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Modeling Tariff Rate Quotas in a Global Context: The Case of Sugar Markets in OECD Countries

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  • Dominique van der Mensbrugghe
  • John C. Beghin
  • Don Mitchell

Abstract

We use mixed-complementarity-problem programming to implement tariff rate quotas (TRQs) in the global computable general equilibrium (CGE) Linkage model. We apply the approach to TRQs in sugar markets in OECD (Organization for Economic Cooperation and Development) countries. We calibrate the model on 2000 policy levels for OECD countries to reflect the full implementation of their World Trade Organization commitments. We look at reforms of TRQ and TRQ-like schemes in the European Union, the United States, and Japan, as well as multilateral trade liberalization. We derive the impact of reforms on welfare, bilateral trade flows, and terms of trade. A 33 percent multilateral decrease of ad valorem tariffs, combined with a 33 percent increase in imports under TRQ-like schemes in the European Union, the United States, and Japan, induces a global welfare gain of about $889 million. These three countries' trade policies create substantial trade diversion, which excludes many low-cost producers from trading opportunities. An expansion of their import quotas alone, without multilateral trade liberalization, induces welfare gains but preserves most of the trade diversion patterns. The latter diversion benefits some least-developed countries' producers because of granted bilateral TRQ allocations. In the context of greater market access, reductions in tariffs in the European Union and the United States, and in border "surcharges" in Japan, will have to be dramatic before they can affect trade flows significantly as compared to TRQ expansion. Full multilateral trade liberalization induces global welfare gains of about $3 billion.

Suggested Citation

  • Dominique van der Mensbrugghe & John C. Beghin & Don Mitchell, 2003. "Modeling Tariff Rate Quotas in a Global Context: The Case of Sugar Markets in OECD Countries," Food and Agricultural Policy Research Institute (FAPRI) Publications 03-wp343, Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University.
  • Handle: RePEc:ias:fpaper:03-wp343
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    References listed on IDEAS

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    1. Amani Elobeid & John C. Beghin, 2005. "Multilateral Trade and Agricultural Policy Reforms in Sugar Markets," Food and Agricultural Policy Research Institute (FAPRI) Publications 04-wp356, Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University.
    2. Elbehri, Aziz & Ken Pearson, 2000. "Implementing Bilateral Tariff Rate Quotas in GTAP using GEMPACK," GTAP Technical Papers 475, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    3. Mitchell, Donald, 2004. "Sugar policies opportunity for change," Policy Research Working Paper Series 3222, The World Bank.
    4. Amani Elobeid & John Beghin, 2006. "Multilateral Trade and Agricultural Policy Reforms in Sugar Markets," Journal of Agricultural Economics, Wiley Blackwell, vol. 57(1), pages 23-48, March.
    5. Bach, Christian Friis & Ken Pearson, 1996. "Implementing Quotas in GTAP Using GEMPACK or How to Linearize an Inequality," GTAP Technical Papers 307, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
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    Citations

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    Cited by:

    1. John C. Beghin & Amani Elobeid, 2015. "The Impact of the U.S. Sugar Program Redux," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 37(1), pages 1-33.
    2. Gohin, Alexandre & Bureau, Jean-Christophe, 2006. "WTO Discipline and the CAP: the Constraints on the EU Sugar Sector," Working Papers 18872, TRADEAG - Agricultural Trade Agreements.
    3. Peterson, Everett & Grant, Jason & Sydow, Sharon, 2016. "Impacts of the Trans-Pacific Partnership for US and International Dairy Trade," 2016 Annual Meeting, July 31-August 2, 2016, Boston, Massachusetts 236143, Agricultural and Applied Economics Association.
    4. Marcel ADENĂ„UER & Kamel LOUHICHI & Bruno HENRY DE FRAHAN & Heinz Peter WITZKE., "undated". "Impact of the "Everything but Arms" Initiative on the EU Sugar Sub-Sector," EcoMod2004 330600001, EcoMod.
    5. Michael Ferrantino, 2006. "Quantifying the Trade and Economic Effects of Non-Tariff Measures," OECD Trade Policy Papers 28, OECD Publishing.
    6. Brockmeier, Martina & Sommer, Ulrich & Thomsen, Karin, 2005. "Sugar Policies: An Invincible Bastion for Modelers?," 89th Seminar, February 2-5, 2005, Parma, Italy 232588, European Association of Agricultural Economists.
    7. Gohin, Alexandre & Bureau, Jean-Christophe, 2005. "Sugar Market Liberalization: Modeling the EU Supply of "C" Sugar," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24740, European Association of Agricultural Economists.
    8. Leena Kerkelä & Ellen Huan-Niemi, 2005. "Trade Preferences in the EU Sugar Sector: Winners and Losers," Discussion Papers 358, Government Institute for Economic Research Finland (VATT).
    9. Gohin, Alexandre & Bureau, Jean-Christophe, 2006. "Bridging Micro- and Macro-Analyses of the EU Sugar Program: Methods and Insights," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25799, International Association of Agricultural Economists.
    10. Oyewumi, Olubukola Ayodeju, 2005. "Modeling tariff rate quotas in the South African livestock industry," Master's Degree Theses 28064, University of the Free State, Department of Agricultural Economics.

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