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Market access and minimum quality standards

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  • Hernán, Roberto
  • Kujal, Praveen

Abstract

In this paper we analyze market access blocking properties of a Minimum Quality Standard (MQS). For an importing country that imports a high and low quality good, the welfare maximizing optimal MQS limits market access only to the high quality firm. This result is further confirmed for a uniform MQS imposed by a high quality producing country that imports a low quality good. The optimal MQS in this case always blocks entry to the low quality foreign firm. We then propose a Flexible Quality Standard (FQS). Under a FQS a good is taxed if it does not meet the standard. Otherwise, imports are exempt from the tariff. Both firms stay in the market under a FQS and discriminatory import tariff. Total welfare in this case is greater than under free trade and under the optimal MQS (for a pure importing country). With uniform conditional tariffs also both firms stay in the market, however, the welfare obtained is greater than under free trade and lower than under a MQS.

Suggested Citation

  • Hernán, Roberto & Kujal, Praveen, 2004. "Market access and minimum quality standards," UC3M Working papers. Economics we042608, Universidad Carlos III de Madrid. Departamento de Economía.
    • Handle: RePEc:cte:werepe:we042608
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