Harmonizing External Quotas in an FTA: A Step Backward?

This paper explores how political–economy forces shape quantitative barriers against the rest of the world in an FTA. We show that whereas the dilution of lobbying power in an FTA typically leads to a relaxation of external quotas, this result is likely to be overturned as integration deepens. In particular, we show that cooperation among member countries on the level of their external quotas, cross–border lobbying by import–competing interests in the free–trade area, and the consolidation of national external quotas into a single one, all lead to stiffer restrictions against imports from the rest of the world. We also show that, unlike tariffs, endogenous quotas are not crucially affected by the presence of rules of origin.     

Corrupt Importers,Domestic Producers & Welfare: Role of Trade Policy

Stringent regulatory foreign exchange and trade policies create distortions and lead to mis‐invoicing of imports and exports. Such legally prescribed opportunistic behavior is alleged to be common in LDCs because of their lack of openness and restrictive policies. This paper focuses on the impact of various trade and currency policies like tariffs, quotas, different exchange rates, and devaluation and administrative policy instruments like monitoring and penalties on import mis‐invoicing under Cournot quantity competition. A framework is developed to analyze the impact of those policies on importers and domestic producers both under fixed and flexible exchange rate regimes.     

Managed trade: The US–Mexico sugar suspension agreements

Under the 1994 North American Free Trade Agreement, Mexican sugar producers were ultimately granted free access to the US sugar market, while all other suppliers, including US refiners, were subject to supply quotas. Following a surge in imports of Mexican sugar, the American Sugar Coalition initiated anti‐dumping and countervailing duty (ADCVD) proceedings against Mexico in early 2014. In December 2014, the ADCVD cases were halted as a result of two suspension agreements negotiated between the US and Mexico. This paper contributes to a small number of empirical studies that have estimated the impact of suspension agreements. We measure the impacts of the ADCVD filings and the suspension agreements on US domestic raw and refined prices, the raw‐to‐refined margin and the quantity and composition of sugar imports from Mexico. Results suggest US raw sugar prices increased by 3¢ per lb. (14%) under ADCVD proceedings, equivalent to an ad valorem tariff between 40% and 50%, while the suspension agreements increased US raw sugar prices by 5¢ (70% tariff equivalent). US refined sugar prices increased by similar amounts under the ADCVD proceedings and the suspension agreements (4.5¢ per lb.). Ultimately, both the ADCVD proceedings and the suspension agreements significantly reduced sugar imports from Mexico. US sugar refiner economic welfare hinges critically on the quantity and composition of raw sugar imports. As such, refiner revenue, following the ADCVD filings and suspension agreements, is estimated to have declined by 16%, relative to a free trade environment.     

Estimating the Impact of WTO and Domestic Reforms on the Indian Cotton and Textile Sectors: a General-Equilibrium Approach

The agreement to abolish the quotas on textiles and clothing introduced under the Multi‐fiber Arrangement (MFA) will create a new and much more competitive world market for India's exports of textiles and clothing. India's inefficient and costly policies, such as cotton export quotas, the hank yarn obligation, and the restrictive policies on foreign investment that have held back productivity in the Indian apparel sector, will impose serious costs. The authors consider the implications of reforming these policies in an open trading environment using a multiregion, applied general‐equilibrium model. They find that the costs of these policies to India increase substantially following abolition of the MFA; the benefits to India from domestic reforms are considerably enhanced when there is global free trade in textiles and apparel.     

The effects of periodic quotas limiting the stock of imports of durables

Analyses of trade quotas typically assume that the quota restricts the flow of some nondurable good. Many real-world quotas, however, restrict the stock of durable imports. We consider the cases where (1) anyone is free to export against such quotas and where (2) only those allocated portions of the total quota are free to export against such quotas. Recent econometric investigations of such quotas have focused on the price of the durable as an indicator of tightness induced by the quota. We show why this is an inappropriate indicator and suggest alternatives.     

Impact of nontariff measures on firms in Tunisia

This paper analyzes the effect of nontariff measures (NTMs) on firms in Tunisia. It draws a precise picture of NTMs’ effects on firms’ imports. We use firm‐level data to take into account firm heterogeneity. We explore the impact of NTMs on small vs. medium and large firms. We also consider the differentiated impact of NTMs. Some measures have informational content and help reduce information asymmetries. When the endogeneity issue of NTMs is controlled for, results show an overall positive impact of NTMs on imports. They provide evidence that NTMs are more beneficial to the imports of medium and large firms. Moreover, NTMs with informational content have an import enhancing effect. An extended analysis separating importing and exporting firms from those solely importing suggests that both types of firms benefit from the positive effects of NTMs. This result highlights the need to assist small firms facing NTMs. Furthermore, some NTMs with informational content should be addressed carefully and not considered only as barriers to trade to be eliminated. Instead, harmonization efforts between countries can be a better policy.     

Tariffs,Quality Choice,and Cost Functions: a Foreign Monopoly Case*

It has been shown that trade restrictions such as tariffs, import quotas, and voluntary export restrictions, lead to quality upgrading of imports. In this paper, however, we reconsider this proposition by focusing on the nature of cost functions. Based on a standard vertical differentiation model, we analyze the effects of tariffs on quality and quantity of imports. We show that if a fixed cost is an increasing function of quality, tariffs lead to quality downgrading of imports. Moreover, we discuss minimum quality requirements (MQR) for such a trade policy. We show that MQR increases the amount of imports and an importing country's welfare in the presence of the fixed cost function. These issues will be addressed in the context of a foreign monopoly.     

State Trading and Tariff Rate Quotas: The Case of Korea's Rice Imports

This paper analyzes the effects of trade liberalization of tariff‐rate quotas under import “state trading enterprises” (STEs) in agriculture. An analytical framework is provided to determine the importance of which instrument is binding under competition (the in‐quota or out‐of‐quota tariff or the quota) and under the initial STE equilibrium. It also depends on whether or not the STE controls both the domestic market prices and owns/controls the import quota (and whether it is obligated to fill the quota or not). An empirical example of the rice STE in South Korea has simulations showing that an increase in imports can be achieved through a moderate expansion of the quota or a decrease in the out‐of‐quota tariff to the level where it becomes binding. However, a significant level of quota expansion induces the STE to switch to the autarky solution and social welfare declines.     

中国服装类奢侈品消费现状分析

分析了中国服装消费市场进口的现状,并从消费人群、社会因素和心理因素等不同角度探讨了中国服装奢侈品消费市场现状原因。指出中产阶层是服装类奢侈品的消费主要人群,消费心态还是攀比为主,消费信贷在中国现阶段发展迅速。中国的服装类奢侈品市场具有广阔的发展前景,毛皮以及皮革类服装消费仍是服装奢侈品市场的主要消费。     

The impacts of imports and trade liberalization in Brazil: Insights from an aggregate cost function

Brazil has faced and continues to struggle with difficult economic challenges, including achieving noninflationary economic growth and a manageable external deficit. This paper presents the results of the estimation of an aggregate translog cost function with inputs of domestic capital and labor and imports and outputs of consumption and investment goods. The resulting calculated elasticities give insights into the relationships among the inputs, as well as the possible impacts of further reducing international trade barriers. The findings suggest that all of the inputs are substitutes for one another and that an increase in imports may have at least short-run negative effects on the demand for domestic capital and labor. However, imports appear to be particularly important in the production of investment goods, so an increase in imports may result in a more than proportionate increase in the output of those products and enhance the long-term growth of the economy. The responses to current challenges facing Brazil will affect its future economic growth as well as have a broader impact on the international scene. The results described here may help to inform policy makers as they address these issues, particularly with respect to international trade policies.     

Volume Quotas with Heterogeneous Product Categories*

Volume quotas on imports are an important part of assistance packages afforded a number of major industries in Australia. Generally, quota is allocated to importers free of charge, although recently a proportion of quota for some product groups has been sold by tender. In this paper we compare the effects of volume quotas applied to heterogeneous product groups when allocated free of charge, by full tender sale and by a combination offender sale and free allocation. The analysis is undertaken for both competitive markets and in the case where importers have some market power.     

Foreign Aid under Quantitative Restrictions: Welfare Effects and International Factor Mobility

Using a two‐country, general‐equilibrium model of international trade, this paper incorporates pre‐existing quantitative trade restrictions and international factor mobility into the transfer problem analysis. The effects of foreign aid on the welfare of both the donor and recipient nations are identified under each form of quantitative trade restriction: quotas and voluntary export restraints (VERs). In doing so, this paper identifies conditions under which international transfers are strictly Pareto‐improving (i.e. increase global welfare). A central result of this analysis is the direct welfare effect of a transfer received by a nation with quota‐constrained (VER‐constrained) imports is enhanced (may be enhanced) by a worsening of the recipient’s terms of trade.     

The impacts of trade and self‐sufficiency policies on heterogeneous rice farms in Malaysia

This paper develops a farm household model of heterogeneous Malaysian rice farmers. The model determines the domestic price of milled rice in equilibrium. The model is simulated to analyze the effects of free trade, self‐sufficiency achieved through trade policy, and the impact of free trade and self‐sufficiency when rice productivity expands. The ex ante results for free trade predict that total rice supply rises as the increase in imports offsets the decrease in domestic production, causing the domestic price of milled rice to fall by 15.8 percent. While this price decrease generates negative income effects for rice farmers, it leads to an expansion of consumption of milled rice by both the farm and urban populations. The results for self‐sufficiency through heightened tariffs predict that production for domestic rice farmers increases. However, with fewer imports, total rice supply falls, causing the domestic price of rice to increase by 41.5 percent. Because free trade is politically unfeasible and trade‐driven self‐sufficiency policies contract total rice consumption, boosting rice production through research and development is an effective way for Malaysia to increase the total supply of rice while limiting its dependence on imports.     

WELFARE LOSSES FROM NON‐TARIFF BARRIERS: THE JAPANESE BEEF QUOTA CASE*

A standard method of estimating deadweight losses caused by import quotas is to estimate a utility function by data over a period in which the quota is not imposed, and to use the estimated utility function to evaluate the virtual price of quota‐laden imports. This method, however, is not applicable if preferences are different between quota and non‐quota periods. In order to overcome this difficulty, the present study introduces a method of estimating a utility function directly from data in a quota period. This method is applied to the estimation of deadweight losses attributable to the Japanese beef quota.     

Tariffs Versus Quotas in a Differentiated Products Market: A Conjectural Variations in Prices Approach

This paper examines the (non)equivalence of a tariff and a quota set at the level of imports generated by the tariff using a conjectural variations in prices model. It extends previous studies by considering a variety of firm behavior patterns in the tariff equilibrium and when the imports and the domestic products are complements. The results obtained encompass most of the previous results. In addition, for complements, replacing a tariff with a quota has opposite effects on the prices of two products. Also, the prices under tariffs and quotas are not necessarily equivalent for complements. [F13]     

Exchange rate pass-through in Canadian manufacturing: its direct and indirect components

Changes in the exchange rate have direct and indirect effects on the prices of domestically produced goods and imports in the domestic market. The direct effects originate with the impact of the exchange rate on the marginal cost of imports; the indirect effects, with its impact on the price of materials used by domestic producers and hence on their marginal costs. Direct and indirect exchange rate pass-through elasticities are estimated for 37 Canadian manufacturing industries and their determinants are examined in a cross-section analysis. It is found that the direct and indirect elasticities are approximately equal in size for domestic goods, while the direct effect is dominant for imports. For a small number of industries, the net result of the direct and indirect effects is that a depreciation of the domestic currency increases the competitiveness of imports, contrary to conventional analysis. Important determinants of the direct (indirect) elasticities are the import share and non-tariff barriers (the responsiveness of domestic costs to changes in the exchange rate, and concentration).     

NAFTA and the Realignment of Textile and Apparel Trade: Trade Creation or Trade Diversion?*

A modified version of the partial‐equilibrium gravity model, originally proposed by Fukao et al. (2003 ), is employed to investigate the changing pattern of US textile trade. We use US Bilateral Manufacturing Imports and Exports data for 1989–2001 to assess the impact of labor wages, tariffs, and exchange rates on the composition of US textile imports before and after the creation of NAFTA. The analysis is performed at the SIC two‐digit industry level and the more disaggregated four‐digit sector level. We find little evidence of trade diversion in textiles frequently attributed to NAFTA, while trade creation is clearly present. Furthermore, lower wages in some textile‐exporting countries (e.g. countries in Asia) do not appear to significantly increase these countries' shares of US textile imports at the expense of other trading partners. However, variations in currency exchange rates and tariffs have substantial effects on the composition of US imports.     

The impact of technology imports on technology balance of payments in Korea: an ARDL bounds testing approach

This study empirically analyses the impact of technology imports on the technology balance of payments in Korea during 1981–2013 using the autoregressive distributed lag bounds testing approach of co-integration. We estimate the long- and short-run coefficients of the technology balance of payments with respect to technology imports. The results show that technology imports produce positive effects on the technology balance of payments in the long run, although it has negative effects in the short run.     

Foreign trade and its impact on employment: The Mexican case

This paper discusses the relationship between foreign trade and employment in a small open economy, and carries out some empirical work using Mexican data. It is argued that employment multipliers are not stable if intermediate inputs are imported. Actual employment multipliers will be given by the relationship between effective demand and installed capacity in each sector, and will depend strongly on whether quotas or tariffs are in operation. It is also found that Mexican exports are capital intensive relative to its imports.     

Trade liberalization and trade performance of environmental goods: evidence from Asia-Pacific economic cooperation members

In this article, we study the impact of trade liberalization, including reductions in both tariff and nontariff trade barriers, on environmental goods (EGs) exports. Using bilateral trade data from 20 Asia-Pacific Economic Cooperation members, we find that tariff reduction in an exporting country has a larger positive impact on its exports of EGs than tariff reduction in an importing country. Our results also show that a lower nontariff barrier in an importing country increases its imports of EGs. A considerable amount of heterogeneity also exists in subsample results based on countries’ income levels.