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Tariff-Rate Quotas, Rent-Shifting and the Selling of Domestic Access
Estey Centre Journal of International Law and Trade Policy
  • Bruno Larue, Universite Laval
  • Harvey E. Lapan, Iowa State University
  • Jean-Philippe Gervais, North Carolina State University
Document Type
Article
Publication Version
Published Version
Publication Date
1-1-2010
Abstract
Tariff-rate quotas (TRQs) have replaced quotas at the end of the Uruguay Round. We analyze TRQs when a foreign firm competes against a domestic firm in the latter's market. Our benchmark is the strategic rent-shifting tariff. We show that the domestic price-equivalent TRQ is a better instrument welfare-wise, as it can extract all of the rents from the foreign firm. We show that different pairs of within-quota tariff and quota can support full rent extraction. The implication is that reduction of the former and enlargement of the latter, holding the above-quota tariff constant, may have no liberalizing effects. The first-best TRQ and the strategic tariff generate different prices. When firms have identical and constant marginal cost, the first-best TRQ entails selling a subsidy to the foreign firm and forcing the exit of the domestic firm.
Comments

This is an article from Estey Centre Journal of International Law and Trade Policy 11 (2010): 213. Posted with permission.

Copyright Owner
The Estey Journal of International Law and Trade Policy
Language
en
File Format
application/pdf
Citation Information
Bruno Larue, Harvey E. Lapan and Jean-Philippe Gervais. "Tariff-Rate Quotas, Rent-Shifting and the Selling of Domestic Access" Estey Centre Journal of International Law and Trade Policy Vol. 11 Iss. 1 (2010) p. 213 - 226
Available at: http://works.bepress.com/harvey-lapan/50/