Journal of Food, Agriculture and Environment

Beef export restrictions in Argentina: Impact on the beef industry and national welfare

Author(s):

Paula Rossi ^*, Masaru Kagatsume

Recieved Date: 2009-01-10, Accepted Date: 2009-03-22

Abstract:

Argentina, as a member of the Cairns group, is among the most aggressive proponents of agricultural trade liberalization in the Doha round at the WTO. However, to deal with the recent hike in food prices, the Argentine government has been imposing quantitative restrictions on the export of its main staple, beef, in order to ensure food security for its population. Under the assumption that the export and domestic markets are perfectly homogeneous, this study analyzed the impact of the export quota on the beef industry and national welfare. The effect of the restrictions in the beef sector is examined through the use of a Three-Stage-Least-Squares (3SLS) dynamic simultaneous regression which allows for interaction between production, consumption and exports. One interesting implication of this analysis is that, initially, export restrictions manage to decrease beef retail prices at the expense of reduced export sales. However, the restrictions may entail subsequent inflationary consequences since they hamper production. Furthermore, policy simulations revealed that when no restrictions are applied higher prices encourage producers to expand their herds. Then, given enough time to complete the biological cycle of the cattle, supply increases enough to satisfy both domestic and foreign demand and to simultaneously boost exports and bring down consumer prices. The impact of the restrictions on national welfare is assessed through a partial equilibrium model applying the producer and consumer surplus techniques. Results showed that as long as Argentina possesses some power in the world market, export restrictions generate gains to domestic consumers and the country as a whole. However, the size of the gains depends heavily on the demand elasticities considered. As domestic consumption becomes more inelastic and as foreign consumers become more price-responsive, a smaller income transfer from the rest of the world is realized to offset the deadweight loss, reducing significantly the social welfare gains to Argentina.

Keywords:

Export restrictions, beef, inflation, Argentina, dynamic simultaneous equation model, policy simulations, welfare analysis, partial equilibrium analysis, sensitivity analysis, demand elasticities

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Journal: Journal of Food, Agriculture and Environment
Year: 2009
Volume: 7
Issue: 2
Category: Food and Health
Pages: 122-130

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