Open Collections

UBC Theses and Dissertations

UBC Theses Logo

UBC Theses and Dissertations

An economic analysis of production and trade of selected ornamental nursery stock in British Columbia Stodola, Bernard James 1976

Your browser doesn't seem to have a PDF viewer, please download the PDF to view this item.

Notice for Google Chrome users:
If you are having trouble viewing or searching the PDF with Google Chrome, please download it here instead.

Item Metadata

Download

Media
831-UBC_1976_A6_7 S76.pdf [ 8.32MB ]
Metadata
JSON: 831-1.0093713.json
JSON-LD: 831-1.0093713-ld.json
RDF/XML (Pretty): 831-1.0093713-rdf.xml
RDF/JSON: 831-1.0093713-rdf.json
Turtle: 831-1.0093713-turtle.txt
N-Triples: 831-1.0093713-rdf-ntriples.txt
Original Record: 831-1.0093713-source.json
Full Text
831-1.0093713-fulltext.txt
Citation
831-1.0093713.ris

Full Text

AN ECONOMIC ANALYSIS OF PRODUCTION AND TRADE OF SELECTED ORNAMENTAL NURSERY STOCK IN BRITISH COLUMBIA by BERNARD JAMES STODOLA B.A., The Un ivers i ty of B r i t i s h Columbia, 1972 A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF SCIENCE in the Department of v; Agr i cu l tu ra l Economics We accept th i s thes is as conforming to the required standard THE UNIVERSITY OF BRITISH COLUMBIA March, 1976 Bernard James Stodola, 1976 In presenting this thes is in pa r t i a l f u l f i lmen t of the requirements for an advanced degree at The Univers i ty of B r i t i s h Columbia, I agree that the L ibrary sha l l make i t f r ee l y ava i l ab l e for reference and study. I fur ther agree that permission for extensive copying of th is thesis for scho la r l y purposes may be granted by the Head of my Department or by his representat ives . It is understood that copying or pub l i ca t ion of this thesis for f i nanc i a l gain shal l not be allowed without my written permiss ion. Bernard James Stodola Department of Ag r i cu l t u r a l Economics The Un ivers i ty of B r i t i s h Columbia 2075 Wesbrook Place Vancouver, B.C., Canada V6T 1W5 Date: March 3, 1976 i ABSTRACT The primary purpose of th i s thes i s was to examine short run supply aspects of B r i t i s h Columbian (EB.CC..)) ornamental nursery stock propagation and trade. To th is end, spa t i a l equ i l i b r ium analys i s was u t i l i z e d in study-ing the inf luences of Canadian plant protect ion regu lat ions , t ransportat ion cos t s , and costs of production on United States (U.S.) import leve ls into the province as well as domestic production l eve l s . ;The basic constructs of the spa t i a l equ i l i b r ium ana lys i s were the t ransportat ion model and the p roduc t i on -d i s t r i bu t i on model. These models were used in e s t ab l i sh ing interreg iona l and in ternat iona l production and trade patterns with respect to B.C. They re la te to se lected ornamental v a r i e t i e s under s p e c i f i e d e f f i c i e n c y c r i t e r i a and various parameters, with reference to the 1973 calendar year. In add i t i on , s e n s i t i v i t y ana lys i s was conducted within the spa t i a l equ i l i b r ium framework. This indicated the strength of the com-p e t i t i v e pos i t ion of domestic propagators v i s - a - v i s U.S. propagators and provided an ins ight into the future state of health o f the B.C. industry. F i n a l l y , an examination of domestic propagation leve l s was undertaken v ia quant i ta t i ve and q u a l i t a t i v e analyses in an attempt to explain the res idual U.S. import quant i t i e s into B.C. For the purpose of th i s study eight d i s t i n c t geographical regions were i d e n t i f i e d . Each region contained a representat ive point o f o r i g i n or de s t i na t i on . Seven of these regions were s p e c i f i e d as production or supply regions, comprised of four domestic production regions and three U.S. production regions. Five of the e ight regions were i d e n t i f i e d as consumption or demand regions, comprised of four B.C. consumption regions i i and one P r a i r i e consumption region. Three nursery con i f e r s , Jwripevus ohinensis 'Pfitzeviana Auvea, ' Thuja occid^ntalis'^JPyrdrrridzlis!' and Pinus mugho mughus were se lected as being representat ive ornamental plant materia ls for the purpose of th i s study. The resu l t s of th is study show that in 1973, B.C. propagators of the s pec i f i ed nursery materia ls had a competit ive advantage in supplying domestic consumption regions. But th is competit ive advantage was reduced to some extent by the existence of Canadian plant protect ion regulat ions. This had the e f f e c t of both d i r e c t l y and i n d i r e c t l y inducing movement of materia ls from the U.S. in greater quant i t ie s than would have been the case without regu lat ions . This study fur ther shows that the competit ive advantage of domestic propagators over U.S. growers was tenuous. Assuming 1975 t ransportat ion rates, a 10 percent increase in domestic costs of pro-duct ion, and constant U.S. procurement costs , would lead to the competit ive advantage being sh i f ted to U.S. supp l iers for some ornamental mater ia l s . In add i t ion the study discovers nothing to ind icate that domestic propagation levels were unduly constrained by resource l im i t a t i on s . The resu l t s suggest that rapid domestic consumption increases coupled with grower uncerta inty regarding l e g i s l a t i v e const ra ints and cer ta in ' e x t e r -n a l i t i e s ' enjoyed by U.S. propagators, accounted for greater import leve ls than would have been expected a p r i o r i . It is bel ieved that the f indings of this ana lys i s can be extended to other ornamental p lant materia ls i n -volved in B.C. propagation, insofar as they are produced and so ld in part or e n t i r e l y under s im i l a r condit ions to those deal t with in the study. TABLE OF CONTENTS Page Abstract i L i s t of Tables v i L i s t of Figures x ' ' Acknowledgements xi i i CHAPTER 1 INTRODUCTION 1 Problem Sett ing . 7 Object ives 12 Scope of Study—Commodities, Regions, Time Period and Data Co l l e c t i on . 13 Research Methodology 18 Outl i ne of Study 20 2 CONCEPTUAL FRAMEWORK 21 Introduction to International and Interregional Trade 21 Theoret ica l Development of Spat ia l Equ i l ib r ium Analys is in the Mult i -Region Model 26 H i s t o r i c a l Development of the Transportat ion and Product ion -D i s t r ibut ion Models 30 An Expos i t ion of the Transportat ion Model 32 An Expos i t ion of the P roduct ion -D i s t r ibu t ion Model . 35 Theoret ica l Implications of Trade Bar r ie r s 39 3 THE EMPIRICAL MODEL k5 i v CHAPTER Page Regional Demarcation of Producing and Consuming Regions 45 Regional Demand Estimates 46 Regional Supply Estimates—Model I 49 Transportat ion and Brokerage Costs 52 Transportat ion Mode 1--Ana 1ysis I 53 Regional Supply Estimates—Model II 55 Domestic Cost of Production Estimates 58 Import Procurement Costs 59 Leg i s l a t i ve Constraints 60 Product ion -D i s t r ibu t ion Model Analyses II to VII . . 64 4 RESULTS OF THE SPATIAL EQUILIBRIUM ANALYSES 73 Ana l y t i c a l Results for Model l - -Ana lys i s I Jk Ana l y t i c a l Results for Model l l - -Ana ly ses II and III. 84 Ana l y t i c a l Results for Model l l - -Ana ly se s IV and V . 90 Ana ly t i ca l Results for Model l l - - A n a l y s i s VI . . . . 95 Ana l y t i ca l Results for Model l l - - A n a l y s i s VI I . . . . 99 5 SUPPLEMENTARY ANALYSIS 107 Quant i ta t ive Analys i s 108 Qua l i t a t i ve Analys i s 116 6 SUMMARY AND CONCLUSIONS . . ; 121 Summary of the Study 121 Outlook, Implications and Po l icy Suggestions . . . . 123 Suggestions for Further Research 126 REFERENCES 127 V APPENDICES Page A 1. Plant Protect ion L e g i s l a t i o n — F e d e r a l and P rov inc i a l 131 2. Federal T a r i f f Po l i cy for Plant Related Mater ia ls 137 B Imports of Ornamental Nursery Mater ia l s into B.C. in 1973 . • 1^ 0 C Domestic Consumption and Production of Spec i f i ed Ornamental Nursery Mater ia l s in B.C. in 1973 • • • 150 D Exchange Rates, Brokerage Charges and Transportat ion Costs 157 E Domestic Costs of Production Estimates and Import Procurement Costs . . . 164 vi LIST OF TABLES TABLE Page 1 . 1 Value of Canadian Farm Sales, Ornamental and F r u i t Nursery Stock Sales, Share D i s t r i bu t i on of Ornamental Sa les, and Ornamental's Share of Total Farm Sales for B r i t i s h Columbia, Ontario and Canada 1969-!97^ 2 1 . 2 Value of imports of Nursery Mater ia ls Through Canadian and B.C. Customs Ports 1969-197^ k 1 . 3 Value of Exports of Nursery Mater ia ls Through Canadian, B.C., Ontario and P r a i r i e Customs Ports 1969-197^ . . . 5 1 . 4 Value of U.S. Farm Sales, Ornamental Sales, Share D i s t r i bu t i on of Ornamenta1 Sa les, and Ornamental's Share of Total Farm Sales for Washington, Oregon and C a l i f o r n i a , 1969 . . 7 1 . 5 Value of Nursery Stock Grown/Sold and Imported in B r i t i s h Columbia 1 9 5 5 - 7 3 9 1 . 6 Number of Growers and Agents Licenced to Se l l Nursery Stock in B.C., 1970-7^ 11 1 . 7 Production of B.C. Ornamental Nursery Stock in Physical and Value Terms, 1 9 7 0 - 7 1 1 5 1 . 8 Quantity of Ornamentals Imported into Three Regions of B.C. 1 9 6 9 - 7 ^ 1 7 1 . 9 Quantity of Imports of Spec i f ied Mater ia ls into Three Regions of B.C. in 1 9 7 3 1 7 2 . 1 P r i n c i p l e s of Absolute and Comparative Advantage: Two Goods/Two Countries 2 3 3 . 1 H i s t o r i c a l l y Predetermined Production and Consumption for One Gallon Equivalents of Golden Juniper, Thuja Pyramidal is and Mugho Pine for Eight Regions in the U.S. and Canada— 1 9 7 3 5 0 3 . 2 Estimated Composite Transportat ion Costs-Brokerage Fees in Cents Per Plant Between Representative Points of Eight Regions in Canada and the U.S. in Canadian Funds — 1 9 7 3 5 ^ vi i TABLE Page 3-3 H i s t o r i c a l l y Predetermined Consumption and Predeter -mined U.S. Production with Domestic Production Augmented by 20 percent fo r One Gallon Equivalents of Golden Jun iper , Thuja Pyramidal is and Mugho Pine for Eight Regions in the U.S. and Canada—1973 . . . . 57 3.4-A Estimated Composites of Import Procurement Costs, Domestic Costs of Production Including Opportunity Costs, and Transportat ion-Brokerage Rates in Cents per Plant Between Representative Points of Eight Regions in Canada and the U.S. in Canadian Funds for Juniperus ahinensis pfitzeriana aurea—1973 . . . . 61 3•4—B Estimated Composites of Import Procurement Costs, Domestic Costs of Production Including Opportunity Costs, and Transportat ion-Brokerage Rates in Cents per Plant Between Representative Points of Eight Regions in Canada and the U.S. in Canadian Funds for Thuja oacidentalis pyramidalis--]S73 62 3.A-C Estimated Composites of Import Procurement Costs, Domestic Costs of Production Including Opportunity Costs, and Transportat ion-Brokerage Rates in Cents per Plant Between Representative Points of Eight Regions in Canada and the U.S. in Canadian Funds for Pinus mugho mughus—1973 63 3.5 H i s t o r i c a l l y Predetermined Consumption with F l e x i b l e Regional Production for One Gal lon Equivalents of Golden Jun iper , Thuja Pyramidal is and Mugho Pine for Eight Regions in the U.S. and Canada —1973 . . . . 67 3.6-A Estimated Composites of Import Procurement Costs, Augmented Domestic Costs of Production Including Opportunity Costs, and 1975 Transportat ion-Brokerage Rates in Cents per Plant Between Representative Points of Eight Regions in Canada and the U.S. in Canadian Funds for Juniperus ahinensis pfitzeriana aurea—1973 68 3.6-B Estimated Composites of Import Procurement Costs, Augmented Domestic Costs of Production Including Opportunity Costs, and. 1975 Transportation-Brokerage Rates in Cents Per Plant Between Representative Points of Eight Regions in Canada and the U.S. in Canadian Funds for Thuja oacidentalis pyramidalis— 1973 69 vi i i TABLE Page 3.6-C Estimated Composites of Import Procurement Costs, Augmented Domestic Costs of Production Including Opportunity Costs, and 1975 Transportation-Brokerage Rates in Cents per Plant Between Representative Points of Eight Regions in Canada and the U.S. in Canadian Funds for Pinus mugho mughus—1973 70 3.7 Estimated Composites Transportation-Brokerage Rates in Cents per Plant Between Representative Points of Eight Regions in Canada and the U.S. in Canadian Funds —1975 . 72 4.1 Optimum Trade Pattern of Golden Junipers for Ana lys i s 1—Model 1 1973 75 4.2 Optimum Trade Pattern of Thuja Pyramidal is fo r Ana lys i s 1—Model 1 1973 . 76 4.3 Optimum Trade Pattern of Mugho Pine for Ana lys i s 1—Model 1 1973 73 4.4 Supply and Demand Pr i ce D i f f e r e n t i a l s for Golden Juniper, Thuja Pyramidal is and Mugho Pine in 1973 Based on Transportat ion Costs and Optimal Trade Patterns as Represented by the Dual of the Transportat ion Model 83 4.5 Optimum Trade Pattern of Golden Junipers for Analyses II and III (enclosed by b racke t s ) - -Model II 1973 85 4.6 Optimum Pattern of Thuja Pyramidal is for Analyses II and I I I (enclosed by b racke t s ) - -Model I I 1973 . . . . 86 4.7 Optimum Trade Pattern of Mugho Pine for Analyses II and M l (enclosed by b racke t s ) - -Model I I 1973 87 4.8 Optimum Procurement, Production and D i s t r i bu t i on of Golden Junipers for Analyses IV and V (enclosed by brackets)--Model II 1973 91 4.9 Optimum Procurement, Production and D i s t r i bu t i on of Thuja Pyramidal is for Analyses IV and V (enclosed by brackets)--Model II 1973 92 ix TABLE Page 4.10 Optimum Procurement, Production and D i s t r i bu t i on of Mugho Pine for Analyses IV and V (enclosed by brackets)—Model II 1973 93 4.11 Optimum Procurement, Production and D i s t r i bu t i on of GoilidenrJunipers for Analys i s VI—Model II 1973 . . . . 96 4.12 Optimum Procurement, Production and D i s t r i bu t i on of Thuja Pyramidal is for Ana lys i s VI—Model II 1973 . . . 97 4.13 Optimum Procurement, Production and D i s t r i bu t i on of Mugho Pine for Analys i s VI—Model II 1973 98 4.14 Optimum Procurement, Production and D i s t r i bu t i on of Golden Junipers for Analys i s VII—Model II 101 4.15 Optimum Procurement, Production and D i s t r i bu t i on of Thuja Pyramidal is for Ana lys i s VII—Model II 102 4.16 Optimum Procurement, Production and D i s t r i bu t i on of Mugho Pine for Ana lys i s VII—Model II 103 5.1 A L i s t of Means and Sample Standard Deviations of Selected Var iables Perta in ing to Total Nursery Data Co l lec ted from Domestic Propagators for the 1973 Calendar Year . . . . . . . 110 5.2 Cor re la t ion C o e f f i c i e n t s for Selected Pa irs of Var iables Perta in ing to Total Nursery Data Co l lec ted by Personal Interview of B.C. Ornamental Nursery Stock Propagators for the 1973 Calendar Year 112 5.3 Cor re la t i on Coe f f i c i en t s for Management, Labor, Land and Capita l Var iab les per ta in ing to Total Nursery Data c o l l e c t e d by Personal ized Interview of B.C. Ornamental Nursery Stock Propagators for the 1973 Calendar Year 113 B.l Value of Ornamental Imports Via the Vancouver Inspection Port into B.C. in 1973 1^ 2 B.2 Quantity Summary Sheet of Juniper Va r i e t i e s Imported into B.C. Through the Vancouver Port of Entry in 1973 B.3 Quantity Summary Sheet of Thuja V a r i e t i e s Imported into B.C. through the Vancouver Port of Entry in 1973 • • • 145 X TABLE. Page B.4 Quantity Summary Sheet of Pine Va r i e t i e s Imported into B.C. Through the Vancouver Port of Entry in 1973 . . . 1 4 6 B.5 Imports of Spec i f i ed Ornamental Mater ia ls fpomUUSS . Or ig ins to the Vancouver and Ch i l l iwack Regions in 1973= 1^ 8 B. 6 Imports of Spec i f ied Ornamental Mater ia ls from U.S. Or ig ins to the Kelowna and V i c t o r i a Regions in 1973 1 ^ 9 C. l Summary Sheet of Spec i f ied Mater ia ls Produced and Sold for the Vancouver (Fraser Va l ley West) Region of B.C. in 1973 151 C.2 Summary Sheet of Spec i f i ed Mater ia ls Produced and Sold for the Ch i l l iwack (Fraser Va l ley East) Region of B.C. in 1973 '52 C.3 Summary Sheet of Spec i f i ed Mater ia l s Produced and Sold for the V i c t o r i a ( is land) Region of B.C. in 1973 153 C. 4 Summary Sheet of Spec i f i ed Mater ia l s Produced and Sold for the Kelowna ( i n te r i o r ) Region of .B.C. in 1973 154 D. l Average P reva i l i n g Exchange Rates Between Canada and the United States in 1973 158 D.2 Typ ica l Brokerage Charges in B.C. for Importing Nursery Stock in 1973 158 D.3 Approximate Weights of Plants in Containers and Number and Weight of Plants in a Semi -Tra i ler Load 160 D.4 Transportat ion Levies for Packed Nursery Stock Between Pairs of Production and Consumption Centres in Canadian Dol lars—1973 161 D. 5 Estimated Truck Rates in Cents Per Plant Between Representative Points of Eight Regions in Canada and the U.S. in Canadian Funds—1973 . . . 163 E. .1 Cost of Production Estimates for Golden Juniper, Thuja Pyramidal is and Mugho Pine Across Four Domestic Production Regions —1973 166 xi TABLE Page E.2 Opportunity Cost Estimates fo r the Production of Golden Juniper, Thuja Pyramidal is and Mugho Pine across Four Domestic Production Regions —1973 169 E.3 Composite Cost of Product ion—Opportunity Cost Estimates of Golden Juniper, Thuja Pyramidal is and Mugho Pine across Four Domestic Production Regions--1973 169 E.h Import Procurement Costs of Golden Jun iper , Thuja Pyramidal is and Mugho Pine Across Three U.S. Supply Regions—1973 170 xi i LIST OF FIGURES FIGURE Page 2.1 Samuelson Two Country/One Commodity Trade Model 29 2.2 Two region trade model with government r e s t r i c t i o n s in movement of commodity kl 2.3 Two region trade model with government p roh ib i t i on in movement of commodity kl x i i i ACKNOWLEDGEMENTS I am deeply indebted to Dr. M. J . Dorl ing for ass i s tance and encouragement received during the course of th i s study. I a l so received helpfu l suggestions and c r i t i c i s m s from Mr. R. B a r i c h e l l o . In add i t ion I appreciate the help provided by various members of Ag r i cu l tu re Canada, Plant Protect ion D i v i s i o n , in c o l l e c t i n g necessary information regarding imports of plant mater-ia l s and regulat ions a f f e c t i n g movement of nursery mater i a l s . Last, but not leas t , my grat i tude is expressed to the many B.C. nurserymen who w i l l i n g l y cooperated in supplying much of the es sent ia l data thereby making th i s study pos s ib le . In the f i n a l ana ly s i s , however, I must take personal r e s p o n s i b i l i t y for the resu l t s and t h e i r i n te rp re t a t i on . CHAPTER 1 INTRODUCTION The heavy dependence of the Canadian Nursery Industry upon imported nursery mater ia l s , p a r t i c u l a r l y from the United S t a t e s (U.S.), is a major fac tor a f f e c t i n g Canadian production and trade of 'propagated plant mate r i a l s . ' The most-r i:mpor t a n i t ' O o o m p o n e n i t u o f e n u r s e r ^ u p r - o d u c t ion , &hea@imdm§ntci$8% a fren p ft a g tswg rSvna for- fcheubeautytb£i the<i>rmfofm} ifio'Mage, flowers or f r u i t , rather than for food, f i be r or other uses. According to S t a t i s t i c s Canada's annual surveys, reported sales of ornamental and f r u i t nursery stock have increased sub s t an t i a l l y over the past few years, as indicated in Table 1.1. These s a l e s were suppl ied j o i n t l y by nursery mater ia l s o r i g i n a l l y propagated in Canada and by mater ia ls propagated abroad (predominately in the U.S.) and subsequently imported into Canada. Table 1.1 a l so ind icates that nursery sales have maintained the i r pro-port ionate share of tota l Canadian farm sales over the period 1969-197^. S t a t i s t i c s Canada reports that in 1973 the to ta l value of orna-mental and f r u i t nursery stock, excluding cut f lowers, decorat ive plant mater ia l s , bulbs, tubers and roots of f lowers, imported into Canada, stood at $10.3 m i l l i o n . Of th is imported value f i gu re , Ontario and B r i t i s h Columbia (B.C.) received the major port ions with $6.8 m i l l i o n Propagation is def ined as the increase or m u l t i p l i c a t i o n of plants by sexual (seeds) or asexual (vegetative) methods, such as cut t ings , g ra f t s , layers or meristem c u l t u r e . 1 2 TABLE 1 . 1 V a l u e o f Canad ian Farm S a l e s , ^ Ornamenta l and F r u i t N u r s e r y S t o c k S a l e s , ^ Sha re D i s t r i b u t i o n o f Ornamenta l S a l e s , and O r n a m e n t a l ' s Share o f T o t a l Farm S a l e s f o r B r i t i s h C o l u m b i a , O n t a r i o and Canada 1 9 6 9 - 1 9 7 4 Sha re D i s t r i b u t i o n Total Farm Sa les Sales of Ornamental and Frui t Nursery Stock of Ornamental F ru i t Nursery Stock Sales and Nursery Share of Total Farm Sa les ($'000) ($(6oo>»o) (percent) (percent) 1969 B.C. 197,589 2,600 13.1 1 .3 Ontario 1,378,868 9,200 46.2 .7 Canada 4,199,819 19,900 100.0 .5 1970 B.C. 217,414 3,400 20.6 1.6 Ontar i 0 1,410,863 10,300 62.4 • 7 Canada 4,250,880 16,500 100.0 .4 1971 B.C. 223,288 3,500 19.8 1 .6 Ontario 1,427,965 10,600 59.9 .6 Canada 4,562,815 17,700 100.0 .4 1972 B.C. 246,665 3,900 15.7 1.6 Ontari 0 1,645,322 15,500 62.2 .9 Canada 5,463,322 24,900 100.0 .5 1973 B.C. 318,947 4,200 14.9 1.3 Ontario 1,949,613 !9 ,0§8 67.1 1.0 Canada 6,801,106 28:19V IQO.g .4 1974 B.C. 365,132 4yl6:22 il!3&6 i .3 Ontario 2,313,998 • £ 2 ^ 8 67*1 1 .0 Canada 8,448,140 100A0 . .4 ' Value of Farm Sales are taken as which includes the returns from a l l sales 2 Sales represent reported amounts equivalent to of a g r i c u l t u r a l from returned Farm Cash Receipts products. mail quest ionna i res . S o u r c e : Farm Cash R e c e i p t s , Statistics Canada, #21-001 1969-1974. : Su rvey o f Canad i an N u r s e r y T rades I n d u s t r y , Statistics Canada, #22-203, 1969, 1970-71, 1971-72, 1972-73, 1973-74. 3 and $1.8 m i l l i o n , re spec t i ve l y . These f igures compare with reported sales of ornamental and f r u i t nursery stock of $18.7 m i l l i o n for Ontar io and $4.2 m i l l i o n for B.C. Imports in 1973, thus represented 36.3 per-cent and 42.9 percent of nursery sales in Ontario and B.C., r e spec t i ve l y . Table 1.2 i l l u s t r a t e s the dramatic increase in imported nursery mater ia ls into Canada and B.C. over the period 1969 to 197*t. Although aggregate data for the Canadian Nursery Industry is scarce there is every ind icat ion that both sales and imports of nursery propagated plant material did increase markedly in 197^ and 1975- It appears that domestic sales and imports w i l l continue to increase into the foreseeable future due to strong consumer demand, favorable U.S. wholesale pr ices and plant protect ion l e g i s l a t i o n . Ontario and B.C. are responsible for the majority of Canadian propagated plant materia l product ion. Very l i t t l e exchange of nursery materia ls occurssbetween these two provinces due to extremes in distance and c l imate. However, both provinces compete to some extent with U.S. imports in the P r a i r i e market. Table 1.2 shows the r e l a t i v e l y large percentage of imports o r i g i n a t i n g from the U.S. Table 1.3 indicates exports of nursery mater ia ls from Canadian o r i g in s and shows the per -centage cont r ibut ion of each o r i g i n ito the t o t a l . It is i n teres t ing that movement of nursery materia ls between the U.S. and Canada are for the most part u n i l a t e r a l l y in favor of the U.S. In f a c t , the Canadian share of trade is f a l l i n g . When comparing leve ls of imports and exports between Tables 1.2 and 1.3 i t should be noted that the d e f i n i t i o n s of 'nursery mater ia l s ' 4 TABLE 1 .2 Value of Imports of Nursery Mater ia ls Through Canadian and B.C. Customs Ports 1969-1974 (Bracketed f igures represent percentage of imports o r i g i n a t i n g from the United States) 1969 1970 1971 1972 1973 1974 (Dol lars) F ru i t t rees , stocks and cutt ings N .A. (90.1) 365,000 (87.9) (86.4) 430,000 213,000 (93/2) 317/QOO: (90.2) 408,000 Trees, p lant s , stocks, cu t t ings , NESS N .A. (87.4) (87.5) (87.9) 5,261,000 5,806,000 6,482,000 (87.0) (87.1) 88597/7000012,563,000 Rose bushes N.A. (92.2) 1,083,000 (93.8) (84.6) 1,156,000 1,153,000 (90.6) 1,429,000 (89.5) 1,567,000 Total nursery imports - Canada N.A. 6,709,000 7,392,000 7,848,000 10,343,000 14,538,000 Fru i t t rees , stocks and cutt ings (36.9) 92,267 (88.2) 133,050 (77-9) (82.5) 139,526 90,805 (84.8) 102,227 (85.5) 78,939 Trees, p lants , stocks, cu t t ings , NES (85.3) 641,664 (84.8) 807,094 (86.1) (88.4) 881,831 1,017,567 (89.6) 1,515,966 (89.3) 2,433,594 Rose bushes (94.9) 150,063 (92.2) 151,412 (97.9) (97.0) 207,013 200,461 (95.3) 200,780 (92.9) 262,080 Total nursery imports - B.C. 883,994 1,091,556 1,228,370 1,308,883 1,818,973 2,774,613 B.C. percentage of Canada N.A. 16.3* 16.6% 16.7% 17.6% 19 .U Key: NES = not elsewhere stated N,A.= not ava i l ab le Source: Imports Merchandise Trade, Statistics Canada, Catalogue #65-203, 1971-72; 1972-74. : External Trade Report - Trade Through B.C. Customs Por t s , Department of Economic Development, Government o f B.C., 1969-1974. 5 TABLE 1 .3 Value of Exports of Nursery Ma te r i a l s ' through Canadian, B.C., Ontario and P r a i r i e Customs Ports 1969-1974 (Bracketed f igures represent percentage of exports destined for U.S. markets) 1969 1970 1971 1972 1973 1974 (Dol 1 ars) Trees, sma11 f ru i t p lants , stocks N.A. (99.2) 626,000 (98.6) 695,000 (98.8) 408,000 (99.8) 607,000 (94.5) 554,000 Nursery and green-house stock NES N.A. (98.7) 3,009,000 2, (99.9) (99.8) 914,000 3,156,000 (99.9) (99.6) 2,882,000 2,479,000 Total nursery exports - Canada 3,430,055 3,635,000 3,609,000 3,564,000 3,489,000 3,033,000 Trees, smal1 f ru i t p lants , stocks^ 24,936 15,975 20,446 24,072 32,216 (65.6) 87,805 Nursery and green-house stock NES (99.9) 763,064 (99.9) 876,321 (99.7) 863,588 (99.5) 749,802 (94.2) 894,046 (98.9) 786,497 Total nursery exports - B.C. 788,000 892,296 884,034 773,874 926,262 874,302 B.C. percentage of Canada 23.0% 24.5% 24.5% 21.7% 26.5% 28.8% Total nursery exports - Ontario^ 2,116,631 2,375,716 2,415,690 2,445,926 2,304,309 2,137,014 Ontario percentage of Canada 61.6% 65.4% 66.9% 68.6% 66.0% 70.5% Total nursery ex-ports - Pra i r ies2 4,985 3,532 17,116 13,889 10,047 7,095 P r a i r i e percentage of Canada .1% .1% .5% .4% .3% .2% Key: NES = not elsewhere s ta ted. N.A. = not a v a i l a b l e . Note nursery mater ia ls are defined more broadly than in Table 1.2. 2 Note percentages destined to U.S. markets not ava i l ab le 1969-1973-Source: Exports Merchandise Trade, Statistics Canada, Catalogue #65-202, 1970-1972; 1971-1973; 1972-1974. : External Trade Report - Through B.C. Customs Ports , Department of Economic Development, Government of B.C., 1969-1974. 6 are not s t r i c t l y comparable. For the sake of comparison, exports in Table 1.3 (p. 5) include cut f lowers, decorat ive plant mater ia l s , bulbs, tubers, roots of flowers and other miscellaneous greenhouse stock whereas imports in Table 1.2 (p. k) do not. Hence exports are cons ider -ably overstated according to the d e f i n i t i o n of nursery mater ia ls u t i l i z e d in th i s study. Due to the methods of data c o l l e c t i o n u t i l i z e d by S t a t i s t i c s Canada i t is bel ieved that released nursery f igures considerably under-state the actual value of nursery sales p a r t i c u l a r l y with respect to B.C.'s contr ibut ion where below average response to surveys has been met. B r i t i s h Columbian pnopagators are leading producers of woody ornamental nursery mater ia l s . However, the proximity to large west coast U.S. ornamental propagators (see Table 1.4), and an absence of t a r i f f s (see Appendix A) and quotas ex i s t i ng between Canada and the U . S . , g g iyesr r i s e to serious concern as to the competit ive a b i l i t y of B.C. ornamental pro-pagators v i s - a - v i s U.S. propagators. Movement of mater ia l s into, out o f , and within B.C. apessubject to the coordinated regulat ions of the Plant Quarantine Act and the B.C. Plant Protect ion Act as expla ined in Appendix A. The in terac t ion between th i s p lant protect ion l e g i s l a t i o n and the easy access into the B.C. market by r e l a t i v e l y large U.S. propagators, strongly inf luences economic circumstances in the B.C. nursery industry. The quant ity of domest ica l ly propagated mater ia ls ava i l ab le on the market is inf luenced by a number of f a c t o r s . The majority of these Woody ornamentals are plants wi:th pers i s tent stem or stems and include con i f e r s , broadleaf evergreens, deciduous shrubs, and ornamental t rees . 7 TABLE 1.4 Value of U.S. Farm Sales, Ornamental Sa les, Share D i s t r i bu t i on of Ornamental Sa les, and Ornamental's Share of Total Farm Sales for Washington, Oregon and C a l i f o r n i a , 1969 Total Farm Sales 0 rnamenta 1 Sa les Share D i s t r i bu t i on of Ornamental Sales Ornamenta1's Share of Total Farm Sales ($'000) ($'000) (percent) (percent) Wash ington 758,225 18,850 2.3 2.5 Oregon 518,623 21,174 2.6 4.1 Ca1i forn i a 3,875,211 174,085 21 .4 4.5 U.S. Total 44,519,658 813,626 100.0 1 .8 Source: Ornamental Production and Marketing Trends, 1948-1972. S t a t i s t i c s B u l l e t i n #529, Economic Research Service U.S.D.A., 1972. factors focuses on t r a d i t i o n a l economic re la t ions s ince the dominant form of conduct in the B.C. nursery industry appears to be purely competit ive res -ponses to the economic and i n s t i t u t i o n a l se t t ing o f the industry. The purpose of th i s research is to analyze some aspects of in terreg iona l competition in th is industry and determine the extent to which production and trade is i n -fluenced by: i) economic factors and i i ) the i n s t i t u t i o n a l and po l i cy arrange-ments, fac ing the B.C. ornamental nursery sector . Problem Sett ing In B r i t i s h Columbia, nursery product ion, consumption and imports have increased s tead i l y over the past two decades. The development of new v a r i e t i e s and c u l t i v a r s , and the introduct ion of new propagation techniques have 8 contr ibuted to increases in both nursery stock consumption and product ion. According to the Ho r t i cu l t u ra l Branch, B.C. Department of A g r i c u l t u r e , the value of nursery stock grown and so ld in B.C. expanded rap id l y from 1955 to 1971 r e f l e c t i n g a very healthy growth ra te . Data presented in Table 1.5 indicates th i s increase and shows the corresponding value of imported materia ls where data is a v a i l a b l e . Of the $5 m i l l i o n domestic f i gure for 1971 presented in Table 1.5, 70 to 80 percent arose from the production of ornamental nursery mater ia l s . No corresponding percentage breakdown of ornamentals for the 1971 import f i gure in Table 1.5 is a v a i l a b l e . However, in 1973 approx-imately 40 to 50 percent of the $1.8 m i l l i o n import f i gure was repre-sented by ornamentals (see Appendix B). The r e l a t i v e importance of ornamental mater ia l s to the nursery industry determined the focus of this study. Despite the fact that propagation, growing-on and marketing of B.C. nursery mater ia ls are becoming big business, industry s t a t i s t i c s are scarce. This lack of information stems from the fact that nursery production is ne i ther food nor f i b r e , and as such is not included in many of the a g r i c u l t u r a l surveys. Much production takes place on small acreages. Marketing is highly d i v e r s i f i e d occurr ing through a var ie ty of out le t s ranging from nur ser ie s , garden centers , f l o r i s t shops, super-markets and department stores to landscapers and garden maintenance operators. In add i t ion production encompasses an almost i n f i n i t e number of plant genera, v a r i e t i e s and c u l t i v a r s as well as varying age/s ize c l a s s i f i c a t i o n s . Due to th i s decentra l i zed and heterogeneous nature of 9 TABLE 1.5 Value of Nursery Stock Grown/Sold and Imported in B r i t i s h Columbia 1955-73 Year Grown/Sold' . . % .Change Imports % Change ($) ($) 1955 782,676 24.3 N.A. 1961 972,916 145.3 N.A. 1966 2,386,538 109.5 1,021,874 11.7 1971 5,000,824 89.6 1,141,537 59.3 19732 9,500,000 1,818,973 These f igures attempt to give a to ta l production value of mater ia l s both sold and unsold. The f igures include value of nursery stock imported in previous years and grown-on before sa le . 2 This f i gure was estimated on the basis of data provided by the Economics Branch, C D . A . , Vancouver, B.C., 1973 in A Perspective of the B.C. Nursery Industry. Source: Nursery Stock Production in B.C., B.C.D.A. H o r t i c u l t u r a l Branch, V i c t o r i a , B.C., 1970-71 . Imports Entered at Customs in Each Province of Canada during the Year 1973. Statistics Canada, Canadian H o r t i c u l t u r a l Counc i l , Ottawa, May 3rd, 1974. the industry, i t is l i t t l e wonder that probably no segment of a g r i cu l tu re knows less about i t s e l f in an aggregate sense than does the nursery industry. Although the primary purpose of th i s study was not to supply a data base for the B.C. nursery industry, in order to pursue the research 10 at hand, i t was necessary to gather considerable primary data much of which appears in tables and appendices throughout the ensuing pages. It is expected that a secondary benef i t o f th i s data w i l l accrue to the nursery industry in the province as well as to future researchers. The B.C. market for ornamentals is character ized by r e l a t i v e l y constant wholesale p r i ce s , as p r i c i n g appears to be based on h i s t o r i c a l pr ices quoted in catalogues published by the larger nurserymen. The larger nurserymen seem to be pr i ce leaders at f i r s t glance while the smaller nurserymen are p r i ce takers. However, th i s p r i c i n g takes the form of an 'ask ing p r i c e ' only because p r i ce cu t t i ng occurs through the l i b e r a l use of ' t r ade ' discounts in both small and large firms a l i k e . Bar r ie r s to entry into the industry are minimal as l i t t l e cap i ta l is necessary, and due to the labor intensive nature of production (pay-r o l l ra t ios of 30 to 50 percent of gross sales are common), inexpensive family labor provides ready access to industry p a r t i c i p a t i o n . Table 1.6 i l l u s t r a t e s changes in the numbers of nurser ies and agents l icensed to se<l:l nursery stock in B.C. over the years 1970 to 1974. Strong but changing consumption patterns in the B.C. market y i e l d ce r t a in marketing advantages to larger producers who can provide a greater range and quant i ty of mater ia l s to r e t a i l e r s , brokers, e t c . An almost tota l lack of adver t i s ing expenditure on the part of most domestic producers fur ther substant iates the competit ive market s t ructure hypothesis. Increasing domestic product ion, and growing import leve l s due to the free access enjoyed by U.S. producers into the B.C. market, a t te s t s to strong demand for nursery products. Nevertheless a ce r ta in 11 TABLE 1.6 Number of Growers and Agents Licenced to Se l l Nursery Stock in B.C., 1970-74 Year No. of Growers No. of Agents or Outlets 1970 113 279 1971 113 282 1972 126 302 1973 123 303 19741 148 . 326 1 The large increase in 1974 is mainly due to inc lus ion of nurseries which were discovered operat ing without l icences in previous yea rs. Source: B.C.D.A. Ho r t i cu l t u ra l Branch, V i c t o r i a , B.C., 1974. degree of government po l i c y intervent ion v ia plant protect ion l e g i s l a -t ion a f f ec t s the free expression of economic re la t ionsh ips in the market for ornamental nursery mater ia l s . Within th is industry perspect ive, the development of an empir ica l model capable of: 1) analyz ing interreg ional trade patterns for s p e c i -f i e d ornamental nursery products between B.C. and the U.S. and 2) i l l u s -t r a t i ng the e f f ec t s of cer ta in economic and i n s t i t u t i o n a l parameters upon ornamental propagation in the province, should provide an important contr ibut ion to understanding the s i t ua t i on of domestic propagators. Furthermore, the extension of these h i s t o r i c a l parameters through the use of both e x p l i c i t and i m p l i c i t s e n s i t i v i t y ana lys i s w i l l indicate the 12 future d i rec t i on of the B.C. nursery industry thus y i e l d i n g an important ins ight into the task of formulating future economic p o l i c i e s . Object i ves In order to accomplish the object ives of th is research a vast amount of primary data was necessary. The development and expression of the empir ica l model used, required c o l l e c t i o n of data from ind iv idua l B.C. propagators on a population basis for the 1973 calendar year. In add i t i on , de ta i l ed information concerning import quan t i t i e s , p r i ce s , o r i g i n s and des t inat ions , extracted from the Ag r i cu l tu re Canada, Plant Protect ion D iv i s ion f i l e s was u t i l i z e d . The model i l l u s t r a t e s through a succession of analyses, the in teract ion of economic and regulatory f a c to r s , which inf luence the competit ive pos i t ion of domestic propagators v i s - a - v i s the i r U.S. counter-pa r t s . A l t e r i n g the economic var iab les and l e g i s l a t i v e parameters which are placed within the model permits ana lys i s of the factors which a f f e c t the quant i ty of s pec i f i ed nursery mater ia ls propagated in the prov ince. The choice of representat ive propagated mater ia l s for use in the model w i l l produce re su l t s which can be general ized to some extent to wider areas of ornamental nursery production in B.C. S p e c i f i c a l l y the object ives of the study are as fo l lows: 1. To develop a r e a l i s t i c empir ica l model such that i n t e r -regional production and trade patterns for chosen nursery mater ia ls in 1973 can be s tud ied. IThis model w i l l incor -porate: i) B.C. consumption, product ion, cost of production 13 including opportunity costs and t ransportat ion charges for four d i s t i n c t geographical a rea s—Fra se r Va l ley West, Fraser Va l ley East, Vancouver Island and In ter ior , i i ) h i s -t o r i c U.S. supply, procurement costs and t ransportat ion costs for C a l i f o r n i a , Oregon and Washington, and i i i ) A lbertan consumption requirements with respect to B.C. product ion. 2. To develop var iant spat ia l equ i l i b r ium models to determine the e f f e c t of government regulat ions in inducing or r e s t r i c t -ing trade between regions and thereby in f luenc ing regional ' competit ive po s i t i on s . 3. To apply s e n s i t i v i t y ana lys i s with respect to: i) varying the leve ls of domestic and U.S. supply and i i ) hypothet ica l changes in costs of production and t ransportat ion costs . Such ana lys i s w i l l indicate optimum leve l s of d i s t r i b u t i o n , supply, and the degree of competit ive advantage ce r ta in regions hold over others . k. To test the 'compet i t ive ' impl icat ions of the empir ica l model and i t s var iants by c o r r e l a t i o n and other analyses on se lected economic var iab les associated with domestic production. Scope of Study—Commodities, Regions, Time Period and Data Co l l e c t i on Three commodities are s p e c i f i e d as representat ive ornamental plant mater ia ls for the purpose of th is study because of the i r importance to the B.C. nursery industry: 14 1. Juniperus ahinensis 'Pfitzeriana Aurea'--'Golden Jun iper ' 2. Thuja oacidentalis 'Pyramidalis'--'Thuja Pyramida l i s 1 3. Pinus mugho mughus—'Mugho P ine . 1 Of these three commodities, a l l of which are members of the ' C o n i f e r ' group, the f i r s t two, Golden Juniper and Thuja Pyramidal i s , are genera l ly reproduced commercially by vegetat ive propagation ( i . e . , cutt ings in these cases) while the other, Mugho Pine i suusua 1'J'ypp'rcppagaite'dbbysseed. No h i s t o r i c a l data is ava i l ab le to ind icate the importance of these three l ines of mater ia ls to to ta l domestic propagation. However, ind iv idua l operators genera l ly concede that these v a r i e t i e s are amongst the largest sales volume represented in the Conifer group, and plant s c i e n t i s t s read i l y u t i l i z e these s p e c i f i c mater ia l s as representat ive when conducting experiments. In 1973, imports of the Jun iper , Thuja and Pine genera accounted for 32.5 percent of to ta l ornamental imports in value terms into the Lower Mainland/Fraser Va l l ey . Appendix B gives a de ta i l ed breakdown for these genera as well as a ranked order ing in value terms of the other important ornamental imports into various areas of the province in 1973-In add i t i on , Appendix B sets out th:i;s information with respect to s p e c i f i c v a r i e t i e s within these genera. Between 80 and 90 percent of nursery production in B.C. takes place in and around the Lower Mainland/Fraser Va l ley areas (see Table 1.7) Conifers are plants which bear seeds in a cone; with the exception of the larches, and the bald cypress, p r a c t i c a l l y a l l con i fer s are evergreen. Note the Pinus f i gures include the composite value for seeds and seedlings as well as o lder stock. 15 TABLE 1.7 Production of B.C. Ornamental Nursery Stock in Physical and Value Terms, 1970-71 Class i f i c a t i o n Number of Plants Va 1 ue ($) Number of C l a s s i f i c a t i o n Plants Va 1 ue ($) ( Inter ior ) (Lower Mairi;larid/Fraser Val ley) Roses 8,100 11,000 Roses 158,225 104,169 Coni fers 100,597 188,344 Conifers 976,450 1,108,051 Other ornamentals 205,183 473,122 Other ornamentals 2,243,760 1,601,891 Total ornamentals 313,880 672,466 Total ornamentals 3,378,444 2,724,111 (Island) (B.C. Total) Roses 2,000 1,000 Roses 168,325 116,169 Coni fers 181,090 275,445 Conifers 1,258,137 1,481,840 Other ornamentals 169,836 213,947 Other ornamentals 2,618,789 2,278,960 Total ornamentals 352,926 490,392 Total ornamentals 4,045,251 3,886,969 Estimate for Non-surveyed Nurseries 300,000 Source: Nursery Stock Production in B.C., B.C.D.A., H o r t i c u l t u r a l Branch, V i c t o r i a , B.C., 1970-71. This locat ion takes advantages of c l i m a t i c , physical and other geographical cons iderat ions inc lud ing proximity to the concentrated demand of the large Vancouver market. More than 95 percent of the Lower Mainland/Fraser Va l ley areas ' consumption of ornamentals a r i ses from production within the area and imports from the U.S. Other d i s t i n c t areas in the province are involved in the production of ornamentals, and imports from the U.S. are an important cons iderat ion in these areas as is i l l u s t r a t e d in Table 1.8. iTablle-l i :;9 (p. 17) 16 indicates the re la t ionsh ips between the s p e c i f i c commodities chosen and the i r broader generic c l a s s i f i c a t i o n in value terms with respect to the importing B.C. regions. Within B.C., product ion, d i s t r i b u t i o n and con-sumption vary s p a t i a l l y , generating regional imbalances which induce pro-duct flow between geographical areas. The fo l lowing eight regions are spec i f i ed as d i s t i n c t geographical areas of o r i g i n and/or des t ina t ion : 1. Fraser Va l ley West 5. P r a i r i e s 2. Fraser Va l ley East 6. Washington State 3. Vancouver Island 7. Oregon k. Inter ior 8. C a l i f o r n i a The U.S. locat ions and the P r a i r i e area are only p a r t i a l l y s pec i f i ed in the study with the former representing supply locat ions and the l a t t e r a demand l oca t i on . A l l other regions are completely s p e c i f i e d with respect to both supply and demand. Supply, demand and product flows for the rest of the world are assumed to be exogenous to th i s ana l y s i s . These i n f l u -ences are small i f not nonexistent, therefore they do not a f f e c t conclusions from the analys i s . The time period used in th i s study is the 1973 calendar year running from January 1st to December 31st. A l l data regarding product ion, consump-t i on , imports, cost of product ion, procurement costs and t ransportat ion lev ies per ta in to th i s time per iod . Personal ized interviews of t h i r t y - f o u r propagators in the four regions of B.C. were conducted to c o l l e c t a l l data involv ing product ion, For the purposes of th is study the Lower Mainland/Fraser Va l ley area is dichotomized into Fraser Va l ley West and Fraser Va l ley East. The former includes the area bounded by Vancouver, Haney and Langley while the l a ter is bounded by Aldergrove, Mission and Ch i l l iwack. 17 TABLE 1.8 Quantity of Ornamentals' Imported into Three Regions of B.C. 1969-74 Year 1nterior Vancouver Island Lower Mainland/ Fraser Va11ey B.C. Total 69/70 60,423 N.A. 1,186,976 N.A. 70/71 93,848 80,217 1,159,311 1,333,376 71/72 144,143 54,958 918,726 1 ,117,827 72/73 236,898 127,472 752,304 1 ,116,674 73/74 181,373 153,942 1,270,677 1 ,605,992 Source: ' Excludes imports of roses. Plant Protect ion D iv i s ions , C.D.A., Vancouver, V i c t o r i a and Pent i c ton. TABLE 1.9 Quantity of Imports of Spec i f ied Mater ia ls into Three Regions of B.C. in 1973 Percent Total Percent Total Pyrami- Percent Go1 den Golden Thuja da 1 i s Total Mugho Total J u n i - of Total Pyrami- of Total Mugho of Juniper per Total Thuja da 1 i s Total Pi ne P i ne Total Lower Ma i nland/ Fraser 66.7 Val ley 231,170 50,299 21 .8 70,713 43,657 59.0 22,500 15,000 1 n ter i or 92,609 31,375 33-9 12,640 10,600 83.9 - - -1 s land 38,010 10,080 26.5 11,425 5,425 47.5 - - -Source: Aggregated from data obtained from Plant Protect ion D iv i s ions , C D . A . , Vancouver, V i c t o r i a , and Pent ic ton. 18 consumption and cost of production in the Canadian regions. These i n t e r -views represent t h i r t y - f o u r contacts out of a populat ion of t h i r t y - s i x propagators in the province. The population is i d e n t i f i e d by the B.C.D.A. H o r t i c u l t u r a l Branch's " L i s t of Growers, Agents and Commercial Outlets Licenced to Se l l Nursery Stock Under the Plant Protect ion Act in 1974," although cons iderable e f f o r t was expended in an attempt to include: i) propagators not on the l i s t , i i ) propagators operating in 1973 but no longer in business at the time of the interviews, and i i i ) estimates for two non-cooperating propagators. Inclusion of propagators was l imi ted to those who propagated at least one of the aforementioned v a r i e t i e s of ornamental mater ia l s at a quantity level of one hundred plants or more per year. i ndierdependenc i es in supply and demand between the three v a r i e t i e s of mater ia l s chosen for the study are not considered endogenously in the model. This is not thought to be a serious shor t -coming in the ana ly s i s . Research Methodology The i n i t i a l d i r ec t i on of research involves the s p e c i f i c a t i o n of spat ia l equ i l ib r ium condit ions for Golden Juniper, Thuja Pyramidal is and Mugho Pine in the 1973 calendar year. Such condit ions require de-velopment of an empir ica l model, formulated within the theore t i ca l framework of in terreg iona l competit ion and comparative locat iona l advantage under assumptions of a per fect competit ive market s t ruc ture . The bas ic models u t i l i z e d w i l l be the Transportat ion Model and the Product ion-Dis -t r i b u t i o n Model which w i l l be extended to include internat iona l competition 19 and opportunity costs of domestic producers. This formulation al lows inc lus ion of l e g i s l a t i v e const ra ints so that the competit ive pos i t i on and a b i l i t i e s of various production areas under a l t e r n a t i v e s t ra teg ies can be determined. An operat ional model requires the formulation of s t a t i c e q u i l i -brium condit ions which include demand and supply re l a t i ons for the relevant regions considered. The present approach al lows for the complete s p e c i f i c a t i o n of spat ia l a l l o c a t i o n for the chosen domestic commodities and p a r t i a l a l l o c a t i o n wmth respect to the fore ign imported mater ia l s . Assuming i n e l a s t i c demand and i n e l a s t i c but va r i ab le supply re l a t i ons at p a r t i c u l a r locat ions , the de sc r i p t i ve spa t i a l model [12] can be developed as a mathematical maximization problem as stated by Samuelson [35]. This formulation transposes into a minimization problem with a l inear ob jec t i ve funct ion and l inear cons t r a in t s . A tota l of t ransportat ion costs , production costs and procurement costs are minimized subject to demand and supply i cond'i'ti ;6nstre$l eotj|iinig l e g i s l a t i v e con-s t r a i n t s . According to th is c r i t e r i o n e f f i c i e n t a l l o c a t i o n of var iab le regional suppl ies to meet predetermined demand within the ex i s t i n g i n -s t i t u t i o n a l se t t i ng , w i l l be determined. The predetermined i n e l a s t i c demand and aggregate supply re l a t i ons are based on h i s t o r i c a l records of import d i spos i t i on and recorded data from interviews with domestic producers regarding production and sa les . The var i ab le locat iona l supply levels are synthesized from recorded i n -formation concerning production expansion capac i ty under f ixed or semi-f ixed resources. Supply leve ls are a lso var ied to i l l u s t r a t e the e f f e c t s 20 of l e g i s l a t i v e const ra ints and cost of product ion/ t ransportat ion cost v a r i a b i l i t y upon optimal trade patterns. Once the optimal patterns of production and trade of the var -ious production and consumption centers are es tab l i shed for the chosen l ines of mater ia l s , the competit ive impl icat ions of the s i t ua t i on can be better understood. In th i s ana 1 ys i s, ddomestii:cppnppagators are shown to be competi t ive, except in ce r t a in instances, with U.S. producers. Dis-cussion center ing on the reasons for such a large i n f l ux of U.S. imports in the face of domestic competit iveness, w i l l be based on deta i l ed ex-amination of various analyses of the spat ia l equ i l ib r ium model and by use of co r re l a t i on ana lys i s involv ing some of the key economic var iab les which a f f e c t quant i t i e s produced. Out l ine of Study The remainder of th i s thesis is set out in f i v e chapters and the Appendices. Chapters 2 and 3. pursue the object ives of the ana ly s i s . Chapter 2 discusses the conceptual framework through a l i t e r a t u r e review which es tab l i shes the log ica l basis of the empir ica l model in Chapter 3. Chapter 3 s pec i f i e s the empir ica l model and defines the inputs necessary for the spat ia l equ i l i b r ium ana l y s i s . Chapter k gives the resu l t s of the ana lys i s obtained by the model and Chapter 5 includes supplementary ana lys i s d i scuss ing the competit ive impl icat ions in q u a l i t a t i v e terms as well as by use of c o r r e l a t i o n ana ly s i s . The f i n a l Chapter contains an eva luat ion of the conclus ions obtained from the ana lys i s and b r i e f l y discusses a number of po l i cy recommendations and suggestions for fur ther research. CHAPTER 2 CONCEPTUAL FRAMEWORK Introduction to Internationa] and Interregional Trade Development of the economic theory which is used to e s t ab l i s h the log ica l basis of the empir ica l model used in th i s study has occurred over the past two centur ie s . The foundation of economic reasoning which led to r e a l i z a t i o n of the advantages of trade was l a i d by the B r i t i s h economists Adam Smith and David Ricardo who developed the c l a s s i c a l theory of the funct ion ing of the economy. In 1776 Smith introduced his celebrated ' p r i n c i p l e of s p e c i a l i z a t i o n 1 by observing that the d i v i s i o n or s p e c i a l i z a t i o n of labor into a number of d i s t i n c t operat ions in a pin f ac to ry , great ly improved the productive power of labor [36,pp.1-21]. Ricardo, wr i t ing in 1817, es tab l i shed the ' p r i n c i p l e of comparative costs ' in which he set out the gains poss ib le by countr ies indulging in fore ign trade where d i f f e r e n t i a l s in product ive e f f i c i e n c y e x i s t [3**, pp . 147-167] . Ricardo stated that fore ign trade increases the amount and va r ie ty of the goods on which revenue may be expended and therefore is highly bene f i c i a l to a country. Although Ricardo recognized that h is argument concerning foreign trade appl ied equa l ly to home trade as w e l l , i t was not un t i l 1848 that another B r i t i s h economist, J.SS. M i l l , formal ly showed that the advantage of trade between two countr ies was s im i l a r to that of trade between two 21 22 r e g i o n s [30]. M i l l p o i n t e d o u t t he i n t i m a t e c o n n e c t i o n e x i s t i n g between S m i t h ' s s p e c i a l i z a t i o n , R i c a r d o ' s c o m p a r a t i v e c o s t s and t he i m p o r t a n c e o f demand i n e x p l a i n i n g what and- how much i s t r a d e d . T h i s l e d t he way t o M i l l ' s s t a t e m e n t s o f the ' p r i n c i p l e s o f a b s o l u t e and c o m p a r a t i v e a d v a n t a g e . ' Hence , under R i c a r d o ' s a s s u m p t i o n o f i m m o b i l i t y o f r e s o u r c e s , each r e g i o n o r n a t i o n i s a b l e t o s p e c i a l i z e i n p r o d u c i n g i tems in w h i c h i t has an advan tage w h i l e t r a d i n g t o o b t a i n t h i n g s t h a t i ii t c e a n n o t p r oduce e f f i c i e n t l y [27,p.660]. One c o u n t r y (A) i s s a i d to have an a b s o l u t e a d v a n t a g e o v e r a n o t h e r c o u n t r y (B) i n t he p r o d u c t i o n o f two c o m m o d i t i e s , w i ne and c h e e s e , i f a u n i t o f r e s o u r c e s can p r oduce more o f bo th c o m m o d i t i e s i n c o u n t r y A than i n c o u n t r y B. T a b l e 2.1, example 1A, i l l u s t r a t e s t he p r i n c i p l e o f a b s o l u t e a d v a n t a g e . Fo r t h i s c a s e , where the o p p o r t u n i t y c o s t o f p r o d u c -i n g one u n i t o f c hee se i s i d e n t i c a l between the two c o u n t r i e s , as i s t he o p p o r t u n i t y c o s t o f p r o d u c i n g a u n i t o f w i n e , t r a d e w i l l p r o v i d e no g a i n s . T a b l e 2.1, example IB, i n d i c a t e s t h a t by s p e c i a l i z i n g i n p r o d u c t i o n and engag i n g i n t r a d e , t h e c o u n t r i e s c o u l d a c h i e v e no n e t g a i n f r om t r a d e . In f a c t any o t h e r p r o p o r t i o n a l movement o f r e s o u r c e s than o n e - h a l f u n i t o f r e s o u r c e s i n c o u n t r y A f rom w i n e t o chee se p r o d u c t i o n and one u n i t o f r e s o u r c e s i n c o u n t r y B f r om cheese t o w ine p r o d u c t i o n , wou ld a c t u a l l y r e -s u l t i n a net l o s s to e i t h e r w ine p r o d u c t i o n , cheese p r o d u c t i o n o r b o t h . C o n s i d e r i n g example 2A i n T a b l e 2.1 where c o u n t r y A has the a b s o l u t e advan tage i n w ine p r o d u c t i o n and c o u n t r y B has the a b s o l u t e a d -v an t age i n c hee se p r o d u c t i o n , s p e c i a l i z a t i o n in p r o d u c t i o n o f the commodity i n w h i c h one c o u n t r y i s more e f f i c i e n t t han t he o t h e r w i l l r e s u l t in g a i n s TABLE 2.1 P r i n c i p l e s of Absolute and Comparative Advantage: Two Goods/Two Countries Production from One Unit of Resources 1A 2A 3A Opportunity Cost of Opportunity Cost of Opportunity Cost of Producing One Unit of : Producing One Unit of: Producing One Unit of: Wi ne Cheese Cheese Wine Wi ne Cheese Cheese Wi ne Wi ne Cheese Cheese Wine Country A 20 30 .66 units wi ne 1.5 un i ts cheese 20 10 2.0 units wine .5 units cheese 60 30 2.0 uni ts .5 uni ts wine cheese Country B 10 15 .66 units wi ne 1.5 un i ts cheese 10 20 .5 un i ts wi ne 2.0 uni ts cheese 10 20 .5 un i ts 2.0 un i ts wine cheese Changes from Sp e c i a l i zat ion and Trade IB 2B 3B Wi ne Cheese Wine Cheese Wi ne Cheese Country A -10 + 15 Shi f t one-haIf uni t of resources in A to cheese production +20 -10 Shi f t one uni t of resources in A to wine production +40 -10 S h i f t two-thirds unit of resources in A to wine production Country B + 10 -15 Shi f t one un i t of resources in B to wine production -10 +20 Shi f t one un i t of resources in B to cheese production -10 +20 Shi f t one uni t of resources in B to cheese production Net Gain 0 0 + 10 + 10 +30 + 10 U J 2k to both countr ies in the event of trade. Note in 2B, that the optimum movement of resources w i l l re su l t in country A producing kO units of wine and country B producing kO units of cheese such that a net gain of 10 units of wine and cheese w i l l accrue. In example 3A and 3B country A holds an absolute advantage over B both in the production of wine and cheese. In th i s case however, in contrast to that in 1A and IB, s p e c i a l -i zat ion and trade w i l l lead to a net gain of 30 units of wine and 10 of cheese. The s a l i e n t feature which d i s t ingu i shes the trade cases in the second and th i rd examples from the non-trade case in the f i r s t example is the concept of 'comparative advantage.' Comparative advantage states that an area w i l l produce products for which i t s r a t i o of advantage as compared with anotheraaeea i :i;s greatest or i t s r a t i o of disadvantage is least . Hence, in example two, i t w i l l benef i t country A to s p e c i a l i z e and trade in wine because i t s margin of advantage or e f f i c i e n c y over country B d i f f e r s between wine and cheese. Examples 2A and 2B show that the oppor-tun i ty costs of producing a unit of cheese are 2.0 and .5 units of wine respect i ve ly in countr ies A and B. Therefore, country A is the lower opportunity cost producer of wine and country B is the lower opportunity cost producer of cheese. Even in example three, country B can be said to have a comparative advantage in cheese because that is the commodity where i t s r a t i o of disadvantage is leas t . No r a t i o or margin of advantage ex i s t s fo r e i ther country in example one. Three important q u a l i f i c a t i o n s must be attached to th i s ana l y s i s . The f i r s t is that th i s ana lys i s can e a s i l y be extended to ' n ' goods and 25 ' n ' countr ies . The second q u a l i f i c a t i o n involves Mi 11 1s" 1 terms of t r ade , 1 or the amount of domestic goods which must be exchanged for a unit o f imported goods. In example two, i f country A can trade for a unit of cheese at terms more favorable than 2 units of wine, i t w i l l do so because i t s domestic opportunity cost of a unit of cheese production is 2 units of wine. M i l l ' s recognit ion of demand and i t s e f f e c t s on the terms of trade led Marshall [28] to the concept of equ i l i b r ium ana lys i s in terms of supply and demand. Th i rd , mention must be made of the re l a t i on of internat iona l trade versus interreg iona l trade in th is mode of ana l y s i s . In contrast with internat iona l trade, interreg iona l trade is character ized by resource mob i l i t y according to marginal p roduc t i v i t y theory. Example three, reading region A for country A and region B for country B, shows a d i f f e rence in production e f f i c i e n c y between the two reg ions. It is evident that in th i s case the greatest increase in real income is achieved by concentrat ing a l l production in region A which has an absolute ad-vantage in both products over region B. Interregional trade is therefore advantageous when each region shows absolute cost advantages for at least one product (see example 2A, Table 2.1 p. 23), or when there are const ra int s on resource mob i l i t y . However, patterns of regional s p e c i a l i z a t i o n in a g r i cu l tu re are not ea s i l y det-ermined because of the complex complementary and supplementary re la t ionsh ips in production which e x i s t . Nevertheless, comparative advantage can be general ized to include complexit ies such as mul t i - reg ions and combinations of products. Although the ear l y Engl ish economists were undoubtably aware of t ransportat ion and t rans fer costs as factors in f luenc ing internat iona l 26 trade, i t was not unt i l the emergence of locat ion theory that economists began to deal e x p l i c i t l y with the e f f ec t s of t ransportat ion costs . J . von Thunen [hk] and A. Weber [45] developed work in th i s f i e l d on a rather theoret i ca l l e v e l , and Mighell and Black [29] were among the f i r s t to give f u l l expression to th i s development in an empir ica l study. The focus on transportat ion costs in locat ion theory led Mighel l and Black to make the i r comprehensive treatment of in terreg iona l compeitition in a g r i cu l tu re which succes s fu l l y integrated supply and demand ana lys i s to y i e l d regional production and d i s t r i b u t i o n data. In more recent times the i r study repre-sents an important a p p l i c a t i o n of spat ia l equ i l i b r ium ana l y s i s , a l b e i t somewhat d i f f e r e n t from s im i l a r ana lys i s based on l inear programming con-cepts . Theoret ica l Development of Spat ia l Equ i l ib r ium Analys is in the Mult i -Region Model The study of in terreg iona l competition has been extended by spa t i a l equ i l i b r ium theory developed under the assumption of p e r f e c t l y competit ive market s t ructures . Spat ia l equ i l i b r ium ana lys i s deals with the problem of interreg iona l p r i c i n g and a l l o c a t i o n and hence has made a very valuable cont r ibut ion to the understanding of in ter reg iona l competi-t i o n . This type of ana lys i s is able to incorporate p r i n c i p l e s of i n t e r -regional and in ternat iona l competit ion and trade. It can be used to represent, therefore , the app l i c a t i on of s p e c i a l i z a t i o n , comparative advantage, locat ion theories and transportat ion costs towards equ i l i b r ium determination within a given time per iod . 27 The u t i l i z a t i o n of mathematical programming to solve the standard economic problem of opt imizat ion has made i t a technique of great p r a c t i c a l importance to economists. The ob ject i ve of l inear and non- l inear pro-gramming is to determine the optimal leve l s of s pec i f i ed productive processes under defined circumstances. This mode of ana lys i s was i n t r o -duced mathematical ly by Koopmans [25] and Dantzig [5]. Short ly a f t e r the introduct ion of l inear programming the method was extended to include non- l inear c a p a b i l i t i e s and a dynamic time element by Kuhn and Tucker; and Takayama and Judge [26;43] • The Koopmans-Hitchcock transportat ion problem [25] allowed an e laborat ion or extension of mathematical programming to re la te to spa t i a l equ i l ib r ium ana l y s i s . The l inear programming aspects of the t ransporta -t ion problem are discussed extens ive ly by Dorfman, Samuelson and Solow [6]. the development of a methodological framework for spa t i a l equ i l i b r ium was provided by Enke [12] who f i r s t i l l u s t r a t e d the p r a c t i c a l i t y of th is formulat ion as an instrument of economic ana lys i s fo r complicated cases where more than two regions are included in the problem. Enke showed through the use of a simple computer that a so lut ion to th i s problem was poss ib le fo l lowing a cost minimization approach. He seated: There are three regions trading a homogeneous good. Each region const i tutes a s ing le and d i s t i n c t market. The regions of each poss ib le pa i r of regions are separated but not i s o l a ted—by a t rans -portat ion cost per phys ica l unit which is independent of volume. There are no legal r e s t r i c t i o n s to l im i t the act ions of the p r o f i t -seeking traders in each reg ion. For each region the funct ions which re l a te local production and local use to loca l p r i ce are known, and consequently the magnitude of the d i f fe rence which w i l l be exported or imported at each local p r i ce is a l so known. Given these trade funct ions and transportat ion cost , we wish to a s ce r ta in : 28 1. the net pr i ce in each region 2. the quant i ty of exports or imports for each region 3. which regions export, import or do neither 4. the aggregate trade in the commodity 5. the volume and d i r ec t i on of trade between each poss ib le pai r of regions. Proceeding from the Enke formulat ion, Samuelson [35] showed how th i s general equ i l i b r ium model could be converted in terms of maximizing net soc ia l payoff and solved by l inear programming. Net soc ia l payoff is analagous to the concept of net consumer and producer surplus and is ca l cu la ted by summing soc ia l payoffs of two regions and subtract ing the transportat ion cost . Socia l payoff in a p a r t i c u l a r region is the a l gebra ic area under the excess demand curve which is equal in magnitude but opposite in sign to the area under the excess supply curve (see Figure 2.1) [47]. Thus, an intimate connection ex i s t s between Samuelson's formula-t i o n , Enke's approach and the o r i g i n a l Koopmans-Hitchcock t ransportat ion problem. The l a t t e r concerned predetermined supply and demand quant i -t i e s , ( i . e . , zero supply and demand e l a s t i c i t i e s ) whereas the Enke-Samuelson approach introduced the dynamic concepts of regional supply and demand funct ions [7]. Beckman [2] introduced the approach of pre -determined supply ( i . e . , zero supply e l a s t i c i t y ) in combination with per-f e c t l y e l a s t i c demand in re l a t i on to a constant demand p r i c e . This approach opened the door to a number of spat ia l equ i l i b r ium studies under-taken by a g r i c u l t u r a l economists. Some of these studies w i l l be mentioned sho r t l y . F i n a l l y the more complex mu l t i - r eg i on , multi-commodity spa t i a l models sometimes inc luding a time dimension, were introduced by Takayama and Judge [43]. These dynamic approaches neces sa r i l y are handled by the Figure 2.1 Samuelson fwo Country/One Commodity Trade Model 30 more soph i s t i ca ted quadrat ic programming rout ines . Two theore t i ca l models which have found considerable app l i ca t ion in empir ica l studies are of in teres t to th i s study. The Transportat ion Model and the Product ion -D i s t r ibut ion Model are now discussed although the major focus in th is study w i l l be on the l a t t e r model which is a soph i s t i ca ted var iant of the former. H i s t o r i c a l Development of the Transportat ion and Product ion -D i s t r ibut ion Models It is poss ib le to i dent i f y two separate f i e l d s of spa t i a l e q u i l i -brium ana lys i s which have been pursued by a g r i c u l t u r a l economists over the past two decades. The f i r s t f i e l d c l o s e l y fol lows the Enke-Samue1 son approach in which an optimum d i s t r i b u t i o n pattern and a complete e q u i l i -brium p r i ce pattern are s p e c i f i e d under given supply and/or demand functions. Empirical studies of th i s type were conducted by Fox; Judge; and Egbert, Heady and Brokken [14;22;10]. Fol lowing in th i s ve in , Takayama and Judge extended the formulation into a quadrat ic programming problem which has led to studies of the type pursued by Emerson; Harr ing -ton and Sahi ; and Zwart [ l l ; 1 7 ; 4 7 ] . The one inescapable shortcoming of th is f i r s t f i e l d of spat ia l models is the necess i ty of extensive aggre-gate regional demand and supply funct ion data. This s pec i a l i zed data is a l l too often not ava i l ab le in the appropriate areas of enquiry. The second type of spat ia l equ i l i b r ium s tud ies , the type with which th is study is u l t imate ly concerned, adheres more c l o s e l y to the Koopmans-Hitchcock Transportat ion Model. This theore t i ca l approach as 31 explained by King; and King and Henry [24;23] has been u t i l i z e d in empir ica l work by Snodgrass and French; Bowden et a l . ; and Padgett et a l . , [37;3;33] • In these cases predetermined supply and demand quantities are used to derive minimum-cost commodity movement patterns which al low a set of imputed p r i ce d i f f e r e n t i a l s to be generated by the 'dua l ' and not market pr i ces per se as in the f i r s t f i e l d mentioned above. Hence p r i ce d i f f e r e n t i a l s between trading regions w i l l be ident i ca l to the transportat ion costs a f f e c t i n g them. A modi f icat ion of the transportat ion problem, the product ion-d i s t r i b u t i o n model, provides a more soph i s t i ca ted and deta i l ed tool for the study of in terreg iona l competition by a g r i c u l t u r a l economists. This model can minimize a tota l of t ransportat ion costs , procurement costs , and production costs under a predetermined demand s i t u a t i o n , while a l low-ing expansion of supply to be p e r f e c t l y e l a s t i c with respect to a constant pr i ce and potent ia l production in a given reg ion. In th i s case the dual so lut ion defines an equ i l ib r ium set of pr ices a t t r i b u t a b l e to the costs of marginal units of supply in the considered regions. Empir ical work in th i s area has been conducted by Egbert, Heady and Brokken; Dor l ing; and Gilmor [10;7;15]• This approach has much less s t r ingent data requirements than does the f i r s t f i e l d of spat ia l e q u i l i -brium ana lys i s mentioned. The main d i f f i c u l t y l i e s in spec i fy ing the model c o r r e c t l y such that i t corresponds to the real economic s i tua t i on being s tud ied. However, the f l e x i b i l i t y for inc luding a wide range of parameters af forded by th is approach makes i t a valuable tool in p rov id -ing s t a t i c comparisons in the study of in terreg iona l competit ion. 32 An Expos i t ion of the Transportat ion Model The basic formulat ion in spa t i a l equ i l i b r i um ana lys i s is the t ransportat ion model. This model e s s e n t i a l l y s p e c i f i e s a ' r ou t i n g ' problem that can be solved by l i near programming. In many cases so lu t ion can be obtained manually by a technique such as the North-West Corner r u l e . This procedure involves the o rder l y manipulation of poss ib le so lu t ion sets unt i l an optimum so lu t ion is a t ta ined. The t ranspor ta t ion model is concerned with a geographical s i t u a -t ion where the d i s t r i b u t i o n of quant i t ie s of product from s p a t i a l l y separated supply regions to s p a t i a l l y separated demand regions must be e f fec ted in order to meet s p e c i f i c requirements. The problem is to spec i fy the most e f f i c i e n t a l l o c a t i o n of product, the c r i t e r i o n of which is the minimization of tota l t ransportat ion cos t s . The major assumptions of th i s model are : i) h i s t o r i c a l l y predetermined supply and demand quan-t i t i e s which are not funct ions of p r i c e , i i ) s p a t i a l l y separated markets representable by d i s c re te geographical po in t s , i i i ) a homogeneous product t rans ferab le at given per unit t ransportat ion costs independent of volume, and iv) a competit ive market s t ructure and an absence of intertemporal r i g i d i t i es . The fo l lowing statement expresses the t ranspor ta t ion model in a l gebra ic form: 33 Object ive Function M i n i m i ze: m n Z = E E T . . X . . 1 J "J i=l j = l ( 0 Subject to: E X . . = D. 1-1 ' J J n E X . . = S. j=l ' J 1 n m E D. = Z S. • i J • i 1 j=l J 1=1 (2) (3) CO X..*0; T..^00 i J i J (5) Where: i = j = T. . = i J X . . = U Si = D. J or i g i n (supply region) (i=l,2...m) dest inat ion (demand region) (j=l,2...n) the per unit t ransportat ion costs of shipping product from the i th o r i g i n to the j t h dest inat ion the amount of product shipped from the i th o r i g i n to the j t h des t inat ion the amount of product a va i l ab l e for supply from the i th o r i g i n the amount of product demanded at the j t h dest inat ion The t ransportat ion model was developed p r imar i l y as a method of d i scover ing the most economical routes of d i spo s i t i on for a f i rm s e r v i c -ing a network of markets; hence th i s model has l im i ted usefulness. How-ever, for p e r f e c t l y i n e l a s t i c p r i ce re l a t i ons where supply and demand are 34 known h i s t o r i c a l l y or are capable of being estimated to some degree of r e l i a b i l i t y , such an a n a l y t i c a l formulation allows determination of an e f f i c i e n t d i s t r i b u t i o n pat tern . The so lu t ion of the dual of the t ransportat ion model permits the computation of a re la ted set of equ i l i b r ium pr ice d i f f e r e n t i a l s a r i s i n g from the optimal trade pat tern . Within the assumptions of a p e r f e c t l y competit ive market s t ruc ture , equ i l i b r ium requires that the p r i ce of a homogeneous good cannot vary between any given o r i g i n and des t inat ion by more than the corresponding t ransportat ion cos t . From th is comes the f am i l i a r 'law of one p r i c e ' which states that a f t e r taking account of qua l i t y and locat iona l d i f f e r e n t i a l s , only one pr i ce can p reva i l in a given competit ive market. The formulation of the dual of the transportat ion model is a l g e b r a i c a l l y represented as fo l lows: Maximize: V = Z D.W. j = l J J m Z S.R. i = l ' 1 (6) Subject to: W^  - R. - T _ (i = l , 2 . . . m ; j = l , 2 . . . n ) (7) T. . - 0; W. - 0; R. ^ 0 I J j i (8) Where: W. J R. = the shadow pr i ce of the product de l ivered at the j t h des t inat ion the shadow p r i ce of the product F.O.B. the i th o r i g i n r e l a t i v e to a base-point pr ice of zero T..,~Dv anddSS.are defined as in the primal above U JJ i " 35 Within th i s perspect ive , equation (7) can be rewri t ten to s ta te : W. - R. + T . . (9) J 1 1 J This implies that the t ransportat ion cost component of the p r i ce at any dest inat ion must not be greater than the base-point d i f f e r e n t i a l at the or i g in^p 1 usutheht ranspo.r;<tat;iiofiocosifcst. I n I ithehpresent-ns tudyd thehdua 1 y ie l d s implied values with the computing package automat ica l ly a s s i gn -ing the base-point p r i ce of zero randomly to a p a r t i c u l a r o r i g i n of product. Since the d i r e c t problem has been solved via the ' p r ima l ' of the t ransportat ion problem, so lut ion of the dual is simple and compara-t i ve locat ion advantage with respect to t ransportat ion costs amongst o r i g i n s can e a s i l y be examined. Thus, the de l ivered pr ices that co r re s -pond to the most economical a l l o c a t i o n of product, from the viewpoint of minimum aggregate t ransportat ion costs , can be determined. In essence the de l ivered p r i ce d i f f e r e n t i a l s provided by the dua l , show the t rans -portat ion marginal costs involved in moving a product between spec i f i ed pa i r s of o r i g i n s and des t ina t ions , r e l a t i v e to a base-point p r i ce of zero. An Expos i t ion of the Product ion-D i s t r i bu t i on Model A va r i a t i on of the 'pure ' t ransportat ion model—the product ion-d i s t r i b u t i o n model—encompasses a much broader formulat ion than i t s pre-cursor and therefore lends i t s e l f to a wider range of a p p l i c a t i o n . The p roduc t i on -d i s t r i bu t i on model reta ins the same basic s t ructure and 36 so lut ion format as the t ransportat ion model, however, i t s formulat ion allows greater ana l y t i c a l f l e x i b i l i t y . This expanded formulat ion permits cost minimization which includes a composite tota l of t rans -portat ion cos t s , tota l costs of domestic production and import procure-ment costs. In other words, the ' T j . 1 in the t ransportat ion model is modif ied to become 1 C . ^ 1 in the p roduc t i on -d i s t r i bu t i on model, and includes the p r i c e / c o s t of production at the o r i g i n plus the t rans -portat ion cost over the relevant route. Included in the domestic cost of ppoduction estimates are opportunity costs which give r i s e to com-p e t i t i v e impl icat ions in the model. Although the p roduc t i on -d i s t r i bu t i on model uses a predetermined demand s t ruc ture , i t d i f f e r s from the t ransportat ion model in that i t allows quantity suppl ied to vary so that supply is determined and a l l oca ted subject to aggregate demand equa1it ies and l inear supply i n -e q u a l i t i e s v ia the minimization c r i t e r i o n . Thus, in th i s case we have a p e r f e c t l y i n e l a s t i c demand s t ructure and a p e r f e c t l y e l a s t i c regional supply s t ructure whereby any given region could p o t e n t i a l l y s a t i s f y a l l demand requirements. However, due to resource pressures, production centers are of ten constrained by factors such as land, c a p i t a l , e t c . , to levels of supply which are considered r e a l i s t i c by the researcher. The p roduc t i on -d i s t r i bu t i on model can be represented a l g e b r a i -c a l l y as fo l lows: 3 7 Object ive Function Min imi ze : Z = m Z i = l n Z j = l C . X. . ' J 1 J (10) Subject to: m i = l Cons t ra i n ts Z X.. = D. U (11) Z x.. s s. ' J I j=l (12) X. . ^ 0 . ; C.. ^ 0 'J j i J (13) Where: i = o r i g i n (supply region) (i = 1,2 ...m) j = des t inat ion (demand region) (j = 1,2 ...n) U the tota l per unit cost of procur ing/ producing product at the i th o r i g i n and transport ing i t to the j t h des t inat ion the amount of product shipped from the i th o r i g i n to the j t h des t inat ion S. = the amount of product ava i l ab l e for supply from the i th o r i g i n cons i s tent with regional quantity const ra ints imposed by the re -searcher . D. = the amount of product demanded (predetermined) J at the j t h des t i na t i on . The e f f i c i e n t a l l o c a t i o n of regional supply to meet predetermined demand and optimal trade patterns w i l l be determined according to the minimization c r i t e r i o n . Solut ion of the problem c a l l s for a dummy or disposal region so that excess supply can be absorbed in a l l o c a t i v e terms 38 within the programming format. Hence the inequa l i ty cons t r a in t , equa-t ion (12), is expressed in equa l i t y terms with excess supply given to th i s disposal region only a f te r a l l demand constra ints are s a t i s f i e d . In addi t ion to th i s supply f l e x i b i l i t y the p roduc t i on -d i s t r i bu t i on model a l so has the capaci ty to handle the inc lus ion of government l e g i s l a t i o n or po l i c y va r i ab le s . These can be expressed in the ob ject i ve funct ion by higher costs between cer ta in regions and/or in the subject ive funct ions by complete or p a r t i a l route blockage between spec i f i ed regions. The equ i l i b r ium pr ice pattern can be examined v i a so lu t ion of the dual of the p roduc t i on -d i s t r i bu t i on model and pr ices can be imputed to regions according to the marginal costs of supplying c r i t i c a l units of product. In other words, the so lu t i on of the dual leads to an e q u i -l ibr ium set of pr ices which are a t t r i b u t a b l e to the costs of marginal units of supply In the relevant regions. In the case of the product ion-d i s t r i b u t i o n model the marginal cost p r i c i n g spec i f i e s actual pr ices which are the marginal costs of production/procurement plus t ransporta -t ion charges occurr ing in the simultaneous c l ea r ing of the market. S imul-taneous c l ea r ing as opposed to c l ea r ing of the market over a period of time is assumed conceptua l ly because th i s is a s t a t i c mode of ana l y s i s . These values at the margin show the maximum revenue a t ta inab le at given locat ions for various f ea s i b l e supply o r i g i n s . In doing this the dual ind icates the marginal producing region which sets the p r i ce in a given market at a p a r t i c u l a r time. Within the dual framework the cons t ra in t : W. - R. - C.. (14) J i 1 J 39 can be wr i t ten to s tate: W. * R. + C.. (15) J i "J implying that the s e l l i n g p r i ce at any des t inat ion must not be greater than the base-pr ice d i f f e r e n t i a l at the o r i g i n plus t ransportat ion costs plus procurement costs or costs of product ion. The base-point p r i ce impl icat ions are p a r a l l e l to those discussed under the t ransporta -t ion model . It is evident that the p roduc t i on -d i s t r i bu t i on model is an empir ica l device which is capable of a s s i s t i n g in achieving the object ives of th i s study. It possesses the c h a r a c t e r i s t i c of a l lowing ana lys i s of i n te r re l a t i onsh ip s amongst regions and is e a s i l y solved to y i e l d e q u i l i -brium quan t i t i e s , pr ices and trade f lows. In add i t ion the model is s u f f i c i e n t l y f l e x i b l e to incorporate const ra int s which r e f l e c t trade bar r ie r s and other imperfections in the a l l o c a t i o n mechanism. Theoret ica l Implications of Trade Res t r i c t ions In the ensuing ana lys i s both interreg iona l and in ternat iona l trade are treated as i dent i ca l except that p o l i t i c a l boundaries with d i f f e r e n t currencies and specia l t ransportat ion-brokerage arrangements must be e x p l i c i t l y cons idered. In the case of th is study, government regulat ions are not j u s t co inc ident with p o l i t i c a l boundaries but rather occur between interreg iona l and in ternat iona l zones a l i k e . The focus of concern in th is study is at the macro l e v e l . An examination of the inf luence of government plant protect ion l e g i s l a t i o n on regional and in ternat iona l trade is undertaken within the empir ica l framework of spat ia l ho equ i l ib r ium ana l y s i s . It is hypothesized that the existence of such l e g i s l a t i o n in the face of r e l a t i v e l y unhindered U.S. imports has a profound e f f e c t on domestic production and i t s a l l o c a t i o n . Conceptually th i s s i tua t ion can be represented g raph ica l l y in very s i m p l i f i e d terms. Consider in Figure 2.1 (p. 29), the f a m i l i a r Samuelson trade model dep ic t ing two countr ies each producing and w i l l i n g to trade a homogeneous commodity. Without trade Pj and P^ would be the respect ive pr ices in force in Canada and the U.S. With f ree trade and per fect competit ion, the commodity moves from the U.S., i . e . , the low pr i ce reg ion, to Canada, i . e . , the high p r i ce reg ion. In e f f e c t , the U.S. surplus region w i l l continue to supply the commodity to the Canadian d e f i c i t region un t i l the regional p r i ce d i f f e r e n t i a l is reduced to an amount equal to the t rans fer cost in which case there is no longer any incentive to trade [11,p.109]. Note that the demand and supply schedules are reversed fo r expos i t ion purposes in the Canadian case of Figure 2.1. The center port ion of Figure 2.1 represents the excess supply and demand which e x i s t in each region over a range of p r i c e s . Conse-quent ly, these curves can be l abe l led excess demand Canada (ED c) and excess supply U.S. (ES^) . Their i n ter sec t ion P^ represents a p r i ce level where the excess demand in Canada equals the excess supply in the U.S. When taking into account the t ransportat ion cost ( T u s c ) of shipping from the U.S. to Canada, the equ i l i b r ium amount of trade is.OQ** instead of 0Q." and the equ i l i b r ium pr i ce is P* rather than P^. Trade w i l l only occur i f the p r i ce d i f f e r e n t i a l between the two countr ies before trade is greater than the t ransportat ion cost . It is evident that r e l a t i v e l y low 4 1 t ransportat ion costs in r e l a t i on to the p r i ce d i f f e r e n t i a l w i l l lead to much greater pr i ce dependency between countr ies than w i l l r e l a t i v e l y high transport costs [ 4 7 , p . 1 8 ] . The development of these diagrams f a c i l i t a t e s the theore t i ca l d i scuss ion of the spat ia l equ i l i b r ium model because they permit examina-t ion of impediments to trade via government regu la t ion, a l b e i t in a s i m p l i f i e d two by one model. In th i s study two bas ic types of l e g i s l a -t ion i n te r fe re with free trade. The f i r s t type of l e g i s l a t i o n involves the mandatory fumigation of a s p e c i f i c plant va r ie ty (see Appendix A) re su l t ing in an increased level of mor ta l i t y amongst the v a r i e t y . This is analagous to the i n t r o -duction of a f ixed import duty on trade between regions. As a resu l t excess demand is reduced by an amount ident i ca l to the d i rec t costs (cost of applying spray) and the i nd i rec t costs ( increased morta l i ty ) of the r e s t r i c t i o n . Figure 2.2 i l l u s t r a t e s such a s i tua t ion showing the resu l tant reduction in trade from OB to OB"., The new equ i l i b r ium pr i ce in the surplus region one f a l l s from P to P* while the new pr i ce in the d e f i c i t or importing region two becomes P*, plus the relevant t ransportat ion cost plus the cost of meeting the government r e s t r i c t i o n . This p r i ce w i l l be greater than the o r i g i n a l P i f the cost of government regulat ion is greater than PP*. In l inear programming terms, a l lowing th is case to be genera l -ized to the mul t ip le region s i t u a t i o n , the appropriate ob ject i ve funct ion components are increased from T. j (or C.j)tt-o: T. . + G. ( 1 6 ) U J hi Region One Figure 2.2 Two region trade model with government r e s t r i c t i o n s in movement of commodity. Region One P Region Two 0. 0 Figure 2.3 Two region trade model with government p roh ib i t i on in movement of commodity. 43 where Gj represents the cost of complying with government regulat ions in export ing the commodity in quest ion. Therefore the amount of trade is reduced and the p r i ce d i f fe rence between regions is increased by G.. The second type of l e g i s l a t i o n involves the complete blockage of trade between cer ta in regions for plant protect ion purposes. In th is case the l im i t a t i on is placed upon the relevant trade flow a c t i v i t y thus p roh ib i t i n g trade a l together . Appendix A indicates the type of l e g i s l a t i o n re su l t i ng in such trade movement p r o h i b i t i o n . Since th i s l e g i s l a t i o n p roh ib i t s movement rather than r e s t r i c t i n g i t between cer ta in o r i g in s and des t inat ions , no p r i ce interdependency between the regions in question e x i s t s . Figure 2.3 (p. 42) shows the e f f e c t s of th i s regu lat ion in terms of the two region Samuelson trade model. In th is case the center port ion is blank because excess demand in region one is not allowed to in teract through trade with excess supply in region two. Hence no new in ter sec t ion can be a r r i ved at and a large p r i ce d i f f e r e n t i a l P ^ i s maintained between regions one and two. -In the l inear programming format i t is convenient to handle proh ib i ted trade routes through a l t e r a t i o n of the t rans fer matrix in the subject ive func t ion . By doing th i s the program defaul ts on the proh ib i ted routes by not cons ider ing them as f ea s i b l e a l t e rna t i ve s in so lv ing the minimization problem. Thus the so lu t ion con-tains locat ions which may be high cost sources of supply r e l a t i v e to the excluded production areas,abut which are acceptable because of the ex-c lu s ion of supply from proh ib i ted regions. kh These plant protect ion regulat ions represent the major i n s t i t u -t iona l imperfections in f luenc ing the B.C. nursery trade. The regulat ions do not apply equal ly between a l l the eight regions considered in the model. The inc lus ion of regulat ions on some regions and the exc lus ion on others set the i n s t i t u t i o n a l framework within which interreg iona l and internat iona l competition take p lace. Subsequent ana lys i s w i l l show that th is regulatory framework induces plant movement over and above the responses expected in a competit ive market s t ruc tu re . Later ana lys i s w i l l show that in fact ce r t a in regions are placed in a hazardous pos i t ion with respect to the i r a b i l i t i e s to compete with other regions both in the regulated commodity and other non-regulated ornamental nursery commodities as we 11. CHAPTER 3 THE EMPIRICAL MODEL The purpose of th is chapter is to spec i fy the succession of analyses used in the two empir ica l models and to set out the data requ i re -ments and methodology used in pursuing the object ives of th is study. The bas ic assumptions of the models, have been stated in Chapter 2. However, these l im i ta t i ons w i l l be r e i t e r a t e d for emphasis where necessary. It is recognized that these assumptions represent an abs t rac t ion from r e a l i t y although they are not thought to ser ious ly d i s t o r t the f ind ings of the ana l y s i s . Solut ion to the models was obtained through use of the "LIP" programming package and the computing centre f a c i l i t i e s at The Un ivers i ty of B r i t i s h Columbia. Regional Demarcation of Producing and Consuming Regions In empir ica l studies involv ing spa t i a l equ i l ib r ium ana lys i s i t is necessary to d iv ide the 'economic world 1 cons idered, into d i s c re te production and consumption regions fo r a given commodity. This geogra-phica l demarcation fo l lowing Judge [22], requires that supply and demand for each region be concentrated at one representat ive ppumt or town with in the region. This s p e c i f i c a t i o n presupposes homogeneous spa t i a l d i s t r i b u t i o n between a l l points wi th in each respect ive reg ion. 45 he For the purpose of this study the B.C. supply and demand regions, as well as the i r representat ive po ints , were taken to be co inc ident in four regions as set out in Chapter 1. These four regions and the i r res -pect ive representat ive points are as fo l lows: Fraser Va l ley West (Van-couver), Fraser Va l ley East (Chi 11iwack), Vancouver Island ( V i c t o r i a ) , and the Inter ior (Kelowna). The three import or surplus supply locat ions , which are p a r t i a l l y s pec i f i ed in the models are: Washington ( Sea t t le ) , Oregon (Port land), and C a l i f o r n i a (Los Angeles). The one p a r t i a l l y spec i f i ed demand or surplus consumption locat ion is the P ra i r i e s (Calgary). The r a t i o n a l i z a t i o n for such de l ineat ions is based on de ta i l ed import and domestic production data for B r i t i s h Columbia in 1973- This data pertains to the prev ious ly mentioned nursery mater ia l s : Golden Juniper, Thuja Pyramida 1is, and Mugho Pine. Regional Demand Estimates The two a n a l y t i c a l models used in th i s study, the t ransportat ion model and the p roduc t i on -d i s t r i bu t i on model both u t i l i z e predetermined demand quant i t ies which do not vary from one model to the other or from one ana lys i s to the next. The absence of published aggregate data on consumption or sa les , makes the est imat ion of demand quant i t i e s a very d i f f i c u l t task. The demand estimates for each of the f i v e consumption regions in the study are derived from two sources. The f i r s t source involved records of imports of the three spec i f i ed mater ia l s into the f i v e consumption regions while the second source involved de ta i l ed information on sales hi in the consumption regions as c o l l e c t e d by personal interview of a l l ornamental propagators in the province. Extreme care was taken in u t i l i z 1 ing these data sources to avoid double counting, as a s ing le plant may be sold in many d i f f e r e n t age/s ize categories over the years. Of the two components, imports and sa les , which make up the demand estimates for ornamental mater ia l s , the former w i l l be considered f i r s t . Import data was obtained from Ag r i cu l tu re Canada, Plant Protec-t ion D iv i s ion for the 1973 calendar year. Appendix B provides a de ta i l ed account of import data a cqu i s i t i on and compi lat ion for the purpose of this study. Tables B.5 and B.6 in Appendix B show the relevant information concerning imports into each of the four B.C. regions from the three U.S. o r i g i n s . Pr ice and quant ity data is d isplayed by an age/s ize c l a s s i f i -cat ion breakdown in order to f u l f i l l the homogeneous commodity requ i re -ments of the empir ica l model. This information represents the import component of the demand estimates for the B.C. regions. The other component of demand estimates was based upon sales of nursery materia ls by propagators in B.C. This information was obtained by personal ized interview of t h i r t y - f o u r ornamental propagators involved in production of the spec i f i ed mater ia l s . Production and sale of nursery mater ia l s are markedly d i f f e r e n t /from other a g r i c u l t u r a l products. Nursery mater ia l s are not harvested and sold l i k e the majority of a g r i c u l t u r a l crops, so that a d i s c re te production period can be i d e n t i f i e d . Rather, nursery stock production is a continuous process. The plant continues to grow and in e f f e c t 48 increases in market value over a number of years, although 'harvest ' may occur at any time. IHence, i t is necessary to e s t ab l i sh a somewhat a r b i t r a r y range of age/s ize c l a s s i f i c a t i o n s into which the nursery mater ia ls can be placed to enable i d e n t i f i c a t i o n of sales volume, pr i ce and cost of product ion. Accord ing ly , a number of c l a s s i f i c a t i o n s were used. In most cases these c l a s s i f i c a t i o n s are a composite of age, container s i ze and/or plant dimension equ iva lents . These categor ies provide some degree of consistency in recording sa les . Nevertheless, ind iv idua l growers some-times deviate from the composite c l a s s i f i c a t i o n s as growth rates in the time dimension (e.g. , two years) vary with rates in the s ize dimension ( i . e . , 12/15 inches or one g a l l o n ) , p a r t i c u l a r l y as material becomes o lder . Tables C. l to C.4 in Appendix C set out these categories for the four domestic "propagation locat ions and the three chosen l ines of ornamental mater ia l s : Golden Juniper, Thuja Pyramidal is and Mugho Pine. Care was taken to ensure that the proper des t inat ion of sales was noted so consumption amongst the four regions would be accurate ly represented. For the purpose of ana lys i s in th i s study the one gallon-12/15 inches equivalent c l a s s i f i c a t i o n was used as the homogeneous commodity across the three plant v a r i e t i e s . This category was chosen for a number of reasons. Amongst the three p[lant v a r i e t i e s , the one ga l lon s ize was cons i s ten t l y ranked e i t he r f i r s t or second in volume and value terms for both imports and domestic sa les , as is indicated in Tables B.5, B.6, C . l , C.2, C.3, and C.4. In add i t i on , th is category was the most con-s i s t e n t l y homogeneous. The other large volume category, one year l i n e r s , was much more d i f f i c u l t to c l a s s i f y accurate ly with respect to age and s i z e . This d i f f i c u l t y occurs due to c l i m a t i c d i f ferences between pro-ducing regions, d i f f e r e n t propagation methods, such as container grown versus f i e l d grown plants and growers' use of d i f f e r e n t pot s izes for various s izes and ages of mater i a l s . Time and f i nanc i a l cons iderat ions regarding the completion of th i s study made i t impossible to pursue ana lys i s on more than one s i ze group. The data in the appendices does pnovide, nevertheless , the option for future research across a wider range of age/s ize categor ies for these three ornamental mater ia l s . Table 3-1 i l l u s t r a t e s the aforementioned to ta l s of imports and domestic sales for consumption of one ga l lon equivalents of Golden Juniper, Thuja Pyramidal is and Mugho Pine in 1973. Demand estimates for Calgary in th i s table are r e s t r i c t e d to sales a r i s i n g from material o r i g i n a t i n g in the four B.C. areas. Therefore, th i s region is only p a r t i a l l y s p e c i -f i e d with respect to consumption in the models. The U.S. regions are not spec i f i ed with respect to consumption at a l l , but are s t r i c t l y supply sources. Regional Supply Estimates—Model I The production or supply estimates for use in the t ransportat ion model (Model l ) , were derived from two sources. The f i r s t source was import data from the Plant Protect ion D iv i s ions and the second source was information obtained by personal interview with domestic propagators. Production in the U.S. areas was taken as co inc ident with recorded imports TABLE 3.1 H i s t o r i c a l l y P r e d e t e r m i n e d P r o d u c t i o n and Consumpt ion f o r One G a l l o n E q u i v a l e n t s o f Go lden J u n i p e r , T h u j a P y r a m i d a l i s and Mugho P i n e f o r E i g h t Reg ions in t h e U.S. and Canada—1973 Reg i on P r o d u c t i on Consumpti on S u r p l u s De f i c i t J u n i p e r Th u j a P i ne J u n i pe r Th u j a P i n e J u n i pe r T h u j a P i ne J un i' pe r T h u j a P i ne 1 . Los A n g e l e s 16,770 4,725 0 - - - 16,770 4,725 0 - - -2. P o r t l a n d 12,900 9,543 0 - - - 12,900 9,543 0 - - -3. S e a t t 1 e 2,800 2,460 0 - - - 2,800 2,460 0 - - -4. Vancouve r 17,450 12,500 10Q470 35T135 29T735 127040 278OO 2 ;460 u 17^685 17^235 1,570 5. C h i l l i w a c k 8,000 8,100 7,495 2,950 5,018 1,895 5,050 3,082 5,600 - - -6. V i c t o r i a 7,500 6,000 5,000 4,835 3,025 2,200 2,665 2,975 2,800 - - -7. Ke1 own a 1 ,000 1,000 100 20,950 4,950 230 - - - 19,950 3,950 130 8. Ca1gary 0 0 0 2,550 1 ,600 6,700 - - - 2,550 1,600 6,700 T o t a l s : 66,420 44,328 23,065 66,420 44,328 23,065 40,185 22,785 8,400 40,185 22,785 8,400 5 1 i n t o t he p r o v i n c e t h r ough the t h r e e i n s p e c t i o n p o r t s o f e n t r y : V a n c o u v e r , V i c t o r i a and P e n t i c t o n . Import q u a n t i t i e s were a g g r e g a t e d a c c o r d i n g t o U.S. o r i g i n and y i e l d e d t he p r o d u c t i o n e s t i m a t e s used i n the mode l s f o r Los A n g e l e s , P o r t l a n d and S e a t t l e as shown i n T a b l e s B . 5 and B . 6 i n A p p e n d i x B. Imports o f t he cho sen l i n e s o f m a t e r i a l s were n e g l i g i b l e f rom c o u n t r i e s o t h e r t han the U.S. No p r o d u c t i o n s p e c i f i c a t i o n i s g i v e n f o r the C a l g a r y r e g i o n in t h i s a n a l y s i s . P r o d u c t i o n d a t a f o r t he B.C. r e g i o n s was g a i n e d f rom p e r s o n a l i n t e r v i e w s o f t h i r t y - f o u r d o m e s t i c p r o p a g a t o r s engaged i n o r n a m e n t a l p r o d u c t i o n . The e a r l i e r d i s c u s s i o n p e r t a i n i n g t o a g e / s i z e c l a s s i f i c a -t i o n s , a p p l i e s e q u a l l y t o t he s u p p l y e s t i m a t e s o f one g a l l o n e q u i v a l e n t s f o r Go lden J u n i p e r , Thu ja P y r a m i d a l i s and Mugho P i n e . A g a i n t he one g a l l o n e q u i v a l e n t c l a s s i f i c a t i o n was used and p r o d u c t i o n e s t i m a t e s o f the f o u r d o m e s t i c r e g i o n s were d e r i v e d . These p r o d u c t i o n q u a n t i t i e s a t t e m p t e d t o t a k e i n t o a c c o u n t o n l y t h a t p o r t i o n o f t o t a l p r o d u c t i o n w h i c h was o f f e r e d f o r s a l e as one g a l l o n p l a n t s , n e t t i n g o u t p r o d u c t i o n c ommi t t ed f o r g r o w i n g - o n and sub sequen t s a l e as l a r g e r s i z e d s t o c k . N e v e r t h e l e s s , as t h i s d a t a i s h i s t o r i c a l i n n a t u r e i t may c o n t a i n a s m a l l amount o f b i a s . I f , f o r e x a m p l e , r e a l i z e d s a l e s f e l l s h o r t o f a v a i l a b l e p r o d u c t i o n and the g rower s i m p l y r e c l a s s i f i e d t he u n s o l d p o r t i o n t o a g r o w i n g - o n commitment, p r o d u c t i o n e s t i m a t e s used i n t he model s wou ld be s l i g h t l y u n d e r s t a t e d as t o t h e i r 1 9 7 3 l e v e l s . T a b l e s C . l l t o n G . f t p r e s e n t a summary o f t h i s d o m e s t i c p r o -d u c t i o n d a t a . T u r n i n g back a g a i n t o T a b l e 3 . 1 ( p . 5 0 ) the p r e d e t e r m i n e d p r o -d u c t i o n o f t he e i g h t r e g i o n s i n c l u d e d i n t he a n a l y s i s and t h e r e s u l t a n t 52 surplus or d e f i c i t pos i t ion of each region is shown. It is assumed that demand for these nursery mater ia ls is not a f fec ted by whatever age/s ize and qua l i t y v a r i a t i on ex i s t s within the one ga l lon equiva lent category. It should be noted that demand and supply data was gathered by an input/output table approach which afforded simultaneous r e c o n c i l i a -t i o n . This procedure ensured that supply equaled demand as required by the models. Transportat ion and Brokerage Costs In order to spec i fy the ob jec t i ve funct ion in the empir ica l model i t was necessary to secure f re i gh t ta i r i f f rates between every pair of representat ive points of production and consumption regions. Accord ing ly , t ransportat ion rates were based on publ ic truck transport lev ies in e f f e c t for the 1973 calendar year. A l l rates quoted in th is study are in terms of Canadian funds and necessary adjustments were made according to the average exchange rate p reva i l i ng in 1973 as shown in Table D.l, Appendix D. In add i t ion to transport rates , i t was necessary to introduce brokerage charges into the ana l y s i s . Table D.2, Appendix D sets out a schedule of typ ica l brokerage charges applying to nursery mater ia l s t rans -ported from U.S. o r i g in s to Canadian des t ina t ions . In preparing th i s data for use in the models i t was necessary to convert the t ransportat ion charges and brokerage fees into the form 'cents per p l an t . ' In order to estimate per unit rates a number of assumptions were required. With respect to t ransportat ion costs which are based on 53 gross weight as represented in Tables D.3 and D.4, Appendix D, the average weight per plant in a container with medium was taken as 7 lbs . Furthermore, the rates per unit are predicated upon a f u l l s e m i - t r a i l e r load of plants at a tota l weight of approximately 40,000 lbs . Table D.5, Appendix D, i l l u s t r a t e s the transport rates in cents per plant and expla ins the d e t a i l s of the i r c a l c u l a t i o n . Proceeding on the basis of this i n f o r -mation and assuming a f u l l s e m i - t r a i l e r load of 6,000 one ga l lon plants valued at $5,000, the tota l brokerage charge for the shipment would be twenty d o l l a r s . This would work out to a fee of $.0G3/plant in Canadian funds. The tota l t ransportat ion cost-brokerage fee matrix is i l l u s t r a t e d in Table 3.2. This matrix appl ies only to one ga l lon equivalents and would require cons iderable a l t e r a t i o n fo r smaller or larger s ized mater-i a l s ( i . e . , one year l i ne r s or two ga l l on ) . The smaller a shipment is in gross weight and value, the more expensive i t is per unit of ma te r i a l . Therefore, i t is poss ib le that the rate s t ructure induces r e l a t i v e l y large s ized shipments to capture th is economy. Note that Table 3-2 i m p l i c i t l y assumes that for any given pair of regions A and B, the t ransportat ion cost from A to B is i dent i ca l with the cost for B to A. Transportat ion Mode 1--Ana 1ysis I Analys i s I makes use of the data suppl ied in Tables 3-1 (p. 50) and 3.2. These tables summarize surplus product ion, d e f i c i t consumption and costs of t ransportat ion between the surplus and d e f i c i t regions. A t ransportat ion cost of zero has been a t t r i bu ted to regional demand locat ions TABLE 3.2 Estimated Composite Transportat ion C o s t S T ^ B n b k e i r a g e F F e e s ' i nCCentsPPerrPI ant-Between Representative Points of Eight Regions in Canada and the U.S. in Canadian Funds—1973- (One Gallon Equivalents) Or ig in - ^ D e s t i n a t i o n Los Angeles Port land Seatt le Vancouver Chi 11iwack V i c to r i a Kelowna Ca1gary Los Angeles 0 - - \kM 17.0 C 17.9C 19.2C 28.7? Port land 0 - 8.8 11.4 12.3 13.6 23.1 Seat t le 0 5.7 8.3 9.2 10.5 20.0 Vancouver 0 2.6 3.5 4.8 14.3 Chi 11iwack 0 6.1 7.4 16.9 V i c t o r i a 0 8.3 17.8 Ke1 own a 0 9.1 55 which correspond to the same regional supply l oca t ions . Therefore, de-mand in a pa r t i cu l a r locat ion is automat ica l ly assigned i t s own supply and the re su l t ing d e f i c i t or surplus is s a t i s f i e d by so lu t ion of the transportat ion model. Consequently the surpluses at Los Angeles, Por t -land, Sea t t l e , Ch i l l iwack and V i c t o r i a are a l l o ca ted according to a t ransportat ion cost mrhmimization c r i t e r i o n to the d e f i c i t s at Vancouver, Kelowna and Calgary. The t ransportat ion model is used only in Analys i s I and is then replaced by the p roduc t i on -d i s t r i bu t i on model in subsequent analyses. Analys is I shows the optimal d i s t r i b u t i o n pattern in 1973munder condit ions in which domestic production of Golden Juniper, Thurjia Pyramidal is and Mugho Pine is a lready determined h i s t o r i c a l l y along with imports from the U.S., and the optimal trade pattern depends so le l y on t ransportat ion cos t s . This d i s t r i b u t i o n pattern focuses on the e f f e c t s that locat ion and the associated t ransportat ion costs have on trade. However, this model does not possess s u f f i c i e n t f l e x i b i l i t y to al low ana lys i s with in a framework where varying degrees of competitiveness and l e g i s l a t i v e const ra int s to trade e x i s t . This more complex s i t u a t i o n is best handled by the p roduc t i on -d i s t r i bu t i on model (Model II), in a succession of analyses which w i l l be discussed shor t l y . Regional Supply Estimates—Model II The regional supply estimates used in Model II d i f f e r cons iderably from those of Model I. Model II allows the use of a p e r f e c t l y e l a s t i c regional supply r e l a t i on in conjunction with the same predetermined demand 56 re l a t i on used in Model I. It is often a n a l y t i c a l l y r e a l i s t i c to con-s t r a i n th i s type of e l a s t i c supply in a way which places an upper l im i t on supply leve ls from the various production regions. Such constra ints al low a so lut ion within the "LIP" format and prevent one or two least cost production regions from supplying a l l d e f i c i t areas in the model, thereby excluding other higher cost production areas from the fea s i b l e so lut ion set . This procedure permits so lu t ion on a least cost basis un-hindered by h i s t o r i c a l production cons t ra in t s . Model II constra ins domestic production regions at a level of 20 percent above the i r predetermined quant i t ie s as expressed in Model I. These augmented production leve l s were a r r i ved at from data co l l e c ted when conducting the interviews of domestic propagators. From this i n -formation i t was determined that an average increase in domestic produc-t ion of roughly 20 percent could be achieved by B.C. propagators. Such an increase could be achieved in the short run across the three chosen v a r i e t i e s being invest igated, although production of other v a r i e t i e s might be reduced. In th i s case the short run is def ined as a period of time s u f f i c i e n t l y short so that factors of product ion, such as land, greenhouse area, and other production s tructures cannoittbeeailiteeed. It is s u f f i c i e n t l y long, however, for va r i ab le factors l i ke labor and mater-i a l s to be adjusted. Table 3-3 summarizes these domestic production adjustments and sets out predetermined demand quant i t i e s along with disposal region quan-t i t i e s . Although expanded domestic production at the 20 percent level cons t i tu tes the major supply modi f i cat ion in Model II, a number of other TABLE 3.3 H i s t o r i c a l l y Predetermined Consumption and Predetermined U.S. Production with Domestic T w-- : Produethon-Augmented^byoZOOpercentofiorqOneaGail lon^'Equrva':lenl!s r-6f0 ' " - 3 ? : . Jd-Golden JuniperjnThuja Eyrjami Ha<J;i s^andnMughoL'Pli neaf orCanada— 1373 E i ght-Regions i/msfcheaU .Si. i.and Canadar-1973' Region Production Consumption Surpl us Def i ci t Jun i per Thuja Pi ne Jun i per Th uj a Pine Jun i per Thuja Pine Jun i per Thuja Pine 1. Los Angeles 16,770 4,725 0 - - - 16,770 4,725 0 - - -2. Portland 12,900 9,543 0 - - - 12,900 9,543 0 - - -3. Seat t le 2,800 2,460 0 . - - - 2,800 2,460 0 - - -4. Vancouver 20,9^0 15,000 12,564 35,135 29,'735 12,040 - - 524 14,195 14,735 -5. Chi l l iwack 9,600 9,720 8,994 2,950 5,018 1,895 6,650 4,702 7,099 - - -6. Vi c t o r i a 9,000 7,200 6,000 4,835 3,025 2,200 4,165 4,175 3,800 - - -7. Kelowna 1 ,200 1 ,200 120 20,950 4,950 230 - - - 19,750 3,750 1 10 8. Ca1gary 0 0 0 2,550 1,600 6,700 - - - 2,550 1,600 6,700 9. Di sposal 0 0 0 6,790 5,520 4,613 - - - 6,790 5,520 4,613 Tota l s : 73,210 49,848 27,678 73,210 49,848 27,678 43,285 25,605 11,423 43,285 25,605 11,423 Includes a Disposal Consumption Region. 58 production var ia t ions are used, p a r t i c u l a r l y with respect to import supply l eve l s . These a l t e r a t i on s are discussed in greater d e t a i l in a l a ter sect ion of th i s chapter. Domestic Cost of Production Estimates Within each domestic production region ( i . e . , Vancouver, C h i l l i -wack, V i c t o r i a and Kelowna) there ex i s t s nursery enterpr i ses of d i f f e r e n t s izes and varying input and output mixes. Each of these enterpr i ses generate an unique set of production costs per acre and per var ie ty of mater ia ls propagated. In order to a r r i v e at cost of production data which could be used in the p roduc t i on -d i s t r i bu t i on model, i t was necessary to ca l cu l a te cost of production as an average cost of production per plant wi th in each of the four regions. As a resu l t of th i s procedure, ind iv idua l en te rpr i se d i f ferences are subsumed with in the weighted average cost of production f i gu res , thus generating regional d i f fe rences which a f f e c t in terreg iona l trade. These ' po in t ' cost of production estimates are weighted on a production volume ba s i s. During the personal interview segment of th i s study, cost of pro-duction information for the chosen l ines of propagated plant material was obtained from propagators in the four domestic production regions for each age/s ize c l a s s i f i c a t i o n for the 1 9 7 3 calendar year. Care was taken to c o r r e c t l y ident i fy the components of the growers' cost of production e s t i -mates. Cost of production estimates included account of the operators ' labor and any unpaid family labor which was u t i l i z e d . These f igures were 59 then reconc i led with ex i s t i ng cost of production data [8]. Appendix E discusses th i s cost of production est imation procedure in greater d e t a i l . In p a r t i c u l a r , the bounding of these point estimates by a confidence interva l is cons idered. Excluded from these estimates obtained from the growers were opportunity cost cons iderat ions perta in ing to the value of land and c a p i -tal investment. Consequently i t was necessary to add in these opportunity cost items in order to a r r i v e at an e x p l i c i t determination of cost of production per plant for the chosen l ines of i nves t i ga t i on . An explana-t ion of the methodology employed in th i s process is contained in Appendix E and the average opportunity cost f i gures are set out in Table E.2. Table E.3 i l l u s t r a t e s the composite cost of production inc luding oppor-tuni ty cost f igures for the four domestic regions for the one gal lon equivalent category of each chosen plant v a r i e t y . Import Procurement Costs Import procurement costs are based on the weighted averages of pr ices paid by Canadian importers F.O.B. U.S. nursery supp l i e r s . These pr ices were recorded from h i s t o r i c a l information concerning imported p lant mater ia l s on f i l e at the Ag r i cu l tu re Canada, Plant Protect ion O f f i ce s in Vancouver, V i c t o r i a and Penticton (see Appendix B). Wholesale p r i ce c a t a -logues were secured from a number of the U.S. £X;p<aete.tf-s; to determine i f recorded pr ices at time of entry into Canada were co inc ident with pr ices o f fered in the catalogues. It was found that in most cases the pr ices were ' f a i r market va lue ' pr ices although l i b e r a l use of trade discounts was observed. 60 When ca l cu l a t i n g the average import procurement pr ices at each of the three U.S. supply locat ions these discounts were taken into account. Table E.4 in Appendix E indicates the procurement costs F.O.B. each U.S. o r i g i n for the one ga l lon s ize c l a s s i f i c a t i o n of Golden Juniper, Thuja Pyramidal is and Mugho Pine for the 1973 calendar year. The estimated to ta l of import procurement costs , domestic costs of product ion, inc luding oppor-tun i ty costs and truck rates in cents per plant between representat ive points of the e ight regions in Canada and the U.S., are given in Tables 3.4A. 3.4B and 3-4C. Leg i s l a t i ve Constraints For the purpose of th i s study two types of l e g i s l a t i v e constra ints are considered. The f i r s t type of l e g i s l a t i o n is the complete p r o h i b i -t ion of plant movement between ce r t a in regions s pec i f i ed within the model. The Pear T r e l l i s Rust Quarantine (see Appendix A) perta ins to the movement oifna HfJtchipemts'i.sppspjfroifirwegifogsowfeieiiseethI shehi;seasea:i;s known-to occur . In 1973, th i s regulat ion e f f e c t i v e l y prevented movement of Golden Junipers from the Vancouver, Chi 11iwack and V i c t o r i a regions to the de-f i c i t consumption area in the Inter ior of the province. This regulat ion d id not a f f e c t U.S. imports into any of the domestic regions in the province. Such a p roh ib i t i on of movement is represented in the product ion-d i s t r i b u t i o n model as a complete blockage in the t rans fer rows between the appropriate o r i g i n s and dest inat ions a f f e c t e d . It is hypothesized that th i s regulat ion induces movement of nursery mater ia l s between regions in a way that erodes the competit ive advantages of domestic producing areas. TABLE 3-4-A Estimated Composites of Import Procurement Costs, Domestic Costs of Production Including Opportunity Costs, and Transportat ion—Brokerage Rates in Cents Per Plant Between Representative Points of Eight Regions in Canada and the U.S. in Canadian Funds for Juniperus chinensis pfitzeriana aicoea—1973^ (One Gallon Equivalents) Or i gin ^^"""^ Los Angeles Port land Seatt le •"""^ Destination Vancouver Chi 11iwack V i c t o r i a Kelowna Ca 1 gary Di sposa1 Los Angeles 91 - 35c 105-45? 108.05? 108.95? 110.25? 119-75? 500.00 Port land 70.34 78.84 81 .44 82.34 83-64 93-14 500.00 Seatt le 93-36 98.76 101.36 102.26 103-56 11 3 - 06 500.00 Vancouver 71 -00 73.60 74.50 75-80 85-30 500.00 Ch i11iwack 72.60 70.00 76.10 77-40 86.90 500.00 Vi c t o r i a 74.50 77.10 71 -00 79-30 88.80 500.00 Kelowna 76.80 79-40 80.30 72.00 81.10 500.00 ' Includes a Disposal Consumption Region mature dumping into th i s region before a l l real The Disposal A c t i v i t y demands are met. i s set at 500.00 to prevent pre -ON TABLE 3-4-B Estimated Composites of Import Procurement Costs, Domestic Costs of Production Including Opportunity Costs, and Transportat ion—Brokerage Rates in Cents Per Plant Between Representative Points of Eight Regions in Canada and the U.S. in Canadian Funds for Thuja oaoidentalis pyramidalis—1973' (One Gallon Equivalents) Or ig in -^^Dest inat ion Los Angeles Portland Seatt le Vancouver Chi 11iwack Vi c t o r i a Kelowna Ca1gary Di sposa1 Los Angeles 91.35c 11.05,45C 108.05C 108. .95C 110.25c 119.75C 500.00 Portland 62.34 70.84 73.44 74. •34 75.64 85.14 500.00 Seatt le 99-36 104.76 107.36 108. .26 109.56 119.06 500.00 Vancouver 68.00 70.60 71. .50 72.80 82.30 500.00 Ch i11iwack 69.60 67.00 73. .10 74.40 83.90 500.00 V i c to r i a 72.50 75.10 69. ,00 77.30 86.80 500.00 Ke1owna 74.80 77.40 78. .30 70.00 79.10 500.00 1 Includes a Disposal Consumption Region. The Disposal A c t i v i t y is set at 500.00 to prevent pre-mature dumping into th is region before a l l real demands are met. TABLE 3.4-C Estimated Composites of Import Procurement Costs, Domestic Costs of Production Including Opportunity Costs, and Transportat ion—Brokerage Rates in Cents Per Plant Between Representative Points of Eight Regions in Canada and the U.S. in Canadian Funds for Pinus mugho mughus—1973^ (One Gallon Equivalents)^ Or ig in Destination Los Angeles Port land Seat t le Vancouver Ch i11iwack V i c t o r i a Kelowna Ca 1 gary Di sposa1 Los Angeles (180.40) il;7M0c (194.10) 11:84.10c (196.7,0) 186.70c (197.60) 187.60c (198.90) 188.90c (208.40) 198.40c 500.00 Portland (180.40) 170.40 (188.90) 178.90 (19*.50) 181.50 (192.40) 182.40 (193.70) 183.70 (203.20) 193.20 500.00 Seatt le (200.40) 190.40 (205.80) 195.80 (208.40 198.40 (209.30) 199.30 (210.60) 200.60 (220.10) 210.10 500.00 Vancouver 94.00 96.60 97.50 (108.80) 98.80 108.30 500.00 Chi l l iwack 95.60 93-00 99.10 (110.40) 100.40 109.90 500.00 Vi c t o r i a 97-50 100.10 94.00 (112.30) 102.30 111.80 500.00 Kelowna 100.80 103.40 104.30 96.00 105.1 0 500.00 ' Includes a Disposal Consumption Region mature dumping into th is region before a l l real The Disposal A c t i v i t y demands are met. is set at 500.00 to prevent pre -Bracketed data is composite procurement cost plus 10.0/plant estimated cost of meeting Plant Protect ion regulat ions where they occur ( i . e . , fumigation charge and increased mor ta l i t y ) . Estimate provided by Monrovia Nursery, Azusa, C a l i f o r n i a . 64 The second type of l e g i s l a t i o n involves a r e s t r i c t i o n in the movement of plants between c e r t a i n spec i f i ed regions. The European Pine Shoot Moth Regulations, as set out in Appendix A, apply to the sa le and movement of a l l Pinus spp.. in the province of B .C . In 1 9 7 3 , th i s regulat ion allowed the sa le and movement of Mugho Pine within the Vancouver, V i c t o r i a and Chi l l iwack regions. Mugho Pine moving outs ide of these regions, or being imported from the U.S., was required to be s p e c i a l l y fumigated with methyl bromide by a c e r t i f i e d agency before movement was a 11 owed. Such a regulat ion is represented in the p roduc t i on -d i s t r i bu t i on model by an increase in the appropr iate ob jec t i ve funct ion cost c o e f f i c -ients . This w i l l represent the added cost of meeting the regu lat ions , both in terms of fumigation charges and increased mor ta l i t y . The matrix i l l u s t r a t e d in Table 3 . 4 C (p. 63) includes these cos t s . No r e s t r i c t i o n s involv ing Thuja Pyramidal is sale or movement ex is ted in 1 9 7 3 . P roduct ion -D i s t r ibut ion Model Analyses I I-VM Tables 3 .1 , 3 -4A, 3 -4B, and 3 - 4 C (pp. 5 0 , 6 1 - 6 3 ) i l l u s t r a t e pre -determined supply and demand in Ana lys i s II. Analys i s II makes use of the same supply and demand quant i t ies u t i l i z e d in the t ransportat ion model of Ana lys i s I to a r r i v e at an optimum pattern of supply and d i s t r i -but ion. In th is respect, Ana lys i s II does not co inc ide with the produc-t i o n - d i s t r i b u t i o n model per se. However, the inc lus ion of domestic cost of production data and import procurement cost information, q u a l i f i e s the ana lys i s as a hybrid p roduc t i on -d i s t r i bu t i on model approach. 65 Analys i s III is i dent i ca l to Analys i s II with the exception that l e g i s l a t i v e const ra ints for Golden Juniper and Mugho Pine are i n t r o -duced into the model. The surplus Golden Juniper regions, Ch i l l iwack and V i c t o r i a in Table 3-1 (p. 50), are not allowed to supply the d e f i c i t region in Kelowna in accordance with plant protect ion regulat ions as set out in Appendix A. The Vancouver region is not allowed to supply the Kelowna area with Golden Juniper e i t h e r . Table 3.4C (p. 63) i l l u s t r a t e s the a l te red ob jec t i ve funct ion costs co inc ident with meeting r e s t r i c t i o n s for the sale and movement of Mugho Pine as set out in Appendix A. Thuja Pyramidalis is allowed unhindered movement between a l l regions included in the study. Analys i s IV and V u t i l i z e the ' t r u e ' p roduc t i on -d i s t r i bu t i on model by g iv ing the domestic producing regions in B.C. augmented supply con-s t r a i n t s . These const ra ints are determined by increas ing the 1973 pro-duction leve l s in domestic regions by 20 percent while holding consumption constant at the predetermined l e v e l s . United States production leve l s for Sea t t l e , Portland and Los Angeles were maintained at the i r predeter -mined l eve l s . Table 3-3 (p. 57) i l l u s t r a t e s the production leve l s used in these analyses. It demonstrates the use of a dummy region or disposal demand a c t i v i t y to reconc i le supply and demand in order to enable so lu t ion in the l inear programming format. Movement of nursery mater ia ls to the disposal regions before a l l other real demands are s a t i s f i e d , is excluded by the introduct ion of p r o h i b i t i v e l y high costs in the appropr iate ob jec t i ve funct ion a c t i v i t i e s . Tables 3-4A, 3.4B and 3.4C (pp. 61-63) show the relevant cost of production 66 and import procurement data used in Analyses IV and V. Ana lys i s IV y i e ld s optimal condit ions without l e g i s l a t i v e cons t ra in t s whereas Analys i s V includes l e g i s l a t i v e f a c to r s . Ana lys i s VI is s im i l a r to Analys i s V with the exception that f l e x i b l e regional production leve ls are allowed in a l l regions in the model. Table 3-5 indicates the production quant i t ie s used to simulate th i s s i t u a t i o n . In th i s ana lys i s a least cost supply region with com-parat ive locat iona l production advantages, could t h e o r e t i c a l l y supply a l l demand areas s pec i f i ed in the model. Again, a d isposal region is employed to take up the excess production and l e g i s l a t i v e const ra int s are inc luded. Analys i s VII u t i l i z e s s e n s i t i v i t y analyses on domestic production costs and t ransportat ion ra tes . In a l l cases domestic production is augmented by the standard 20 percent used in the preceding analyses and l e g i s l a t i v e factors are cons idered. Four s e n s i t i v i t y ' runs ' are made under a l t e r n a t i v e s t r a teg ie s . The f i r s t two cases consider a 5 percent increase in domestic production cos t s , 1975 t ransportat ion rates and i) predetermined U.S. product ion, o r , i i ) f l e x i b l e U.S. product ion. The other two cases involve the same s i t ua t i on except a 10 percent increase in domestic production costs is cons idered. In a l l cases, import pro-curement costs are assumed constant. Tables 3-6A, 3-6B and 3.6C show the data u t i l i z e d in the ob jec t i ve funct ions of the s e n s i t i v i t y analyses. Tables 3-3 (p. 57) and 3.5 i l l u s -t rate the various domestic and import production leve l s used for the s e n s i t i v i t y cases. The 1975 t ransportat ion-brokerage charges used in the TABLE 3-5 H : s> t Hi s tor i caH 'KydPre'det'eT-mi nefa^ Gofisumptti'ohhw'ith F lexi B'le- Reg ion^'1cP r'odtic't'i on-'>f or". One ' Gal'lond'Equ.ivailents of ^ Goldenafluri;i perr, - Thu'rjia Pyrami da 1 is andr"Mugho Pine f o r n e U S.- a n d E-i'gbta Reg ions ' i i icthe' U . S . an.d Canada-- 19731 - ?-y Region Production Consumpti on Surp1 us D e f i c i t Juni per Thuja P i ne Jun i per Thuja Pine Jun i per "Thuja Pine Juniper Thuja P i ne 1 . Los Angeles 75,000 50,000 25,000 - - - 75,000 50,000 25,000 -2. Port land 75,000 50,000 25,000 - - - 75,000 50,000 25,000 -3. Seat t le 75,000 50,000 25,000 - - - 75,000 50,000 25,000 -4. Vancouver 75,000 50,000 25,000 35,135 29,735 12,040 39,865 20,265 12,960 -5. Chi l l iwack 75,000 50,000 25,000 2,950 5,018 1,895 72,050 44,982 23,105 -6. Vi c t o r i a 75,000 50,000 25,000 4,835 3,025 2,200 70,165 46,975 22,800 -7. Ke1 owna 75,000 50,000 25,000 20,950 4,950 230 54,050 45,050 24,770 -8. Ca1gary 0 0 0 2,550 1,600 6,700 - - 2,550 1,600 6,700 9. Di sposal 0 0 0 458,580 305,6,72 151,935 - - 458,580 305,672 151,935 Tota l s : 525,000 350,000 175,000 525,000 350,000 175,000 461,130 307,272 158,635 461,130 307,272 158,635 Includes a Disposal Consumption Region. TABLE 3.6-A Estimated Composites of Import Procurement Costs, Augmented Domestic Costs of Production Including Opportunity Costs,1 and 1975 Transportat ion—Brokerage Rates in Cents Per Plant Between Representative Points of Eight Regions in Canada and the U.S. in Canadian Funds for Juniperus ahinensis pfitzeviana auvea— 1973 2 (One Gallon Equivalents) Ori gin Los Angeles Port land Seat t le Vancouver Chi l l iwack 1 \l i c to r i a Kelowna Ca lgary Di sposa1 ^ D e s t i n a t i o n Los Angeles 91.35c 108.25c 111.35c 112.45c 114.05c 125.45c 500.00 Portland 70.34 80.54 83.64 84.74 86.34 97.74 500.00 Seatt le 93-36 99.86 102.96 104.06 105.56 116.96 500.00 Vancouver (74.55) (77.65) (78.75) (80.35) (91.75) 78.10 81 .20 82.30 83.90 95.30 500.00 Ch i11iwack (76.60) (73.50) (80.80) (82.40) (93.80) 80.10 77.00 84.30 85.90 97.30 500.00 V i c to r i a (78.75) (81.85) (74.55) (84.55) (95.95) 82.30 85.40 78.10 88.10 99.50 500.00 Kelowna (81.40) (84.50) (85.60) (75.60) (86.50) 85.00 88.10 89.20 79.20 90.10 500.00 ' Domestic Costs of Production are augmented by 5 percent and 10 percent . The 5 percent level is indicated by brackets. 2 Includes a Disposal Consumption Regi on. The Disposal A c t i v i t y i s set at 500.00 to prevent pre -mature dumping into th i s region before a l l rea 1 demands are met. TABLE 3.6-B Estimated Composites of Import Procurement Costs, Augmented Domestic Costs of Production Including Opportunity Cos t s , ' and 1975 Transportat ion—Brokerage Rates in Cents Per Plant Between Representative Points of Eight Regions in Canada and the U.S. in Canadian Funds for Thuja ooaidentalis pyramidalis—1973^ (One Gallon Equivalents) Origin Los * ^ Destination Angeles Port land Seat t le Vancouver Ch i11iwack Vi ctor i a Ke 1owna Cal gary Di sposa1 Los Angeles 91.35c - 108.25c 111.35c 112.45c 114.05c 125.45C 500.00 Portland 62.34 72.54 75.64 76.74 78.34 89.74 500.00 Seatt le 99-36 105.86 108.96 110.06 111 .56 122.96 500.00 Vancouver (71.40) 74.80 (74.50) 77-90 (75.60) 79.00 (77.20) 80.60 (88.60) 92.00 500.00 Ch i11iwack (73.45) 76.80 (70.35) 73-70 (77.65) 81 .00 (79.25) 82.60 (90.65) 94.00 500.00 V i c t o r i a (76.65) 80.10 (79.75) 83.20 (72.45) 75.90 (82.45) 85.90 (93.85) 97-30 500.00 Ke1owna (79-30) 82.80 (82.40) 85.90 (83.50) 87.00 (73.50) 77.00 (84.40) 87.90 500.00 ' Domestic Costs of Production are augmented by 5 percent and 10 percent. The 5 percent level is indicated by brackets. 2 'Includes a Disposal Consumption Region. The Disposal A c t i v i t y is set at 500.00 to prevent premature dumping into th i s region before a l l real demands are met. TABLE 3.6-C Estimated Composites of Import Procurement Costs, Augmented Domestic Costs of Production Including Opportunity Costs , 1 and 1975 Transportat ion—Brokerage Rates in Cents Per Plant Between Representative Points of Eight Regions in Canada and the U.S. in Canadian Funds for Pinus mugho mughus--1973^ (One Gallon Equivalents) Or ig in — Di sposa1 Los Angeles Port land Seatt le Vancouver Ch i11iwack V i c t o r i a Kelowna Calgary ^^Des t i na t i on Los Angeles 180000$$ 196.90c 200.00c 201.10c 202.70c 214.10c 500.00 Portland 180.40 190.60 193.70 194.80p 196.40 207.80 500.00 Seat t le 200.40 206.90 210.00 211.10 212.60 224.00 500.00 Vancouver (98.70) (101.80) (102.90) (104.50) (115.90) 103.40 106.50 107.60 109.20 120.60 500.00 Ch i11iwack (100.75) (97.65) (104.95) (106.55) (117-95) 105.40 1 02.30 109.60 111.20 122.60 500.00 Vi c t o r i a 4102.90) ;(106.00) (98.70) (108.70) (120.10) 107.60 110.70 103.40 113-40 124.80 500.00 Kelowna (106.40) (109.70) (110.80) (100.80) (111.70) 111.40 114.50 115.60 105.60 116.50 500.00 ' Domestic Costs of Production are augmented by 5 percent and 10 percent . The 5 percent level is indicated by brackets. 2 Includes a Disposal Consumption Region The Disposal A c t i v i t y is set . at 500.00 to prevent pre -mature dumping into th is region before a l l real demands are met. 71 s e n s i t i v i t y a n a l y s e s a r e d i s p l a y e d i n T a b l e 3.7 a n d h a v e b e e n i n c r e a s e d an a v e r a g e o f a p p r o x i m a t e l y 20 p e r c e n t o v e r 1973 c h a r g e s . T h e s e f o u r s e n s i t i v i t y c a s e s a r e i n t r o d u c e d t o d e t e r m i n e w h e t h e r o r n o t c h a n g e s i n p r o d u c t i o n a n d t r a n s p o r t a t i o n c o s t v a r i a b l e s w i l l l e a d t o d i f f e r e n t p r o d u c t i o n - d i s t r i b u t i o n p a t t e r n s t h a n t h o s e e s t a b l i s h e d i n t h e p r e c e d i n g a n a l y s e s . A s s u c h , t h e y i n d i c a t e t h e e x t e n t t o w h i c h c e r t a i n a r e a s h a v e o r do n o t h a v e c o m p e t i t i v e a d v a n t a g e s i n t h e p r o d u c t i o n a n d d i s t r i b u t i o n o f t h e s p e c i f i e d o r n a m e n t a l n u r s e r y m a t e r i a l s a m o n g s t t h e demand r e g i o n s i n c l u d e d i n t h e m o d e l . T h e s t r u c t u r e a n d c o m p o n e n t s o f t h e e m p i r i c a l m o d e l s u s e d i n t h i s s t u d y h a v e now b e e n e s t a b l i s h e d . T h e r e s u l t s o f t h e v a r i o u s a n a l y s e s u n d e r t a k e n t o a c h i e v e t h e o b j e c t i v e s o f t h e s t u d y a r e d i s c u s s e d i n d e t a i l i n t h e f o l l o w i n g c h a p t e r . TABLE 3-7 Estimated Composites Transportat ion—Brokerage Rates in Cents Per Plant Between Representative Points of Eight Regions in Canada and the U.S. In Canadian Funds —1975 (One Gallon Equivalents) Or ig in ^ -^Dest inat ion Los Angeles Port land Seatt le Vancouver Chi 11iwack Vi ctor i a Kelowna Ca 1 ga ry Los Angeles 0 - - 16.9c 20.0c 21.1c 22.7c 34.1c Portland 0 - 10.2 13.3 14.4 1616.0 27.4 Seatt le 0 6.5 9.6 10.7 12.2 23.6 Vancouver 0 3.1 4.2 5.8 17.2 Ch i11iwack 0 7.3 8.9 20.3 V i c t o r i a 0 10.0 21.4 Kelowna 0 10.9 Transportation-Brokerage rates augmented by 20 percent over 1973 rates. Source: Vancouver Rate Departments: Johnston Terminals, M i l l a r and Brown Trucking, Murcury F r e i g h t l i n e s , O.N.C., and Pub l i c Freightways. ':' A.B.C. Customs Brokers and Border Brokers, Vancouver, B.C. CHAPTER 4 RESULTS OF THE SPATIAL EQUILIBRIUM ANALYSES The resu l ts from seven analyses are discussed in th i s chapter. The previous chapters have developed the background, conceptual frame-work and data base of the study. So lut ion of the empir ica l models can now be interpreted in terms of projected patterns of regional production and consumption of the spec i f i ed nursery materia ls under condit ions assumed in the study. A l l so lut ions have been achieved within a l inear programming cost minimization format, whereby t ransportat ion costs are minimized in Model I and p roduc t i on -d i s t r i bu t i on costs are minimized in Model II. The short run context of these models must be kept in mind when in terpret ing the ana l y t i ca l r e s u l t s . The so lut ions are based on a s ing le year ' s data and condit ions may change outside of 1973, thus rendering these resu l t s unappl icable. Nevertheless, such ana lys i s is undertaken under the assumptions that i t can provide very useful comparisons in short run s i t u a t i o n s , which can be looked at in a longer run framework. Analys is I involves the t ransportat ion model (Model l ) , while Analys i s II to VI I concern the p roduc t i on -d i s t r i bu t i on model (Model II). Analys is II and III e s t ab l i sh a base-so lut ion for Model II for the 1973 calendar year. The p red i c t i ve c a p a b i l i t y of the model is examined by comparing the optimal condit ions generated and the actual data ex i s t i ng in 1973. Analyses IV to VII propose a l te rna te s t ra teg ies which y i e l d 73 74 project ions that can be compared with this base-so lut ion as a means of i den t i f y ing the impact of changes in ce r ta in va r i ab l e s . This approach al lows, through the success ive changing of v a r i ab l e s , an ana lys i s of the competit ive pos i t i on of domestic ppoduction regions v i s - a - v i s U.S. production areas. Ana l y t i ca l Results for Model I—Analys i s 1 Model I, or the t ransportat ion model, minimizes tota l transpor-ta t ion costs for domestic d i s t r i b u t i o n of Golden Jun iper , Thuja Pyrami-dal is and Mugho Pine under predetermined regional supply and demand cond i t ions . According to th i s s p e c i f i e d c r i ter ion ,opptiiima 1 sspatiial sal l o -cat ion patterns for one gal lon equivalents are der ived. The three optimum d i s t r i b u t i o n patterns fo r these chosen v a r i e t i e s are shown in Tables k.\ to 4.3, i nd ica t ing movement of mater ia ls from surplus to d e f i c i t regions. In examining the resu l t s of Ana lys i s I several q u a l i f i c a t i o n s must be cons idered. In ce r ta in instances, domestic production regions do hot a l l o c a t e product completely to s a t i s f y the i r own supply before they a l l o c a t e to other d e f i c i t regions. This occurs, despite a zero t ransportat ion cost assoc iated with such a s e l f - f u l f i l l i n g demand a c t i -v i t y . In these cases th is d i s t r i b u t i o n procedure requires that a region simultaneously import product from one region and export the same product to another region. At f i r s t glance, th is s i t u a t i o n appears to v i o l a t e the cost m i n i -mization c r i t e r i o n of the t ransportat ion model. Upon c loser examination, 75 TABLE 4.1 Optimum Trade Pattern of Golden Junipers for Analys i s 1—Model 1 1973 From to Los Angeles Port land Seatt le Vancouver Ch i l l iwack Vi c t o r i a Ke 1owna (Number of Plants) Total Vancouver Chi 11iwack V i c t o r i a Kelowna Calgary Supply 1 16,570 15,900 2,665 2,950 200 12,900 2,800 5,050 1,550 4,835 1 ,000 16,770 12,900 2,800 17,450 8,000 7,500 1 ,000 Total Demand 35,135 2,950 4,835 20,950 2,550 66,420 1 1973 predetermined supply estimates: see Table 3.1; 1973 t ransporta -t ion costs : see Table 3-2. 1973 predetermined demand est imates: see Table 3-1. TABLE 4.2 Opt i mum Trade Pattern of Thuja Pyramidal is for Analys i s 1--Model 1 1973 From to Vancouver (Number of Plants) Chi 11iwack V i c t o r i a Kelowna Calgary Total Supp1y' Los Angeles 4,725 4,725 Portland j 4,593 4,950 9,543 Seatt le 2,460 2,460 Vancouver 11,900 600 12,500 Ch i11iwack 3,082 5,018 8,100 Vi c to r i a 2,975 3,025 6,000 Kelowna 1 ,000 1 ,000 2 Total Demand 29,735 5,018 3,025 4,950 1,600 44,328 1973 predetermined supply est imates: see Table 3.1; 1973 t ransporta -t ion costs : see Table 3-2. 2 1973 predetermined demand est imates: see Table 3.1-TABLE 4.3 Optimum Trade Pattern of Mugho Pine for Analys i s 1 —Model 1 1973 From to Vancouver (Number of Plants) Ch i l l iwack V i c t o r i a Kelowna Calgary Total Supply' Los Angeles Port land Seatt le Vancouver 9,240 230 1 ,000 10,470 Ch i11i wack 1 ,895 5,600 7,495 V i c t o r i a 2,800 2,200 5,000 Kelowna 100 100 2 Total Demand 12,040 1,895 2,200 230 6,700 23,065 1973 predetermined supply est imates: see Table 3.1; 1973 transporta t ion costs : see Table 3-2. 2 1973 predetermined demand est imates: see Table 3-1. 78 however, i t is evident that th i s s i t u a t i o n re su l t s from an unique c h a r a c t e r i s t i c of the t ransportat ion cost matrix in which more than one unique so lu t ion may e x i s t . It was found that the optimal value of the ob jec t i ve funct ion in Analys i s I was $8,571-51 for the d i s t r i b u -t ion patterns shown in Tables 4.1 to 4.3 (pp. 75~77). The optimum pattern in Table 4.1 (p. 75) for Golden Junipers can be a l t e red such that the Vancouver region exhausts a l l i t s production on i t s own demand. The optimal value of such an a l t e r a t i o n would remain at $8,571.51. Thus, the s p e c i f i e d a l l o c a t i o n in Ana lys i s I in which Vancouver imports 16,570 Golden Juniper plants from Los Angeles, consumes 15,900 plants of i t s own production of 17,450 plants and exports 1,550 plants to Calgary, is i dent i ca l in cost to an a l l o c a t i o n pattern in which Van-couver imports 15,020 Golden Juniper plants from Los Angeles, consumes 17,450 p lants , or a l l i t s own product ion, and leaves the Los Angeles region to export 1,550 p lants to Calgary. A s im i l a r s i t ua t i on ex i s t s with respect to production and consumption of Golden Junipers in the Okanagan. In a l l such cases, where two a l te rnate d i spos i t i ons of mater-i a l s y i e l d the same tota l cost out lay , e i t he r a l l o c a t i o n is acceptable as the optimum d i s t r i b u t i o n . It should be noted that optimal trade patterns and corresponding minimum tota l t ransportat ion costs are s t r i c t l y contingent upon the assumptions and data estimates used in the ana l y s i s . S p e c i f i c a l l y , the assumption of homogeneity of product in the supply and demand estimates is c r i t i c a l to the cor rec t s p e c i f i c a t i o n of optimal d i s t r i b u t i o n pat terns . This assumption ex i s t s in two dimensions for the purposes of th i s study. 79 The f i r s t dimension involves the age/s ize c l a s s i f i c a t i o n as was d i s -cussed at length in Chapter 3 and Appendix C. The second dimension concerns the uniformity of qua l i t y between various production regions u t i l i z e d in the model. It is the opinion of the wr i te r that no serious d i f fe rences in q u a l i t y homogeneity ex i s t between production regions which would lead to d i s t o r t i o n in the optimum d i s t r i b u t i o n patterns. In th is respect, a l l o c a t i o n is achieved under condit ions in which domestic nursery products are ident i ca l with imports from the U.S. At th is po int , i t is of in teres t to compare the divergencies be-tween the optimal trade patterns determined from Analys i s I and the actual trade patterns as they are known to have ex i s t ed . Upon comparing the optimal trade patterns of Tables 4.1 to 4.3 (pp. 75 -77) with the h i s t o r i -cal data as shown in Tables B.5, B.6 and C.l to C.4 in the Appendices, i t is found that genera l ly speaking the ornamental nursery mater ia l s are a l l oca ted to those regions which would be expected. The surplus U.S., Chi l l iwack and V i c t o r i a regions are shown to supply the d e f i c i t Vancouver, Kelowna and Calgary areas for Juniper and Thuja. The surplus Ch i l l iwack region suppl ies the bulk of d e f i c i t con-sumption to the Calgary region for P ine. These a l l o c a t i o n s are made on the basis of least cost trucking routes on ly. The major source of divergency between the model resu l t s and h i s t o r i c a l records concerns movement of Juniper and Pine amongst regions included in the model. This divergency resu l t s because Analys i s I makes no attempt to incorporate plant movement r e s t r i c t i o n s as set out by government regu lat ions . 80 Another source of these divergencies rests upon the model's f a i l u r e to include a mechanism to handle intertemporal r i g i d i t i e s . These r i g i d i t i e s may ex i s t where homogeneous commodity suppl ies in least cost regions are not ava i l ab l e to demand regions at the required times. Hence, a consumption region may be forced to make use of a product from a higher cost region to meet imperative demand requirements during the of f - season of the low cost reg ion. In the case of the domestic demand regions in B.C., th i s is a relevant argument in that C a l i f o r n i a can e f f e c t i v e l y supply mater ia l s in any season of the year. The same is not true for more norther ly produc-t ion regions. The increasing use of container growing production methods in a l l regions, however, is beginning to change th i s s i t u a t i o n . Never-the less , the p o s s i b i l i t y of a region s e l l i n g a l l i t s a va i l ab l e product in one time period maintains th i s argument to some extent. These i n t e r -temporal r i g i d i t i e s could be minimized by conducting the ana lys i s on a quarter ly or monthly bas i s . The necess i ty of obta in ing disaggregated data for such an approach was considered p r o h i b i t i v e for the study. One further source of divergency between the model resu l t s and the h i s t o r i c a l d i s t r i b u t i o n pattern is t ransportat ion cost matrix pecu-l i a r i t i e s . In these cases a d i r ec t route between a production and con-sumption region is more expensive than a route which involvesaan i n t e r -mediate region. Thus, in Table 4.2 (p. 76) i t is less expensive to ship 4,950 Thuja plants to Kelowna from Port land and then ship 1,000 plants from Kelowna to Calgary than i t is to move 3,950 p lants to Kelowna from Port land and 1,000 plants from Portland to Calgary, leaving the 1,000 plants produced in Kelowna to p a r t i a l l y s a t i s f y demand at that po int . 81 Table D.5 indicates the reason for th is anomaly. It costs 22 .8 cents/p lant to ship d i r e c t from Portland to Calgary. However, by using an intermediate region ( i . e . , Kelowna), i t costs 22 .4 cents /p lant to ship from Portland to Calgary. This d i f f e rence is so small that i t is probably overlooked by importers, or perhaps o f f s e t by some s p e c i f i c ex te rna l i t y not represented in the model. These t ransportat ion matrix p e c u l i a r i t i e s occur between the above-mentdioned i pegflonsgthnoughout a l l the analyses in this study. The other sources of d ivergenc ies , mentioned above, a lso ex i s t with respect to the remaining analyses. The optimal a l l o c a t i o n s , as described by the t ransportat ion model in Analys i s I, provide useful information regarding the comparative locat iona l advantages of producing regions on the basis of t ransportat ion costs . This information helps expla in competit ive forces between regions. Provided that the r e l a t i v e t ransportat ion rates and other condit ions hold constant between the pa i r s of regions spec i f i ed in the model, the optimal trade d i spo s i t i on w i l l remain unaltered in future time periods under the minimum cost c r i t e r i o n . The primal so lu t ion of the t ransportat ion model, when expressed in dual format, can be used to ca l cu l a te a set of p r i ce d i f f e r e n t i a l s for the designated points of supply and demand as stated by Dorfman, Samuelson and Solow [6]. Based on the optimum d i s t r i b u t i o n pat tern, the set of s imul -taneous equations given in equation (7), W. - R. ^ T . . J " ' J is sodived By the *LIP* package. A set of p r i ce d i f f e r e n t i a l s were generated 82 with respect to the actual p r i ce which ex is ted at a point assigned a zero p r i ce in the dual s o l u t i on . These d i f f e r e n t i a l s are, in e f f e c t , the marginal costs of t ransportat ion between the supply reg ion, which is chosen as the numeraire, and the other supply and demand regions which enter into the s o l u t i on . It is obvious that actual pr i ces cannot be imputed from the ava i l ab l e information; only p r i ce d i f f e r e n t i a l s under equ i l ib r ium condit ions can be ca l cu l a ted . In the case of Analys i s I p r i ce d i f f e r e n t i a l s are presented in Table k.k. The pr i ce of Juniper and Thuja at Los Angeles and the p r i ce of Pine at V i c t o r i a were automat ica l ly assigned a zero p r i ce and the re -su l t ing pr ice d i f f e r e n t i a l s a l l re la te to these bas ic po in t s . It should be mentioned that although p r i ce d i f f e r e n t i a l s are shown as r e l a t i n g to Los Angeles and V i c t o r i a , d i f f e r e n t i a l s for any pair of locat ions can be obtained by subt rac t ion . For example, ithe Los Angeles based p r i ce d i f f e r -en t i a l s for Juniper at Vancouver and Port land are 14.1 and 5-6 cents re spec t i ve l y . Therefore the pr i ce d i f f e r e n t i a l between these two supply o r i g i n s is 8.5 cents per p l an t . Table k.k d i sp lays two separate kinds of economic information v ia the pr i ce d i f f e r e n t i a l s . The supply region d i f f e r e n t i a l s r e f l e c t the comparative locat iona l advantages of Juniper, Thuja and Pine at the l i s t e d po ints , while the demand region d i f f e r e n t i a l s refer to de l ivered pr i ces that correspond to the most economical a l l o c a t i o n of output. This p r i ce d i f f e r e n t i a l information is of considerable use when analyzing the i n t e r -act ion of regions s pec i f i ed in the model. From the ana lys i s of the dual of the t ransportat ion model, the e f f e c t s of t ransportat ion costs on rea l i zed pr i ces can be i l l u s t r a t e d . 83 TABLE 4.4 Supply and Demand Pr ice D i f f e r e n t i a l s for Golden Juniper, Thuja Pyramidal is and Mugho Pine in 1973 Based on Transportat ion Costs and Optimal Trade Patterns as Represented by the Dual of the Transportat ion Model Supply Region D i f f e r e n t i a l s Demand Region D i f f e r e n t i a l s cents/p lant cents /p lant Between Los Angeles (J S T ) ; V i c t o r i a (P) and Between Los Angeles (J & T) ; V i c t o r i a (P) and Port land (J) 5.6 Vancouver (j) 14.1 Portland (T) 5.6 Vancouver (T) 14.1 Seatt le (l) 8.7 Vancouver (P) 3-5 Seatt le (T) 8.7 Chi11iwack (J) 1 1.5 Vancouver (j) 14.1 Chi 11iwack (T) 11.5 Vancouver (T) 14.1 Chi 11iwack (P) • 9 Vancouver (P) 3.5 V i c t o r i a (J) 10.6 Ch i l l iwack (J) 11.5 V i c t o r i a (T) 10.6 Chi 11iwack (T) 11.5 V i c t o r i a (P) 0 Chi 11iwack (P) • 9 Kelowna (J) 18.9 V i c t o r i a (j) 10.6 Kelowna (T) 18.9 V i c t o r i a (T) 10.6 Kelowna (P) 8.3 Ke1 own a (J) 19.3 Calgary (J) 28.4 Kelowna (T) 19-3 Calgary (T) 28.4 Kelowna (P) '8.7 Calgary (P) 17.8 Key: (J) (T) (P) = Golden Juniper = Thuja Pyrami da l i s = Mugho Pine 84 For example, the rea l i zed value of Thuja Pyramidal is at the Chi 11iwack production region is worth 2.8 cents /p lant more than at the Seat t le pro-duction region, due to the d i f fe rence in comparative locat iona l advantage between the two regions. This f ind ing is not immediately obvious upon inspect ion of t ransportat ion matrix data in Table D.5, Appendix D. Ana l y t i ca l Results for Model II--Analyses I I and I I I Model I I, or the p roduc t i on -d i s t r i bu t i on model, minimizes tota l import procurement cos t s , domestic costs of product ion, inc luding oppor-tun i ty costs and transportat ion-brokerage cos t s . This minimization per-tains to d i s t r i b u t i o n of Golden Jun iper , Thurjia Pyramidal is and Mugho Pine under predetermined regional demand condit ions and va r i ab le production constra int l e ve l s . Analyses II and I I I, however, make use of a hybrid p roduc t i on -d i s t r i bu t i on model in which predetermined demand and supply leve l s are the same as those in Ana lys i s I. Analys i s II y i e l d s optimal spat ia l a l l o c a t i o n patterns for one ga l lon equivalents of the three chosen plant mater ia l s under a strategy of no l e g i s l a t i v e cons t ra in t s . Ana lys i s III includes l e g i s l a t i v e con-s t r a i n t s . Model II provides the veh ic le with which production regions ' competit ive po s i t i on s , as inf luenced by minimum produc t i on -d i s t r i bu t i on costs and l e g i s l a t i v e cons t ra in t s , can be measured. Tables 4.5 to 4.7 set out the optimal patterns of supply and d i s -t r i b u t i o n under the c r i t e r i o n spec i f i ed in Analyses II and III. The unbracketed f igures perta in to optimum a l l o c a t i o n s for Analys i s II. The 85 TABLE 4.5 Optimum Trade Pattern of Golden Junipers fo r Analyses II and I I I - (enclosed n - - by brackets)—Model = I I 1973 ' — ' ' From to Vancouver (Number of Plants) Chi l l iwack V i c t o r i a Kelowna Ca1gary Di sposa1 Total Supply' Los Angeles (8,720) 16,770 (8,050) (16,770) 16,770 Portland 11,350 (12,900) 1,550 (12,900) 12,900 Seatt le (2,800) 2,800 (2,800) 2,800 Vancouver (15,900) (17,450 (1,550) (17,450) 17,450 Ch i11iwack (5,050) 1,550 (2,950) 2,950 3,500 (8,000) 8,000 Vi c t o r i a (2,665) 2,665 (4,835) 4,835 (7,500) 7,500 Ke1 own a (1,000) 1 ,000 (1,000) 1,000 2 Total Demand (35,135) 35,135 (2,950) 2,950 (4,835) (20,950) 4,835 20,950 (2,500) 2,550 (0) 0 (66,420) 66,420 ' 1973 predetermined supply est imates: see Table 3-1; 1973 supply-d i s t r i b u t i o n cos t s : see Table 3-4-A. 2 1973 predetermined demand est imates: see Table 3.1. 86 TABLE 4.6 Optimum Trade Pattern of Thuja Pyramidal is for Analyses II and I I I - (enclosed (D i s t r i bu t i on Pby.tbracKets^nsMode'l I I ! 1 Qr/,$ ] osed by B a r . ! — (Number of Plants) Total From to Vancouver Chi 11iwack V i c t o r i a Kelowna Calgary Disposal Supply Los Angeles (4,725) 4,725 (4,725) 4,725 Portland (6,453) 6,453 (2,490) 2,490 (600) 600 (9,543) 9,543 Seatt le (2,460) 2,460 (2,460) 2,460 Vancouver (12,500) 12,500 (12,500) 12,500 Chi l l iwack (3,082) 3,082 (5,018) 5,018 (8,100) 8,100 V i c t o r i a (2,975) 2,975 (3,025) 3,025 (6,000) 6,000 Kelowna (1,000) 1,000 (1,000) 1,000 2 Total Demand (29,735) 29,735 (5,018) 5,018 (3,025) 3,025 (4,950) 4,950 (1,600) (0) 1,600 0 (44,328) 44,328 1973 predetermined supply est imates: see Table 3.1; 1973 supply d i s t r i b u t i o n costs : see Table 3.4-B. 1973 predetermined demand est imates: see Table 3-1. 87 TABLE 4.7 Optimum Trade Pattern of Mugho Pine for Analyses II and I I I - (enc losed (D i s t r i bu t ion Pbytbrackets)i.==Mode'T j j i l 9 7 g l o s * d From to Vancouver (Number of Plants) Chi 11iwack.Victoria Kelowna Calgary Disposal Tota 1 Supply' Los Angeles Port land Seatt le Vancouver (3,640) 3,640 (230) 230 (6,600) 6,600 (10,470) 10,470 Ch i11iwack (5,600) 5,600 (1,895) 1,895 (7,495) 7,495 V i c t o r i a (2,800) 2,800 (2,200) 2,200 (5,000) 5,000 Kelowna (100) 100 (100) 100 2 Total Demand (12,040) 12,040 (1,895) (2,200) 1,895 2,200 (230) 230 (6,700) (0) 6,700 0 (23,065) 23,065 1973 predetermined supply est imates: see Table 3.1; 1973 supply-d i s t r i b u t i o n costs : see Table 3.4-C. 2 1973 predetermined demand est imates: see Table 3.1. 88 bracketed f igures give patterns fo r Ana lys i s III. The purpose of these two runs is to compare the actual or h i s t o r i c a l product flow for 1973 with the recommended a l l o c a t i o n descr ibed by the model. Such a compari-son indicates the c a p a b i l i t y of the empir ica l model and points out areas of divergency between the model norm and r e a l i t y . It is in teres t ing to note that past s i t iii doles have not o f fered an ob jec t i ve comparison of the s u i t a b i l i t y of model recommendations with real world cond i t ions . Two points should be mentioned in th is regard. F i r s t , the model may be well s pec i f i ed but divergencies from the real world s i t u a t i o n can occur because of shortcomings in what a c t u a l l y happens ( i . e . , i n e f f i c i e n c i e s ) . On the other hand the model may be ove r s imp l i -f i e d and therefore cannot provide an e f f i c i e n c y p o s i t i o n . Under th is s i t ua t i on i t is incumbent on the researcher to ensure that his formula-t ion and data are of the highest poss ib le q u a l i t y . At th is stage i t would seem that ob jec t i ve assessment could take p lace . It might be poss ib le to apply a Chi-square test for a nu l l hy-pothesis o f no d i f fe rences ex i s t i ng for supply proport ions amongst d i f f e i — ent regions with regard to recommended and actual leve ls of supply. This would, however, introduce assumptions of random sampling and types of population estimates which would be d i f f i c u l t to reconc i le with Spat ia l Equ i l ibr ium Analys i s procedure. This suggests that there is an inherent d i f f i c u l t y in using such a test procedure. This view is lent some sup-port by the fact that a l l spat ia l studies reviewed have not found i t useful to apply such a t e s t . Nevertheless, a su i tab le test would be a valuable tool to researchers, but i t is l e f t to future studies to pursue th i s search. 89 Analyses II and III, ignoring the l e g i s l a t i v e aspects, d i f f e r fundamentally from Ana lys i s I in that var i ab le costs of production be-tween production regions are s p e c i f i e d . Model II, therefore, improves the i n teg r i t y of these analyses, because in the real world f a c to r , immobility and natural condit ions leading to d i f f e r i n g production cost leve l s between regions, p a r t i c u l a r l y with respect to U.S. and Canadian producing areas, occur regu l a r l y . It is evident from examination of Tables 4.5 to 4.7 (pp. 85-87) that the a l l o c a t i o n of one ga l lon equiva lents given by Model II d i f f e r s considerably between Ana lys i s II and Analys i s III. The d i s t r i b u t i o n patterns provided by Ana lys i s III which include l e g i s l a t i v e cons t r a in t s , give a much better approximation of nursery mater ia ls movement than does Analys i s II which excludes l e g i s l a t i v e f a c t o r s . This can be v e r i f i e d by comparing the a l l o ca t i on s in Analyses II and III in Tables 4.5 to 4.7 with the h i s t o r i c a l d i spos i t i ons portrayed in Tables B.5 and B.6 in Appendix B and Tables C.l to C.4 in Appendix C. Those divergencies which do ex i s t between Analys i s III and the h i s t o r i c a l s i t ua t i on can be as-cr ibed to intertemporal r i g i d i t i e s or other model shortcomings. In analyzing the a l l o c a t i v e d i f fe rences between Analys i s II and Analys is III the important point to note is that l e g i s l a t i v e contro l s a l t e r the d i s t r i b u t i o n pattern for Golden Jun iper . The pattern for Mugho Pine remains una l tered. This paradox occurs due to the d i f f e r e n t nature of l e g i s l a t i v e const ra ints in the two cases. The Golden Juniper regu la -t i ons , as set out in Appendix A, p roh ib i t the movement of mater ia l s amongst s pec i f i ed regions and as a consequence outweigh any competit ive aspects 90 of nursery material movement. The Mugho Pine regu la t i ons , - a l so^-set out in Appendix A, r e s t r i c t movement of Pine mater ia l s in a manner which allows trade only at a greater per unit cost between s p e c i f i e d regions. This resu l t s in the retent ion of competit ive inf luences to some extent. Thuja Pyramidal is is not subjected to movement regulat ions and therefore the optimum d i spos i t i ons between Analyses II and I I Iaaeeuunchanged. It i s of in teres t to note that tota l costs for the optimum s o l u -t ion in Ana lys i s II amounted to $112,698.10, while the tota l costs associated with Analys i s II are $113,381.10. It is evident from these d i spos i t i ons that the inc lus ion of l e g i s l a t i v e const ra ints in Analys i s III increases s l i g h t l y the optimal value of the ob jec t i ve func t i on . In other words, the cost of trade is increased, which, depending on the e l a s t i c i t i e s of demand and supply, resu l t s in an increase in pr ice which is probably borne most heavi ly by the consumer. Ana l y t i ca l Results for Model II--Analyses IV and V Analyses IV and V u t i l i z e supply cons t ra in t s , predetermined demand and cost data set out in Tables 3-3 (p. 57), 3-4A, 3-4B and 3.4C (pp. 61-63). The optimum patterns of production and d i s t r i b u t i o n are presented in Tables 4.8 to 4.10. Ana lys i s IV represented by the unbracketed f i gu res , does not include l e g i s l a t i v e cons t ra in t s . Analys i s V, indicated by bracketed f i gu re s , includes the l e g i s l a t i v e const ra int s of the previous analys i s . The s i g n i f i c a n t point concerning the resu l t s in Tables 4.8 to 4.10 is that with the inc lus ion of augmented production cons t ra in t l e ve l s , 91 TABLE 4.8 Optimum Procurement, Production and D i s t r i bu t i on of Golden Junipers for Analyses IV and V™ (enclosed (D i s t r ibu t ion By tbrackets) A-Model s I T (l^^osed by B<ezx-From to Vancouver (Number of Plants) Chi 11iwack .V i c to r i a Kelowna Ca1gary Di sposa1 Total Supply1 Los Angeles (1,930) 9,980 (8,050) (6,790) 6,790 (16,770) 16,770 Port land 11,550 (12,900) 1,350 (12,900) 12,900 Seatt le (2,800) 2,800 (2,800) 2,800 Vancouver (19,590) 20,940 (1,350) (20,940) 20,940 Ch i11iwack (6,650) 6,640 (2,950) 2,950 10 (9,600) 9,600 Vi ctor i a (4,165) 4,165 (4,835) 4,835 (9,000) 9,000 Kelowna . (1,200) 1 ,200 (1,200) 1 ,200 2 Total Demand (35,135) 35,135 (2,950) (4,835) (20,950) 2,950 4,835 20,950 (2,550) 2,550 (6,790) 6,790 (73,210) 73,210 Domesti c iregiidpaAscorast'Ea intgrlieveds augmefitedebyT201pegcent:Ssee Tab[liey3d3^til9^3tsiupp(lxy-d!istK(i:bufiiibnecostsA. see Table 3- 4-A. 2 1973 predetermined demand est imates: see Table 3.3; includes disposal demand a c t i v i t y : see Table 3-3. 92 TABLE 4.9 Optimum Procurement, Production and D i s t r i bu t i on of Thuja Pyramidal is For Anal ysesArlcVVands V! \(enc(lo'sedMibyebrackets) — (D i s t r i bu t ion PatternMode lArlili H -97-3 V enclosed by ;: s ' ^ e From to Vancouver (Number of Plants) Chi 11iwack V i c t o r i a Kelowna Ca1gary Di sposa1 Total Supply 1 Los Angeles ( ^ 2 5 ) '4;725 (4,725) 4,725 Port land (6,258) 6,258 (3,285) 3,285 (9,543) 9,543 Seatt le (1,665) 1,665 (795) 795 (2,460) 2,460 Vancouver (15,000) 15,000 (15,000) 15,000 Ch i l l iwack (4,702) 4,702 (5,018) 5,018 (9,720) 9,720 Vi c to r i a (3,775) 3,775 (3,025) 3,025 (400) 400 (7,200) 7,200 Kelowna (1,200) 1 ,200 (1,200) 1 ,200 2 Total Demand (29,735) 29,735 (5,018) (3,025) 5,018 3,025 (4,950) 4,950 ({ft,600) 1,600 (5,520) 5,520 (49,848) 49,848 Domest i c ije.g|iidpad-scorns.t.ijai n t . l e v e l s augfhetitedebyT201 pej>c0nt!-j§ee if a bA-ey 3d3 11-95J31 s uppAys d* s t ij&bu ftiibnieccf s i s %. see Table 3.4-B. 2 1973 predetermined demand est imates: see Table 3-3; includes disposal demand a c t i v i t y : see Table 3.3-93 TABLE 4.10 Optimum Procurement, Production and D i s t r i bu t i on of Mugho Pine for Ana l^s-esAiliVl ands VI ^ened'osedMibyebrackets) (D i s t r i bu t i on PatternMode 1 Ailiid 1'1'973 V enclosed by 3 r a c ! . i . s ! From to Vancouver (Number of Plants) Ch i l l iwack V i c t o r i a Kelowna Calgary Di sposa1 Total Supp1y' Los Angeles Portland Seatt le Vancouver (5,754) 5,754 (230) 230 (6,580) 6,580 (12,564) 12,564 Chi l l iwack (6,286) 6,286 (1,895) 1,895 (813) 813 (8,994) 8,994 Vi c t o r i a (2,200) 2,200 (3,800) 3,800 (6,000) 6,000 Kelowna (120) 120 (120) 120 -j- . i p. .2 ( 1 2 , 0 4 0 ) ( 1 , 8 9 5 ) ( 2 , 2 0 0 ) (230) (6,700) ( 4 , 6 1 3 ) (27,678) Total Demand ]2)0k0 1 ,895 2 , 2 0 0 2 3 0 6 , 7 0 0 4 , 6 1 3 2 7 , 6 7 8 Domestic reg ional scans tea initgrlieivesls a\ugmfe%tede<byT2IQl<pej7cent: see Table c3i.3;ril^7-3iisiuppd.ysd:is;tsrabuctH6n cost's.: see Table 3 . 4 - C . 2 1973 predetermined demand est imates: see Table 3 - 3 ; includes disposal demand a c t i v i t y : see Table 3 . 3 . 94 assessment of the competit ive pos i t ions of Golden Juniper, Thuja Pyramidalis and Mugho Pine in the production regions as spec i f i ed by Model II is extended fu r the r . The d i f ferences between a l l o ca t i on s given in Analyses IV and V are s im i l a r to those d i f fe rences between Analyses I I and III. Again the a l l o c a t i o n given by the ana lys i s which includes l e g -i s l a t i v e constra ints (Analysis V) is superior to that given by the ana lys i s which excludes l e g i s l a t i v e constra ints (Analysis IV). The derived patterns of domestic production take account of comparative advantage and in ter reg iona l competit ion because opportunity costs have been included in production costs fo r the B.C. producing regions. It should be noted once again that the three chosen mater ia l s in the one ga l lon equiva lent , age/s ize c l a s s i f i c a t i o n , are assumed to be homogeneous. The competit ive pos i t ions shown in Tables 4.8 to 4.10 (pp. 91-93) ind icate domestic production and d i s t r i b u t i o n is in a favorable pos i t ion as compared with imports from the U.S. in 1973- Ana lys i s V shows that the en t i r e amount of augmented domestic production for Golden Junipers and Thuja Pyramidalis is consumed. At the same time some of the U.S. supply is now put into the disposal region ind ica t ing that material from these locat ions is less competit ive than domestic supply. Material from Portland is shown by Tables 4.8 and 4.9 (pp. 91-92), to have a competit ive advantage in B.C. domestic consumption regions over material from Los Angeles and Sea t t l e . NogMughonBi neoffiilowsoifirom^the U.S. to B.C. Vancouver and Kelowna are shown in Table 4.10 (p. 93) to have a competit ive advantage in the production and trade of th i s material for 95 one ga l lon equ iva lents . This is supported by the fac t that the C h i l l i — wack and V i c t o r i a regions send the i r excess production to the disposal reg ion. Ana l y t i c a l Results for Model II--Ana lys i s VI Analys is VI is i dent i ca l to Analys i s V in every respect except that f l e x i b l e production const ra int leve l s are u t i l i z e d as i l l u s t r a t e d in Table 3.5 (p. 67). These f l e x i b l e production leve l s permit any s ing le region with a s u f f i c i e n t l y strong competit ive advantage in production and d i s t r i b u t i o n to supply the consumption requirements at every region spec i f i ed in Model II. Analys is VI ind ica tes , therefore, the f u l l com-p e t i t i v e advantage of each production region with respect to s a t i s f y i ng the demand at each consumption region, unhindered by the production con-s t r a i n t s which may ex i s t in the real world. The optimal production and d i s t r i b u t i o n patterns for Analys i s VI which includes l e g i s l a t i v e const ra int s for Golden Juniper and Mugho Pine are set out in Tables 4.11 to 4.13. Analys i s VI shows that the B.C. pro-duction regions have a competit ive advantage in production and d i s t r i -bution over the U.S. regions for Golden Juniper, Thuja Pyramidal is and Mugho Pine. This advantage perta ins to the 1973 calendar year and one ga l lon equivalents of the above mentioned mater i a l s . Furthermore, Analys i s VI indicates that each production region has a comparative advan tage in the production and d i s t r i b u t i o n of these mater ia l s fo r t h e i r own respect ive consumption. Kelowna has the competit ive edge in supplying the Calgary consumption region. 96 TABLE 4.11 OOptiiimumrPpooupe'ment,TPriddueit'itoni and i Dusbpiiibutioniof Golden Junipersofof>nAna:lys is I V'lMsModel I I I 1973 Witom to (Number of Plants) Vancouver Chi 11iwack V i c t o r i a Kelowna Calgary Di sposa1 Total Supply' Los Angeles 75,000 75,000 Port land 75,000 75,000 Seatt le 75,000 75,000 Vancouver 35,135 39,865 75,000 Chi 11iwack 2,950 72,050 75,000 Vi c tor i a 4,835 70,165 75,000 Kelowna 20,950 2,550 51,500 75,000 2 Total Demand 35,135 2,950 4,835 20,950 2,550 458,580 525,000 ' Filrexiiifble rregti'onadscoiristora i nt-r leve 1 scgseesTabde 3s5 ;e 1973; supj d i s t r i b u t i o n costs : see Table 3.4-A. 5.1 y-2 1973 predetermined demand est imates: see Table 3-5; demand a c t i v i t y : see Table 3-5-i ncludes di sposa1 97 TABLE 4.12 r - Opt i munrwP-rocufemeri t<jciproducfe i on ahd Di s tr i button o f > -Thuja Pyramieiail isn.forsAnar^STsoV(l4-M6del II 1973 F rom to (Number o f Plants) Vancouver Chi11iwack V i c t o r i a Kelowna Calgary Di sposa1 Total Supply' Los Angeles 50,000 50,000 Portland 50,000 50,000 Seatt le 50,000 50,000 Vancouver 29,735 20,265 50,000 Chi l l iwack 5,018 44,982 50,000 V i c t o r i a 3,025 46,975 50,000 Ke1owna 4,950 1,600. 43,450 50,000 Tota1 Demand 2 29,735 5,018 3,025 4,950 1,600 305,672 350,000 Frlekiiibile reg[i'ona£lsconsttraifittr 1 eve 1 s<: g s<ees label e 3a5;e 1.973; suppjly?-9i s t r ibut ion cos t s : See Table 3-4-B. 2 1973 predetermined demand est imates: see Table 3-5; includes disposal demand a c t i v i t y : see Table 3-5. 98 TABLE 4.13 Optimum Procurement, Production and D i s t r i bu t i on of Mugho Pine fo r Analys i s VI--Model 11 1973 From to (Number of Plants) Vancouver Chi11iwack V i c t o r i a Kelowna Ca lgary Total Di sposa1 Supply 1 Los Angeles 25,000 25,000 Port land 25,000 25,000 Seatt le 25,000 25,000 Vancouver 12,040 12,960 25,000 Ch i11iwack 1,895 23,105 25,000 V i ctor i a 2,200 22,800 25,000 Ke1owna . 230 6,700 18,070 25,000 2 Tota1 Demand 12,040 1,895 2,200 230 6,700 151,935 175,000 Frlex'ibile Fegfi o'nafls coins bra i nitr 1 eve ls«:g sees labile '3s5;e 197.3; suppjly-di stmi butio:n costs: see Table 3-4-C. 2 1973 predetermined demand est imates: see Table 3-5; includes disposal demand a c t i v i t y : see Table 3-5-99 The resu l t s of Model II Analyses II to VI ind icate that domestic supply regions were competit ive with U.S. production regions in 1973. Plant Protect ion l e g i s l a t i o n and l im i ta t i ons in domestic production l e ve l s , rather than higher costs of production in B.C. regions, caused the market to seek a l t e r n a t i v e sources of supply from the U.S. to f u l f i l l domestic demand. Ana l y t i c a l Results for Model II — Analys i s VI I Ana lys i s VII u t i l i z e s supply const ra ints set out in Table 3-3 (p. 57) for domestic supply regions, and supply leve l s set out in Table 3-5 (p. 67) for U.S. production regions. Predetermined demand data is the same as that used for a l l preceding analyses. However, cost data is a l t e r e d in order to conduct s e n s i t i v i t y analyses. The transportat ion cost matrix is updated to portray 1975 rates rather than the 1973 rates which were used in a l l previous analyses. Table 3.7 (p. 72) i l l u s t r a t e s these 1975 composite transportat ion-brokerage rates in cents per p lant . They r e f l e c t rates augmented by approximately 20percent over those in e f f e c t in 1973-With th is t ransportat ion cost a l t e r a t i o n , Analys i s VII conducts two s e n s i t i v i t y runs. The f i r s t run y i e ld s the optimal production and trade patterns for Golden Jun iper , Thuja Pyramidal is and Mugho Pine under a strategy of increased domestic costs of production at the 10 percent l e v e l . The second run y ie ld s optimal patterns under a strategy of i n -creased domestic costs of production at the 5 percent l e v e l . In both 100 cases l e g i s l a t i v e const ra ints are considered as in previous analyses. U . S . procurement costs , F.O .B . region of o r i g i n , are held at the i r 1973 l e ve l s . A cursory inspect ion of wholesale p r i ce catalogues from U . S . producers in 1975 indicates that 1973 p r i ces were almost i dent i ca l to those quoted in 1975 for the ornamental nursery mater ia ls examined in th is study. Tables 3 .6A, 3-6B and 3.6C (pp. 68-70) set out the matrix for the increased leve ls of domestic production for the three chosen v a r i e t i e s of plant mater ia l s . Domestic cost of production estimates used in th i s study are r e a l l y bounded by confidence i n t e r v a l s , as discussed in Appendix E. In-sofar as these cost estimates contain a percentage e r r o r , the s e n s i t i v i t y f ind ings could be a f f e c t e d . If the cost of production estimates are understated, the s e n s i t i v i t y resu l t s could be negated. On the other hand, an overstatement of cost of production estimates would make the s e n s i t i v i t y ana lys i s even more s i g n i f i c a n t . It is f e l t that the est ima-t ion procedure u t i l i z e d in this study tends to overestimate cost of production f i gu re s . Further d i scuss ion of these points can be found in Appendix E. Analys i s VII examines the e f f e c t s o f increased leve l s of domestic production costs on the competi t ive advantage of the B . C . production regions v i s - a - v i s the U .S . supply o r i g i n s . The optimal production and d i s t r i b u t i o n patterns are i l l u s t r a t e d in Tables 4 .14 to 4 .16. The pat-terns involv ing a 10 percent increase in domestic costs of production 101 TABLE 4.14 Optimum Procumement, Production and D i s t r i bu t i on of Golden Junipers for Analys i s VII—Model II 1 From to Vancouver (Number of Plants) Ch i l l iwack V i c t o r i a Kelowna Ca1gary Di sposa1 Total Supply Los Angeles (75,000) 75,000 (75,000) 75,000 Portland (7,545) 3,380 (20,950) 20,950 (1,350) 1,350 (45,155) 49,320 (75,000) 75,000 Seat t le (75,000) 75,000 (75,000) 75,000 Vancouver (20,940) 20,940 (20,940) 20,940 Chi 11iwack (6,650) 6,650 (2,950) 2,950 (9,600) 9,600 V i c tor i a 4,165 (4,835) 4,835 (4,165) (9,000) 9,000 Ke1owna (1,200) 1 ,200 (1,200) 1 ,200 T o t a , 0 3 ^ 3 ( 3 5 , . 3 5 ) (2,950, (4,835) (20,950) 4,335 20,950 (2,550)(199,320)(265,740) 2,550 199,320 265,740 Bracketed f igures perta in to a D i s t r i bu t i on Pattern re su l t ing from a 10 percent increase in Domestic Costs o f Production while unbracketed f igures perta in to a 5 percent increase. 2 F lex ib l e regional const ra int leve ls for a l l U.S. regions: see Table 3.5; domestic supply estimates augmented by 20 percent: see Table 3-3; 1975 t ransportat ion costs : see Table 3-7; augmented domestic costs of product ion: see Table 3-6-A. 3 1973 predetermined demand estimates: posa1 demand a c t i v i t y : see Table 3-3-see Table 3-3; includes d i s -102 TABLE 4.15 Optimum Procurement, Production and D i s t r i bu t i on of Thuja Pyramidal is for Analys i s VII--Model iM 1973 (Number of Plants) Total From to Vancouver Chi 11iwack V i c t o r i a Kelowna Calgary Disposal Supply^ Los Angeles (50,000) 50,000 (50,000) 50,000 Portland (29,735) 14,735 (4,950) 4,950 (400) 400 (14,915) 29,915 (50,000) 50,000 Seatt le (50,000) 50,000 (50,000) 50,000 Vancouver 15,000 (15,000) (15,000) 15,000 Chi 11iwack (5,018) 5,018 (4,702) 4,702 (9,720) 9,720 Vi c to r i a (3,025) 3,025 (4,175) 4,175 (7,200) 7,200 Ke1owna (1 ,200) 1 ,200 (1 ,200) 1 ,200 Total Demand^ ^29,735) 29,735 (5,018) 5,018 (3,025) 3,025 (4,950) 4,950 (1,600 1 ,600 (138,792)(183,120) 138,792 183,120 Bracketed f igures perta in to a D i s t r i bu t i on Pattern re su l t ing from a 10 percent increase in Domestic Costs of Production while unbracketed f igures perta in to a 5 percent increase. 2 F lex ib le regional constra int leve ls for a l l U.S. regions: see Table 3.5; domestic supply estimates augmented by 20 percent: see Table 3-3; 1975 t ransportat ion costs: see Table 3-7; augmented domestic costs of pro-duct ion: see Table 3.6-B. 3 1973 predetermined demand est imates: see Table 3-3; includes disposal demand a c t i v i t y : see Table 3-3. 103 TABLE 4.16 Optimum Procurement, Production and D i s t r i bu t i on of Mugho Pii'ne for Analys i s VII--Model II 1 1973 From to Vancouver (Number of Plants) Ch i l l iwack V i c t o r i a Kelowna Ca1gary D i sposa1 Total Supply 2 Los Angeles (25,000) 25,000 (25,000) 25,000 Port land (25,000) 25,000 (25,000) 25,000 Seatt le (25,000) 25,000 (25,000) 25,000 Vancouver (5,754) 12,040 (230) 230 (6,580) 294 (12,564) 12,564 Ch i l l iwack (6,286) (1,895) 1,895 6,286 (813) 813 (8,994) 8,994 V i c t o r i a (2,200) 2,200 (3,800) 3,800 (6,000) 6,000 Kelowna (120) 120 (120) 120 Total Demand3 (12,040) 12,040 (1,895) 1,895 (2,200) 2,200 (230) 230 (6,700) 6,700 (79,613) 79,613 (102,678) 102,678 ' Bracketed f igures perta in to a D i s t r i bu t i on Pattern re su l t i ng from a 10 percent increase in Domestic Costs of Production while unbracketed f igures perta in to a 5 percent increase. 2 F l e x i b l e regional const ra int levels for a l l U.S. regions: see Table 3-5; domestic supply estimates augmented by 20 percent: see Table 3-3; 1975 t ransportat ion costs: see Table 3-7; augmented domestic costs of pro-duct ion: see Table 3-6-C. 3 1973 predetermined demand est imates: see Table 3.3; includes disposal demand a c t i v i t y : see Table 3-3. 104 are indicated by bracketed data, while the 5 percent patterns are shown by unbracketed data. Table 4.14 (p. 101) shows the optimum pattern for Golden Junipers under these two s t r a teg ie s . With a 10 percent increase in domestic production costs the Portland region enters the so lu t ion to f i l l the demand for Junipers at Kelowna. Its se lec t i on occurs because of the l e g i s l a t i v e constra ints in f o r ce . Port land is shown to supply the Vancouver and Calgary consump-tion regions. V i c t o r i a is shown to send 4,165 Golden Junipers to d i s -posal because Portland now has a cost advantage over the V i c t o r i a region in the supply of these two d e f i c i t regions. The other U.S. production regions do not enter the so lut ion be-cause Portland is the least cost U.S. supp l ier and has no supply cons t ra in t with respect to th i s ana l y s i s . The B.C. producing regions are operating under an augmented production schedule. If the Port land supply level was constrained so that no product from th i s o r i g i n was a l l oca ted to the disposal reg ion, the other U.S. areas would come into the so lu t ion only a f te r the V i c t o r i a d isposal quant i ty was exhausted in a real consumption a c t i v i t y . This precedence ar i ses from V i c t o r i a ' s cost advantage over the Los Angeles and Seatt le supply regions. Under a 5 percent increase in domestic costs of product ion, Port-land enters the s o l u t i on . In th i s case, however, supply fromPPort1 and w i l l only s a t i s f y the l e g i s l a t i v e constra int for Golden Juniper movement. Port land makes up the excess demand of consumption regions which domestic production reg ions canno&tmeetttdcieetoosuppfl ^ycons:tra;iiiiiitss. 105 Table 4.15 (p. 102) i l l u s t r a t e s the optimal trade patterns for Thuja Pyramidal is under the two cost increase s t r a teg ie s . Under a 10 percent increase in domestic production cos t s , the Port land region again enters the so lu t ion as a least cost supp l i e r . In th i s case, Port land suppl ies the demand for the Vancouver and Kelowna regions completely. It shares supplying the Calgary region with the constrained Kelowna produc-t ion region. Even so, Kelowna remains the least cost supp l ier up to i t s production c a p a b i l i t i e s . Port land has a competit ive advantage in the Vancouver region because a l l the production permitted in th i s region i s a l l oca ted to the disposal reg ion. Under the condit ions of ana l y s i s , Ch i l l iwack and V i c t o r i a have an advantage in supplying the i r own demand. Port land has an advantage in supplying a l l other domestic demand locat ions because Chi l l iwack and V i c t o r i a production is assigned to the disposal reg ion. The unbracketed f i gures in Table 4.15 (p. 102) y i e l d the optimum pattern for Thuja Pyramidal is under a 5 percent increase in domestic pro-duction cos t s . In th is case, only Port land has a competit ive advantage in ppoduction and d i s t r i b u t i o n over the Ch i l l iwack and V i c t o r i a regions in the supply of other domestic regions. The Ch i l l iwack and V i c t o r i a regions do, however, maintain the least cost advantage in supplying t h e i r own respect ive demands. They then a l l o c a t e the i r excess supply to the disposal reg ion. It should be noted that under th i s 5 percent increase in cos t s , Vancouver now has the advantage in supplying i t s own demand as wel 1 . The optimum produc t i on -d i s t r i bu t i on pattern for Mugho Pine is i l l u s t r a t e d in Table 4.16 (p. 103) with the 10 percent pattern being 106 indicated by bracketed f igures and the 5 percent pattern shown by un-bracketed f i gu re s . In both these increased cost of production cases, the U.S. supply regions do not enter the optimal s o l u t i on . In both cases the Vancouver and Kelowna production centers have the advantage in supply-ing areas in add i t ion to t h e i r own. Ch i l l iwack and V i c t o r i a both make use of the disposal region for the i r excess supp l ies . The resu l t s of the preceding analyses have shown that in 1973 domestic production regions had a cost advantage over U.S. supply centers in the production and d i s t r i b u t i o n of Golden Junipers , Thuja Pyramidal is and Mugho Pine for the one ga l lon equiva lent age/s ize c l a s s i f i c a t i o n . However, in the case of Golden Jun ipers , l e g i s l a t i v e constra ints super-seded th i s competit ive advantage in ce r t a i n instances and induced movement from r e l a t i v e l y high cost U.S. l oca t ions . In the case of the Mugho Pine regu lat ions , i t was shown that the l e g i s l a t i v e const ra int s d id not i n te r fe re with the competit ive movement of nursery mater ia l s . Furthermore, the resu l t s have ind icated through s e n s i t i v i t y ana lys i s the extent to which domestic production areas enjoyed a competit ive cost advantage over U.S. o r i g i n s . Spat ia l equ i l ib r ium ana lys i s of the type conducted in th is study does not expla in f u l l y the reasons for the l imi ted domestic production leve ls of these mater ia l s in 1973. These l im i ta t ions led to a greater level of imports from the U.S. than would otherwise be expected, given the competit ive advantage held by domestic propagators. It is l e f t to the fo l lowing chapter to attempt to examine and exp la in th i s paradoxical s i t u a t i o n , v ia a supplementary d i scuss ion and ana l y s i s . CHAPTER 5 SUPPLEMENTARY ANALYSIS Despite the competit ive advantage held by domestic propagators in the production and d i s t r i b u t i o n of Golden Juniper, Thuja Pyramidal is and Mugho Pine for one ga l lon equiva lents in 1973, a s i zeab le quant ity of U.S. imported mater ia l nonetheless, flowed into B.C. In the preced-ing chapters, spat ia l equ i l i b r ium ana lys i s has shown that l e g i s l a t i v e factors have induced a greater movement of nursery mater ia l s from the U.S. into B.C. than would otherwise have occurred;- rgJiyen i the compet-i t i v e s i t ua t i on ex i s t i n g between U.S. and domestic propagators. Although these l e g i s l a t i v e aspects do account d i r e c t l y for a large port ion of U.S. imported mater ia l s , they by no means cons t i tu te the only reason for imports. In searching fo r an explanation of th i s paradox, two d i rec t i ons of invest igat ion were pursued. The f i r s t d i r e c t i o n involved a quant i ta -t ive examination of the data co l l e c ted from domestic propagators in the survey stage of th i s study. This approach was undertaken to determine the l i ke l i hood of resource constra ints as a f ac to r a f f e c t i n g the level of domestic production of the three spec i f i ed nursery mater ia l s . The second approach concerned a q u a l i t a t i v e examination of some of the costs and benef i t s assoc iated with production and marketing e x t e r n a l i t i e s of domestic supply v i s - a - v i s U.S. supply. 107 108 Quant i ta t ive Analys i s Data co l l e c ted from t h i r t y - f o u r propagators in B.C. indicated that propagation of a l l c lasses of ornamental nursery material showed an increase in volume over the three year per iod 1970 to 1973- During this time, the average percentage increase for growers in propagation of Jun ipers , Thuja and Pine was 48.8 percent, 64.9 percent and 29-6 per -cent, re spec t i ve l y . The standard deviat ions of the increases in these c lasses of mater ia ls over th is period weKe669^4 ,38388aar id997 f t8 r r5espect i ve l y . The average percentage increase fo r growers in propagation of a l l other vegetat ive ly propagated materia ls was 30.4 percent and the standard deviat ion was 50.8. S i m i l a r l y , the average percentage increase in pro-pagation of a l l other seed propagated mater ia l s was 9.1 percent with a standard dev iat ion for the period of 26.6. In response to the enquiry about future expansion of a l l c lasses of ornamental nursery material in the three year period fo l lowing 1973, domestic propagators indicated plans for increased leve l s of product ion. The future an t i c ipa ted average percentage increases in the propagation of Jun iper , Thuja, Pine and a l l other ornamental mater ia l s were 20.8 per-cent, 56.4 percent, 8.4 percent and 45.4 percent, re spec t i ve l y . The respect ive standard deviat ions for these c lasses were 83.2, 178.3, 47.5 and 161.2. The above-mentioned survey response data suggests that the B.C. ornamental nursery industry has been, at least s ince 1970, in a s ta te of rapid expansion and that th is expansion is l i k e l y to continue at least un t i l 1977 ceteris -paribus. Further deta i l ed d i scuss ion with B.C. 109 propagators regarding resource constra ints on production leve l s and a cqu i s i t i on of resources, indicated no ser ious l im i t i ng factors with regard to production leve ls of Golden Jun iper , Thuja Pyramidal is and Mugho Pine in 1973. Propagators a l so c i t ed no serious resource con-s t r a i n t s in achieving 1973 production leve l s and in planning future pro-duction increases. Understandably they were worried about the t r a d i -t iona l a g r i c u l t u r a l concerns with r e l i a b l e labor and reasonably pr i ced land. Growers d id , however, express concern over increas ing factor pr ices v i s - a - v i s U.S. p r i ce s , and the uncerta inty and inequity surround-ing plant protect ion regu lat ions . Most propagators claimed that they produced as much mater ia l as they had planned, given the s i ze of the i r ind iv idua l operat ion and the amount of time they were w i l l i n g to spend on production per day. Growers r e l i e d on the i r personal knowledge of the market and t h e i r degree of r i s k avers ion in choosing p a r t i c u l a r v a r i e t i e s and quant i t ies of ornamentals to produce. The mean age of interviewed propagators was 51-7 years, while the mean years in operat ion was 1<1>.9 years. The predominant form of ownership was f a i r l y evenly s p l i t between sole p ropr ie to r sh ip and l imi ted company status with the raf.e partnership occur r ing . Table 5.1 provides a summary of means and sample standard deviat ions for se lected var iab les from survey data c o l l e c t e d from domestic propagators. The combination of th is information seems to ind icate that pro-pagation of ornamental nursery mater ia l s was not s i g n i f i c a n t l y a f fec ted by resource constra ints in 1973, although short-run expansion could have 110 TABLE 5.1 A L i s t of Means and Sample Standard Deviations of Selected Var iab les Perta in ing to Total Nursery Data Co l lected from Domestic Propagators for the 1973 Calendar Year Var iab le Mean Standard Deviation Age of Operator 51.7 13.1 Years in Operation 11.9 9.2 Gross Sales $88,500.00 $126,917.37 Number of Plants Sold 55,714 69,707 Percent of Sales Propagated on Holding 63.3% 34.3% Percent of Sales Imported from the U.S. 10.3% 17.6%" Quantity of Sales Propagated on Holding 38,451 47,273 Quantity of Golden Junipers Produced 4,552 7,414 Quantity of Golden Junipers Sold 3,058 6,459 Quantity of Thuja Pyramidal is Produced 8,541 8,993 Quantity of Thuja Pyramidal is Sold 4,273 8,957 Quantity of Mugho Pine Produced 1,930 6,365 Quantity of Mugho Pine Sold 1,770 2,763 Number of Hours of Part Time Labor 2,463 4,209 Number of Managers 1.5 .6 Number of Fu l l Time Employee's 2.6 4.2 Number of Acres in Production 17-5 31.9 Number of Square Feet of Structures 6,553.8 8,461.4 Machinery and Equipment Value $15,181.82 $21,124.62 Fuel Expenditure $$$,542.10 $1,452.32 Outstanding Capita l Borrowed $16,214.28 $36,874.51 I l l proved d i f f i c u l t for most propagators. It appears from th i s d i scuss ion that fo r the most par t , the B.C. industry was simply su f fer ing from a response lag in 1973• Consequently, U.S. imports were required to aug-ment expanding B.C. production because of a tremendous unpredicted increase in demand for nursery mater ia l s in the province. To invest igate further the p o s s i b i l i t y of resource const ra int s r e s t r i c t i n g domestic production in 1973, c o r r e l a t i o n ana lys i s was under-taken to examine the re la t ionsh ips between key economic var iab les bearing on the propagation of ornamental nursery mater ia l s . Accord ing ly , data co l l ec ted in the survey stage of th i s study from domestic propagators was subjected to the simple c o r r e l a t i o n procedure contained in the *SPSS* package at The Univers i ty of B r i t i s h Columbia. The use of th is computing routine allowed a matrix of Pearson c o r r e l a t i o n c o e f f i c i e n t s to be gen-erated, ind ica t ing the degree to wh}ch se lected var iab les were l i n e a r l y re l a ted . Tables 5.2 and 5-3 ind icate c o r r e l a t i o n matrices for a l i s t of se lected va r i ab le s . Reading from l e f t to r ight for each pa i r of var iab les the three displayed numbers show the c o r r e l a t i o n c o e f f i c i e n t (pos i t i ve or negat ive), the number of observations u t i l i z e d in the der iva t ion of the c o e f f i c i e n t and the level of s i gn i f i c ance at which the nul l hypothesis for the populat ion co r re l a t i on c o e f f i c i e n t can be re jec ted . With the *SPSS* routine the nul l hypothesis is usua l ly re jected at a s i gn i f i c ance level of less than .05. Although many of the generated c o e f f i c i e n t s show no c lose a s soc i a -t i on s , there are a number of key pairs of var iab les which are l i n e a r l y TABLE 5 . 2 Correlation Coefficients for Selected Pairs of Variables Pertaining to Total Nursery Data Collected by Personal Interview of B.C. Ornamental Nursery Stock Propagators for the 1973 Calendar Year Number Sold of Plants Gross Sales Quantity of Golden Junipers Propagated Quantity of Thuja Pyramidal is Propagated Quanti ty of Mugho Pine Propagated MANAGEMENT No. of managers .1487 (28) .225 . 1 4 9 7 (28) . 2 2 4 .0508 (27) . 4 0 1 .1055 (27) .300 - . 0 5 2 3 (27) .398 Years in business .2053 (28) . 1 4 7 .2218 (28) . 128 .1629 (27) .208 .1283 (27) .262 - . 1 8 8 4 (27) • 173 Age of operator . 0 0 4 0 (28) .492 . 0 9 9 1 (28) .308 - .2651 (27) . 0 9 1 - . 1 2 6 0 (27) .266 . 1430 (27) .238 Wage of managers .7142 ( 1 4 ) .002 .8929 ( 1 4 ) .001 .1006 ( 1 4 ) .366 . 2 6 8 5 ( 1 4 ) . 1 7 7 .3863 (14) .086 LABOR No. of full time employees .8239 (27) .001 .9063 (27) .001 .3011 (27) .063 .4396 (27) .011 - .0001 (27) .500 No. of hours part time employees .4983 (27) . 0 0 4 . 6 1 7 6 (27) .001 .0235 (27) .453 .2607 (27) . 0 9 5 .0551 (27) .392 LAND Acres in production . . 6 4 6 6 (28) .001 .5832 (28) .001 .1343 (27) .252 . 1945 (27) . 1 6 5 .0275 (27) . 4 4 6 CAPITAL No. sq. ft. structures . 6 2 3 7 ( 2 6 ) .001 . 6 7 9 1 ( 2 6 ) .001 . 3 0 8 8 ( 2 6 ) . 0 6 2 . 5 5 7 6 ( 2 6 ) . 0 0 2 .0077 ( 2 6 ) . 4 8 5 Value of machinery and equipment . 7 5 5 4 (22) .001 . 8 0 7 6 (22) .001 . 2 3 0 4 (22) . 1 5 1 . 4 4 2 9 (22) . 0 1 9 . 0 2 1 7 (22) . 4 2 6 Expenditure for materials . 3 1 4 2 ( 2 0 ) . 0 8 9 . 7 4 7 8 ( 2 0 ) .001 - . 1 0 1 2 ( 2 0 ) .336 . 2 5 6 8 ( 2 0 ) . 1 3 7 . 2 1 7 5 ( 2 0 ) . 1 7 8 Fue1 expend i ture . 5 3 9 3 (19) .009 .4807 ( 1 9 ) . 0 1 9 . 2 1 1 5 ( 1 9 ) . 1 9 2 . 3 8 4 6 ( 1 9 ) . 0 5 2 - . 1 9 3 0 (19) . 2 1 4 Overhead .7180 (21) .001 .8560 (21) . .001 .1012 (21) .331 .4275 (21) .027 . 1 1 2 3 (21) .314 Outstanding capital borrowed .4474 (28) .008 .6057 (28) .001 .0770 ( 2 7 ) . 3 5 1 .3497 (27) .037 .1007 ( 2 7 ) .309 MISCELLANEOUS Gross sales .8081 ( 2 8 ) .001 - -Quantity propagated on holding . 7 1 8 8 ( 2 6 ) .001 . 3 5 6 4 ( 2 6 ) .037 Quantity Golden Juniper propagated . 5 6 9 6 (27) .001 .2354 (27) .119 - - - . 7 5 4 0 (27) .001 - . 1 2 1 5 (27) .273 Quantity Thuja Pyramidal is " .7357 (27) .001 .5475 (27) .002 . 7 5 4 0 (27) .001 - - - . . 1 0 4 4 (27) .302 Quantity Mugho Pine propagated . 1 6 2 6 (27) .209 .4207 (23) .023 - . 1 2 1 5 (27) .273 . 1 0 4 4 (27) .302 - - -For each pair of variables the leftmost number represents the correlation coefficient, the center bracketed number indicates the number of observations and the rightmost number yields the level of significance. TABLE 5.3 Correlation Coefficients for Management, Labor, Land and Capital Variables pertaining to Total Nursery Data Collected by Personalized Interview of B.C. Ornamental Nursery Stock Propagators for the 1973 Calendar Year No. of Full Time No. of Hrs. Part No. of Managers Yrs. ii Business Age of Operator Wage of Managers Employees Time Employees No. of managers - - -Years i n business . 1 8 5 4 (28) .172 . - •• - • -Age of operator - . 2 1 1 5 (28) . 1 4 0 . 3 2 8 1 (28) . 0 4 4 - •- -Wage of managers . 4 2 8 9 ( 1 4 ) . 0 6 3 . 1042 ( 1 4 ) . 3 6 1 . 0 4 1 6 ( 1 4 ) .444 - • •. - -No. of full time employees . 0 4 2 3 (27) . 4 1 7 . 3 2 1 6 ( 2 7 ) . 0 5 1 . 1 4 1 7 (27) . 2 4 0 .8057 ( 1 4 ) .001 - -No. of hrs. of part time employees .2714 (28) 0 8 5 . 3 6 3 4 (27) .031 . 0 5 5 7 (27) . 3 9 1 .6996 ( 1 4 ) .003 . 6 4 6 3 (27) .001 - -Acres in production '.'. . 1 2 6 8 (28) . 2 6 0 . 1 3 8 9 (28) . 2 4 0 - . 0 4 9 8 (28) . 4 0 1 .4942 ( 1 4 ) .036 . 6 9 3 8 (27) .001 .5676 (27) .001 No. of sq. ft. of structures - . 0 1 5 4 (26) . 4 7 0 . 1169 (26) . 2 8 5 . 0 5 0 3 (26) . 4 0 4 . 4 8 0 2 ( 1 4 ) . 0 4 1 . 5 9 3 9 ( 2 6 ) .001 . 6 5 0 8 ( 2 6 ) .001 Machinery and equipment value .0750 (22) 370 .1712 (22) .223 . 0 1 4 3 (22) .475 .6530 (13) .008 .8465 (22) .001 .9105 (22) .001 Expenditure on materials .0824 (20) .365 .1372 (20) .282 .1250 (20) .300 .6155 ( 1 4 ) .010 . 5 5 1 7 (20) .006 .3389 (20) .072 Fuel expenditure .2178 ( 1 9 ) 185 . 5 2 6 1 (19) .010 .0281 (19) .455 .2802 (12) .189 .4757 (19) .020 . 6 1 1 8 (19) .003 Overhead .3533 (21) 058 . 0 1 6 7 (21) .471 .0532 (21) .409 .7212 ( 1 4 ) .002 .7297 (21) .001 .6197 (21) .001 Outstanding capital borrowed -.0056 (28) .489 -.1325 (28) . 2 5 1 .0105 (28) .479 . 3 4 2 4 ( 1 4 ) . 1 1 5 .4792 (27) .006 .2532 (27) . 101 Acres in No. Sq. Ft. of Value of machin- Expendi ture for Fuel Production Structures ery 6 Equipment Materi a 1s Expendi ture Overhead No. of managers Years in.business Age of operator Wage of managers No. of full time employees No. of hrs. of part time employees Acres in production - - -No. of sq. ft. of structures . 3 9 9 4 (26) .022 - -Machinery and equipment value . 8 5 4 2 (22) .001 . 5 6 2 8 ( 2 2 ) . 0 0 3 •-. • - - • Expenditure on materials - . 0 1 4 6 (20) . 4 7 6 . 3089 (20) . 0 9 3 .2798 ( 1 9 ) . 1 2 3 -Fuel expendi ture . 3 6 7 1 (19) . 0 6 1 . 5 5 5 9 (19) .007 . 4 0 7 8 (18) . 0 4 6 . 2 4 0 9 (18) . 1 6 8 - -Overhead . 4 0 4 4 (21) .035 .4510 (21) .020 .6458 ( 1 9 ) .001 . 6 6 6 0 (20) .001 .3017 (19) . 100 - -Outstanding capital borrowed .1382 (28) . 2 4 2 .4311 ( 2 6 ) . 0 1 4 .4398 (22) .020 .5500 (20) .006 .0572 (19) .408 .8349 (21) .001 For each pair of variables the leftmost number represents the correlation coefficient, the center bracketed number indicates the number of observations and the rightmost figure yields the level of significance. 1 1 4 re lated in a s i g n i f i c a n t way. In these cases the c o e f f i c i e n t s provide useful conf irmat ion of re l a t i ons which would be expected to e x i s t a p r i o r i i f there was reasonably f u l l use of resources in nursery stock product ion. General ly speaking, these re l a t i ons indicate the as soc ia t ion that higher leve l s of resources on a holding are co inc ident with more product ion. In Table 5.2, a number of s i g n i f i c a n t co r re l a t i ons between ' t o t a l resource 1 var iab les and ' t o t a l output ' var iab les are observed. The var iab les 'gross sa les ' and 'number of plants so ld ' are re lated to a number of var iab les de l imited under the headings: Management, Labor, Land and C a p i t a l . It is i n te res t ing to note, that genera l ly speaking, stronger re la t ionsh ips are observed between input and output var iab les when ' s a l e s ' rather than 'p roduct ion ' var iab les are used for output prox ies . The reason for th i s is that many of the propagators interviewed were a l so engaged in r e t a i l sales and/or growing-on cer ta in v a r i e t i e s of nursery mater ia l s purchased from other local nurserymen or abroad. It is of p a r t i c u l a r in teres t to note that in Table 5.2 (p. 112) the quant ity of Golden Junipers and Thuja Pyramidal is propagated are p o s i t i v e l y cor re la ted at a s i g n i f i c a n t level (.75), perhaps suggesting some degree of market interdependencies. Table 5-3 (p. 113) i l l u s t r a t e s how the l i s t of input var iab les de l imited under the headings, Management, Labor, Land and Capi ta l move together. In p a r t i c u l a r , the var iab les 'wage of managers,' 'number of f u l l time employees,' and 'number of hours of part time employees' show a number of s i g n i f i c a n t co r re l a t i on s when re la ted to the other input va r i ab l e s . This would seem to indicate the importance of labor in the 115 propagation process. As the amount of land and cap i t a l inputs increase over higher leve ls of product ion, so must the leve l s of labor u t i l i z a t i o n due to the labor - in tens ive nature of ornamentals' propagation. It is a l so worth noting that the var iab le 'va lue of machinery and equipment' is very highly cor re la ted with the var iab les 'acres in pro-duct ion ' (.85), 'overhead' (.65), and 'number of square feet of s t r u c -tures ' (.56). Once again th i s points to the maintenance of co r re l a t i ona l re la t ionsh ips in resource use by nurserymen: in these cases they concern d i f f e r e n t forms of cap i t a l investment. In order to make any d e f i n i t i v e statement regarding resource con-s t r a i n t s , i t is necessary to rule out the p o s s i b i l i t y of excess capaci ty ex i s t i ng in the B.C. nursery industry. The c o r r e l a t i o n c o e f f i c i e n t s pro-vided in Table 5-2 ( p . 112), which re l a te input to output va r i ab l e s , would conceptual ly provide cer ta in patterns to ind icate excess capac i ty . It could be hypothesized that low or zero co r re l a t i on s between f i xed or long-run factors and output would ind icate excess capac i ty . This would occur because over the long-run f i xed factors o f production would hot b e imcbeaseduand p e r i napsns<l!©.W(l:ys beared weed sunder, ian .excessheapab'istyhsiiit'uation . ExpansioncundeK/ofidiilll beapaci t.ytwduilid besi md i/eatedrbyapcbsiiit-i veteoenel at j,ons betweenfa;bl!dfaG.tonsso,fnipVodiiipt'honaamdoout'pi!ibf although' it'h§nexpeeted m a g h i -t-udeeofitsuch eornel ;at ion.s . i s not c l e a r . One d i f f i c u l t y with th i s approach l i e s i n the d i s t i n c t i o n between long run and short run f ac to r s . In Table 5.2 the var iab les 'number o f managers,' 'number o f f u l l time employees,' 'acres i n p roduct ion , ' 'number o f square feet o f s t r uc tu re s , ' 'overhead' and 'outstanding cap i t a l borrowed' 116 a r e c o n s i d e r e d t o be l ong run f a c t o r s . A l l o t h e r ' r e s o u r c e ' v a r i a b l e s a r e d e f i n e d as s h o r t run f a c t o r s . ;The d i s t i n c t i o n between l ong run and s h o r t run f a c t o r s i s o f t e n a r b i t r a r y and hence c o r r e l a t i o n c o m p a r i s o n s can be i n d e t e r m i n a t e . Upon o b s e r v a t i o n o f t he c o r r e l a t i o n c o e f f i c i e n t s i n T a b l e 5-2 ( p . 112) , a range o f c o e f f i c i e n t s between l ong run f a c t o r s and 'number o f p l a n t s s o l d 1 o r ' g r o s s s a l e s ' a r e d i s p l a y e d . N o n e t h e l e s s , t he m a j o r i t y o f l ong run f a c t o r s a r e s i g n i f i c a n t l y c o r r e l a t e d w i t h t h e s e o u t p u t v a r -i a b l e s . I f no e x c e s s c a p a c i t y e x i s t e d i t m i gh t be e x p e c t e d t h a t s h o r t run o r v a r i a b l e f a c t o r s wou ld be used i n t e n s i v e l y under a r e s o u r c e c o n -s t r a i n t s i t u a t i o n ( i . e . , h i g h p o s i t i v e c o r r e l a t i o n ) , as t hey wou l d n e c e s s a r i l y be v a r i e d o v e r h i g h e r l e v e l s o f p r o d u c t i o n . The f i x e d v a r -i a b l e s 'number o f f u l l t ime e m p l o y e e s ' shows a h i g h c o r r e l a t i o n , bu t the s h o r t run v a r i a b l e 'number o f hour s o f p a r t t i m e e m p l o y e e s ' shows a low c o r r e l a t i o n w i t h o u t p u t . From t h i s a n a l y s i s t h e r e i s a s u g g e s t i o n o f no e x c e s s c a p a c i t y e x -<i:st!i-ihgn<j|ni itheh<i:nelus'tr;yf yhowever/erthehev<i:derieec<iis j mo it © e n t i r e l y .oco i i c l us i v e . N o t h i n g d e f i n i t i v e f rom the c o r r e l a t i o n r e s u l t s can be s t a t e d r e g a r d i n g r e s o u r c e c o n s t r a i n t s . The re i s n o t h i n g t o i n d i c a t e t h a t r e s o u r c e c o n -s t r a i n t s a r e s e r i o u s , n o n e t h e l e s s , t h e p o s s i b i l i t y o f t h e i r e x i s t e n c e c anno t be r u l e d ou t e n t i r e l y . Q u a l i t a t i v e A n a l y s i s In a d d i t i o n t o the p o s s i b i l i t y t h a t r e s o u r c e a v a i l a b i l i t y may have l i m i t e d d o m e s t i c p r o p a g a t i o n l e v e l s in 1973, a number o f f a c t o r s l e d 117 d i r e c t l y to non-pr ice inf luences favor ing trade in U.S. propagated mater ia l s . These factors resu l ted in e x t e r n a l i t i e s , the benef i t s of which were conferred upon U.S. propagators, or conversely the costs of which were borne by domestic propagators. Much of the preceding ana lys i s has dewelled upon the d i r e c t e f f e c t s of plant protect ion l e g i s l a t i o n on domestic production and d i s -t r i b u t i o n of three representat ive ornamental plant v a r i e t i e s . It is assumed that the resu l t s of th is ana lys i s can be extended to include the majority of v a r i e t i e s and c u l t i v a r s comprising the Jun iper , Thuja and Pine genera. L i t t l e mention, however, has been made of the i nd i rec t e f f ec t s of l e g i s l a t i o n on domestic propagation of the three v a r i e t i e s in p a r t i c u l a r , and indeed to ornamental propagation as a whole. The ana lys i s w i l l now be d i rec ted to th i s concern. The implementation of s tr ingent Juniper and Pine regu lat ions , as well as other l e g i s l a t i o n regarding ornamental nursery mater ia l s , has, and is l i k e l y to continue to have, a marked e f f e c t on domestic propagation. This e f f e c t is expressed by increased costs of propagation and by lack of grower confidence due to uncertainty about future cost increases. The implementation of l e g i s l a t i o n , such as that perta in ing to Juniper movement, has had a dampening e f f e c t on domestic production l e v e l s , p a r t i c u l a r l y in the f i r s t few years, s ince introduct ion of regu la t ions . The p o s s i b i l i t y of further l e g i s l a t i o n , s imi la r to the Juniper l e g i s l a t i o n which destroyed markets for Fraser Va l ley West, Fraser Va l ley East and Vancouver Island propagators, is a retarding inf luence which w i l l l i k e l y remain with the B.C. nursery industry fo r some time. It is 118 an inf luence which now causes propagators to re f r a in from s p e c i a l i z i n g heavi ly in a p a r t i c u l a r l ine of product ion. The st 'RiihgenfcePi 'neuregu'l'ationsoi nvojllviiingemovementt'to the Inter ior have caused a subs t i tu t ion in demand for otheroonnamen<ta1..mater ia 1 s, par-t i c u l a r l y Junipers which cannot be suppl ied by the Fraser Va l ley and Vancouver Island production regions. This fur ther provides an advantage for U.S. production areas. In a d d i t i o n , note has been made in Appendix A of the container t a r i f f advantage enjoyed by U.S. propagators. The larger average s ize of operat ion amongst U.S. propagators appears to y i e l d a d i s t i n c t advantage to these producers v i s - a - v i s domestic growers, e s p e c i a l l y with respect to marketing e x t e r n a l i t i e s . Not only are U.S. propagators genera l ly more aggressive marketers than the i r Can-adian counterparts, but through the l i b e r a l use of quant i ty or trade discounts and serv ice and qua l i t y product d i f fe rent i a t ion , t f cheUUSSgrowers a l so hold a superior po s i t i on due to the fact that as s i ze of operat ion increases, growers are more capable of e s tab l i sh ing superior supply re -la t ions with r e t a i l operators . Owing to the tremendous range of v a r i e t i e s and age/s ize categories of mater ia ls required by r e t a i l nurserymen, Canadian propagators often su f fer from i n s u f f i c i e n t s i z e of operat ion to be capable of provid ing the choice of mater ia ls required. In add i t i on , U.S. producers are able to o f f e r cont inu i ty of supply throughout the year. This is due par t l y to the i r ' s i z e economies' but a l so due to a superior growing cl imate and almost exc lus ive use of container grown p lant s , enabling plant movement at any time of the year. 119 One fur ther ex te rna l i t y which benef i ts U.S. producers a r i se s from the economies of l a r ge - s i ze truck loads. Canadian r e t a i l e r s who seek nursery mater ia l s from the U.S. propagators because of l e g i s l a t i v e aspects of p lant protect ion regu la t ions , or the s u p e r i o r i t y of U.S. marketing arrangements, f i nd that genera l ly speaking, large truck load lots of plant mater ia ls imported from the U.S. are more economical than small loads. For example, because of Juniper regu lat ions , movement of mater ia ls occurs from the U.S.* to the Inter ior of B.C. However, along with the Juniper imports there often comes a va r ie ty of other mater ia l s to make up a f u l l load l o t . Hence, the regulat ions involv ing Juniperus spp. have the fur ther de leter ious e f f e c t of discouraging domestic pro-duction and trade in other competit ive l ines of mater ia l s . This occurs because of these truck load economies, and again because buyers prefer to deal with a l im i ted number of suppl iers for convenience and depend-a b i l i t y . From th i s d i scuss ion i t is hypothesized that the unexplained port ion of the flow of U.S. ornamental mater ia ls into B.C. in 1973, was due par t l y to lagged response of domestic propagators in the face of rap id ly e sca la t ing consumer demand and par t l y due to e x t e r n a l i t i e s be-stowing benef i t s on U.S. propagators v i s - a - v i s domestic propagators. The ana lys i s has found no ind icat ion of serious resource cons t r a in t s , although the p o s s i b i l i t y of domestic resource const ra int s l i m i t i n g produc t ion cannot be e n t i r e l y ruled out. The resu l t s of the spa t i a l equ i l i b r ium ana lys i s and the supple-mentary ana lys i s are seen to adequately explain the in teract ions of U.S. 120 and domestic supply of propagated plant mater ia l s in the chosen l ines of inves t i ga t ion for the 1973 calendar year. Under s t r i c t l y comparable circumstances, the resu l t s can be general ized to ornamental propagation of most v a r i e t i e s and age/s ize categor ies . CHAPTER 6 SUMMARY AND CONCLUS IONS Summary o f t h e S t u d y T h i s s t u d y h a s a t t e m p t e d t o c o n d u c t a n e c o n o m i c a n a l y s i s o f s p e c i f i c l i n e s o f o r n a m e n t a l n u r s e r y p r o d u c t i o n a n d t r a d e i n t h e p r o v i n c e o f B . C . T h e m a i n f a c t o r s a f f e c t i n g d o m e s t i c p r o d u c t i o n a n d t r a d e w e r e f o u n d t o be g o v e r n m e n t i m p o s e d p l a n t p r o t e c t i o n l e g i s l a t i o n , d o m e s t i c c o s t s o f p r o d u c t i o n v e r s u s i m p o r t p r o c u r e m e n t c o s t s , a n d t h e p r o x i m i t y a n d a c c e s s i b i l i t y o f l a r g e U . S . p r o p a g a t o r s t o t h e B . C . m a r k e t . H o w -e v e r , t h e m a j o r f i n d i n g was t h a t r e g u l a t i o n s d i d h i n d e r d o m e s t i c p r o -p a g a t i o n a n d t r a d e i n 1 9 7 3 • T h e a n a l y s i s was f a c i l i t a t e d t h r o u g h t h e u s e o f s p a t i a l e q u i l i -b r i u m a n a l y s i s . T h e t r a n s p o r t a t i o n a n d p r o d u c t i o n - d i s t r i b u t i o n m o d e l s s e t up i n a l i n e a r p r o g r a m m i n g c o s t m i n i m i z a i t i j j o n f o r m a t , p r o v e d t o be an e f f i c i e n t m e t h o d f o r h a n d l i n g t h e i n t e r a c t i o n o f l e g i s l a t i v e a n d e c o n o m i c f a c t o r s d e t e r m i n i n g p r o d u c t i o n l e v e l s a n d t r a d e o f B r i t i s h C o l -u m b i a n p r o p a g a t e d p l a n t m a t e r i a l s . T h e u s e o f t h e s e m o d e l s a s v e h i c l e s o f a n a l y s i s i l l u s t r a t e d t h a t n o t w i t h s t a n d i n g s p e c i f i c a s s u m p t i o n s a n d d a t a r e s t r i c t i o n s , t h e r e c o m m e n d e d o p t i m a l b e h a v i o r y i e l d e d m e a n i n g f u l c o m p a r i s o n s w i t h a c t u a l p a t t e r n s o f p r o d u c t i o n a n d t r a d e . I t m u s t be a p p r e c i a t e d t h a t t h e s e m o d e l s w e r e f o r m u l a t e d i n a s h o r t r u n c o n t e x t . 121 122 The t ransportat ion model indicated the r e l a t i v e locat iona l advantage of domestic propagators over U.S. propagators in supplying h i s t o r i c a l B.C. and P r a i r i e consumption requirements for the 1973 calendar year. The p roduc t i on -d i s t r i bu t ion model allowed the inc lus ion of domestic cost of production estimates and import procurement cos t s . This showed the competit ive advantage or disadvantage of the various production centers s pec i f i ed in the model, with respect to production and trade in representat ive ornamental nursery mater i a l s , in re l a t i on to the consumption regions set out in the ana l y s i s . The succession of analyses conducted in conjunct ion with the p roduc t i on -d i s t r i bu t i on model permitted the introduct ion of p lant pro-tect ion l e g i s l a t i o n under a number of production level s t r a teg ie s . These resu l t s indicated that in 1973 domestic propagators held a competit ive cost advantage in the production of the representat ive mater ia l s , Juniyevus ahinensis 'Pfitzeriana Aurea, ' Thuja oacidentalis 'Pyramidalis, ' and Pinus mugho mughus in the one gal lon equivalent age/s ize category. Fur-thermore, i t was shown that in ce r ta in instances plant protect ion l e g i s -l a t i on was d i r e c t l y responsible for a cance l l i ng of th i s competit ive advantage by domestic propagators, thereby act ing in favor of U.S. pro-pagators. Supplementary ana lys i s i l l u s t r a t e d i nd i rec t aspects of th is l e g i s -l a t i on which further weakened the pos i t i on of domestic propagators. S e n s i t i v i t y ana lys i s helped reveal the extent of the competit ive cost advantage enjoyed by domestic growers v i s - a - v i s U.S. growers of propagated plant mater ia l s . F i n a l l y , add i t iona l supplementary ana lys i s was employed 123 to invest igate the reasons for large import leve l s of propagated plant mater ia ls despite th i s domestic competit ive advantage. While ser ious excess capacity is not thought to ex i s t in the B.C. nursery industry, i t is not c lear whether resource constra ints a f fec ted domestic propagation leve l s in 1973- Indirect e f f e c t s o f p lant protect ion l e g i s l a t i o n and cer ta in ' e x t e r n a l i t i e s ' associated with U.S. propagation c e r t a i n l y induced a greater flow of ornamental mater ia l s from the U.S. than would have been expected from the p l a in in terac t ion of d i r e c t l e g i s l a t i o n e f f e c t s and domestic production cost advantages. Outlook, Implications and Po l i cy Suggestions Assuming the resu l t s of th is study permit some genera l i za t ion to the vast major i ty of ornamental p lant mater ia ls propagated by domestic growers in 1973, i t is important to note that B r i t i s h Columbian ornamental producers only had a tenuous competit ive cost advantage over U.S. pro-ducers at th i s time. Subsequently, there have been ind icat ions that domestic costs of production have r i sen more rap id ly than those in the U.S., p a r t i c u l a r l y in the sphere of wages and land p r i c e s . Hence, these circumstances can qu ick ly d i sp lace any cost advantage exh ib i ted in 1973. However, to the extent that cost o f production est imat ing procedures over -estimated these f i gu re s , the competit ive impl icat ions of domestic pro-duction and trade are a l l the more pronounced. This would tend to r e i n -state a stronger domestic production cost p o s i t i o n , e s p e c i a l l y in the l i gh t of the s e n s i t i v i t y analyses. 124 The t a r i f f - f r e e access of U.S. mater ia ls into the B.C. market, the favorable plant protect ion regulat ions with respect to U.S. supply, the c o n t a i n e r - t a r i f f advantage and any real or imagined qua 1ity advan-tages enjoyed by U.S. importers and the apparent oversupply s i tua t i on present ly beginning to bu i ld up in Oregon in some l ines of propagation; a l l have serious impl icat ions as to the future competit ive a b i l i t y of domestic propagators. The growing trend towards con ta ine r i za t i on of nursery production in the U.S. extends the s e l l i n g season for these producers. Intel— temporal r i g i d i t i e s due to a more r e s t r i c t i v e production and marketing season in Canada do occur. Although the emphasis in t h i s study has been on the one gal lon equiva lent age/s ize category of plant mater ia l s , i t is f e l t that the resu l t s of th i s study apply equal ly to a wide range of age/s ize c l a s s i f i c a t i o n s , p a r t i c u l a r l y s ince con ta iner i za t i on makes poss ib le the r e l a t i v e l y easy movement of larger s ized plant mater ia l s . It appears that geographical c e n t r a l i z a t i o n of nursery produc-t ion favor ing U.S. regions is l i k e l y to occur ,aat ldeast for smaller s ized stock. '^Nevertheless, the heavy weight of larger s ized mater ia l s and the rapid e sca la t ion of shipping costs , due p r i n c i p a l l y to increas ing fuel cos t s , w i l l probably tend to keep production of larger s ized mater ia ls decentra l i zed in the near fu ture . Notwithstanding these f a c t o r s , con-tinued expansion in demand for ornamentals w i l l s t i l l a l low domestic propagators to reta in a prominent ro le in supplying mater ia l s despite the numerous adverse inf luences c i t e d . 125 It should be mentioned that from the consumer's point of view easy access to mater ia ls from the U.S. has been a bene f i t . The r e l a t i v e l y long gestat ion period involved in producing f i n i shed plant mater ia l s fo r the consumer makes i t d i f f i c u l t f o r producers to react qu ick ly to changes in consumer demand. This lagged supply s i tua t i on often leads to a ' cob -web reac t ion ' in which pr ices and quant i t i e s f l u c tua te widely. .However, the existence of read i l y access ib le U.S. supp l ies , both with respect to quant i ty and range of products, has acted to dampen considerably any f l u c tua t i on s , thus s t a b i l i z i n g consumer pr i ce l eve l s . Much d i scuss ion has centered around the adverse inf luence of plant protect ion l e g i s l a t i o n upon domestic propagation l eve l s . The resu l t s in an e a r l i e r , s e c t i o n of th i s study indicated that the regu la -t ions governing Juniper movement, in which trade between cer ta in regions was p roh ib i ted , had a much more severe e f f e c t upon domestic propagation than the regulat ions a f f e c t i n g Pine movement. To th i s end i t is recommended that a ifiu Henursery. i o e c t i f meat ion grog rami bee i fisjtt§a,fceddtQoredaoeet@oaanwiTO plant protect ion movement regu la t ions . Nursery c e r t i f i c a t i o n would pro-vide an incent ive fo r the growing of disease and pest f ree nursery stock by a l lowing movement of regulated plant mater ia l s that were found ' c l e a n . ' In so doing, a greater quant i ty of domestic propagation would be en -couraged . 126 Suggestions for Further Research The extension of spa t i a l equ i l ib r ium ana l y s i s , to include ana lys i s of nuifseTymmatterci-a;]sppvodCictcionirino6lt'h§rdcNtye>se' il'i fifes" o f propagation across a wide range of age/s ize categor ies , would provide valuable information to those concerned with the B.C. nursery industry. In add i t i on , a de ta i l ed comparison of cost components in production between U.S. and domestic growers would indicate def ini t;ively$n»the future a b i l i t i e s of domestic producers to compete with the i r counterparts in the U.S., ceteris paribus. F i n a l l y , the compi lat ion of economic data for nursery propagated material as a continuing a c t i v i t y would provide a base from which researchers and industry par t i c ipant s could read i ly monitor many of the economic aspects which a f f e c t nursery production in the province of B r i t i s h Columbia. References 1. Andison, A.F. and O.G. Dawson. A Perspective of the B.C. Nursery Industry. Unreleased report . Vancouver: Economics Branch, C D . A . , 1973. 2. Beckman, M. "A Continuous Model of T ranspor ta t i on . " Econometrica, 20 (1952), 643-660. 3. Bowden, D.L., et a l . " In terreg iona l Competition in the U.S. Turkey Industry." Hilgardia, 37 (1967), 437-531. 4. B r i s t o l , P.W. An Economic Survey of the Rhode Island Nursery Industry. B u l l e t i n 410. Kingston: Un ivers i ty of Rhode Island A g r i c u l t u r a l Experiment S t a t i on , 1973. 5. Dantzig, D.G. "Programming of Interdependent A c t i v i t i e s : Mathe-matical Model." In T. C. Koopmans (ed.) Analysis of Production and Allocation. New York: John Wiley and Sons, 1951. 6. Dorfman, R., et a l . Linear Programming and Economic Analysis. New York: McGraw H i l l , 1958. 7. Dor l ing, M. J . Spatial Equilibrium Analysis for the Canadian Com Economy. Unpublished Ph.D. thes i s , McGil l Un i ver s i t y , 1964. 8. Dor l ing , M. J . Case Studies of Nursery Enterprise Costs in the Vancouver Area 1965-67. The Un ivers i ty of B r i t i s h Columbia, Department of A g r i c u l t u r a l Economics, 1967. 9. Economic Research Serv i ce . U.S.D.A. Ornamental Production and Marketing Trends 1948-72. S t a t i s t i c a l B u l l e t i n 529- Washington: U.S.D.A., 1974. 10. Egbert, A. C , et a l . Regional Changes in Grain Production. B u l l e t i n 521. Ames (iKowa); A g r i c u l t u r a l Experimentation S ta t i on , 1964. 11. Emerson, P. An Economic Analysis of World Corn Trade. Unpublished Ph.D. thes i s , Purdue Un iver s i t y , 1975. 12. Enke, S. " Equ i l i b r i um Among S p a t i a l l y Separated Markets: So lut ion by E l e c t r i c Analogue." -Econometrieia, 19 (1952), 40-47. 13- External Trade Report. Trade Through British Columbia Customs Ports in 1974. V i c t o r i a : Department of Economic Development, Government of B r i t i s h Columbia, 1974. 127 128 14. Fox, K. A. "A Spat ia l Equ i l ib r ium Model of the Livestock Feed Economy." Econometricia, 21 (1953), 547-566. 15- Gilmor, G. Spatial Equilibrium Analysis for Canadian Apple Pro-duction. Unpublished M.Sc. thes i s , Un ivers i ty of B r i t i s h Columbia, 1968. 16. Goodrich, D.C. Toward the Year 1985: Growth and Change in Ornamental Horticulture. New York: Cornel l Un ivers i ty Col lege of A g r i c u l t u r e , Special Ser ies 13, 1970. 17. Harr ington, D. H. and R. K. Sahi. A Quadratic Programming Model of the Canadian Dairy Industry. A Working Paper. Ottawa: Economics Branch, CD .A . , 1974. 18. Ho r t i cu l t u ra l Branch, B r i t i s h Columbia Department of A g r i c u l t u r e . Nursery Stock Production in B.C. Surrey: B.C.D.A., 1971. 19. H o r t i c u l t u r a l Research I n s t i tu te , Inc. Marketing of Ornamental Nursery Stock. Washington: American Assoc iat ion of Nurserymen, H.R.I-., 1965. 20. Ho r t i cu l t u ra l Research In s t i tu te , Inc. Scope of the Nursery In-dustry. Washington: American Assoc ia t ion of Nurserymen, H.R.I., 1972. 21. H o r t i c u l t u r a l Research In s t i tu te , Inc. Operating Cost Study. American Assoc iat ion o f Nurserymen, H.R.I., 1972. 22. Judge, G. G. Competitive Position of the Connecticut Poultry Industry—A Spatial Equilibrium Model for Eggs. B u l l e t i n 3 '8. Storrs (Conn.): A g r i cu l t u r a l ExperimentaStation, 1956. 23. King, R. A. and W. R. Henry. "Transportat ion Models in Studies of Interregional Competit ion." In Studies of Interregional Compe-tition. North Carol ina A g r i c u l t u r a l Experiment S ta t i on , 1961. 24. King, R. A. Interregional Competition—Research Methods. Raleigh: A g r i c u l t u r a l Po l i cy Research In s t i tu te , North Caro l ina State Uni -v e r s i t y , 1963. 25. Koopmans, T. C. "Optimum U t i l i z a t i o n of the Transportat ion System." Econometrica, 17 (1949) 136-146. 26. Kuhn, H. and A. Tucker. "Non-1"near Programming." In J . Neyman {ed.) Proceeding of the Second Berkley Symposium. Los Angeles: Un ivers i ty of C a l i f o r n i a Press, 1951. 27. L ipsey, R. G., et a l . Economics. New York: Harper and Row, 1973-129 28. Marsha l l , A l f r e d . Principles of Economics. E ighth E d i t i o n . London: MacMMlan Press L t d . , 1920. 29. M i ghe l l , R. L. and J . D. Black. Interregional Competition in Agriculture—with Special'Reference to Dairy Farming in the Lake States and New England. Cambridge: Harvard Un iver s i t y Press , 1951. 30. M i l l , J . S . Principle of Political Economy. London: Longmans, Green and Co., 1886, Book M l , Chapter 18. 31. Morr is , D. Analysis of the Sales and Use of Landscape Plants in B.C. 1967-1968. Unpublished M.Sc. theses, The Un ivers i ty of B.C., 1969. 32. Padgett, J . H. and T. L. F r a z i e r . The Relationship Between Costs and Pricing of Woody Ornamentals. B u l l e t i n 100. Athens: Un ivers i ty of Georgia Col lege Experiment S ta t ion , 1962. 33. Padgett, J . H., et a l . An Optimum Flow Pattern of Feed Grains in Georgia. B u l l e t i n 38. Athens: Georgia Ag r i cu l t u r a l Experiment S ta t ion , 1964. 34. Ricardo, David. On the Principles of Political Economy and Taxation. Middlesex: Penquin Books L t d . , 1971, Chapter VII. 35. Samuelson, P. A. " Spa t i a l P r i ce Equ i l ib r ium and Linear Programming." American Economic Review, 42 (1952) 283-303. 36. Smith, Adam. The Wealth of Nations. Toronto: The Modern L i b r a ry , Random House Inc., Reprinted 1938, Book I, Chapter I-I II. 37- Snodgrass, M. M. and C. C. French. Linear Programming Approach to Interregional Competition in the Dairy Industry. Purdue: Indiana Experimental Research S ta t i on , 1959-38. S t a t i s t i c s Canada, A g r i c u l t u r a l D i v i s i o n , H o r t i c u l t u r a l Crops Uni t . Survey of Canadian Nursery Trades Industry. Catalogue 22 -203. Ottawa: S t a t i s t i c s Canada, 1969, 1970-71, 1971-72, 1972-73. 39. S t a t i s t i c s Canada, Ag r i cu l tu ra l D i v i s i on . Farm Cash Receipts. Catalogue 21-001. Ottawa: S t a t i s t i c s Canada, 1969-1974. 40. S t a t i s t i c s Canada. Exports Merchandise Trade. Catalogue 65-202. Ottawa: S t a t i s t i c s Canada, 1970-72, 1971-73, 1972-74. 41. S t a t i s t i c s Canada. Bank of Canada Statistical Review. Ottawa: S t a t i s t i c s Canada, 1974. 42. S t a t i s t i c s Canada. Imports Entered at Customs Ports in Each Prov-ince of Canada During the Year 1973. Ottawa: Canadian H o r t i c u l t u r a l Council Report, S t a t i s t i c s Canada, 1974. 130 43. Takayama, T. and G. G. Judge. " Equ i l i b r i um Among S p a t i a l l y Separated Markets: A Reformulat ion." Econometrica, 32 (1964) 510-524. 44. Thuenen, J . H. von. The Isolated State. Hamburg,, 1826. 45. Weber, A. Theory of the Location of Industry. Trans lated by C. F r i e d r i c h , Chicago: Un ivers i ty of Chicago Press, 1929. 46. Wi l l iams, F. W. and B. Sepasy. The Demand for Woody Ornamentals in Clarke County;, Georgia. Research Report 135- Athens, Univer-s i t y of Georgia Col lege Experiment S ta t i on , 1972. 47. Zwart, A. C. A Recursive Spatial Analysis of the North American Pork Sector. Unpublished M.Sc. theses, Un ivers i ty of Guelph, 1973. APPENDIX A PLANT PROTECTION LEGISLATION-FEDERAL AND PROVINCIAL FEDERAL TARIFF POLICY FOR PLANT RELATED MATERIALS PLANT PROTECTION LEGISLATION-FEDERAL AND PROVINCIAL The Plant Protect ion D i v i s i on , Ag r i cu l tu re Canada, is respon-s i b l e for protect ing Canadian farm and fo res t industr ies from the introduct ion of insects and diseases in jur ious to p lant s . Under the terms of the International Plant Protect ion Convention to which Canada is a s ignatory, a dual inspect ion system for the purpose of protect ing the market place on a b i o l og i ca l bas is , rather than as an a l t e r n a t i v e for t a r i f f p ro tec t i on , is accepted by most trading nat ions. As a resu l t a l l plant products are proh ib i ted entry into Canada without p r i o r authori ty. This author i ty in B.C. can be atta ined from one of the three Plant Protect ion D i v i s i on s . These d i v i s i o n s w i l l provide, upon request, a summary of regulat ions under the Plant Quarantine Act (formerly the Destruct ive Insect and Pest Act) governing the movement of plants and plant products into the country. Permission for import is granted upon supplying to the D i v i s i on , information concerning the v a r i e t i e s of plants to be imported. In add i t i on , the name and address of importer, approx i -mate date of shipment a r r i v a l and port of entry to be used, are requ i red. There does e x i s t , however, a l i s t of plants which are e i the r proh ib i ted entry ou t r i gh t , or allowed r e s t r i c t e d entry subject to the s a t i s f a c t i o n of some s p e c i f i e d procedures. A permit a l lowing importation is issued and must be accompanied by a c e r t i f i c a t e of inspect ion, signed and dated by an authorized o f f i c i a l 131 132 of the country of o r i g i n . These documents must be attached to the sh ip -ment before entry is permitted into Canada. The inspect ion c e r t i f i c a t e , c a l l e d a Phytosanitary C e r t i f i c a t e , indicates that the plants included in the shipment were inspected at the time of packing and were found apparently f ree of plant pests and diseases. In some cases, e i ther for ce r t a in p lants or for ce r t a i n countr ies of o r i g i n , add i t iona l c e r t i f i c a -t ion is required. This c e r t i f i c a t i o n (a charge is lev ied for a Phyto-san i tary C e r t i f i c a t e issued in the U.S.) f u l f i l l s the i n te rna t i ona l l y agreed upon r e s p o n s i b i l i t y of the suppl iers of plant mater ia l s to protect the consumer. At the time of entry, the plant mater ia l s are held at customs u n t i l inspectors of the Plant Protect ion D i v i s i on check the mater ia l s fo r pests and d iseases. The mater ia l s are released i f they are found f ree of problems, or treatment is recommended for pests i f they are d iscovered. This operat ion completes the dual inspect ion procedure. A fur ther duty of the D i v i s i on is to regulate exports from Canada by issuing a Phytosanitary C e r t i f i c a t e (free of charge), thus meeting Canada's r e s p o n s i b i l i t i e s o f International p lant p ro tec t i on . The ch ie f concern of th is federal agency is the International and In terprov inc ia l monitoring of p lant movement in Canada. Nonetheless, in spec ia l cases i t is a l so involved with Intraprovinc ia 1 movements as w e l l . The B.C. government has a Plant Protect ion Act which provides regulat ions for the preventing and spreading of insect s , pests and d i s -eases des t ruc t i ve to vegetat ion with in the province. A l l vendors of nursery stock in B.C. must be l icensed under the Act , and are charged a 133 nominal fee for th i s l i cense by the H o r t i c u l t u r a l Branch of the B.C.D.A. Within th is umbrella are regulat ions which deal with the protect ion of the f o res t industry, f r u i t growing industry and the nursery industry, as well as the i r in teract ions with one another. The p rov inc ia l and federal plant protect ion bodies maintain a c lose l i a i s o n . Good cooperation occurs and communication is conducted through a number of meetings each year. This contact is necessary due to the overlapping j u r i s d i c t i o n a l nature of these two plant protect ion agencies. Although regulat ions perta in ing to Balsam Woolly Aphid, L i t t l e Cherry disease, Deciduous Barberry, and Golden Nematode are in force in B.C., only a summary of the regulat ions involv ing the ornamental mater ia l s examined in th is study w i l l be presented. F i r s t the regulat ions regarding Juniperus spp. w i l l be set out , and then the regulat ions r e -lated to Pinus spp. w i l l fo l low. The growing, entry and movement of p lants of the Juniperus spp. in Canada are governed by the Pear T r e l l i s Rust regulat ions of the prov-i nc i a l and federa l governments. Under the Plant Protect ion Act of B.C., any appointed inspector is author ized to examine a l l pear trees and junipers suspected of being infected by Pear T r e l l i s Rust. Upon d i s -covery of th is disease he can order the grower to remove and destroy infected p lant s . In 1973, any Juniperus spp. grown in the Vancouver Forest D i s t r i c t were not allowed with in the boundaries of the Cariboo-Kamloops or Nelson Forest D i s t r i c t s except when moving in t r an s i t through these d i s t r i c t s . In th i s instance, the shipment required i d e n t i f i c a t i o n by Quarantine 134 movement s t i cker s issued by Ag r i cu l tu re Canada, Plant Protect ion Div-i s i o n . Junipers grown in the U.S., however, were allowed entry into a l l d i s t r i c t s of B.C. and Canada. Movement of Juniperus spp. within the quarantined provinces of B.C., A l b e r t a , Saskatchewan and Manitoba, were al lowed, but no movement east of Manitoba was allowed entry to B.C. grown junipers unless grown in the non-quarantined areas of the Cariboo-Kami oops or Nelson Forest D i s t r i c t s . Export of Junipers to the U.S. in 1973 was proh ib i ted from the quarantined areas of B.C. where Pear T r e l l i s Rust was known to occur. Entry to the U.S. of jun ipers from Canadian areas east of Manitoba, was allowed upon issue of a Phytosanitary C e r t i f i c a t e . Entry from the western provinces required spec ia l permit and post -entry quarantine. Junipers from the Cariboo-Kamloops and Nelson Forest D i s t r i c t s were allowed movement to the U.S. under the same terms governing entry from eastern Canadian provinces. Since 1973, several minor a l t e ra t i on s have been made to the Pear T r e l1 i s Rust regu lat ions , however, the essence of the regulat ions remain the same. The Pear T r e l l i s Rust regulat ions c i t e d above, profoundly a f f e c t the course of trade in Junipers between the regions of B.C. and the U.S. i d e n t i f i e d for the purposes of th is study. Junipers propagated in the three U.S. regions: C a l i f o r n i a , Oregon and Washington and the B.C. In ter ior reg ion, are allowed entry into a l l the consumption regions spec-i f i e d in the empir ica l model. Junipers propagated on Vancouver Island and the Fraser Va l l ey , East and West regions, are allowed entry into a l l consumption regions except the B.C. I n ter io r . It is a f ind ing of the 135 study that the Pear T r e l l i s Rust regulat ions in 1973 induced import of a greater quant ity of U.S. produced mater ia l s than would otherwise have been the case on a t s t r i c t l y economic bas i s . The European Pine Shoot Moth regulat ions r e s t r i c t movement of Pinus spp. into B.C. from a l l other countr ies and provinces of Canada. Pine trees brought into the province from the U.S. and other Canadian provinces must be fumigated with Methyl Bromide at a dosage of k lbs. per 1000 cu . f t . of space for an exposure period of between 2.5 to 3.5 hours depending on the f o l i a ge temperature. Fumigation must be confirmed by a c e r t i f i c a t e from the State or Federal Department of Ag r i cu l tu re , un-less arrangements were made to have the fumigating done in B.C. Pine dest ined for other provinces may be moved through B.C. tin t r a n s i t under Customs bond in sealed t rucks . In 1973, pine trees shipped from the Vancouver Forest D i s t r i c t to other B.C. areas could be moved only i f they were f ree of any v i s i b l e evidence of Pine Shoot Moth in fec t i on or damage. They had to be dipped in an approved i n sec t i c i de i f shipped during the period from A p r i l 1st to May 15th. If the pines were shipped between July 15th and May 31st, fumigation with Methyl Bromide was required. In a l l cases, the pines had to be inspected at the time of fumi-gation or d ipping, and tagged with treatment c e r t i f i c a t i o n tags. During the per iod , May 15th to Ju ly 15th, pines were not allowed shipment from the Vancouver Forest D i s t r i c t . Pines being shipped to dest inat ions out -si de of B.C. were required to be inspected and found f ree of v i s i b l e signs of Pine Shoot Moth i n f e s t a t i o n . During the per iod , June 1st to 136 July 15th, shipment outside of B.C. had to be conveyed in sealed vans, but no pr io r fumigation or dipping was required. Movement of pines with in B.C. is now subject to a d i f f e r e n t set of regulat ions which al low shipment with in the Vancouver Forest D i s t r i c t . This movement can take place without fumigat ion, only i f the f i e l d in which the pines are grown adhere to cer ta in C e r t i f i c a t i o n Program standards. These standards include inspection by c e r t i f i e d inspectors , freedom from disease and use of c e r t i f i c a t i o n tags. Movement outs ide of the Vancouver Forest D i s t r i c t i s now allowed between July 15th and May 15th, only upon fumigation of pine mater ia l s . The European Pine Shoot Moth regulat ions in e f f e c t , increase the per unit cost of shipping pines from one region to another. A l l im-ported pines from the U.S. Regions: C a l i f o r n i a , Oregon and Washington, require fumigation regardless of des t inat ion to domestic consumption regions. Pines shipped from the domestic production regions to the P r a i r i e s do not require fumigation at any time during the year. Pines shipped from the Vancouver Island and Fraser Va l l ey , East and West, areas to the In ter ior , are required to be fumigated. For the purposes of th is study the cost o f fumigation for one gal lon equivalents of Mugho Pine was taken to be 10 cents /p lant . This cost is based on data 'provided by Monrovia Nursery in Azusa, C a l i f o r n i a . It includes the app l i c a t i on charge and an estimate of the cost re su l t ing from increased morta l i ty of fumigated p lant s . Table 3-4C (p. 63) i n d i -cates the add i t ion of th is cost to the production and d i s t r i b u t i o n of Mugho Pine for the spec i f i ed regions in the study. 137 FEDERAL TARIFF POLICY FOR PLANT RELATED MATERIALS The Customs T a r i f f Act governs the importation of a l l items inc luding p l an t - re l a ted mater ia l s into Canada. The s p e c i f i c rates of customs dut ies vary with each item re spec t i ve l y , and according to the trading status enjoyed by the export ing nation with Canada. For the ornamental nursery mater ia ls considered in th i s study, only imports from the U.S. are of concern. Accord ing ly , the schedule of rates discussed w i l l per ta in to the Most Favoured-Nation T a r i f f c l a s s i f i c a t i o n with in which trade between the U.S. and Canada takes p lace. Hydrangeas and other pot grown p lants , rose stock and other stock fo r g ra f t ing or budding, a t t r a c t a 12-1/2 percent ad valorem t a r i f f under T a r i f f I tern #7803-1. If, however, these materia ls are used by f l o r i s t s or nurserymen for bona f ide forc ing purposes, or growing-on p r i o r to d i sposa l , they are admitted f ree of duty under T a r i f f I tern #78o4-]. These regulat ions havennot been a l te red s ince 1971/72. M u l t i f l o r a rosebushes are subject to a 12-1/2 percent ad valorem t a r i f f under T a r i f f I tern #7940-1. Other rose bushes a t t r a c t a s p e c i f i c rate of 3 cents/p lant under T a r i f f I tern #7945-1. The t a r i f f s involv ing roses have been unchanged s ince 1959. A l l other ornamental nursery materia ls contained in pots with medium are allowed into Canada without duty under T a r i f f I tern #8000-1. U.S. exporters enjoy a small advantage over Canadian exporters with respect to nursery mater ia l s in that the U.S. has t a r i f f s of 5 percent and 7-5 percent covering most graf ted and budded f r u i t trees and other nursery stock. 138 A l l f e r t i l i z e r s are f ree from duty under T a r i f f I terns #93100 and pott ing s o i l s are exempt as w e l l . Polyethelene l i ne r s and p l a s t i c pots (without plants) are subject to an ad valorem duty of 17-1/2 per -cent under T a r i f f I tern #93907-1 - P lant containers imported from the U.S. for use in plant production by domestic propagators are subject to duty, while plant containers which hold l i v i n g plants are not subject to duty. This resu l t s in a cost advantage to U.S. propagators who ship to the Canadian market. In 1973, standard one ga l lon containers cost B.C. nurserymen approximately 10 to 12 cents each, depending on the quantity purchased. It is assumed that th is purchase p r i ce embodies the 17-1/2 percent ad valorem tar i f f .whethertbheppotwwas ilimpoiLt-e'door produced domest ica l ly . The U.S. container producers are the marginal supp l iers and as a re su l t set the p r i c e . Therefore, domestic propagators suf fered a 1.75 to 2.10 cents /p lant cost disadvantage in competition with imported mater ia l s from th i s inequitable t a r i f f s i t u a t i o n a lone. A l l nursery materia ls entering Canada in big commercial orders must be accompanied with a signed statement by the exporter, s t a t i ng that the mater ia ls in the order were sold at ' F a i r Market Value' at the time and place of shipment, in the currency of the country of export. This statement ensures that s i m i l a r goods, when so ld in the same quant i -t i e s for home consumption in the ordinary course of trade under competit ive condit ions by the importer, are sold at a p r i ce not below that which p reva i l s on the local market of the exporter . Although th i s s t i p u l a t i o n does not ensure that exported mater ia ls are being sold at pr ices above the i r cost of product ion, i t does however 139 guarantee that mater ia l s are not being dumped at a p r i ce less than that at which they are so ld on the local U.S. market. It should be noted that unless a s p e c i f i c complaint is lev ied by Canadian c i t i z e n s , the government makes no check on U.S. exporters as to the verac i t y of t h e i r f a i r market value statements. 139a APPENDIX B IMPORTS OF ORNAMENTAL NURSERY MATERIALS INTO BRITISH COLUMBIA IN 1973 IMPORTS OF ORNAMENTAL NURSERY MATERIALS INTO BRITISH COLUMBIA IN 1973 Individual records of each nursery material shipment enter ing, the province of B.C. are kept on f i l e at the three Plant Protect ion Of f i ces in Vancouver, V i c t o r i a and Bent icton. These Plant Protect ion Of f i ces c o l l e c t information concerning the plant mater ia l s imported as a by-product o f the i r plant inspect ion dut ies . This information, for the most par t , remains in a disaggregated form unless s p e c i f i c s t a t i s t i c s are required on some plant disease re lated inves t i ga t ion . Nonetheless, th i s data provides a wealth of information on imports. It includes o r i g i n and dest inat ion of shipments, composition of shipments on a va r ie ty or c u l t i v a r bas i s , quant i ty , age/s ize and p r i ce per unit of each var ie ty or c u l t i v a r , date of shipment and mode of t ransportat ion used for shipment. This disaggregated data is kept on f i l e so that i t can be a v a i l -able to researchers on a time ser ies basis subject to permission for access from the Of f i cer - i r i -Charge , Plant Protect ion D iv i s ions B.C., Ag r i cu l tu re Canada. Due to the volume of nursery imports enter ing B.C., the aggregation of th i s data, even for a s ing le year, is aeveryetiedious and time-consuming task. In order to a r r i v e at the most important imports of ornamental nursery mater ia l s in 1973, a number of operations had to be undertaken. 140 141 It was f i r s t decided to use imports through the Vancouver port of entry j u r i s d i c t i o n , as proxy for imports into B.C. as a whole. This approach was not considered unnecessar i ly r e s t r i c t i v e s ince some 70 per -cent of to ta l B.C. imports enter at th i s po int . However, th i s proxy was only used to e s t ab l i sh the overa l l p i c ture and was l a te r abandoned in favor of deta i led import data into the ind iv idua l port of entry areas. Accord ing ly , raw data l i s t s were compiled for ornamental imports through the Vancouver inspect ion por t . These l i s t s contained names and addresses of importers and exporters , s p e c i f i c names, quan t i t i e s , pr ices per un i t , age/s ize c l a s s i f i c a t i o n s and date and mode of shipments for a l l ornamental v a r i e t i e s and c u l t i v a r s enter ing the province. In a few cases, where plant mater ia l s were transshipped to another plant protect ion j u r i s d i c t i o n a f t e r enter ing at Vancouver, i t was necessary to net out these quant i t i e s from the Vancouver f i g u r e . From these l i s t s , a second set of l i s t s were compiled on a genera basis showing va r ie ty or c u l t i v a r , age/s ize c l a s s i f i c a t i o n , quant i ty , value and p r i ce per unit of a l l ornamental imports. The aggregation of th i s v a r i e t a l data on a genera basis allowed the construct ion of Table B . l . It was sometimes necessary to put value data into d i s c re te form by rounding to the nearest d o l l a r by sys temat ica l ly moving border l ine cases a l t e r n a t i v e l y up to the next highest d o l l a r and then down to the next lowest, e t c . This is recognized to be an arbi ttiafyppDoeeduMebbut, i f does keep the data reasonably unbiased. In some cases i t was necessary to pro - ra te ce r t a in missing data items, such as pr i ce per unit or age/ s i ze c l a s s i f i c a t i o n , although th is was done on a cons i s tent basis as w e l l . 142 TABLE B.l Value of Ornamental Imports 1 Via the Vancouver Inspection Port into B.C. in 1973 (Dol lars) Var iety Va 1 ue Var iety Value Jun i pers 115,674 Magnolia 8,800 Pines 62,705 Cotoneaster 8,136 2 Roses 57,754 Cupressus (Cypress) 6,-851 Thuja 52,146 Chamaecypa r i s 6,201 2 Azalea 51,649 Hydrangea^ 5,457 2 Rhododendrons 36,364 Taxus (Yew) 5,124 Acev (Maple) 26,698 Euonymus 3,552 Vicea (Spruce) 23,204 V i burnum 3,099 Betula (Birch) 11,209 Miscel laneous Seeds 1,573 Cedrus (Cedar) 9,183 Unspeci f ied Ornamentals 213,596 Total Value of Ornamental Imports 708,975 1 A l l value f igures include l i ve plants and seeds where a p p l i -cab le . The pine f i gure does not include a value for cut Christmas t rees . 2 These f igures do not include values for greenhouse quant i t i e s used for fo rc ing or other purposes. 3 Total ornamental value excludes f r u i t s , small f r u i t s , per-enn i a l s , annuals, t r op i ca l s and other herbaceous plants as def ined in Chapter One. Source: Disaggregated 1 9 7 3 Data, Plant Protect ion D i v i s i on , C D . A . , Vancouver, B.C. 143 Table B.l (p. 142) i l l u s t r a t e s the ord ina l ranking in value terms of the seventeen most important ornamental import genera for T973-Although Jun iper , Pine and Roses are the top three imports in value terms, Roses were replaced by Thuja for the purposes of th i s study to make import choices cons i s tent with important domestic production cho ices . Roses are mainly imported as l i t t l e domestic propagation takes place in B.C. A telephone survey of a l l known ornamental propagators in the province was then undertaken to determine the propagated mater ia l s which were most important in volume and value terms to the domestic growers. It was discovered that an almost per fect correspondence between major imported ornamentals and the main domest ica l ly propagated ornamentals ex i s ted . At th is po int , the prev ious ly mentioned set of l i s t s were again used, th i s time to rank on a volume bas i s , a l l v a r i e t i e s and c u l t i v a r s within the chosen genera c l a s s i f i c a t i o n s : Jun iper , Thuja and Pine. Tables B.2 to B.4 ind icate th i s ranking and show that Golden Juniper {Juniperus ahinensis 'Pfitzeriana Aurea'), Thuja Pyramidal is {Thuja oaoidentalis 'Pyramidalis '), and Mugho Pine {Pinus mugho mughus) were the major imported v a r i e t i e s in t h e i r respect ive genera categories enter ing through the Vancouver port o f entry in 1973. The f i n a l step involved in the ex t rac t ion of import information necess i tated once again going back to the o r i g i n a l l i s t s of ornamental imports. Figures concerning quant i ty , p r i ce per un i t , age/s;i:ze c l a s s i -f i c a t i o n , o r i g i n , des t ina t ion and date and mode of t ransportat ion of 144 TABLE B.2 Quantity Summary Sheet of Juniper Va r i e t i e s Imported into B.C. Through the Vancouver Port of Entry in 1973 Var iety Quanti ty Var iety Quanti ty A. JUNIPERUS CHINENSIS: 1) P f i t z e r i a n a Aurea 50,299 2) P f i t z e r i a n a Compacta 31,454 3) P f i t z e r i a n a Glauca 30,447 4) Aurea (Gold Coast) 6,280 5) Blaawi 3,050 6) Mint Julep 2,155 7) Maneyi 2,050 8) Densaerecta Spartan 1 ,002 9) F ru i t l and i 1,000 10) Torulosa (Hollywood) 378 11) Kete leer i 277 12) Hetzi Glauca 275 13) Armstrongi Chicken 105 14) Robusta Green 102 15) Sargenti Glauca 100 16) Blue Point 64 17) Hetzi Columnaris 57 18) Waukagan 50 19) Iowa Spi ral 8 20) Glauca Columnaris 2 21) Wintergreen 2 B. JUNIPERUS HORIZONTAL IS 1) Plumosa Compacta 2) Wi1toni 3) Bar Harbor 4) Hughes ( S i l ve r Spreader) 5) Emerson's Creeper 6) Webberi 7) Turquoise Spreader 8) Emerald Spreader E. JUNIPERUS V IRGINI ANA C. JUNIPERUS COMMUNIS 1) Vase D. JUNIPERUS SAB INA 1) Tamari sc i f o l i a 2) Blue Danube 3) Scandia 4) Broadmoor 5) Buf fa lo 6) Arcadia 8,105 4,040 3,350 200 200 100 25 5 75 48,773 9,050 3,350 1,655 175 150 1) Cuppress i f o l i a 152 2) Skyrocket 37 3) Manhattan Blue 10 4) Burki 10 F. JUNIPERUS SC0P0L0RUM 1) B1ue Hawen 3,700 2) polorado Green 3,000 3) Moffeti 112 4) Welchi 54 5) Pathf inder 50 6) Excelsa S t r i c t a 50 7) Cuppres s i f o l i a Erecta 50 8) Gray Gleam 30 9) Wichita Blue 25 G. JUNIPERUS.JAP0NICA 1) San Jose 11,750 H. JUNIPERUS PR0CUMBENS 1) Variegata Golden 275 2) Nana 250 1 . JUNIPERUS BANDISUGI 108 J . JUNIPERUS PFITZERIANA Old Gold 579 K. JUNIPERUS C0NFERTA Blue P a c i f i c 100 L. JUNIPERUS SQUAMATA 1) Meyeri 170 2) Expansa Parsoni 10 3) Blue Star Novelty 5 M. JUNIPERUS BONSAI 2,025 N. JUNIPERUS CRESTA GLAUCA 25 0. JUNIPERUS IRISH 133 P. JUNIPERUS COAST OF MAINE 50 TOTAL JUNIPER IMPORTS 2 3 U 7 0 Source: Disaggregated 1973 Data, Plant Protect ion D i v i s i on , C D . A . , Vancouver, B.C. 145 TABLE B . 3 Quantity Summary Sheet of Thuja Va r i e t i e s Imported into B.C. Through the Vancouver Port of Entry in 1973 Var iety Quantity A. THUJA OCCIDENTAL IS 1) Pyramidal is 43,657 2) Woodwardi (Globosa) 4,687 3) Aureo Specata 380 4) Smaracd 83 B. THUJA ORIENTAL IS 1) Aurea-Nana 6,042 2) Blue Cone 2,250 3) Bakeri 2,050 4) Westmount 1,025 5) F ru i t l and i 500 C. THUJA PLICATA 1) Excelsa 9,700 D. THUJA SUNKIST 125 D. THUJA BREWER 89 F. THUJA OBTUSA 25 G. THUJA GOLD-TIP ELEGANT ISSI MA 100 TOTAL THUJA IMPORTS 70,713 Source: Disaggregated 1973 Data, Plant Protect ion D i v i s i on , C D . A . , Vancouver, B.C. 146 TABLE B.4 Quantity Summary Sheet of Pine V a r i e t i e s ' Imported into B.C. Through the Vancouver Port of Entry in 1973 Var iety Quant i t y A. PINUS MUGHO MUGHUS 15,000 B. PINUS SYLVESTRIS (SCOTCH) 4,650 C. PINUS NIGRA SUSTRIACA 2,500 D. PINUS THUMBERG 1 ANA (JAP. BLACK) 300 E. PINUS STROBUS 50 TOTAL PINE IMPORTS 22,500 Pinus Seed 8,368.75 (pounds) Includes imports for growing purposes only. Christmas trees are excluded from the t o t a l . Source: Disaggregated 1973 Data, Plant Protect ion D i v i s i on , C D . A . , Vancouver, B.C. 147 these v a r i e t i e s were compiled for imports enter ing the Vancouver i n -spection j u r i s d i c t i o n . In add i t i on , the same type of data was c o l l e c t e d from the Penticton and V i c t o r i a ports so as to y i e l d a complete p rov inc i a l import p i c ture for the chosen ornamental mater i a l s . This then, allowed the construct ion of Tables B.5 and B.6 which indicate the o r i g i n , des t ina t i on , p r i ce and quant i ty o f various age/s ize c l a s s i f i c a t i o n s of Golden Jun iper , Thuja Pyramidal is and Mugho Pine in 1973. The four B.C. regions import-ing materia ls co inc ide with the regions set out in Chapter 1 and 3-TABLE B.5 Imports of Spec i f ied Ornamental Mater ia ls from U.S. Orig ins to the Vancouver and Ch i l l iwack Regions' in 1973- (Bracketed f igures represent the weighted mean p r i c e s 2 per unit of imported mater ia l s in U.S. Funds) Vancouver Chi .11 iwack R. C. Li ner 6 Mos. 1 Yr . 1 Ga l . 12/15" 2 Yr. 2 Ga l . 5 Gal . Larger 15/18" 18/24" Sizes R. C . 3 Liner 1 Ga l . 2 Ga l . 5 Ga l . Larger • \ . 12/15" 15/18" 18/24" Sizes 6 Mos. 1 Yr. 2 Yrs. Golden Juniper Seatt le Golden Juniper Portland Golden Juniper Los Angeles Thuja Pyrami da 1i s Seatt 1 e Thuja Pyrami da l i s Port land Thuja Pyramidal is Los Angeles Mugho Pine** Seatt le Mugho Pine Port land Mugho P i ne Los Angeles (.10) 125 (.15) 3,000 (.25) 200 (.30) 9,650 (.93) 2,800 (.70) 2,050 (.90) 6,835 (2.09) 2,475 (1.75) 182 (2.00) 150 (2.61) 350 (2.25) 100 (3-30) 300 (4.67) 300 (.70) 250 (9.50) 32 (.30) 5,000 (.15) 1,100 (.30) 100 (.25) 10,100 (.30) 7,000 (.99) 2,460 (.62) 7,775 (.90) 2,000 (1.24) 725 (2.50) 200 (1.75) 5,760 (5.11) 347 (2.44) 1,13.4 (.62) (1.24) (1.75) 668 300 1,300 (3.75) 150 (2.36) 2,538 (.06) 9,000 (.06) 6,000 1 These regions are cons istent wi th those i den t i f i ed in Chapter Three under Regional Demarcation. Pr ices take account of quant ity discounts where they have been granted. 3 R.C. represents rooted c u t t i n g . For further discuss ion of size/age categories see Chapter Three under Regional Demand Estimates. "* Mugho Pine is 2 years o ld and approximate s i ze i s 6". Source: Disaggregated 1973 Data, Plant Protect ion D iv i s i on , CD.A. , Vancouver, B.C. TABLE B.6 Imports of Spec i f i ed Ornamental Mater ia l s from U.S. Orig ins to the Kelowna and V i c t o r i a Regions' in 1973. (Bracketed f igures represent the weighted mean p r i ce s^ per un i t of imported materials in U.S. Funds) Kelowna V i c t o r i a Or ig in i ze/Age R. C . 3 6 Mos. L iner 1 Yr. 1 Gal. 12/15" 2 Yrs. 2 Ga l . 15/18" 5 Gal. 18/24" Larger S i zes R. C. 3 6 Mos. L iner 1 Yr. 1 Ga l . 2 Gal . 5 Gal . Larger 12/15" 15/18" 18/24" Sizes 2 Yrs. Golden Juniper Seatt le (3.90) 50 Golden Juniper Portland (.70) 10,600 (1.75) 50 (2.25) 125 (.10) 2,800 (.25) 1,600 Golden Juniper Los Angeles (.30) 10,500 (.90) 9,600 (3.30) 450 (.30) 5,345 (.90) 335 Thuja Pyramidal is Seatt le Thuja Pyramidal is Portland (.15) 3,900 (.25) 800 (.62) 1,100 (2.00) 700 (.15) 5,400 (.90) . 25 Thuja Pyramidal is Los Angeles (.30) 1,400 (.90) 2,700 Mugho Pine Seatt le Mugho Pine Port land Mugho Pine Los Angeles These regions are cons i s tent w i th those i den t i f i ed in Chapter Three under Regional Demarcation. 2 Pr ices take account of quant i ty discounts where they have been qranted. 3 R. C. represents rooted c u t t i n g . For further discuss ion of size/age categories see Chapter Three under Regional Demand Estimates. Source: Disaggregated 1973 Data, Plant Protect ion D iv i s ions , CD.A. , Kelowna and V i c t o r i a , B.C. APPENDIX C DOMESTIC CONSUMPTION AND PRODUCTION OF SPECIFIED ORNAMENTAL NURSERY MATERIALS IN B.C. IN 1973 DOMESTIC CONSUMPTION AND PRODUCTION OF SPECIFIED ORNAMENTAL NURSERY MATERIALS IN B.C. IN 1973 Data concerning domestic production and consumption of the spec i f i ed ornamental nursery mater ia l s was c o l l e c t e d by way of de ta i l ed interviews of a l l known propagators in the prov ince. Part of the quest ionnaire used in the interviews gathered s p e c i f i c information on propagation, product ion, sales and d i spo s i t i on of these mater ia l s across age/s ize categor ies s im i l a r to those used for recording imports in Appendix B. Again, i t should be noted that these c l a s s i f i c a t i o n s are approximations, therefore, the s ize to age re la t ionsh ips are subject to some dev iat ion as was mentioned in Chapter 3. The quest ionnaire i n -formation re lates to h i s t o r i c a l production and sales records for 1973. Interviews were conducted in the spring and summer of 1975 by the wr i t e r , and for a l l p r a c t i c a l purposes cons t i tu te a populat ion survey. Chapter 1 provides add i t iona l methodological information concerning the interviews. The resu l t s of these interviews are summarized in Tables C.l to C.4. Some discuss ion of the data in these tables can be found in Chapter 3 under Regional Demand Estimates and Regional Supply E s t i -mates- -Mode I I . It is bel ieved that the f i gures contained in these tables repre-sent a good approximation of what a c tua l l y occurred in 1973- One poss ib le source of e r ror occurs where domestic sales of mater ia l s from years p r i o r to 1973 were held by non-interviewed r e t a i l e r s or growers-on and then sold in 1973. This s i t ua t i on was r e c t i f i e d to the extent pos s ib le , by 150 TABLE C. 1 Summary Sheet of Specif ied Materials Produced and Sold for the Vancouver (Fraser Valley West) Region of B.C. in 1973 Juniperus Chinensis . 'Pfitzeriana Aurea'a Thuja Oacidentalis 'Pyramidalis'^ Pinus Mugho Mughusc Totals ^ — —'"•'Size/Age R.C.1 Liner 1 Yr. 1 Gal . 12/15" 2 Yr. 2 Gal. 15/18" 18/24" Larger S i ze 2 R.C.' Liner 1 Yr. 1 Gal. 12/15" 2 Yrs. 2 Gal. 15/18" Larger S i ze 2 3" 1 Gal. 10/12" 1 Gal. 12/15" 15/18" Quantity Propagated 82,350 155,250 1971 67,000 1972 30,000 1973 45,000 Total Production Avai lable for Sale 15,000 15,250 17,450 13,050 3,125 1,300 10,000 35,000 12,500 5,600 19,300 20,000 5,500 4,970 300 Total Sales to Fraser Valley West Region 12,000 10,050 15,450 7,275 3,125 1,300 10,000 17,500 11,500 5,600 16,325 20,000 4,100 3,070 300 Total Sales to Fraser Valley East Region Total Sales to Interior Region -8,750 50 Total Sales to Island Region 3,000 5,200 700 180 7,000 240 Total Sales to Pra i r ie Region 1,300 5,595 1,750 1,000 2,685 1,400 1,900 a Totals include responses from nineteen propagators. Totals include responses from sixteen propagators. 0 Totals include responses from s ix propagators. R.C. represents rooted cutt ing. Larger s ize includes a l l s izes greater than those l i s ted ind iv idua l ly . Source: Personal Interviews: Fraser Valley West Propagators. TABLE C.2 Summary Sheet of Spec i f ied Mater ia ls Produced and Sold for the Ch i l l iwack (Fraser Val ley East) Region of B.C. in 1973 Juniperus Chinenst3 'Pfitzeriana Aurea'a Thuja Oceidentalis 'Pyramidalis Pinus Mugho Mughus' Totals ' ^^*^S i ze/Age R.C. 1 Liner 1 Yr. 1 Gal . 12/15" 2 Yrs. 2 Ga l . 15/18" 18/24" Larger S i z e 2 R.C.' Li ner 1 Yr. 1 Ga l . 12/15" 2 Yrs. 2 Gal . 15/18" Larger S i z e 2 3" 1 Ga l . 10/12" 1 Ga l . 12/15" 15/18" Quantity Propagated 36,050 57,700 1971 5,000 1972 60,000 1973 15,000 Total Production Avai1able for Sale 6,750 8,000 6,200 5,250 400 2,000 16,000 8,100 2,540 10,325 3,500 3,545 3,950 3,000 Total Sales to Fraser Val ley West Region 3,523 5,000 4,195 4,233 321 1,450 4,000 1 ,980 7,827 1,000 2,000 2,400 Total Sales to Fraser Val ley East Region 3,227 2,000 1,405 517 79 2,000 14,500 3,250 560 798 3,500 545 550 600 Total Sales to In te r io r Region 350 350 TotaI Sales to 1sland Region 100 50 Tota1 Sales to Prai r i e Region 1,000 600 500 400 1,300 2,000 1,400 3 Totals include responses from nine propagators. Totals include responses from nine propagators. c Totals include responses from three propagators. R.C. represents rooted cu t t i n g . Larger s ize includes a l l s izes greater than those l i s t e d i n d i v i d u a l l y . Source: Personal Interviews: Fraser Val ley East Propagators. v n no TABLE C.3 Summary Sheet of Spec i f ied Mater ia l s Produced and Sold for the V i c t o r i a (Island) Region of B.C. in 1973 Juniperus Chinensis 'Pfitzeriana Au-'ja'3 Thuja Oacidentalis 'Pyramidalis Pint is Mughc > Mughus0 Totals ^ - ^ b i z e / A g e R.C.' L iner 1 Yr. 1 Ga l . 12/15" 2 Yrs. 2 Ga l . 15/18" 18/24" Larger S i z e 2 R.C. 1 Liner 1 Yr. 1 Gal . 12/15" 2 Yrs. 2 Gal . 15/18" Larger S i z e z 3" 1 Ga l . 10/12" 1 Ga l . 12/15" 15/18" 1968 10,000 Quantity Propagated 12,000 21,000 1973 17,000 Total Production Ava i l ab le for Sa 1 e 5,000 7,500 2,500 2,000 100 10,000 6,000 . 100 2,500 10,000 3,500 1,500 7,000 Total Sales to Lower Fraser West Region 2,400 3,000 700 1,400 5,000 2,000 9,035 500 1,500 6,100 Total Sales to Fraser Val ley East Region . 1,100 700 2,000 1,100 965 800 300 Total Sales to In te r io r Region Total Sales to •Island Region 1,500 3,800 1,800 600 100 3,000 2,900 100 2,500 3,000 1,100 1,100 600 Total Sales to P r a i r i e Region a Totals include responses from three propagators. Totals include responses from three propagators. c Totals include responses from three propagators. 1 R.C. represents rooted cu t t i n g . 2 Larger s i ze includes a l l s izes greater than those l i s t e d i n d i v i d u a l l y . Source: Personal Interviews: Island Propagators. \_n V J O TABLE C.4 Summary Sheet of Specif ied Materials Produce' and Sold for the Kelowna (Interior) Region of B.C. in 1973 Juniperus Chinensis 'Pfitzeriana Aurea'3 Thuja Oceidentalis 'Pyramidalis'^ Pinus Mugho Mughus' Totals ^ - " - " ' s i ze/Age R.C. ' Liner 1 Yr. 1 Gal. 12/15" 2 Yrs. 2 Gal. 15/18" 18/24" Larger S i ze 2 R.C. 1 Liner 1 Yr. 1 Gal. 12/15" 2 Yrs. 2 Gal. 15/18" Larger S i z e 2 3" 1 Gal. 10/12" 1 Gal. 12/15" 15/18" Quantity Propagated 21,500 22,000 25,500 Total Product ion Avai lable for Sale 5,000 1,000 1,000 1,000 1,000 3,000 4,400 200 230 3,050 Total Sales to Fraser Va1 ley West Region Total Sales to Fraser Va1 ley East Reg ion Total Sales to Interior Region 3,500 750 700 .800 800 3,000 4,400 20 200 2,050 Total Sales to Island Region Total Sales to . Prai r ie Region 1,500 250 300 200 200 180 30 1,000 a Totals include responses from three propagators. Totals include responses from three propagators. c Totals include responses from three propagators. i o R.C. represents rooted cutt ing. Larger s ize includes a l l sizes greater than those l i s ted ind iv idua l ly . Source: Personal Interviews: Interior Propagators. 155 questioning propagators as to the i r knowledge of such 'outstanding ' mater ia ls and including an est imation for these plants in the tab les . Great care was taken to keep imported material from past years and domestic product ion/sa les f i gures separate and to accurate ly set out d i spos i t i on of materia ls from one region to another, so that double counting would not take p lace. Hence, a l l quant ity f i gures perta in only to mater ia ls o r i g i n a l l y propagated in B.C. It should be noted that in most cases, sales recorded were wholesale in nature. However, r e t a i l sales by propagators were included where they occurred. This approach further f a c i l i t a t e d exc lus ion of a l l double counting from sales t rans -ac t ions . Table C. l (p. 151) includes estimates for two non-cooperating propagators for the Vancouver/Fraser Va l ley West region. A l l other regions involve f u l l populat ion data, subject to the prev ious ly mentioned q u a l i f i c a t i o n that for inc lus ion growers had to propagate at least one of the three spec i f i ed v a r i e t i e s of ornamental mater ia l s , at a quantity level of one hundred or more plants per year. The quantity propagated f igures given in each of the four tables provide an ind ica t ion of the to ta l production undertaken in 1973- These quant i t ies comprise the stock of mater ia ls from which the sales of var -ious age/s ize groupings w i l l a r i s e over the next few years. The quant i -t ie s avai lab le for sale in the groupings depends on each grower's committment of a port ion of his propagation every year, to be grown-on for sa le in subsequent years as the plants mature. This quantity is reduced to some extent due to a degree of mor-t a l i t y which occurs as plants grow over the various age/s ize ca tegor ies . 156 Morta l i t y may vary great ly between ind iv idua l propagators according to t h e i r cu l tu ra l p r a c t i c e s . In add i t i on , some plants are rendered un-marketable due to cer ta in defect s , e tc . A U.S. study by Padgett [32] estimates that t ransp lant ing losses and unmarketable material losses amount to 15 percent of propagated ornamental nursery mater i a l s . In the case of Mugho Pine in Tables C.l to C.4 (pp. 151-54), age groupings are riot provided to correspond with s ize categor ies . There appeared to be a great deal of v a r i a t i o n in these elements amongst growers. The 3" c l a s s i f i c a t i o n is given simply to provide an ind icat ion of successful propagation quant i t i e s to th i s stage of growth. Due to the r e l a t i v e l y small number of propagators engaged in pine propagation, production quant i t ie s for a range of years was c o l l e c t e d . S ize ca te -gories between the 3" c l a s s i f i c a t i o n and the one ga l lon category are not given because i t was impossible to e s t ab l i sh uni formity of groupings in these cases. APPENDIX D EXCHANGE RATES, BROKERAGE CHARGES AND TRANSPORTATION COSTS EXCHANGE RATES, BROKERAGE CHARGES AND TRANSPORTATION COSTS Since th i s ana lys i s involves both inte i—regional and i n t e r -national commodity movements between the U.S. and Canada, pr ices quoted in terms of d i f f e r e n t currencies must be taken into account. -Hence a l l rates, pr i ces and costs u t i l i z e d in th i s study have been converted to a common monetary basis of Canadian funds. Table D.1 shows the monthly averages of exchange rates in 1973 which led to the adoption of the year ' s average of $.9994 Canadian to $1.00 U.S. as the measure of con-vers ion. The vast majority of nursery items moving through Canadian Customs u t i l i z e the serv ices of a broker and thus are subject to a brokerage charge. Brokers are customs' expediters who f a c i l i t a t e the rapid handling of the paperwork and ' red tape' necessary to c lea r imported items through customs. In the case of nursery products which are per ishable in nature, and as such cannot be t i ed up at customs for days, brokerage serv ices are imperative. The brokerage rate quotations given in Table D.2 are the average charges as provided by the two major Vancouver brokerage f i rms: A.B.C. Customs Brokers and Border Brokers. These 1973 rates perta in to goods in C l a s s i f i c a t i o n #3 ( i . e . , goods f ree of duty and export sales tax). Plants and the pots or containers they come in , are considered as a s ing le e n t i t y . Therefore, the regular duty of 17-5 percent on pots (see Appendix 157 158 TABLE D.l Average P reva i l i n g Exchange Rates Between Canada and the United States in 1973 ($ Canadian Per $ U.S.) January 1.0000 Apri 1 1.0036 SJuly 1.001 4 October .9994 February .9900 May .9960 August 1.0046 November 1.0000 March .9988 June .9982 September 1.0054 December .9960 Source: Exchange Rates, Bank Canada, Ottawa, 1974. of Canada S ta t i s t i ca 1 Rev i ew, Government of TABLE D.2 Typica l Brokerage Charges in B.C. for Importing Nursery Stock in 1973 ($ Canadian) Value of Value of Va 1ue of Value of Goods Rates Goods Rates Goods Rates Goods Ra tes ($ U.S.) C$ U.S.) ($ U.S.) ($ U.S.) 100 7-50 1,500 14.00 3,000 17.00 4,500 19.50 500 1 1 .00 2,000 15.00 3,500 18.00 5,000 20.00 1,000 12.00 2,500 16.00 4,000 19-00 Source: Personal communications, A.B.C. Customs Brokers and Border Brokers, Vancouver, B.C. 159 A) does not apply in th i s instance. Brokerage fees are app l ied to the ' f a i r market value ' of the plants in the country of o r i g i n . Fa i r market value is a l so discussed in Appendix A. To f a c i l i t a t e est imation of the cost of t ransport ing nursery mater ia ls from the various o r i g i n s to the various des t inat ions on a per unit bas i s , i t was necessary to procure data on the average weight of d i f f e r e n t age/s ize c l a s s i f i c a t i o n s of plants in containers with medium. These weights were provided by Monrovia Nursery in Azusa, C a l i f o r n i a and are i l l u s t r a t e d in Table D.3- The f igures assume a standard pott ing medium which does not u t i l i z e excessive amounts of l i gh t non-so i l com-ponents, such as sawdust, ve rmicu l i t e , p e r l i t e or peatmoss. Table D.3 a l so provides an approximation of the number and weight of p lants in a f u l l s e m i - t r a i l e r truck load. Transportat ion rates between every poss ib le pa i r o f o r i g i n s and dest inat ions were gathered from a number of trucking operat ions. E a r l i e r in the study an examination of B.C. imports confirmed that v i r t u a l l y a l l movement of mater ia ls was conducted by pub l ic t ruck ing. Although a good deal of intraprovincia1 movement is conducted by pr iva te trucks, i t is f e l t in the interests of cons i s tency, that standard pub l i c rates should be u t i l i z e d . When taking into account opportunity costs of the nurserymen prov id ing the i r own trucking se rv i ce s , pub l i c t ransportat ion rates were though to provide a uniform approximation in a l l cases of nursery mater ia l s movement. Rates were c o l l e c t e d from the fo l lowing Vancouver trucking f i rms: Johnston, M i l l a r and Brown, Murcury, O.N.C. and Pub l i c Freightways. 160 TABLE D.3 Approximate Weights of Plants in Containers and Number and Weight of Plants in a §emi=Tr-ai ler Load Approximate Number Weight of Plants of Plants in Semi- in a Fu l l Semi-S ize of Plant Weight of Plant Traill er-Load . .Tnailler Load 5 Gal Ion 4o lbs. 900 36,000 lbs . 2 Gallon 15 lbs. 2,500 37,500 lb s . 1 Gallon 7 lbs. 6,000 42,000 lbs . 4" Pot .75 lbs. 50,000 37,500 lbs . 2h" L iner .50 lbs. 90,000 45,000 lbs . Source: Personal communi i cat ions , Monrovia Nursery, Azusa, C a l i f o r n i a . Table D.4 provides a schedule of these rates for three d i s c re te weight l e v e l s . The 10,000 pound level rates are L.T.L. charges between each pair of o r i g ins and dest inat ions in the t ransportat ion matrix in Table D.4. L.T.L. charges refer to rates for ' l e s s than a truckload or semi-t r a i l e r load l o t s . ' The 40,000 pound level rates concern f u l l loads of nursery mater ia l s . Vancouver is a break-point for a l l nursery materia l t r a v e l l i n g to Canadian dest inat ions in the model. This break-point means that the U.S. to any domestic des t inat ion t ransportat ion charge, is comprised of the standard U.S. o r i g i n to Vancouver rate plus the app l i cab le Vancouver to the domestic des t inat ion charge. This break-point occurs because the U.S. to Canada c a r r i e r s w i l l only serv ice major centers on the i r routes, leaving smaller domestic trucking l ines with the shorter haul business. 161 TABLE D.4 Transportat ion Levies for Packed Nursery Stock Between Pairs of Production and Consumption Centres in Canadian Dol1ars--1973 Lbs1. Vancouver/ Vancouver/ Vancouver/ Vancouver/ Vancouver/ Vancouver/ Los Angeles Port land Seatt le Ch i l l iwack V i c t o r i a Ke 1owna 10,000 312.72 177.27 130.00 164.37 209.89 136.55 20,000 847.27 509.09 323.64 97.78 198.93 144.98 40,000 847.27 509.09 323.64 155.10 209.04 289.96 Chi 11iwack/ Chi 11iwack Ch i11iwack Chi 11iwack Ch i l l iwack Chi 11iwack Los Angeles /Port land / Sea t t l e /Vi c t o r i a /Kelowna /Ca1gary 10,000 477.09 341.64 294.37 374.26 300.92 440.85 20,000 945.05 606.87 421 .42 296.71 242.76 606.90 40,000 1,002.37 664.19 478.74 364.14 445.06 1,014.87 V i c t o r i a / V i c t o r i a / Vi c t o r i a/ Vi c to r i a/ V i c t o r i a / Los Anqeles Pdrt land Seatt le Kelowna Ca 1 gary 10,000 522.61 387.16 339.89 346.44 486.37 20,000 1,046.20 708.02 522.57 343.91 708.05 40,000 1,056.31 718.13 532.68 499.00 1,068.81 Kelowna/ Kelowna/ Kelowna/ Kelowna/ Los Anqeles Port land Seat t le Ca1qary 10,000 449.27 313.82 266.55 244.45 20,000 992.25 654.07 468.62 338.85 40,000 1,137.23 799-05 613.60 546.21 Calgary/ Ca1gary/ Calgary/ Los Anqeles Port land Seatt le 10,000 589.20 453.75 406.48 20,000 1,356.39 1,018.21 832.76 40,000 1,707-04 1,368.86 1,183-41 Ca 1 gary 276.48 509.12 859.77 Source: Personal communications, Rate Departments, Johnston Terminals, M i l l a r and Brown Trucking, Mercury Freight L ines, O.N.C. and Publ ic F re i gh t -ways, Vancouver o f f i c e s . 162 It should be noted that the U.S. o r i g i n to Vancouver rates are ident i ca l for the 20,000 and 40,000 pound leve l s in each pair of these routes. This assumes that the 20,000 to 40,000 pound leve ls comprise a f u l l load shipment. The Vancouver to domestic dest inat ions charges do not al low such a premium on f u l l load shipments regardless of weight. As such,ra d i f f e r e n t i a l charge ex i s t s for the two weight, l e v e l s . With the establishment of th i s information i t is poss ib le to estimate t ransportat ion rates on a per unit basis between the e ight representat ive regions in Canada and the U.S. which are used in the empir ica l models. In order to a r r i v e at a 'cents per p lant ' f i gu re , how-ever, ce r ta in assumptions must be made. These assumptions requ i re : i) a f u l l s e m i - t r a i l e r load of p lants , i i ) that th is load is comprised of approximately 6000-one-galIon p lants , and i i i ) that the weight of these p lants would necess i ta te the 40,000 pound level rates for t rans -por ta t i on . Table D.5 i l l u s t r a t e s these per unit t ransportat ion charges which are commutative in nature. TABLE D.5 Estimated Truck Rates in Eight Regions in Cents Per Plant Between Representative Points Canada and the U.S. in Canadian Funds—1973 (1 Gallon Equivalents) of Dest inat ion Los Angeles Portland Seatt1e Vancouver Chi l l iwack Vi c t o r i a Ke1owna Ca1gary Los Angeles • 0 0 0 14.1c 16.7C 17.6c 18.9C 28.4c Portland 0 0 8.5 11.1 12.0 13.3 22.8 Seatt le 0 5.4 8.0 8.9 10.2 19.7 Vancouver 0 2.6 3.5 4.8 14.3 Ch i11iwack 0 6.1 7.4 16.9 V i c t o r i a 0 8.3 17.8 Kelowna 0 9.1 APPENDIX E DOMESTIC COST OF PRODUCTION ESTIMATES AND IMPORT PROCUREMENT COSTS DOMESTIC COST OF PRODUCTION ESTIMATES AND IMPORT PROCUREMENT COSTS Within the four domestic production regions, the number of growers involved in propagation of one or more of the chosen v a r i e t i e s of ornamental products d i f f e r e d apprec iab ly . In the Vancouver reg ion, cost of production approximations were c o l l e c t e d from nineteen Golden Juniper propagators, s ixteen Thuja Pyramidal is and s i x Mugho Pine pro-pagators. For the Ch i l l iwack region, responses were received from nine Golden Jun iper , nine Thuijia Pyramidal is and three Mugho Pine producers. V i c t o r i a and Kelowna each y ie lded three growers' est imates for the three spec i f i ed mater i a l s . 1 Individual propagators in these four regions were responsible for g reat ly d i f f e r i n g leve l s of production for each of the chosen v a r i e t i e s . It was decided that weighted averages on a volume bas i s , would best represent cost of production approximations for each nursery mater ia l in the respect ive regions. These approximations were a r r i ved at in conversation with i n d i -vidual growers. Some propagators already had cost of production f i gures a v a i l a b l e . Growers were informed by the interviewer of the components of production costs to bear in mind when making the i r c a l c u l a t i o n s . In-cluded in these estimates were a l l d i r e c t expenditure items pro-rated to each plant var ie ty cons idered. A l l items, such as u t i l i t i e s , o f f i c e expenses, adve r t i s i n g , taxes, machinery maintenance and depreciat ion were considered on a pro-rated basis as w e l l . The cost of production estimates 164 165 include account of the operators ' labor and any unpaid fami ly labor, as mentioned in Chapter 3-An attempt was made to cor rect or r a t i o n a l i z e cost of production f igures before they were accepted from the propagators. This was accom-p l i shed by u t i l i z i n g data from an e a r l i e r cost of production study conducted by Dorl ing [8], The f i n a l accepted cost of production estimates were reconc i led with th i s data from the standpoint of advancing reasonable comparabi l i ty regarding component percentage composition and actual costs adjusted for intervening i n f l a t i o n e f f e c t s . The resu l tant cost of pro -duction estimates are summarized in Table E.l in the form of point e s t i -mates. It is recognized that these estimates are bounded by confidence i n te rva l s . The magnitudes of such in terva l s are regulated by whatever percentage e r ro r has occurred v ia the cost of production est imation procedure. The estimates are bel ieved to be overestimated rather than underestimated due to the procedure fo l lowed. Jo in t costs ex i s ted on a l l holdings considered in th i s study. These costs were d i f f i c u l t to apportion and so were a l l o ca ted on an area bas is . Since th i s area tended to be larger , rather than smaller than that which ex i s ted in r e a l i t y , the costs were overest imated. The cost o f production estimates were fur ther overestimated in that the opportunity costs ca l cu la ted (discussed in the next section) u t i l i z e d an ident i ca l procedure. The estimates displayed in Table E.l assume a homogeneous age/ s i ze c l a s s i f i c a t i o n fo r the one ga l lon equivalents as wel l as homogeneous 166 TABLE E.1 Cost of Production Estimates for Golden Juniper, Thuja Pyramidalis and Mugho Pine Across Four Domestic Production Regions--l973 (Dol lars) (One^Ga,! 1 on . Equiva lents ) ' Region Golden Jun i per Thuja Pyramidal is Mugho P ine Vancouver .65 .63 .91 Ch i11iwack .65 .64 .91 V i c tor i a .66 .64 .92 Ke1owna .68 .67 .94 Source: Personal interviews, domestic propagators, reconc i led with i n f l a t ed f igures found in Case Studies of Nursery Enterpr i se costs by Dr. M.J. Dor l ing . qua l i t y of a l l mater ia l s produced within each v a r i e t a l category. It should be noted that the cost of production estimates for Mugho Pine include a composite of 10/12 inch and 12/15 inch s izes within the one gal lon e q u i -va lent category. It was impossible to obtain opportunity cost estimates perta in ing to the value of land and cap i ta l investment from ind iv idua l growers. At the time of the interviews, however, s p e c i f i c data was c o l l e c t e d which would l a te r allow the der i va t ion of these opportunity cost items portrayed in Table E .2.(p. 169) . Data was c o l l e c t e d from ind iv idua l propagators concerning the c lo s ing va luat ion for the 1973 calendar year of the fo l lowing litems: i) tota l land area assoc iated with the en te rp r i se , i i ) g reenhouses—plas t i c and g lass, temporary and permanent, i i i ) other s t ructures excluding l i v i n g 167 accommodations but inc luding covered areas for po t t ing , packing, storage, machinery and o f f i c e s , iv) a l l heating and watering equipment, v) trucks, cars , t r a c to r s , c u l t i v a t o r s , e t c . , used for business purposes and v i ) a l l other relevant machinery and equipment. The f i r s t item gave the value of land while items i i to vi y ie lded the value of c ap i t a l investment. At th i s stage the value of land and cap i ta l investment on each enterpr i se were subjected to an a r b i t r a r y rate of return estimate of 8 percent. This rate of return was considered to be the average return p reva i l i n g in 1973. The resu l t s of th i s operation gave opportunity costs of land and opportunity costs of cap i t a l for every propagation operation interviewed. In order to a r r i v e at opportunity costs on a per p lant basis for each of the three chosen v a r i e t i e s , i t was necessary to pro-rate the en te rp r i s e s ' opportunity costs ca l cu la ted p rev ious l y . These land and cap i t a l opportunity costs were pro-rated on a percentage basis according to the area and time of land and cap i ta l u t i l i z e d in the respect ive production of Golden Juniper, Thuja Pyramida-l i s and Mugho Pine. The opportunity costs of land and cap i t a l on a per plant basis were adjusted to encompass, in the cases of Golden Juniper and Thuja Pyramidal i s , a two-year production period which is necessary to produce one ga l lon s ize mater ia l s . In the case of Mugho Pine th i s adjustment was made for a four to s ix year production per iod . These production period adjustments are thought to represent the average time required to produce one gal lon equ iva lents , subject of course to the q u a l i f i c a t i o n s set out in Chapter 3-168 The opportunity costs of land and cap i t a l ca l cu la ted for each propagator interviewed were then grouped according to the four domestic production regions. Considerable variance occurred between enterpr i ses in each region. According ly, a weighted average f i gu re was derived for each of the four producing regions and is i l l u s t r a t e d in Table E.2. The cost of production data in Table E. l (p. 166) was added to the opportunity cost f i gures in Table E.2 to y i e l d a composite matrix in Table E.3- These composites were then used in the ob ject i ve funct ion of Model 11 with t ransportat ion charges added to the appropr iate a c t i v i t i e s . Import procurement costs were secured from two sources. The f i r s t source was the import f i l e s at the Plant Protect ion Of f i ces in the prov inces. The F.O.B. U.S. nursery pr i ces were recorded while access ing information from h i s t o r i c a l records when compil ing data for Appendix B. L i s ted p r i c e s , for the most part , were wholesale pr ices and included a l l trade discounts where they occurred. The second source involved the c o l l e c t i o n of 1973 wholesale p r i ce catalogues from cooperating exporters of one gal lon equivalents for Golden Junipers , Thuja Pyramidal is and Mugho Pine. It was discovered that pr i ces obtained from these two sources corresponded very c l o s e l y , ind ica t ing an absence of 'dumping' a c t i v i t y onto the B.C. market. Weighted averages of the pr ices in force in C a l i f o r n i a , Oregon and Wash-ington were ca1culateddand are displayed in Table E.4. These procure-ment costs in conjunct ion with the appropriate transportat ion-brokerage charges were u t i l i z e d in the ob ject i ve funct ion of Model II. 169 TABLE E.2 Opportunity Cost Est imates 1 f o r the. Production of.Golden Juniper, Thuja Pyramidal is and Mugho Pine across Four Domestic Production Regions--1973 (Dol lan.s?). {(Qhea Gall (Ion, Equivalents) Reg i on Golden Juniper Thuja Pyrami da l i s Mugho P i ne Vancouver .06 .05 .03 Ch i11iwack .05 • 03 .02 Vi c t o r i a .05 .05 .02 Kelowna .04 .03 .02 Opportunity cost estimates per ta in to the value of land and cap i ta 1 . Source: Data U t i l i z e d to estimate opportunity costs was obtained by personal interview of domestic propagators. TABLE E.3 CQmp.osjjjteeCQSjtto6fPpod,uQt,i;on,7^'Qppo,rt;uiji|i;ty Cost Estimates of Golden Juniper, Thuja Pyramidal is and Mugho Pine across Four Domestic Production Regions--1973 (Do 1 1 a r(sj)i e (Q,ne 1 Ga 1 iiqn; \ Eq,u -b^ a tents) Region Golden Juniper Thuja Pyramidal is Mugho Pine Vancouver • 71 .68 .94 Ch i11iwack .70 .67 .93 Vi c t o r i a .71 .69 .94 Ke1owna .72 .70 .96 1 Estimates are from the combination of data in Tables E.1 and E .2 . 170 TABLE E.k Import Procurement Costs of Golden Juniper, Thuja Pyramidal is and Mugho Pine Across Three U.S. Supply Reg ions-.-1973 (Dol lars) (One Gallon Equiva lents) ' Reg ion Golden Juniper Thuja Pyramidal is Mugho P i ne Los Angeles .91 .91 1.70 Portland .70 .62 1 .70 Seat t le .93 .99 1 .90 Source: Information obtained from import records at Ag r i cu l tu re Canada: Plant Protect ion D iv i s ions , Vancouver, Pent icton and V i c t o r i a ; and wholesale nursery catalogues of U.S. propagators. 

Cite

Citation Scheme:

        

Citations by CSL (citeproc-js)

Usage Statistics

Share

Embed

Customize your widget with the following options, then copy and paste the code below into the HTML of your page to embed this item in your website.
                        
                            <div id="ubcOpenCollectionsWidgetDisplay">
                            <script id="ubcOpenCollectionsWidget"
                            src="{[{embed.src}]}"
                            data-item="{[{embed.item}]}"
                            data-collection="{[{embed.collection}]}"
                            data-metadata="{[{embed.showMetadata}]}"
                            data-width="{[{embed.width}]}"
                            data-media="{[{embed.selectedMedia}]}"
                            async >
                            </script>
                            </div>
                        
                    
IIIF logo Our image viewer uses the IIIF 2.0 standard. To load this item in other compatible viewers, use this url:
https://iiif.library.ubc.ca/presentation/dsp.831.1-0093713/manifest

Comment

Related Items