ECONOMIC IMPLICATIONS OF THE AUSTRALIA-U.S. FREE TRADE AGREEMENT FOR U.S. DAIRY MARKETS AND DOMESTIC DAIRY FARM PROGRAMS

We develop a simulation model to analyze the effects on U.S. milk markets of an Australia-U.S. free trade agreement. An important contribution to the literature is the derivation of explicit supply and demand relationships for milk components, which allows an analysis of long-term production, consumption, and trade patterns that is not tied to specific products. Simulations indicate that increased imports from Australia, resulting from bilateral trade liberalization, would result in modest reductions in U.S. milk prices and production