Regional Impact of Trade Liberalization on the Income of U.S. Grain/Livestock Farmers

Estimates of the change in 1970 net farm income resulting from free trade in grains and livestock are derived for ten production regions of the United States. Gains and losses are distributed by six economic classes of farm. Two inequality indices are used to assess the impact on the distribution of income. Although free trade leads to greater inter-regional inequality, intra-regional inequality declines. The net effect is a decline in total inequality. The qualitative relevance of these results under current conditions is supported by their robustness to changes in assumed income gains. Since the signing of the General Agree-ment on Tariffs and Trade (GATT) in 1947 the United States has played a major role in an ensuing series of multilateral trade negotia-tions. In the sixth session, the Kennedy Round (1964-67), agricultural trade emerged as a major area of conflict, with the United States and the European Community (EC) adopting radically different negotiating pos-itions. The U.S. pressed for a significant re-duction in trade restrictions in order to ex-pand the market for its exports. The EC, on the other hand, sought to preserve existing barriers in order to protect its fledgling Common Agricultural Policy. No real com-promise was reached and little progress was made in liberalizing agricultural trade. The postwar international economic sys-tem, which had done much to facilitate the multilateral approach of GATT, was seriously weakened in 1971 when the U.S., in re-sponse to increasing balance of payments pressures, abandoned dollar convertibility. This action and the following dollar devalua-tion generated considerable uncertainty and widespread fears of a return to prewar pro-tectionist policies. There was a growing realization that a new round of GATT negoti