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Auctioning U.S. Import Quotas, Foreign Response, and Alternative Policies

  • Robert C. Feenstra

In this paper we quantify the potential revenue available to the U.S. from auctioning import quotas, and the resulting drop in foreign producer surplus relative to free trade. Previous estimates of auction revenue are in the range of $3 7-5.15 billion for 1986 or 1987. Using simulation results from computable partial or general equilibrium models, we find that this revenue gain would be at the expense of a large drop in foreign producer surplus. Ignoring textiles and apparel, the potential auction revenue is $1 3-2.15 billion, and the foreign loss is $0.5-O.7 billion relative to free trade. One alternative to auction quotas is a system of tariff-rate quotas, which are designed to keep supplier countries welfare equal to that in free trade. We calculate that the tariff-rate quotas could raise $067-1.55 billion in revenue for the U.S. While this amount is less than available through auction quotas, it could still fund a significant program of worker adjustment, and would mitigate the foreign response.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2839.

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Date of creation: Feb 1989
Date of revision:
Publication status: published as The International Trade Journal, Vol. 3, No.3, pp239-259, Spring 1989.
Handle: RePEc:nbr:nberwo:2839
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  1. Feenstra, Robert C & Lewis, Tracy R, 1991. "Negotiated Trade Restrictions with Private Political Pressure," The Quarterly Journal of Economics, MIT Press, vol. 106(4), pages 1287-307, November.
  2. Paul Krugman, 1986. "Strategic Trade Policy and the New International Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262610450, June.
  3. Trela, I. & Whalley, J., 1988. "Do Developing Countries Lose From The Mfa?," University of Western Ontario, The Centre for the Study of International Economic Relations Working Papers 8804c, University of Western Ontario, The Centre for the Study of International Economic Relations.
  4. Robert C. Feenstra & Jagdish N. Bhagwati, 1982. "Tariff Seeking and the Efficient Tariff," NBER Chapters, in: Import Competition and Response, pages 245-262 National Bureau of Economic Research, Inc.
  5. Goldstein, Morris & Khan, Mohsin S, 1978. "The Supply and Demand for Exports: A Simultaneous Approach," The Review of Economics and Statistics, MIT Press, vol. 60(2), pages 275-86, May.
  6. Tarr, David G, 1987. "Effects of Restraining Steel Exports from the Republic of Korea and Other Countries to the United States and the European Economic Community," World Bank Economic Review, World Bank Group, vol. 1(3), pages 397-418, May.
  7. Brown, Drusilla K., 1987. "Tariffs, the terms of trade, and national product differentiation," Journal of Policy Modeling, Elsevier, vol. 9(3), pages 503-526.
  8. Kala Krishna, 1988. "The Case of the Vanishing Revenues: Auction Quotas With Oligopoly," NBER Working Papers 2723, National Bureau of Economic Research, Inc.
  9. Haynes, Stephen E & Stone, Joe A, 1983. "Specification of Supply Behavior in International Trade," The Review of Economics and Statistics, MIT Press, vol. 65(4), pages 626-32, November.
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