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Economic Issues in Tariffication: An Overview

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  • Moschini, GianCarlo

Abstract

Tariffication is an effort to convert all existing agricultural nontariff barriers (NTBs) to trade into bound tariffs and to reduce these tariffs over time. The main economic issues that arise with tariffication stem from the nonequivalence of tariffs in NTBs in a number of scenarios. This paper analyzes nonequivalence 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 in implement 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, and 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 on tariffication should be the conversion of NTBs to acceptable long-run (bound) tariffs rates, and considerable flexibility in the conversion process could be exercised during the transition period.

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Bibliographic Info

Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 814.

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Date of creation: 01 Jul 1991
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Handle: RePEc:isu:genres:814

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Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
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References

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  1. Giancarlo Moschini & Karl D. Meilke, 1991. "Tariffication with Supply Management: The Case of the U.S.-Canada Chicken Trade," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 39(1), pages 55-68, 03.
  2. 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).
  3. 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.
  4. Moschini, GianCarlo & Meilke, Karl D., 1987. "Sustainable Rates Of Return For Milk Quotas In Ontario," Working Papers 123571, University of Guelph, Department of Food, Agricultural and Resource Economics.
  5. Weitzman, Martin L, 1974. "Prices vs. Quantities," Review of Economic Studies, Wiley Blackwell, vol. 41(4), pages 477-91, October.
  6. 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.
  7. Melvin, James R, 1986. "The Nonequivalence of Tariffs and Import Quotas," American Economic Review, American Economic Association, vol. 76(5), pages 1131-34, December.
  8. 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.
  9. 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.
  10. 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).
  11. James E. Anderson, 1988. "The Relative Inefficiency of Quotas," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262511789, December.
  12. 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.
  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. Young, Leslie, 1980. "Optimal revenue-raising trade restrictions under uncertainty," Journal of International Economics, Elsevier, vol. 10(3), pages 425-439, August.
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Citations

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Cited by:
  1. John C. Beghin & Barbara El Osta & Jay R. Cherlow & Samarendu Mohanty, 2001. "Cost of the U.S. Sugar Program Revisited, The," Center for Agricultural and Rural Development (CARD) Publications 01-wp273, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  2. 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.
  3. Nordstrom, Hakan, 2001. "Do variable levies beggar thy neighbour?," European Journal of Political Economy, Elsevier, vol. 17(2), pages 403-420, June.
  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. & Lariviere, Sylvain, 1999. "The Problems And Pitfalls In Modeling International Dairy Trade Liberalization," Working Papers 14579, International Agricultural Trade Research Consortium.
  6. 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.
  7. Barichello, Richard R. & Cranfield, John A.L. & Meilke, Karl D., 2007. "Options for Supply Management in Canada with Trade Liberalization," Commissioned Papers 6124, Canadian Agricultural Trade Policy Research Network.
  8. 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.
  9. 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).
  10. Krishna, Kala & Tan, Ling Hui, 2010. "Trade policy with endogenous entry revisited," Journal of International Economics, Elsevier, vol. 80(2), pages 271-279, March.

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