An Economic Investigation of the Import Licensing Methods and TRQs in Agriculture

Tariff-Rate Quotas (TRQs) were introduced at the outset of the Uruguay Round to support market access following the tariffication of non-tariff barriers to trade in agriculture. TRQs created an administrative mess in which governments often discretionarily allocate import licenses to private and/or public firms. Numerous papers describe the arbitrarily chosen procedures used to allocate licenses in different countries and the resulting distorted trade patterns. However, few research efforts have formally studied the impacts of different administrative methods on welfare. Due to significant spreads between domestic and world prices, the administration of import licenses can have important strategic effects under imperfect competition. We propose a simple theoretical framework to highlight the various economic implications of two methods used by WTO members: the historical allocation and the first-come-first-serve procedures. These two methods differ in their discretionary degree and, under imperfect competition, lead to different welfare implications depending on the structural parameters of an industry. Numerical simulations are provided to illustrate our findings     

Exporting to new destinations and the effects of tariffs: the case of meat commodities

This study uses a random parameter probit estimation to examine the effects of tariff liberalization on the probability of establishing new trading relationships in meat commodities. Our simulation results indicate that the effects of tariff reductions decrease with distance, but increase with the level of development. The probabilities of trade increase at an increasing rate with the size of tariff reductions thus justifying calls for ambitious liberalization schemes. Canada and Mexico are the NAFTA countries that are most likely to export in response to EU tariff reductions on bovine and poultry meats, while Brazil and Argentina emerge as the MERCOSUR countries most likely to penetrate the EU bovine meat market after EU tariff reductions. Uruguay's probability to export poultry meat is most responsive to EU tariff reductions.     

A gravity model to account for vertical linkages between markets with an application to the cattle/beef sector

A gravity model is developed to explain bilateral trade flows in primary and processed commodities within the same agri-food supply chain. It accounts for vertical production linkages, trade and domestic policies, and supply rigidities at the farm level. Our application focuses on cattle/beef trade flows between 42 countries. The estimated parameters of the model are used to simulate trade flows. We found large differences in the impacts of the full and partial liberalization scenarios. A parametric bootstrap procedure is used to generate confidence intervals around predicted trade liberalization outcomes.     

Time consistent export quotas in an oligopolistic world market

We investigate the strategic behavior between exporting countries that face endogenous terms of trade on the world market. In a non-cooperative setting, if production decisions occur before consumption decisions, the ex-ante optimal export quota is not time consistent as the ex-post elasticity of the residual foreign import demand curve is lower than the ex-ante elasticity. However, we show that the exporters’ inability to irrevocably commit to their quota may be welfare superior to the precommitment solution. If exporters can sell forward a proportion of their exports before production decisions are made, they will do so even though, in equilibrium, it may decrease welfare compared to a situation in which forward markets do not exist. Moreover, the equilibrium with forward markets is welfare inferior to the commitment equilibrium for exporters.     

Performance analysis for three pillars of sustainability

Journal of Productivity Analysis - Gross domestic product (GDP) has come under criticism as the only objective that countries should pursue for societal well-being. In this paper we apply an...