Factors affecting cheese exports to Asia

In order to evaluate the impacts of the different export policies on Australian export volume and value of cheese and to identify the impact of increased imports of Australian cheese on Australian dairy producer profits a model of cheese trade for Australia, the EU, the US, New Zealand, Japan, the Philippines, Indonesia, Singapore, Malaysia, and Thailand was estimated. The model allows for heterogeneity and cheese is differentiated by country of origin. The model consists of seven demand systems (Australia and the six Asian countries) linked together and linked to a single endogenous supply model (Australia) and four exogenous supplies (EU, NZ, US and the ROW). The demand systems are estimated using an Armington specification with a translog functional form. The reduction of domestic support policies was found to increase Australian dairy producer's surplus and and the deregulation of the Australian dairy industry was found to decrease producer surplus. The estimations results imply that cheese is a heterogeneous product and that any attempt to model it as a homogeneous product may introduce errors in to the estimation. As well, it was shown that using a single stage elasticity for a simultaneous stages equation may also introduce error