The impacts of tariffication on Canadian milk producers were estimated via supply, price and trade flow parameters using a spatial price equilibrium model applied to milk production regions of Canada and the United States. / Two price scenarios were put forward because of supply management in Canada. The first incorporated producer prices while the second used shadow prices for Canadian producers, defined as the producer price less a reduction in price which accounts for the value of production quota. The hypothesis that tariffication reduces milk production in Canada to the extent that U.S. producers increase their exports to Canada was partly supported in scenario one but not in scenario two. Specific tariffs of $11.00/hl prevented U.S. imports to reach Qu 'ebec and Ontario. However, the rest of Canada increased its imports from Great Lakes to the detriment of Quebec and Ontario. Consequently, production decreased slightly in Qu 'ebec and increased in Ontario, whereas prices decreased significantly in both provinces. Scenario two showed ability of Qu 'ebec and Ontario to withstand American competition. Prices and production level remained unchanged while export flows to the rest of Canada increased to the detriment of the Great Lakes. / The present study investigated only a specific aspect of the tariffication proposal in the GATT and does not intend not to reflect the very complex aspects of GATT negotiations. The findings of this analysis must be interpreted with this caveat. Further studies considering other plausible tariffication scenarios or effective tariffs on an individual dairy product basis would broaden our understanding of the potential implications of tariffication.

This study has compared the effect of milk pricing systems on the selection goals of dairy producers in two provinces of Canada, British Columbia (BC), and Quebec. These provinces were chosen for comparison as BC produces milk largely for a fluid market, while Quebec produces milk for a manufacturing market. Within BC, due to a higher utilization and higher milk price, the value/kg of skim on Vancouver Island was higher than that of the Vancouver Lower Mainland over the study period 1963-1982. Between the two provinces, the value/kg of skim in BC was found to be consistently higher than in Quebec over the 20 year period, while the value of fat was higher in Quebec than BC. In BC in 1980, the value of a kilogram of skim was approximately $0.30, whereas its value in Quebec was only $0.20. During the 1960s in BC, the value of skim represented one half the value of milk, and in 1982 it comprised two thirds of the value of milk, as compared to Quebec, where fat represented 43% of the value of milk. Net economic values were calculated by subtracting the dollar cost of production associated with the components of milk (carrier, fat and protein), from the gross value/kg of skim and fat. These values showed that the value/kg of protein was negative and decreasing in both BC and Quebec. The economic value/kg of butterfat has been consistently positive and increasing over the study period in BC and Quebec to $3.27 and $3.34/kg respectively in 1982. The relative economic values of carrier, fat and protein in BC and Quebec in 1982 were 0.08:1.00:-0.10 and 0.06:1.00:-0.12 respectively, which puts moderate selection on carrier and fat, and negative selection on protein. Selection index weights for carrier, fat and protein revealed that the BC dairy industry has always applied positive selection to the carrier and fat portion, and negative selection to the protein portion of milk. In 1982 the selection weights were 0.087:1.253:-1.189. The Quebec index has shown more fluctuation that BC, with less selection against solids compared to BC; (0.050:1.280:-0.657). Theoretical genetic goals of the BC dairy industry have been consistent at approximately 3.0% butterfat, 2.0% protein and 95.0% carrier. The genetic goals in Quebec have undergone wide fluctuations, but generally have signalled the dairy producer to increase both butterfat and protein. The goals of the two industries are now very similar, with the exception that Quebec continues to place higher value on solids than BC. / Land and Food Systems, Faculty of / Graduate

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