Economic Research Report No. (ERR-16) 33 pp

February 2006

Trade Liberalization in International Dairy Markets: Estimated Impacts

This report examines issues related to modeling complex policy regimes that affect international dairy markets using a partial equilibrium, multiple-commodity, multiregion model of agricultural policy and trade. Average bound tariffs for dairy remain among the highest of all agricultural commodities and dairy trade is characterized by a large number of megatariffs and tariff-rate quotas (TRQs). In addition to tariffs and TRQs, countries have used milk production quotas to control milk production. Modeling results indicate that liberalization would reduce world dairy product supplies and increase the value of dairy trade.

Keywords: International dairy markets, trade liberalization, modeling, tariffs, TRQs, production quotas, domestic support, export subsidies, ERS-Penn State Trade model

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