WELFARE EFFECTS OF AGRICULTURAL TRADING BLOCS - THE SIMULATION OF A NORTH-AMERICAN CUSTOMS UNION

Agricultural trade liberalization among the three North American Free Trade Agreement (NAFTA) signatories is modeled using a political prefe rence function. The model distinguishes among Canada, Mexico, the Unit ed States, and a politically passive rest of the world. Through the us e of intracountry compensation, the analysis shows that, from an agric ultural perspective, economic integration is in the best interest of t he group as a whole, although not in the best interest of individual c ountries. More specifically, of the agricultural production sectors, C anadian dairy, Mexican corn, and U.S. beef producers suffer the greate st losses from the formation of a North American customs union.