How does tariff-rate quota modelling affect CGE results? An application for MIRAGE
Since the Uruguay Round Agricultural Agreement (URAA) entered into force in 1994, tariff-rate quotas (TRQs) have become the most widely used trade policy instrument to improve agricultural market access while at the same time controlling import volumes. Until now, the MIRAGE CGE model only takes into account the exogenous quota rents (MAcMap-HS6 database) allocated entirely to exporters. Unfortunately, this methodology does not authorise any regime when trade policy changes (e.g. a quota-volume increase for very sensitive agricultural products or a tariff reduction). In order to improve the treatment of TRQs in MIRAGE we model them as bilateral TRQs at the HS6 level using MAcMapHS6-v2 database. Assuming a simple scenario of bilateral trade agreement between the European Union and Mercosur, we test the previous TRQ modeling and we compare its results to the present version of MIRAGE (aggregation biases and TRQ modeling). The macroeconomic and trade results give us an idea of the biases introduced by the negligence of TRQ modeling.
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