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Economic issues in tariffication: an overview

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  • Moschini, Giancarlo

Abstract

The agricultural trade liberalization proposal known as 'tariffication' aims at converting all existing non-tariff barriers (NTBs) to trade into bound tariffs, and to reduce these tariffs over time. This is in tune with the original philosophy of the General Agreement on Tariffs and Trade (GATT) and it calls for a dramatic overhaul of existing agricultural policies in many developed countries. The main economic issues that arise with tariffication stem from the non-equivalence of tariffs and NTBs in a number of scenarios. This paper analyzes non-equivalence arising from the existence of: imperfect competition in importing countries; price instability in importing and exporting countries; and, inefficient allocation of quantitative restrictions. It is shown that in all these cases the definition of an appropriate 'equivalent tariff to be used in tariffication is not straightforward, and that in general this equivalent tariff cannot be computed on the basis of only observed price differences between countries. Tariff-rate quotas, which are meant to be the main tool of implementation of tariffication according to the existing proposal, are analyzed in some detail. Concerning the relationship between tariffication and the other elements of the trade liberalization package, it is shown that tariffication would limit the scope of export subsidy policies. It is also shown that the existence of production and export subsidies makes observed price gaps between countries of questionable value in setting equivalent tariff levels. Finally, it is argued that the main focus of tariffication should be the conversion of NTBs to acceptable long-run (bound) tariffs rates, and considerable flexibility in this conversion process could be exercised in the transition period.

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Bibliographic Info

Article provided by International Association of Agricultural Economists in its journal Agricultural Economics of Agricultural Economists.

Volume (Year): 05 (1991)
Issue (Month): 2 (June)
Pages:

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Handle: RePEc:ags:iaaeaj:172718

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Keywords: International Relations/Trade; Production Economics;

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  1. Weitzman, Martin L, 1974. "Prices vs. Quantities," Review of Economic Studies, Wiley Blackwell, vol. 41(4), pages 477-91, October.
  2. James E. Anderson, 1988. "The Relative Inefficiency of Quotas," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262511789, December.
  3. Andrew Schmitz, 1983. "Supply Management in Canadian Agriculture: An Assessment of the Economic Effects," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 31(2), pages 135-152, 07.
  4. Dasgupta, Partha & Stiglitz, Joseph E, 1977. "Tariffs vs . Quotas as Revenue Raising Devices under Uncertainty," American Economic Review, American Economic Association, vol. 67(5), pages 975-81, December.
  5. Giancarlo Moschini & Karl D. Meilke, 1988. "Sustainable Rates of Return for Milk Quotas in Ontario," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 36(1), pages 119-126, 03.
  6. Melvin, James R, 1986. "The Nonequivalence of Tariffs and Import Quotas," American Economic Review, American Economic Association, vol. 76(5), pages 1131-34, December.
  7. GianCarlo Moschini & Karl D. Meilke, 1991. "Tariffication with Supply Management: The Case of the U.S.-Canadian Chicken Trade," Center for Agricultural and Rural Development (CARD) Publications 90-gatt2, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  8. Young, Leslie & Anderson, James E, 1980. "The Optimal Policies for Restricting Trade under Uncertainty," Review of Economic Studies, Wiley Blackwell, vol. 47(5), pages 927-32, October.
  9. Fishelson, Gideon & Flatters, Frank, 1975. "The (non)equivalence of optimal tariffs and quotas under uncertainty," Journal of International Economics, Elsevier, vol. 5(4), pages 385-393, November.
  10. Young, Leslie, 1980. "Optimal revenue-raising trade restrictions under uncertainty," Journal of International Economics, Elsevier, vol. 10(3), pages 425-439, August.
  11. Zietz, Joachim A. & Vald├ęs, Alberto, 1988. "Agriculture in the GATT: an analysis of alternative approaches to reform," Research reports 70, International Food Policy Research Institute (IFPRI).
  12. Alston, Julian M. & Carter, Colin A. & Jarvis, Lovell S., 1989. "A CHOICES Debate On ... Japanese Beef Trade Liberalization: It May Not Benefit Americans," Choices, Agricultural and Applied Economics Association, vol. 4(4).
  13. Young, Leslie & Anderson, James E, 1982. "Risk Aversion and Optimal Trade Restrictions," Review of Economic Studies, Wiley Blackwell, vol. 49(2), pages 291-305, April.
  14. Anderson, James E, 1985. "The Relative Inefficiency of Quotas: The Cheese Case," American Economic Review, American Economic Association, vol. 75(1), pages 178-90, March.
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Cited by:
  1. Barichello, Richard & Cranfield, John & Meilke, Karl, . "Options for Supply Management in Canada with Trade Liberalization," 2006 NAAMIC Workshop III: Achieving NAFTA Plus 163876, North American Agrifood Market Integration Consortium (NAAMIC).
  2. Nordstrom, Hakan, 2001. "Do variable levies beggar thy neighbour?," European Journal of Political Economy, Elsevier, vol. 17(2), pages 403-420, June.
  3. Anonymous & Meilke, Karl D. & Knutson, Ronald D. & Ochoa, Rene F. & Rude, James, 2006. "Achieving NAFTA Plus," 2006 NAAMIC Workshop III: Achieving NAFTA Plus 163871, North American Agrifood Market Integration Consortium (NAAMIC).
  4. Rude, James & Meilke, Karl D., 2005. "Implications of the July 2004 WTO Framework Agreement for Canadian Agriculture," Trade Policy Briefs 24150, Canadian Agricultural Trade Policy Research Network.
  5. Meilke, Karl D. & Rude, James & Burfisher, Mary E. & Bredahl, Maury E., 2001. "Market Access: Issues And Options In The Agricultural Negotiations," Commissioned Papers 14625, International Agricultural Trade Research Consortium.
  6. Meilke, Karl D. & Lariviere, Sylvain, 1999. "The Problems And Pitfalls In Modeling International Dairy Trade Liberalization," Working Papers 14579, International Agricultural Trade Research Consortium.
  7. Beghin, John C. & El Osta, Barbara & Cherlow, Jay R. & Mohanty, Samarendu, 2003. "Cost of the U.S. Sugar Program Revisited, The," Staff General Research Papers 1947, Iowa State University, Department of Economics.
  8. Krishna, Kala & Tan, Ling Hui, 2010. "Trade policy with endogenous entry revisited," Journal of International Economics, Elsevier, vol. 80(2), pages 271-279, March.
  9. Meilke, Karl D. & Huff, Karen, 2001. "Trade Liberalization Under Nafta: Where From Here?," Trade Liberalization Under NAFTA: Report Card on Agriculture; Proceedings of the 6th Agricultural and Food Policy Systems Information Workshop -2000 16819, Farm Foundation, Agricultural and Food Policy Systems Information Workshops.
  10. Boughner, Devry S. & de Gorter, Harry & Sheldon, Ian M., 2000. "The Economics Of Two-Tier Tariff-Rate Import Quotas In Agriculture," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 29(1), April.

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