Evaluating the TRQ Import Licensing Mechanisms in the Canadian Chicken Industry

Tariff rate quotas (TRQs) were introduced at the end of the Uruguay Round to support market access following the tariffication of nontariff barriers to trade in agriculture. The allocation of import licenses under the TRQ regime in the Canadian chicken industry is currently made according to discretionary criteria. The welfare properties of this import licensing scheme are evaluated in comparison with a less discretionary allocation method such as first-come, first-served (FCFS) using a numerical model. The analysis also provides a welfare evaluation of both methods as the current minimum access commitment for chicken imports is expanded. It is found that total welfare in the Canadian chicken industry is likely to be higher under a TRQ administration method based on nondiscretionary criteria such as firstcome, first-served. However, particular assumptions about the chicken producers'response to increased foreign competition can reverse this finding. Moreover the welfare differences between the two license administration schemes are less important when market access to imports is substantial.