Agricultural Trade:

Determining Government Support Under the U.S.-Canada Free Trade Agreement

RCED-91-63: Published: Feb 11, 1991. Publicly Released: Feb 19, 1991.

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Pursuant to a congressional request, GAO assessed how well the government-support formula specified by the United States-Canada Free Trade Agreement measured agricultural trade distortion.

GAO found that: (1) the formula measured the percentage of producer income resulting from government support, rather than the amount of trade distortion caused by government subsidies; (2) the formula's benefits include its simplicity and acceptability to both countries; (3) other methods of measuring trade distortion would be based on production, rather than producer income, and would rely on more assumptions than does the present formula; and (4) methods that directly measure trade distortion could become valuable if the two countries reach consensus on assumptions and techniques and the data needed for more sophisticated models become more readily available.

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