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Economic issues in tariffication: an overview

  • Moschini, Giancarlo

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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Article provided by Blackwell in its journal Agricultural Economics.

Volume (Year): 5 (1991)
Issue (Month): 2 (June)
Pages: 101-120

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Handle: RePEc:eee:agecon:v:5:y:1991:i:2:p:101-120
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  1. 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.
  2. 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.
  3. Young, Leslie, 1980. "Optimal revenue-raising trade restrictions under uncertainty," Journal of International Economics, Elsevier, vol. 10(3), pages 425-439, August.
  4. GianCarlo Moschini & Karl D. Meilke, 1991. "Tariffication with Supply Management: The Case of the U.S.-Canadian Chicken Trade," Food and Agricultural Policy Research Institute (FAPRI) Publications 90-gatt2, Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University.
  5. M. L. Weitzman, 1973. "Prices vs. Quantities," Working papers 106, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Moschini, GianCarlo & Meilke, Karl D., 1988. "Sustainable Rates of Return for Milk Quotas in Ontario," Staff General Research Papers 11270, Iowa State University, Department of Economics.
  7. 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).
  8. 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.
  9. James E. Anderson, 1988. "The Relative Inefficiency of Quotas," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262511789, June.
  10. 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).
  11. 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.
  12. Melvin, James R, 1986. "The Nonequivalence of Tariffs and Import Quotas," American Economic Review, American Economic Association, vol. 76(5), pages 1131-34, December.
  13. 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.
  14. 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.
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