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Understanding Agricultural Price Range Systems as Trade Restraints: Peru – Agricultural Products

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  • Kamal Saggi
  • Mark Wu

Abstract

An agricultural price range system (PRS) aims to stabilize local prices in an open economy via the use of import duties that vary with international prices. The policy is inherently distortionary and welfare-reducing for a small open economy, at least according to the canonical economic model. We offer an explanation for why a government concerned with national welfare may nevertheless implement such a policy when faced with risk aversion and imperfect insurance markets. We also highlight open questions arising out of the Peru – Agricultural Products dispute for the WTO’s Appellate Body to address in order to clarify how a PRS consistent with WTO rules could be designed. Finally, we discuss the possibility that a WTO member might resort to a free trade agreement (FTA) to preserve its flexibility to implement a PRS and how an FTA provision of this sort ought to be treated in WTO litigation.

Suggested Citation

  • Kamal Saggi & Mark Wu, 2015. "Understanding Agricultural Price Range Systems as Trade Restraints: Peru – Agricultural Products," RSCAS Working Papers 2015/58, European University Institute.
    • Handle: RePEc:rsc:rsceui:2015/58
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    References listed on IDEAS

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    1. Jonathan Eaton & Gene M. Grossman, 1985. "Tariffs as Insurance: Optimal Commercial Policy When Domestic Markets Are Incomplete," Canadian Journal of Economics, Canadian Economics Association, vol. 18(2), pages 258-272, May.
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    Cited by:

    1. Moise Nken & Halis Murat Yildiz, 2017. "Implications of multilateral tariff bindings on the formation of preferential trade agreements and quest for global free trade," Working Papers 068, Toronto Metropolitan University, Department of Economics.
    2. Bown, Chad & Crowley, Meredith A., 2016. "The Empirical Landscape of Trade Policy," CEPR Discussion Papers 11216, C.E.P.R. Discussion Papers.
    3. Gregory Shaffer & L. Alan Winters, 2016. "FTAs as Applicable Law in WTO Dispute Settlement: Was the Appellate Body Wrong in Peru-Additional Duty (DS457)?," RSCAS Working Papers 2016/65, European University Institute.

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    More about this item

    Keywords

    Agriculture; free trade agreement; price range system; WTO law;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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