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An Economic Investigation of the Import Licensing Methods and TRQs in Agriculture
Author(s) -
Gervais JeanPhilippe,
Surprenant David
Publication year - 2000
Publication title -
canadian journal of agricultural economics/revue canadienne d'agroeconomie
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 37
eISSN - 1744-7976
pISSN - 0008-3976
DOI - 10.1111/j.1744-7976.2000.tb00395.x
Subject(s) - imperfect competition , competition (biology) , tariff , agriculture , imperfect , welfare , market access , international economics , business , economics , international trade , public economics , microeconomics , market economy , ecology , linguistics , philosophy , biology
Tariff‐Rate Quotas (TRQs) were introduced at the outset of the Uruguay Round to support market access following the tariffication of non‐tariff barriers to trade in agriculture. TRQs created an administrative mess in which governments often discretionarily allocate import licenses to private and/or public firms. Numerous papers describe the arbitrarily chosen procedures used to allocate licenses in different countries and the resulting distorted trade patterns. However, few research efforts have formally studied the impacts of different administrative methods on welfare. Due to significant spreads between domestic and world prices, the administration of import licenses can have important strategic effects under imperfect competition. We propose a simple theoretical framework to highlight the various economic implications of two methods used by WTO members: the historical allocation and the first‐come‐first‐serve procedures. These two methods differ in their discretionary degree and, under imperfect competition, lead to different welfare implications depending on the structural parameters of an industry. Numerical simulations are provided to illustrate our findings