Some Unintended Consequences of TRQ Liberalization
This paper analyzes the impacts of trade liberalization in a non-integrated industry where a marketing agency controls the supply of a necessary input in the production of a processed commodity. Trade of the processed good is restricted through a Tariff-Rate Quota (TRQ) and domestic processors operate in an imperfectly competitive industry. Under a fixed proportions technology, an increase in the minimum access commitment of the TRQ will generally lower the domestic retail price to consumers if the marketing agency is a profit-maximizing monopolist. Conversely, if the marketing agency pursues some specific non-economic objectives, it is shown that increases in the minimum access commitment holding the tariff rates constant can lead to higher retail prices and thus negate the benefits of trade liberalization for consumers.
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Volume (Year): 1 (2003)
Issue (Month): 1 (May)
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