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Understanding Agricultural Price Range Systems as Trade Restraints: Peru – Agricultural Products (DS457)

Author

Listed:
  • Kamal Saggi

    (Vanderbilt University)

  • Mark Wu

    (Harvard University)

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 (DS457)," Vanderbilt University Department of Economics Working Papers 15-00009, Vanderbilt University Department of Economics.
    • Handle: RePEc:van:wpaper:vuecon-sub-15-00009
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    References listed on IDEAS

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    More about this item

    Keywords

    Price range systems; variable duties; WTO; dispute; welfare;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • K0 - Law and Economics - - General

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