THE ROLE OF THE IMPORTS FOR RE-EXPORTS PROGRAM (IREP) IN DETERMINING CANADIAN DEMAND FOR IMPORTED CHEESE: IMPLICATIONS FOR U.S. EXPORTS

摘要

Given the importance of the Imports for Re-exports Program (IREP) to Canadian dairy importers and processors, this study assessed the impact of per-unit export returns on total and origin-specific demand for imported cheese in Canada. Demand was estimated using a production version of the Rotterdam model where it was assumed that firms imported cheese in a two-step profit maximization procedure. Unlike consumer-based approaches, this approach allowed for determining the impact of domestic price, export price and resource prices on import demand and the derivation of unconditional price elasticities. Estimation results showed that imports of U.S. cheese were not statistically responsive to export prices. However, results indicated a significant and positive relationship between export prices and imports from Denmark, France, other EU countries, and ROW. Therefore, if Canadian processor and importers increase utilization of the IREP, U.S. exports to Canada will likely remain unchanged while imports from the EU will significantly increase.