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The Possibility of Inefficient Liberalization through Tariffication

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  • Kaempfer, William H
  • Marks, Stephen V

Abstract

A typical step in trade liberalization under the GATT is tariffication--the conversion of quantitative import restrictions to their ad valorem tariff equivalents. This paper shows that, if there is market power in the protected industry, tarrification may cause a global efficiency loss. In particular, in a small country if the protected industry is a monopoly that is freely able to export but cannot profitably do so, then tarrification unambiguously imposes global efficiency costs. In a a large country, the global efficiency effects are uncertain a priori. In both cases, however, tarrification unambiguously benefits the monopoly and lowers foreign welfare. Copyright 1994 by Blackwell Publishing Ltd.

Suggested Citation

  • Kaempfer, William H & Marks, Stephen V, 1994. "The Possibility of Inefficient Liberalization through Tariffication," Review of International Economics, Wiley Blackwell, vol. 2(2), pages 123-130, June.
    • Handle: RePEc:bla:reviec:v:2:y:1994:i:2:p:123-30
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    Cited by:

    1. Chen, Hung-Yi & Chang, Yang-Ming & Chiou, Jiunn-Rong, 2011. "A welfare analysis of tariffs and equivalent quotas under demand uncertainty: Implications for tariffication," International Review of Economics & Finance, Elsevier, vol. 20(4), pages 549-561, October.
    2. Jan Jørgensen & Philipp Schröder, 2007. "Effects of Tariffication: Tariffs and Quotas under Monopolistic Competition," Open Economies Review, Springer, vol. 18(4), pages 479-498, September.
    3. Jan G. Jorgensen & Philipp J. H. Schröder, 2002. "Effects of Tariffication: Tariffs, Quotas and VERs under Monopolistic Competition," Discussion Papers of DIW Berlin 269, DIW Berlin, German Institute for Economic Research.
    4. Hong Hwang & Cheng-Hau Peng & Hsiu-Ling Wu, 2013. "Tariffication and Welfare in a Differentiated Duopoly," The World Economy, Wiley Blackwell, vol. 36(7), pages 899-911, July.

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