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Implementing Tariff Rate Quotas In Cge Models: An Application To Sugar Trade Policies In Oecd Countries

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  • van der Mensbrugghe, Dominique
  • Beghin, John C.
  • Mitchell, Don

Abstract

We use Mixed-Complementarity-Problem programming to implement tariff rate quotas (TRQ) in the global CGE LINKAGE model. We apply the approach to tariff rate quotas in sugar markets in OECD countries. We calibrate the model on 2000 policy levels for OECD countries to reflect the full implementation of their World Trade Organization commitments. We look at reforms of TRQ and TRQ-like schemes in the EU, the United States, and Japan, as well as multilateral trade liberalization. We derive the impact of reforms on welfare, bilateral trade flows, and terms of trade. A 33-percent multilateral decrease of ad-valorem tariffs, combined with a 33-percent increase in imports under TRQ-like schemes in the EU, the United States, and Japan, induces a global welfare gain of about 889 million dollars. These three countries' trade policies create substantial trade diversion, which excludes many low-cost producers from trading opportunities. An expansion of their import quotas alone, without multilateral trade liberalization, induces welfare gains but preserves most of the trade diversion patterns. The latter diversion benefits some Least Developed Countries' producers because of granted bilateral TRQ allocations. In the context of greater market access, reductions in tariffs in the EU and the United States, and in border "surcharges" in Japan will have to be dramatic before they can significantly affect trade flows as compared to TRQ expansion. Full multilateral trade liberalization induces global welfare gains of about $3 billion.

Suggested Citation

  • van der Mensbrugghe, Dominique & Beghin, John C. & Mitchell, Don, 2003. "Implementing Tariff Rate Quotas In Cge Models: An Application To Sugar Trade Policies In Oecd Countries," 2003 Annual meeting, July 27-30, Montreal, Canada 22098, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  • Handle: RePEc:ags:aaea03:22098
    DOI: 10.22004/ag.econ.22098
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    References listed on IDEAS

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    1. Skully, David W., 1999. "The Economics Of Trq Administration," Working Papers 14584, International Agricultural Trade Research Consortium.
    2. Bach, Christian Friis & Ken Pearson, 1996. "Implementing Quotas in GTAP Using GEMPACK or How to Linearize an Inequality," GTAP Technical Papers 307, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    3. Mitchell, Donald, 2004. "Sugar policies opportunity for change," Policy Research Working Paper Series 3222, The World Bank.
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    Cited by:

    1. Lips, Markus & Rieder, Peter, 2005. "Aggregation of Tariff-Rate Quotas," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 54(05), pages 1-3.
    2. Flaig, Dorothee & Rubin, Ofir & Siddig, Khalid, 2013. "Imperfect competition, border protection and consumer boycott: The future of the dairy industry in Israel," Journal of Policy Modeling, Elsevier, vol. 35(5), pages 838-851.
    3. 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.
    4. Pan, Suwen & Welch, Mark & Mohanty, Samarendu & Fadiga, Mohamadou L. & Ethridge, Don E., 2005. "Assessing the Impacts of the Chinese TRQ System and U.S. Subsidies on the World Cotton Market," Estey Centre Journal of International Law and Trade Policy, Estey Centre for Law and Economics in International Trade, vol. 6(2), pages 1-16.
    5. Flaig, Dorothee & Rubin, Ofir D. & Siddig, Khalid H.A., 2012. "Impact Of Liberalizing Production And Trade On The Future Of The Dairy Industry In Israel," 52nd Annual Conference, Stuttgart, Germany, September 26-28, 2012 133039, German Association of Agricultural Economists (GEWISOLA).

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