Alternative Trade Mechanisms in World Dairy Markets

Dairy remains among the most protected agricultural sectors within OECD countries. Trade implications of this protection are import barriers and policies to induce greater exports, all of which distort markets. The Uruguay Round Agreement on Agriculture (URAA) set limits on subsidized exports and tariff rates for dairy products in order to liberalize trade. Yet few of the nations engaged in dairy market support have quit their efforts since the agreement. Continued implementation of the URAA with its accompanying limits, or possibly expanded liberalization after future trade talks, may result in greater stress on domestic price support mechanisms. We investigate implications of the URAA limitations on world dairy markets and some alternative methods of dairy product trade intervention by examining cases of existing and potential trade distortion.