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Economic Issues in Tariffication: An Overview

Tariffication is an effort to convert all existing agricultural nontariff barriers (NTBs) to trade into bound tariffs and to reduce these tariffs over time. The main economic issues that arise with tariffication stem from the nonequivalence of tariffs in NTBs in a number of scenarios. This paper analyzes nonequivalence 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 in implement 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, and 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 on tariffication should be the conversion of NTBs to acceptable long-run (bound) tariffs rates, and considerable flexibility in the conversion process could be exercised during the transition period.

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Paper provided by Center for Agricultural and Rural Development (CARD) at Iowa State University in its series Center for Agricultural and Rural Development (CARD) Publications with number 90-gatt1.

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Date of creation: Jul 1991
Date of revision:
Handle: RePEc:ias:cpaper:90-gatt1
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  1. Weitzman, Martin L, 1974. "Prices vs. Quantities," Review of Economic Studies, Wiley Blackwell, vol. 41(4), pages 477-91, October.
  2. Melvin, James R, 1986. "The Nonequivalence of Tariffs and Import Quotas," American Economic Review, American Economic Association, vol. 76(5), pages 1131-34, December.
  3. 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.
  4. GianCarlo Moschini & Karl D. Meilke, 1991. "Tariffication with Supply Management: The Case of the U.S.-Canadian Chicken Trade," Center for Agricultural and Rural Development (CARD) Publications 90-gatt2, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  5. 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.
  6. Moschini, GianCarlo & Meilke, Karl D., 1987. "Sustainable Rates Of Return For Milk Quotas In Ontario," Working Papers 123571, University of Guelph, Department of Food, Agricultural and Resource Economics.
  7. Zietz, Joachim A. & Valdés, 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, 1980. "Optimal revenue-raising trade restrictions under uncertainty," Journal of International Economics, Elsevier, vol. 10(3), pages 425-439, August.
  12. 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.
  13. 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.
  14. 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.
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