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Institutionalized Metzler Effects: Tariff-Rate Quota Liberalization in a Supply-Managed Industry

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  • Pouliot, Sebastien
  • Larue, Bruno

Abstract

A supply management system governs Canada’s poultry sector. Tariff Rate Quotas (TRQs), with prohibitive above-quota tariffs and low in-quota tariff, mimic import-quotas limit international competition in Canada’s poultry market. The quota part of the TRQs is a minimum access commitment under international trade agreement that is defined as a fraction of domestic production. We show in a 3-stage game involving negotiations between retailers and processors and between processors and farms that increasing minimum access commitment under current trade agreements can produce Metzler effects with larger price increases observed at the farm and processing levels. Simulations based on 2008 data support the Metzler paradox and shed light on import license allocations between retailers and poultry processors in Canada.

Suggested Citation

  • Pouliot, Sebastien & Larue, Bruno, 2011. "Institutionalized Metzler Effects: Tariff-Rate Quota Liberalization in a Supply-Managed Industry," Working Papers 102651, Structure and Performance of Agriculture and Agri-products Industry (SPAA).
    • Handle: RePEc:ags:spaawp:102651
    DOI: 10.22004/ag.econ.102651
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    File URL: https://ageconsearch.umn.edu/record/102651/files/SPAA_Metzler_Chicken_TRQ.pdf
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    References listed on IDEAS

    as
    1. Jean-Philippe Gervais & Stephen Devadoss, 2006. "Estimating bargaining strengths of Canadian chicken producers and processors using a bilateral monopoly framework," Agribusiness, John Wiley & Sons, Ltd., vol. 22(2), pages 159-173.
    2. Jean-Philippe Gervais & David Surprenant, 2003. "Evaluating the TRQ Import Licensing Mechanisms in the Canadian Chicken Industry," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 51(2), pages 217-240, July.
    Full references (including those not matched with items on IDEAS)

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    Keywords

    Agricultural and Food Policy; Industrial Organization; International Relations/Trade;
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