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Potential trade distortion effects of state trading enterprises under the tariff-rate quota scheme

  • Yoon, Jung-Hyun
  • Lim, Song Soo
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    The paper analyzes the potential trade distortion effects of state trading enterprises (STEs) on soybean imports to Korea. Traditionally, STEs have exercised exclusive rights to import the so-called strategic products, to ensure food security, domestic price stabilization, and import mark-ups. However, STE imports have been criticized on the grounds that industries using soybeans as a raw material are unable to obtain a diverse mix of quality material and cannot exercise the right to choose their own ingredients. Under a theoretical framework, a tariff equivalent of the STE is postulated to equate imports by private firms with imports by the STE. An empirical model is constructed and estimated using annual data spanning 1980-2009. The estimated results show that providing exclusive rights to imports has a negative effect on market access. When the STE pursues consumer welfare, the import-reducing effect turns out to be smaller than that in the producer welfare maximization case.

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    File URL: http://www.economics-ejournal.org/economics/discussionpapers/2013-22
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    Paper provided by Kiel Institute for the World Economy in its series Economics Discussion Papers with number 2013-22.

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    Date of creation: 2013
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    Handle: RePEc:zbw:ifwedp:201322
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    1. Steve McCorriston & Donald MacLaren, 2002. "State Trading, the WTO and GATT Article XVII," The World Economy, Wiley Blackwell, vol. 25(1), pages 107-135, 01.
    2. Philip C. Abbott & Linda M. Young, 1999. "Wheat-Importing State Trading Enterprises: Impacts on the World Wheat Market," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 47(2), pages 119-136, 07.
    3. Laroche Dupraz, Catherine & Matthews, Alan, 2007. "A graphical analysis of the functioning of tariff rate quotas: market access and welfare effects for exporting countries," Working Papers 7210, TRADEAG - Agricultural Trade Agreements.
    4. McCorriston, Steve & MacLaren, Donald, 2005. "The trade distorting effect of state trading enterprises in importing countries," European Economic Review, Elsevier, vol. 49(7), pages 1693-1715, October.
    5. Steve McCorriston & Donald MacLaren, 2008. "State Trading Enterprises as an Impediment to Improved Market Access: The Case of the Korean Rice Market," Review of International Economics, Wiley Blackwell, vol. 16(3), pages 431-443, 08.
    6. Dixit, Praveen M. & Josling, Timothy E., 1997. "State Trading In Agriculture: An Analytical Framework," Working Papers 14608, International Agricultural Trade Research Consortium.
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