Tariff (De‐) Escalation with Successive Oligopoly

This paper explores the issue of a simultaneous reduction in tariffs at different stages of a vertically related market where each stage is oligopolistic. When vertically related markets are characterized as a successive oligopoly, reducing tariffs by an equivalent amount on upstream and downstream imports will have a differential effect on market access and hence profits at each stage as a result of a combination of horizontal and vertical effects. These differential effects have implications for the tariff structure post‐trade reform.     

The Trade and Welfare Effects of State Trading in China with Reference to COFCO

The use of state trading to manage imports and exports has been a long‐standing feature of China’s agricultural trade regime. While the use of state trading was modified by China’s accession to the WTO, state trading still dominates for some commodities, even though there have been recent attempts to diminish its importance. In this paper, we analyse the potential trade distorting effect of COFCO on market access and export competition by drawing on some recent research on the impact of STEs on agricultural trade. By using a calibrated model of China’s imports of wheat and exports of maize, we are able to quantify the size of the trade distortions.     

How do institutions affect corruption and the shadow economy?

This paper analyzes a simple model that captures the relationship between institutional quality, the shadow economy, and corruption. It shows that an improvement in institutional quality reduces the shadow economy and affects the corruption market. The exact relationship between corruption and institutional quality is, however, ambiguous and depends on the relative effectiveness of institutional quality in the shadow and corruption markets. The analytics also show that the shadow economy and corruption are substitutes. The predictions of the model are empirically tested and confirmed.     

THE WELFARE IMPLICATIONS OF NITROGEN LIMITATION POLICIES

The effects of nitrogen limitation policies on the UK fertiliser market are considered. Using a simulation model which incorporates some structural aspects of the UK fertiliser industry, the extent and distribution of the welfare effects of nitrogen tax and quota policies are estimated. The results show that, while farmers lose from both policies, the main fertiliser manufacturers may gain in the short run from a quota policy, while profits would be reduced with a nitrogen tax policy.     

Market intermediaries,storage and policy reforms

Intermediaries play a crucial role in the functioning of agricultural and food markets in developing countries through linking production, imports and storage with consumption. We analyse how competition in the intermediary sector and alternative forms of intermediaries determine the incentives for storage and market outcomes more generally. We apply this framework to the Egyptian wheat sector as an illustrative case study, a country where food security is a priority, where both forms of intermediaries co-exist and undertake storage but where issues of reforms to the role of intermediaries have been raised. Through stochastic simulation, we analyse two changes in government policy: first, the effects of changing the policy instruments with both types of intermediaries undertaking storage; second, relating to market reforms where the private sector replaces the storage function of the parastatal. These issues have wider significance for addressing the interaction between food security and a wide range of policy reforms including de-regulation of parastatals in developing countries.     

REBALANCING EC CEREALS PROTECTION AND THE GATT URUGUAY ROUND

This paper considers the proposals put forward by the EC at the GATT Uruguay Round in December 1990. The EC's objective of rebalancing the Common Agricultural Policy in the context of a partial liberalisation of agricultural support on the world cereals market is assessed, as is the choice of base year from which liberalisation would have been initiated. The US's proposal for more significant reduction in agricultural support is also considered. The results show that the EC would not necessarily have benefited from rebalancing, since the effects would have depended on the choice of base period. For example, with 1986 (1988) as the base year, net welfare changes would have been 20 (50) percent higher (lower) with rebalancing, relative to the case without. Not surprisingly, the more substantial liberalisation proposed by the US would have resulted in greater net welfare gains even if rebalancing was conceded by the US.     

State Trading Enterprises as an Impediment to Improved Market Access: The Case of the Korean Rice Market

The trade and welfare effects of tariffs are well known. Less well known, and more difficult to analyze, are the economic effects of state trading enterprises (STEs). Despite STEs in importing countries having the potential to limit market access, they are no longer on the agriculture agenda in the Doha Round Negotiations in the WTO, because some Members have asserted that importing STEs do not distort international trade. We evaluate this assertion through the use of a theoretical model of an STE, which is calibrated to data for the Korean rice market. We show that this STE does distort international trade by restricting market access relative to a Cournot benchmark, and that it affects the domestic and international distribution of social welfare. This finding permits the conclusion that an important opportunity is being missed in the negotiations to improve market access, because importing STEs are not on the agenda.     

Domestic and Trade Equivalences of State Trading Importers

Market intermediaries in importing countries in the form of state trading enterprises (STEs) involve government manipulation of market structure that can be designated a nontariff measure because they are perceived to affect market access. However, the trade effect may be only an unintended consequence of the pursuit of the domestic concerns towards which the objectives of the STE are targeted as well as the extent of the exclusive rights that it is given. These objectives may reflect concerns about domestic distortions or, where these do not exist, redistribution towards producers or consumers. To this end, identifying the domestic effects of STEs through the use of producer and consumer subsidy equivalents that complement measures of the trade distorting effect is important in gauging the overall impact of STEs. In this paper, we outline a method to measure these policy equivalences which can be readily applied to aid transparency in trade negotiations.     

Redistribution,state trading enterprises and ‘politically optimal’ tariffs

State trading enterprises (STEs) are widely used and can be viewed as instruments of trade policy. We analyse two aspects: the first is their potential trade distorting effect; the second is how they modify the case for the ‘politically optimal’ tariff. We show that the STE can reduce the need for a tariff designed for domestic redistribution. This result introduces some ambiguity about how STEs are interpreted: from a multilateralist perspective, they should be dealt with in the same way as other non‐tariff barriers; from a nationalistic perspective, they can reduce the need for ‘politically optimal.’