Import Sensitive Products and Perverse Tariff-Rate Quota Liberalization
This paper shows that a Tariff-Rate-Quota's (TRQ) minimum access expansion can perversely trigger domestic price increases. Often, TRQs have prohibitive over-quota tariffs to mimic import-quotas, in providing minimum market access. In the WTO's Doha Round, it is likely that countries using TRQs will avoid aggressive tariff reductions if they increase the quota portion of TRQs. We show that when the import price lies between the unit cost of production and the price received by domestic upstream firms, an increase in import quota as a share of domestic production may cause an increase in the domestic retail price.
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|Date of creation:||13 Aug 2012|
|Publication status:||Published in Canadian Journal of Economics, August 2012, vol. 45 no. 3, pp. 903-924|
|Contact details of provider:|| Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070|
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