Termination of the WGTA: An examination of factor market distortions, input subsidies and compensation

Input subsidies are common in North American agriculture and create production and trade distortions. As the theoretical discussion in this paper shows, the Crow transportation subsidy was no exception. The Crow benefit was eliminated in 1996 with the elimination of the Western Grain Transportation Act. Under the "pay the producer" approach, farmers in western Canada were compensated for the removal of the Crow subsidy, but the compensation was nowhere near that required to make grain and oilseed producers in western Canada at least as well off as before the Crow subsidy was removed. This policy change satisfied the compensation principle but not the Pareto principle. Reasons are given why this was the case, including very divergent views from various farm groups such as the National Farmers Union, the Alberta Cattle Commission, and the Alberta Barley Growers Association.