Domestic Commodity Research Articles

Tariff Reform in a Small Open Multi-Household Economy with Domestic Distortions and Nontraded Goods

We examine tariff reforms in the context of a small open economy and simultaneously deal with three extensions of the current literature: nonremovable domestic tax distortions, nontraded goods, and many households. Using the new concepts of a constant utility tax adjusted balance of trade function and a constant utility productivity improvement in tariffs, necessary and sufficient conditions for the existence of strict Pareto improving tariff and transfer reforms are established. We also consider directional tariff reforms such as movements towards the world price vector, proportional reductions, and reductions of extreme tariffs. Also discussed is the role of normality of household preferences. Most of the literature on piecemeal tariff reform in small open economies has been concerned with models in which there is a single household and in which domestic commodity taxes are absent. An exception to this is Lloyd (1974), who allows the existence of domestic commodity taxes but maintains the assumption of a single household. Nor does he consider nontraded commodities (other than nontaxed fixed factors). Others such as Foster and Sonnenschein (1970), Bertrand and Vanek (1964), Bruno (1972), Hatta (1977b) and Fukushima (1979) deal with single household economies with no domestic distortions. The purpose of this paper is to consider the question of tariff reform in a very general model of a small, open economy. The generality of the model allows us to simultaneously deal with three extensions of the current literature. The first extension is to allow for nonremovable domestic tax distortions, the second is to incorporate nontraded commodities into the model and the third is to explicitly consider a multi-household economy. By dealing simultaneously with these extensions to the model we are able to provide a general treatment of tariff reform in small open economies and to obtain new and more general results. Since domestic tax distortions are prevalent in the real world, it is important that they be taken into account in any analysis of tariff reform. Specifically, it is of considerable theoretical and policy interest to determine whether the piecemeal tariff policy prescriptions that have been derived in the literature for models

From Traps to Draggers: Domestic Commodity Production in Northwest Newfoundland, 1850–1982

From Traps to Draggers: Domestic Commodity Production in Northwest Newfoundland, 1850–1982. Sinclair. Peter R. Memorial University, Newfoundland: Institute of Social and Economic Research, 1985.156 pages. $9.00 Can.

Do Motives Matter?

Among moralists and social critics of several stripes, it is not enough that the right thing be done: they also insist that it be done, and be seen to be done, for the right reasons. They are anxious to know whether we are sending food to starving Africans out of genuinely altruistic concern, or merely to clear domestic commodity markets, for one particularly topical example. Or, for another example, critics of the Brandt Commission’s plea for increased foreign aid more generally say, in stinging rebuke: ‘Many of those who support the proposal... do so out of genuine humanitarian concern about... poverty. But it is doubtful whether this is the main concern of its authors, and it certainly is not their only concern. ... They are, instead, primarily concerned with the preservation of the existing world economic order.’What is common to all such cases is an attempt at motive differentiation. Any particular piece of behavior might have sprung from any of a number of different underlying motives; commentators (moralists, social critics) want to know which was the real motive. Here I shall show that this characteristic quest for motive differentiation is misguided. In most of the standard social situations, it makes no material difference to agents’ actions whether they act from one sort of motive or another. And in such circumstances, pressing the motivational issue will usually lead only to mischief, of both a pragmatic and a moral sort.

Aflatoxin control—How a regulatory Agency managed risk from an unavoidable natural toxicant in food and feed

The control by the Food and Drug Administration (FDA) of aflatoxin, a relatively recently discovered, unavoidable natural contaminant produced by specific molds that invade a number of basic food and feedstuffs, provides an example of the varying forces that affect risk assessment and management by a regulatory Agency. This is the story of how the FDA responded to the initial discovery of a potential carcinogenic hazard to humans in a domestic commodity, to the developing information concerning the nature of the hazard, to the economic and political pressures that are created by the impact of natural forces on regulatory controls, and to the restraints of laws within which the Agency must work. This story covers four periods: the years of discovery and action decisions on the basis of meager knowledge and the fear of cancer; the years of tinkering on paper with the regulatory process; the years of digestion of the accumulating knowledge, and the application of that knowledge to actions forced by natural events; and an audit of the current status of knowledge about the hazard from aflatoxin, and proposals for regulatory control based on that knowledge.

Productivity- and Pareto-Improving Changes in Taxes and Tariffs

that only has tariffs and domestic commodity taxes as policy instruments. The concept of a productivity improvement in tariffs and taxes is introduced and conditions for its existence are established. We prove that a Pareto-improving change in tariffs and domestic taxes exists if a productivity-improving change in tariffs exists and if the Weymark condition on the matrix of household demands holds. Conditions are established for particular tariff reforms, such as proportional reductions and reductions of extreme rates, to yield Pareto improvements in welfare.

World Non-Oil Primary Commodity Markets: Reply to Sephton

ATHER THAN COMMENTING on our paper (Staff Papers, Vol. 33, March 1986, pp. 139-84), Sephton introduces a small analytical model in which monetary policy affects primary commodity prices. The purpose of our paper was to show the role of basic demand and supply-side variables in the medium-term fluctuation of world commodity prices. It is unclear what Sephton is attempting to explain with his model. Are the commodity prices in his model world prices in U.S. dollars or domestic currency prices in a primary-commodity-exporting country? Sephton's model appears to be intended to explain how domestic commodity prices are influenced by monetary policy rules in a primary-exporting country, but these latter prices are not what we dealt with in our paper. If this interpretation is correct, then what Sephton is trying to explain would be only one of several factors influencing the global supply of commodities.

Returns to Individual Traders of Futures: Aggregate Results

By means of a data set previously unavailable for academic research, actual trading histories of individual futures traders are examined. With this more detailed data, the author is able to (1) test the risk/return hypothesis directly; (2) include a much larger segment of the market than before; and (3) use actual instead of hypothetical t rading strategies. It is shown that the commercial (hedging) traders are most profitable, while noncommercial (speculative) traders earn n egative or zero profits. Because speculators are not receiving reward s for the risks they willingly absorb, the theory of normal backwarda tion and its extension can be rejected. Copyright 1987 by University of Chicago Press.

Buying Australian

We investigate the short‐run effects on the trade balance and on aggregate employment of persuading domestic residents to switch expenditure from imports to domestic commodities. Simulations with ORANI indicate that the favourable initial effects of such switches may be offset significantly by induced demand for imports as domestic production expands and by the inflationary effects of domestic expansion which erode the international competitiveness of exports and import‐competing products.

From Traps to Draggers: Domestic Commodity Production in Northwest Newfoundland, 1850-1982

From Traps to Draggers: Domestic Commodity Production in Northwest Newfoundland, 1850-1982

Future Directions for Food and Agricultural Trade Policy

During the 1970s U.S. agriculture experienced an unprecedented export boom. This export boom produced an unusual, albeit short-lived, period of prosperity for agriculture. Land previously idled by government programs was brought back into production and new land cleared, with the result that by 1981 cropland in production was a record high 391 million acres. In constant value (1967 dollars) terms net farm income rose from $12.2 billion in 1971 to an unusual peak of $25.1 billion in 1973. The need for direct government support of agriculture declined. In the 1980s, this strong export performance of U.S. agriculture has been reversed. The physical volume of exports reached a peak in 1980, and the value of exports reached a peak in 1981. Both volume and value have steadily declined since those peaks. Total value of exports declined from $43.8 billion in 1981 to $34.8 billion for the 1983 fiscal year, a decline of 21%. This decline in foreign markets has contributed to a serious income problem in agriculture. Net farm income declined to an unprecedentedly low figure of $7.6 billion (in 1967 dollars) in 1982. It also contributed to a serious financial crisis in agriculture as expanded debt commitments based on an export-driven expectation of continued prosperity for agriculture was met with significantly reduced farm incomes, serious cash-flow problems, and reduced equity as land values declined. The decline in farm markets has also created a serious challenge to farm programs and policy makers. From negligible program costs in the 1970s--except for the dairy program-the costs of farm programs burgeoned out of control. By 1981 they were up to $3.2 billion; in 1982 they tripled to $10 billion; and for 1983 the regular program costs are expected to more than triple again, to $21.8 billion. Commodity stocks also burgeoned to very high levels as recordand near-record-breaking crops were met with slumping markets. The acre-equivalent of the decline in exports of corn, cotton, wheat, and soybeans from 1980 to 1983 was 22.6 million acres. U.S. agriculture obviously faced a serious adjustment problem. The administration's response to this crisis was the Payment-in-Kind (PIK) program, which removed close to 82 million acres of land from production in 1983. The PIK program is expected to add anywhere from $12 to $21 billion to this year's outlays for farm programs. That means that total program costs for 1983 may well be as large as $35 billion. But as important as program costs is the paid idling of some of this nation's most productive resources at the very time it is attempting to recover from the worst economic slump in the post-World War II period. It is no exaggeration to say that U.S. agriculture and agricultural policy are at a crossroads. If its export performance does not improve, it will be forced to deal with a sizable adjustment problem of transferring resources out of agriculture. It can do that by letting market forces do their job or by costly government programs in the form of paid diversion, large export subsidies, or some other means to bring supply in balance with demand, or some combination of the two. In this paper I want to address the export performance issues. The emphasis on export performance rather than trade policy is a considered one. I find it impossible to discuss trade policy without considering domestic commodity programs. The two are inextricably intertwined. Hence, I choose the generic concept of export performance, since I will discuss both domestic program issues and trade policy issues. The first part of this paper reviews the changes in the international economy over the last fifteen to twenty years. These changes are G. Edward Schuh is a professor and Head, Department of Agricultural and Applied Economics, University of Minnesota.

Fishermen of Northwest Newfoundland: Domestic Commodity Production in Advanced Capitalism

This paper investigates the changing social organization of the fishermen in northwest Newfoundland, especially Port au Choix. Until the mid-sixties these fishermen worked as domestic commodity producers utilizing simple inshore technologies. Subsequently, a minority adopted more capital intensive technologies based on individual property ownership and the hiring of wage-labour. Shrimp and cod dragging became the preferred form of fishing. Yet domestic commodity producers also increased in number in a context where alternative employment was scarce and state policy permitted survival. The significance of state intervention is emphasized and implications of the Kirby Task Force report are considered. The experience of the fishermen is examined in relation to theories of primary production in advanced capitalism which are found to be inadequate to cope with the complexities of change in this area due to an excessively lineal and structuralist orientation.

Interrelationship Among Export Markets, Resource Conservation, and Agricultural Productivity

ern farm prosperity. While the public invested in a multibillion dollar supply and marketing control program over several decades to provide agriculture an equitable share of national income, the effects were somewhat minute in improving farm prosperity and asset values compared to the quantum jump resulting from greater exports since the early 1970s. The sources of these increases, greater incomes and populations of developing countries, institutional changes causing the Soviet Union and China to enter Western markets, and generally higher per capita incomes and meat consumption the world over, hasbarring the negative fallout of major wars-the prospects of furthering the demands for U.S. grain and food exports. This newly acquired prosperity and wealth for agriculture in the immediate future does not necessarily promise a continued payoff for the next generations of farmers. There are two potential reasons that maintenance and further growth may not benefit equally the next generations. One is the tendency of current generations to capitalize the future growth in demand and income for U.S. agriculture into present land values. They have already banked this future return to an extent that the current return on land investment is very low. While numerous agricultural economists have proclaimed that exports and export policies are the significant future issues of agriculture (Schuh), this is true mainly for farmers who are land owners and have been or will be able to take advantage of the tremendous inflation in land values, resulting from general inflation and the growth in export demand and domestic commodity pric s, and realize huge gains in their asset values. Of course, their descendents who inherit these enhanced asset values similarly will gain. If land prices forever, owners of farm land and their offspring will o gain forever, just as will holders of gold and scarce works of art if they continue to inflate forever.

Aflatoxin Control: Past and Present

Domestic commodities most susceptible to aflatoxin contamination are peanuts, corn, cottonseed, and tree nuts (almond, pecans, walnuts); the most susceptible imported commodities are Brazil nuts and pistachio nuts. The development, effectiveness, and shortcomings of the strategies used to limit consumer exposure to aflatoxin from these commodities are reviewed.

Primary Effects on Employment of Shifts in Demand from Domestic to Foreign Products

T HIS paper presents some results of a Brookings Institution study of the effects on domestic employment of unilateral reductions of United States import barriers. The study was undertaken to provide quantitative information which would be useful in the formation of economic policy. It was necessary, at a number of points, to make arbitrary assumptions and, about some points, assumptions contrary to those commonly made. These were made only where no empirical basis for better ones was available. Because of these assumptions, as well as those implicit in the general technique used, the results cannot be taken as precise. I believe, nevertheless, that they come much closer to the mark than any made hitherto. Where the evidence in support of alternative assumptions was inconclusive and the bias involved in the alternatives could be identified, I deliberately chose the assumption that involved the greater adverse effect upon employment. Thus any error in the estimates is in the direction of overstating adverse If a reduction of import barriers affects output and employment in the liberalizing country at all, it does so by shifting domestic demand from domestic products toward competing foreign products. It is not necessary to state in detail the long-run effects of such a shift, for here we are concerned only with short-run These are primarily: i. A decrease in the outputs of the domestic commodity whose protection is reduced and of the commodities and services that enter immediately or remotely into its production. These two decreases in output, called respectively direct and indirect, make up the effect. crease of the U.S. propensity to import, called the export effect. 3. The further effects on domestic goods and services of changes in consumption, investment, and government expenditure resulting either from domestic income changes caused by output changes or from price changes, called the domestically effects. 1 4. The further effects on exports resulting from changes in imports by income changes caused by (3), called induced export effects. The full study will present estimates of primary effects and first export This paper presents only the estimates of the primary These estimates do not include any offsetting employment effects of changes in exports. The estimates in this paper are not estimates of the employment effects of any specific program of import liberalization. Such estimates would require two broad steps: First, estimating the resulting shift of expenditures from domestic to foreign goods and second, estimating the employment effects of that shift. Such estimates involve two difficulties. One is that there is no satisfactory empirical basis for taking the first step. That shift depends upon the price elasticities of supply and demand for each commodity concerned, both at home and abroad. I believe that Howard Piquet, who did estimate import increases, would agree that the best one can do is to make an informed guess.2 Second, such an estimate of employment effects would be valid only for one out of an infinite number of possible liberalization programs. I believe that these two considerations make it not worth while to attempt the first step in this

Export, Import, and Domestic Prices in the United States, 1926-1930

Introduction, 195. — I. The distinction between international and domestic commodities, 196; the criterion of physical movement, 198; of price behavior, 200; of market independence, 205. — II. The statistical procedure, 207; the selection of commodities, 207; of prices, 208; and of weights, 211. — III. The results, 215; the movements of the primary international and domestic indexes, 216; the difference in level of the New York and Chicago indexes, 218; comparison of the indexes with medians of the same commodities, 221; the analysis of sub-groups within the primary indexes, 223. — Conclusion, 225.

International and Domestic Commodities and the Theory of Prices

The assumption of independent national price systems, in theory and in treatment of current problems, 409. — I. No and no prices; only local prices, more or less sensitive to external conditions, 410; merchandise and services, wholesale and retail prices, not differentiated in the terms international and domestic commodities, 413. — II. Parallelism in movement of wholesale price indices, 413; Internationalization of the commodity price structure, 414. — III. Illusion of price structure for wholesale merchandise: large or sustained movement not essential to price interdependence, 422; defective market data and apparent price deviations, 432; limitations upon actual deviation; a priori indications of high correlation, 433. — IV. Reformulation: the local category consists mainly of services and retail prices, 436; merchandise at wholesale is international, 437; regional prices structurally related, 442. — V. Practical applications: farm relief, 452; export combinations, 453; tariff and monetary problems, 455. — VI. Regional prices of goods: as affected by foreign exchange, 456; by movement of specie or changes in purchasing power, 457; a possible reconciliation with orthodox theory, 458; price stabilization through credit policies of central banks, 459.

International Trade Under Depreciated Paper. The United States, 1862-79

I. The greenback currency period affords a favorable opportunity for a statistical investigation of international trade under depreciated paper. — This investigation to be correlated with recently advanced theory, 221. — II. The international account of the United States from 1862 to 1879, 230. — III. Contrast of changes in the value of gold in the United States with contemporaneous changes in foreign countries, 235. — Dependence of these changes on international loans, 241. — IV. Fluctuations in the merchandise balance and the relation of these to loans and the value of gold, 245. — V. Comparative prices of export, import and domestic commodities and their relation to fluctuations in the value of gold, 249. — Contrast with English prices, 258. — VI. Comparison of wages in industries affected by movements in the value of gold with those unaffected by such movements, 265. — VII. Conclusion, 272.