An economic analysis of the effects of the Uruguay Round Agreement and full trade liberalization on the world dairy sector

A dairy trade model of the world dairy economy is developed. The model inco rporates the allocation of milkfat and solids- nonfat among dairy commoditi es in a spatial equilibrium context. The model is used to simulate the mark et equilibrium impacts of the Uruguay Round Agreement and full free trade i n the world dairy sector, including prices, production, consumption and tra de flows. The free trade results indicate average world prices for farm mil k near current U.S. levels, while farm milk prices in western Europe, Japan and Canada fall by 25.8%, 36.4% and 32.3%, respectively. In contrast, Aust ralia and New Zealand farm milk prices rise by 22.5% and 50.8%, respectivel y.