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Gains from Trade Liberalization with Imperfectly Competitive World Markets. A Note

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  • Anania, Giovanni

Abstract

The paper shows how analyses assuming perfect competition can yield a distorted estimation of the expected effects of a trade liberalization when market imperfections exist. The analytical framework adopted is very simple and three extreme imperfect market structures are considered. In the first case, the exporting country maximizes its producer and consumer surplus by intervening in the world market. The second market imperfection considered is the existence of a private firm playing the role of "pure middleman" in the world market. Then the case of a producer-owned marketing board which is granted exclusive export authority is addressed. It is shown that under all three scenarios, if perfect competition is assumed when market imperfections exist, the impact of a tariff reduction on prices and volume traded is overestimated. A ranking of the size of such distortions in the three cases analyzed is provided. Finally, it is proved that when a private firm exerts monopoly and monopsony power in the world market, both the importing and the exporting countries may well be better off if, rather than making a move towards trade liberalization, the importing country "compensates" the exporting country by means of a direct transfer.

Suggested Citation

  • Anania, Giovanni, 2002. "Gains from Trade Liberalization with Imperfectly Competitive World Markets. A Note," 2002 International Congress, August 28-31, 2002, Zaragoza, Spain 24971, European Association of Agricultural Economists.
    • Handle: RePEc:ags:eaae02:24971
    DOI: 10.22004/ag.econ.24971
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    More about this item

    Keywords

    International Relations/Trade;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy

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