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Tariffs and quotas in world trade: A unified variational inequality framework

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  • Nagurney, Anna
  • Besik, Deniz
  • Dong, June

Abstract

In this paper, we develop a unified variational inequality framework in the context of spatial price network equilibrium problems that captures world trade policies in the form of tariff rate quotas, which are two-tiered tariffs, and that have been applied in practice to numerous commodities. The spatial price network equilibrium model allows for multiple supply markets and multiple demand markets in different countries as well as multiple transportation routes. The model is qualitatively analyzed and also related to models with trade policies such as ad valorem tariffs and strict quotas. A case study on the dairy industry focusing on the United States and France is presented to illustrate the modeling and computational framework with impacts of stricter quotas, higher over quota tariffs, as well as additional transportation routes assessed. The numerical examples reveal that although domestic producers can gain under tariff rate quotas, consumers may experience higher prices. Given the relevance of tariffs to global trade in the world today and discussions concerning the impacts, the framework constructed in this paper is especially timely.

Suggested Citation

  • Nagurney, Anna & Besik, Deniz & Dong, June, 2019. "Tariffs and quotas in world trade: A unified variational inequality framework," European Journal of Operational Research, Elsevier, vol. 275(1), pages 347-360.
    • Handle: RePEc:eee:ejores:v:275:y:2019:i:1:p:347-360
    DOI: 10.1016/j.ejor.2018.11.040
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    Cited by:

    1. Anna Nagurney & Dana Hassani & Oleg Nivievskyi & Pavlo Martyshev, 2023. "Exchange rates and multicommodity international trade: insights from spatial price equilibrium modeling with policy instruments via variational inequalities," Journal of Global Optimization, Springer, vol. 87(1), pages 1-30, September.
    2. Nagurney, Anna & Hassani, Dana & Nivievskyi, Oleg & Martyshev, Pavlo, 2024. "Multicommodity international agricultural trade network equilibrium: Competition for limited production and transportation capacity under disaster scenarios with implications for food security," European Journal of Operational Research, Elsevier, vol. 314(3), pages 1127-1142.
    3. Feng, Pingping & Zhou, Xiaoyang & Zhang, Ding & Chen, Zhaobo & Wang, Shouyang, 2022. "The impact of trade policy on global supply chain network equilibrium: A new perspective of product-market chain competition," Omega, Elsevier, vol. 109(C).
    4. Yang, Huixiao & Ou, Jinwen & Chen, Xiaofeng, 2021. "Impact of tariffs and production cost on a multinational firm's incentive for backshoring under competition," Omega, Elsevier, vol. 105(C).
    5. Hu, Xiaowei & Li, Peng, 2022. "Relief and stimulus in a cross-sector multi-product scarce resource supply chain network," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 168(C).
    6. Nagurney, Anna & Besik, Deniz & Li, Dong, 2019. "Strict quotas or tariffs? Implications for product quality and consumer welfare in differentiated product supply chains," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 129(C), pages 136-161.
    7. Xiaowei Hu & Peng Li, 2021. "Relief and Stimulus in A Cross-sector Multi-product Scarce Resource Supply Chain Network," Papers 2101.09373, arXiv.org, revised Nov 2022.
    8. Anna Nagurney & Patrizia Daniele & Ladimer S. Nagurney, 2020. "Refugee migration networks and regulations: a multiclass, multipath variational inequality framework," Journal of Global Optimization, Springer, vol. 78(3), pages 627-649, November.
    9. Anna Nagurney & Deniz Besik & Ladimer S. Nagurney, 2019. "Global supply chain networks and tariff rate quotas: equilibrium analysis with application to agricultural products," Journal of Global Optimization, Springer, vol. 75(2), pages 439-460, October.
    10. Li, Wei & Sun, Hui & Dong, Hao & Gan, Yuqin & Koh, Lenny, 2023. "Outsourcing decision-making in global remanufacturing supply chains: The impact of tax and tariff regulations," European Journal of Operational Research, Elsevier, vol. 304(3), pages 997-1010.
    11. Zhang, Ting & Wang, Yulan & Shen, Bin & Prak, Dennis, 2023. "Welfare-maximizing tariff versus trade-surplus-maximizing tariff: Impacts on multinational firm competition," International Journal of Production Economics, Elsevier, vol. 264(C).
    12. Feng-Jie Xie & Lu-Ying Wen & Si-Yi Wang & Yong-Fei Li, 2024. "Complex Characteristics and Control of Output Game in Cross-Border Supply Chains: A Perspective of Inter-Chain Competition," Mathematics, MDPI, vol. 12(2), pages 1-18, January.
    13. Chiedza L. Muchopa, 2021. "Economic Impact of Tariff Rate Quotas and Underfilling: The Case of Canned Fruit Exports from South Africa to the EU," Economies, MDPI, vol. 9(4), pages 1-17, October.

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