Journal
JOURNAL OF INTERNATIONAL TRADE & ECONOMIC DEVELOPMENT
Volume 17, Issue 2, Pages 311-322Publisher
ROUTLEDGE JOURNALS, TAYLOR & FRANCIS LTD
DOI: 10.1080/09638190701872863
Keywords
agricultural trade; domestic monopoly; price-equivalence; quotas; tariffs; trade policy
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Price-equivalent import tariffs and quotas are compared when domestic production is controlled by a monopolist, say an agricultural marketing board with the power to restrict domestic supply, under endogenous terms of trade. Welfare comparisons boil down to sourcing costs comparisons. Quotas tend to dominate at high domestic prices, ad valorem tariffs at intermediate prices and specific tariffs at low domestic prices. Welfare maxima are achieved with more restrictive policies than under perfect competition. These results rationalize separate negotiations for sensitive products in the Doha Round and the setting of tariff-rate quotas that mimic import quotas for these products. Finally, in ascertaining the robustness of our policy ranking to the choice of variable anchoring the comparisons, we found that specific tariffs unambiguously dominate ad valorem tariffs and quotas when government revenue or imports anchor the comparisons. However, some quota revenues and import levels cannot be achieved with tariffs.
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