67 percent in 1991 under the BMAA and to reach 1.232 million mt by 1997. The BMAA and the GATT tariff reduction results are similar until 1994 when the BMAA tariff levels off at 50 percent.