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Economics Research Institute Study Paper




Utah State University Department of Economics

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This project involved three steps. First, we assembled a consolidated data set on prices, trade flow volumes, and transfer costs-the costs of moving product from one location to another-for feed grains (com and soybean meal), slaughter hogs, and fresh or chilled carcasses and primal cuts (bellies, hams, loins, ribs) among the eight main pork economies of the Pacific Rim (Australia, Canada, Japan, Korea, Mexico, the Philippines, Taiwan, the United States), covering the years 1990-96. By making available for the first time comparable international data, we have helped resolve a major stumbling block to careful empirical analysis of factor and product markets in the pork industry. We are making these data available on the World Wide Web. Second, we developed an improved statistical method for establishing the relationship between spatially distinct markets. The new method we developed permits distinction between "market integration," reflecting the tradability of products, and "competitive market equilibrium" in which extraordinary profits are exhausted by competitive pressures. These two concepts are conflated in traditional market analysis methods. Third, we applied this new method to the data assembled in the first stage. The estimation results reveal that while there have been extraordinary profit opportunities available in a few niche markets, these are generally highly competitive, well-integrated markets. The Pacific Rim is effectively a single market for pork producers today. Intermarket transfer costs are often substantial, with tariffs especially important, so further trade liberalization to reduce tariffs should further exports by and the competitiveness of U.S. producers.