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Publication Date:
May 2003
ISSN:
1542-0485
DOI:
10.2202/1542-0485.1019

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Some Unintended Consequences of TRQ Liberalization

Jean-Philippe Gervais / James I Rude

1Laval University, Canada

1University of Manitoba, Canada

Citation Information: Journal of Agricultural & Food Industrial Organization. Volume 1, Issue 1, Pages –, ISSN (Online) 1542-0485, DOI: 10.2202/1542-0485.1019, May 2003

Publication History:
Published Online:
2003-05-18

This paper analyzes the impacts of trade liberalization in a non-integrated industry where a marketing agency controls the supply of a necessary input in the production of a processed commodity. Trade of the processed good is restricted through a Tariff-Rate Quota (TRQ) and domestic processors operate in an imperfectly competitive industry. Under a fixed proportions technology, an increase in the minimum access commitment of the TRQ will generally lower the domestic retail price to consumers if the marketing agency is a profit-maximizing monopolist. Conversely, if the marketing agency pursues some specific non-economic objectives, it is shown that increases in the minimum access commitment holding the tariff rates constant can lead to higher retail prices and thus negate the benefits of trade liberalization for consumers.

Keywords: Tariff-rate quotas; Trade liberalization; Marketing agencies

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