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Uses a conjectural variation approach to derive a general result concerning the equivalence of tariffs and quotas. Shows that, as long as the quota is binding, the equivalence of tariffs and quotas depends exclusively on the domestic firm′s conjectural variations. Specifically, the domestic prices of the goods under the quota are higher than, identical to, or lower than those under the tariff if the domestic firm′s conjectural variation under the quota is larger than, equal to, or smaller than that under the tariff. This conclusion holds for both price‐setting and quantity‐setting duopoly with heterogeneous goods as well as quantity‐setting duopoly with homogeneous goods.

Corn, which has the highest domestic production, planting area and consumption, is the top cereal in relation to demand and supply in China. However, the comparative advantage of China in corn has continuously deteriorated in recent years and based on the recent situation and possible supply and demand trends, it is widely accepted that a corn self-sufficiency rate of 95% is difficult to achieve. Under current import-restriction policies, corn may stand at the crossroads of reforms to solve its predicted insufficient supply. In this study, the authors analyse the necessity of relaxing trade restrictions on corn in China and explore the effects of trade restrictions by reducing tariffs and expanding tariff-rate quotas on corn and related industries and the welfare change caused by possible relaxations.

The authors construct a computable general equilibrium (CGE) model and design nine scenarios for the analysis.

The results show that relaxations of import restrictions are probable methods to meet the aim of sufficient corn supply during shortages. They are simulated to reduce corn's domestic production and price, increase import and import prices and lead to a decline in self-sufficiency but benefit the production of corn-related industries of corn. The results also imply that expanding the quota is a better method for releasing trade restrictions in China.

The comparative advantage of China in corn deteriorated with an increase in prices. Based on the current situation and possible trends of supply and demand, the referenced goal of achieving 95% corn self-sufficiency appears difficult, implying that reliance on imports is probably imminent and vital. This study provides simulation results in future scenarios and offers policy implications for China's corn trade policies.

This chapter utilizes the results of Deneckere ·& Kovenock (1988, 1989, 1992, 1996) on price setting games with capacity constraints and different unit costs up to capacity to analyze the effects of quotas and tariffs in a model in which a domestic market for a homogeneous product is supplied by a duopoly consisting of a domestic and a foreign firm. A model of the timing of price setting is constructed in which the existence of price leadership, as well as the identity of the leader, depends upon the vector of unit costs and capacities (k1, k2, c1, c2). With firm 1 the foreign firm and firm 2 the domestic firm, the levying of a tariff raises the foreign unit cost of production up to capacity to c1t = c1 + t, while the imposition of a ‘binding’ quota reduces capacity from k1 to k1q (the level of the quota). The effects of quotas and tariffs on the equilibrium in the game of timing are examined starting from an initial vector in which costs are identical, c1 = c2 = c. It is shown that, due to the endogeneity of price leadership, trade restrictions can have surprising effects. In addition to the traditional view that quotas hurt the foreign firm and help the domestic firm, and the results of Harris (1985) and Krishna (1989) that quotas may help both firms, we show that with endogenous timing a quota can make the domestic firm worse of and the foreign firm better off (by altering the identity of the price leader). However, a quota will always (weakly) increase price. In contrast, a tariff always (weakly) hurts the foreign firm and (weakly) helps the domestic firm but may, by affecting the leadership role, lower price. The question of the equivalence of quotas and tariffs is also examined. In contrast to the result of Deneckere & Kovenock (1989) for the simultaneous price setting game, we show that with the endogenous timing of price-setting there are certain initial conditions (k1, k2, c1, c2) for which the prices and quantities generated by a ‘binding’ quota can be duplicated by a tariff (and vice versa). It is possible, however, that a quota that reduces the foreign capacity slightly is equivalent only to a very severe tariff. We conclude by showing how the model allows for simple welfare comparisons in environments in which protection is likely.

The purpose of this paper is to demonstrate by text and empirical facts, the need to reform the rules in force.

This study confronts current standards with empirical facts. To do this, it is postulated that even though current market access standards are better that the Gatt 1947 rules, they leave the possibility for some members to hijack them to eventually increase their protection effective tariff.

Market access standards for agricultural products should be reformed because of their asymmetry. To put an end to this asymmetry, these standards should be rebalanced. This is precisely the challenge of the current multilateral negotiations.

Unlike the studies conducted on this subject (to my knowledge), which are mainly based on economic or political science methods, this analysis is essentially based on legal reasoning law.

The purpose of this paper is to revisit the celebrated conflict that lasted close to two decades and pitted the EU against the USA and against MFN suppliers of bananas. It starts by recalling the major turning points in the dispute and argues that the EU-USA conflict could largely be explained by the changing landscape on trade-policy making on both sides of the Atlantic. As to the EU-MFN grower dispute, it can be largely explained by uncertainty on the distribution of quota rents and on the reluctance to use economic analysis in the panel decisions. Econometric and simulation estimates are given in support of this argument.

Analytical interpretation of the conflict supported by graphical analysis. Econometric and simulation estimates to support the arguments.

The paper shows that the EU-MFN grower dispute is largely explained by uncertainty on the distribution of quota rents as result of the move away from region-specific quotas to tarification.

Lack of better data on transport costs and unreliable price data discussed in the paper is an important caveat only partly remedied through simulation analysis.

The use of the simple and transparent models here would have helped the panel reach an informed decisions on what tariff would have preserved the same market shares for MFN growers of bananas.

This is the first thorough political-economy review of the dispute since the often cited paper: Cadot and Webber, (2002) “Banana splits: policy process, particularistic interests, political capture, and money in transatlantic trade politics.”

Most current modeling approaches identify very small gains from trade reform. In this chapter, we examine recent developments in the literature to assess whether standard modeling approaches are mis-specifying, understating, or overstating the gains from trade reform. Key areas where the impacts of trade barrier reduction appear to be understated include the measurement of barriers; the aggregation of these barriers; process productivity gains, particularly those resulting from reallocation of resources between firms; product quality improvements and expansion of product variety; factor supply; and investment of gains from trade.

Examines the impact of the sugar tariff‐rate import quota programme on the United States economy. Uses a computable general equilibrium model composed of 14 producing sectors, 14 consuming sectors, six household categories classified by fincome, and a government. Examines the effects of abolishing the tariff‐rate import quota on sugar prices and quantities. Suggests that a complete elimination of the sugar programme would result in lower output by all producing sectors (by about $2.85 billion) but, for all producing sectors besides the agriculture programme crops, crude oil, and petroleum refining sectors, output would actually increase (by about $2.98 billion). There would also be an increase in the consumption of goods and services (by about $197 million), and an increase in welfare (by about $121 million). The government would realize a reduction in revenue of about $15 million. When subjected to a sensitivity analysis, the study′s results are reasonably robust with regard to the assumption of the value of the own‐price elasticity of demand for sugar – i.e., while the model′s equilibrium values do vary in response to different assumptions of the values of this elasticity, the fluctuations are not so enormous as to suggest that the model is unrealistically sensitive to these parameters.

This paper analyzes the effects of the expiration of the Multi Fiber Arrangement (MFA), which ended quota restrictions on US textile and apparel imports in 2005, on the sourcing of US apparel. We test if the realignment in trade following the phase out of quotas can be explained by comparative advantage and market size.

We use a gravity framework to investigate the role of comparative advantage (labor costs) and other factors such as exporter size, PTAs and tariff reductions on the pattern of US apparel imports. Detailed data on quotas by country-product pair are used for the purpose.

Our empirical results show a significant increase in imports from large quota constrained countries once the MFA ended. Moreover, the pattern of trade seems to favor low wage countries that have a comparative advantage in producing apparel, which is highly labor intensive.

The end of quotas removed a major distorting factor in US apparel trade. This study examines the role of trade theory in the changing pattern of apparel imports that followed the end of the MFA. We use a gravity framework to test the theory of comparative advantage and the role of exporter size. Previous studies on the end of the MFA and its effects, do not examine the causal factors behind the realignment of US apparel trade.