The Effects of a New WTO Agreement on Canada's Chicken Market: A Differentiated Products Modeling Approach

Abstract

Current World Trade Organization (WTO) negotiations include proposals that would affect the trade barriers protecting Canada's chicken producers from foreign competition. This research analyzes the effects of the most recent proposals to emerge from WTO negotiations on Canada's chicken industry. We develop a partial‐equilibrium model that generates welfare effects for the Canadian chicken industry supply chain. The baseline model is adapted to represent chicken as two distinct products: white meat and dark meat. Simulation results suggest that the welfare effects of current WTO proposals would be small, providing that chicken receives the sensitive products designation. Liberalization leads to higher total welfare in the chicken industry, which is accounted for by consumer welfare that increases by a larger amount than producer welfare decreases. The results are very sensitive to the disaggregation of chicken as two products; a finding that should inform future research.