Modeling dynamic adjustment in Japanese livestock markets under trade liberalization

139 Pages·2015·2.3 MB·English

by  Thomas Iver Wahl

Iowa State University Capstones, Theses and
Retrospective Theses and Dissertations
Dissertations
1989
Modeling dynamic adjustment in Japanese
livestock markets under trade liberalization
Thomas Iver Wahl
Iowa State University
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Wahl, Thomas Iver, "Modeling dynamic adjustment in Japanese livestock markets under trade liberalization " (1989).Retrospective
Theses and Dissertations. 9094.
https://lib.dr.iastate.edu/rtd/9094
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Modeling dynamic adjustment in Japanese livestock markets
under trade liberalization
Wahl, Thomas Tver, Ph.D.
Iowa State University, 1989
U M I
SOON.ZeebRd.
Ann Aibor, MI 48106

Modeling dynamic adjustment in Japanese livestock markets
under trade liberalization
by
Thomas Iver Wahl
A Dissertation Submitted to the
Graduate Faculty in Partial Fulfillment of the
Requirements for the Degree of
DOCTOR OF PHILOSOPHY
Department: Economics
Major: Agricultural Economics
Approved
Signature was redacted for privacy.
In Charge of Major Worl
Signature was redacted for privacy.
For the Major Department
Signature was redacted for privacy.
For the Graduate CoAege
Iowa State University
Ames, Iowa
1989
ii
TABLE OF CONTENTS
CHAPTER 1. INTRODUCTION 1
Literature Review 2
Research Problems 5
Objectives 7
Summary 7
CHAPTER 2. THE JAPANESE LIVESTOCK INDUSTRY 9
Japanese Livestock Markets 9
Japanese Livestock Policy 22
Summary 31
CHAPTER 3. METHODOLOGICAL ISSUES AND CONCEPTUAL MODEL 32
Microeconomic and Econometric Considerations 32
The Conceptual Model 48
Summary 51
CHAPTER 4. EMPIRICAL ESTIMATION 52
The Data 52
Estimation Procedures 52
Methodology Results 54
Estimated Parameters of the Model 69
Model Validation 79
Summary and Conclusions 84
iii
CHAPTERS. POLICY SIMULATION RESULTS 86
Policy Simulation Assumptions 86
Policy Simulation Results 94
Summary and Conclusions 116
CHAPTER 6. SUMMARY AND CONCLUSIONS 119
Conclusions 123
Suggestions for Further Research 125
BIBLIOGRAPHY . 127
ACKNOWLEDGEMENTS 131
1
CHAPTER 1. INTRODUCTION
Japan is the largest export market for U.S. beef products. Currently, 35 to 40 percent of
the beef consumed in Japan is imported, 40 percent of which is of U.S. origin. However,
Japanese consumers pay four to five times more for beef than do U.S. consumers because of trade
barriers and Japanese government intervention. During past trade negotiations, the UnitedS tates
has demanded the removal of these trade barriers in an effort to gain greater access to Japan's
beef market for U.S.-produced beef. The Japanese government, however, has historically
rejected these demands and has allowed only small increases in the quota in an apparent attempt
to minimize the opposition of the politically powerful domestic beef producers and to appease
U.S. interests.
In June 1988, however, as a result of pressure from the United States and Australia, the
Japanese government signed a new beef import agreement, the Beef Market Access Agreement
(BMAA), which calls for a phased reduction of Japan^s trade barriers on beef imports. The
BMAA specifies a two-phase reduction of Japan's beef import barriers over six years. Japan has
agreed to comply with the terms of the Uruguay Round of the General Agreement on Tariffsa nd
Trade (GATT) Negotiations at the end of the six-year period.
In April 1989, during the Mid-Term Review of the Uruguay Round of GATT
Negotiations, a proposal to convert quantitative and other nontariff barriers to their tariff
equivalents as a framework for reducing trade barriers was included in the agreed-upon long-
term measures. The tariffication proposal creates a common yardstick with which to measure
and reduce the level of trade barriers. The GATT tariff reduction proposal converts trade
barriers to their tariff equivalents in the first year and then reduces the tariff over a number of
years, whereas the two-phased BMAA substantially increases the level imports allowed under of
the quota for three years and then converts the quota to a tariff that is reduced for the next three
years.
2
An analysis of the potential impacts of the transition from a quota to a tariff under the
BMAA and the GATT tariff reduction proposal upon Japanese livestock producers will be
beneficial to policy makers and negotiators as they assess future changes in trade policies that
affect livestock production. However, for the analysis to fully reflect the dynamic nature and
the biological restrictions of the livestock production process, a complete model of the Japanese
livestock industry would need to incorporate simultaneous supply and demand determination.
A review of studies relevant to the Japanese livestock industry is presented in the following
section. Studies that are primarily descriptive are reviewed first, followed by econometric studies
of the livestock sector. The research problems to be addressed are then presented. Finally, the
objectives of the study are presented.
Literature Review
The economic structure and policy environment of the Japanese livestock industry is the
topic of numerous books, monographs, and research reports. Many of these studies are primarily
descriptive and are excellent sources for background material on the Japanese livestock industry
and policies.
Among these, Longworth (1983) is one of the most comprehensive on the Japanese beef
industry. He presents an in-depth look at the Wagyu (native Japanese cattle) and dairy industries,
including the government policies, the structure of the beef industry, and how that structure has
changed from the early 1960s until the early 1980s. Longworth also makes predictions about
levels of imports and prices; however, these predictions are based primarily upon his knowledge
of Japan's beef industry.
Coyle (1983) examines the structure of the beef, pork, egg, and broiler sectors as well as
the fisheries industry and the feed-grains sector. Coyle presents data for the period from 1960
to 1965, which is difficult to find elsewhere. Predictions about the future of the livestock