Impact of the trade liberalization of fluid milk on the Taiwanese dairy industry

In Taiwan, over 90% of raw milk is used to produce fluid milk, of which half is fresh drinking milk, one quarter is flavored milk and the other quarter is long-life milk and fermented milk. Therefore, there will be an expected influence on the Taiwanese dairy industry caused by the tendency of trade liberalization to result in the import of less costly fluid milk as opposed to the current policy of restricted importation. The purpose of this study is to analyze and solve the equilibrium demand, supply and the prices of fluid milk in each demand area and supply county of Taiwan under fixed import quantities and given income levels. This was accomplished by incorporating a spatial price equilibrium model that was derived for the maximization problem, Then, we modeled problems associated with three simulated fluid milk import policies - including import quotas, tariff, and complete liberalization - in order to analyze the impact and influence of the policies on consumers, producers and factories (dairy companies), respectively, from 2001 through 2006.