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Abstract
Colombia negotiated bilateral Trade Agreements (TAs) with the United
States and with the MERCOSUR region (Argentina, Brazil, Paraguay, and
Uruguay). Colombian cattle and beef interest groups argue that TAs
hurt the local beef supply chain. We employ a partial equilibrium
framework to assess the impact of these TAs on the welfare of cattle
producers, beef marketers and meat consumers in Colombia. Our results
suggest that with free imports of chicken parts from the U.S, beef
consumption and retail prices of beef both decrease and the derived
demand and prices of fed cattle decrease. With beef imports from the
MERCOSUR region, domestic beef prices and beef production fall, but
total beef consumption increases. Overall, consumers are better off
and there are net gains to society with free trade agreements. These
net gains tend to increase over time, as Colombia gradually decreases
the tariff for imported beef. We identify the reduction in marginal
costs required to compete with imported beef, primarily from MERCOSUR.
We argue that this is possible because the elimination of trade
barriers is gradual and the Colombian beef supply chain can compete
with imported meats with an annual reduction of marginal costs between
2 and 4%.