A classification of trade barriers 1.Taxonomy 2.Breakdown of effects Equivalence and non-equivalence of tariffs & QRs 1.Perfect competition 2.Monopoly.

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A classification of trade barriers 1.Taxonomy 2.Breakdown of effects Equivalence and non-equivalence of tariffs & QRs 1.Perfect competition 2.Monopoly 3.World price volatility 4.QR administration: licence allocation and efficiency QRs: incidence & measurement issues 1.QR cost estimates: a few examples 2.Quality upgrading 3.Using the gravity equation to assess the effect of QRs

Trade barriers Dissipative barriers QuotasVERsContingent tariffs: antidumping countervailing safeguard clauses Sanitary & Phytosanitary standards Technical Barriers to Trade Price undertakings Noncontingent tariffs: MFN Preferential Foreign-capture barriers Domestic- capture barriers Quantitative Restrictions (QR) A Classification of trade barriers 1.Taxonomy Non-tariff barriers (NTB)

World price Quantities Prices Domestic demand Marginal cost World price plus tariff Tariff ABDC Equivalence and non-equivalence of tariffs & QRs 1.Perfect competition Tariff under competition Quantity imported

World price Quantities Prices Domestic price Domestic demand Quota Marginal cost A BD C Residual (after-quota) demand Equivalence and non-equivalence of tariffs & QRs 1.Perfect competition Quota under competition

World price Quantities Prices Domestic demand Marginal cost Marginal revenue Equivalence and non-equivalence of tariffs & QRs 2. Monopoly Tariff under monopoly World price plus tariff Tariff ABDC Quantity imported

World price Quantities Prices Domestic price Domestic demand Marginal cost B Residual (after-quota) domestic demand Quota A C D Equivalence and non-equivalence of tariffs & QRs 2. Monopoly Quota under monopoly

Source: Kee, Nicita & Olarreaga 2006a (a) Ad-valorem equivalent of core NTBs, by GDP/capita of using country (b) AVE of agricultural price-support measures Use of Non-Tariff Barriers (NTBs)

Low world price Quantities Prices Domestic demand Tariff Marginal cost Equivalence and non-equivalence of tariffs & QRs 3. World price volatility Tariff at low price

Quantities Prices High world price Domestic demand Tariff Marginal cost Equivalence and non-equivalence of tariffs & QRs 3. World price volatility Tariff at high price

Low world price Quantities Prices Domestic price Domestic demand Marginal cost Quota Equivalence and non-equivalence of tariffs & QRs 3. World price volatility Quota at low price

Quantities Prices High world price = domestic price Domestic demand Marginal cost Quota (not binding) Equivalence and non-equivalence of tariffs & QRs 3. World price volatility Quota at high price Actual imports

Source: Kee, Nicita & Olarreaga 2006a Overall protection: OTRI and MA-OTRI Define Overall Trade Restrictiveness Index (OTRI) as uniform tariff that gives same level of imports as all current barriers: OTRI Existing barriers (tariffs + AVE of NTBs)

OTRI and MA-OTRI by level of income (a) OTRI(b) MA-OTRI

Source: Kee, Nicita & Olarreaga 2006a Overall protection: OTRI and MA-OTRI in agriculture

Third-country tariff-quota 2.2 m 75 ECU/ton ACP quota tariff-free 857,700 tons EU OST quota price support 854,000 tons Dom. Rep. Belize Ivory Coast Cameroon 90,000 tons F.A. countries: Costa Rica 23.4% Columbia 21% Nicaragua 3% Venezuela 2% Other countries 50.6% - 90,000 tons Exporting country breakdown Licence allocation breakdown (by type of operator) Category A: 66.5% Dollar importers Category B: 30% ACP/OST importers Category C: 3.5% New entrants Primary importers 57% Custom clearers/ ripeners 43% QRs: incidence and measurement issues 2. Using the gravity equation to assess the effect of QRs Bananas

S EU S ACP S$S$ Q $ = 2.65 p* + t p EU p* Million tons /ton Q ACP = 0.85 (a) (tariff-quota) Q EU D EU S $ (t) S EU S ACP S$S$ Q $ = 2.65 p* + t p EU p* Million tons /ton Q ACP = 0.85 (a) (tariff-quota) Q EU D EU S $ (t) Total rents Rents to US companies Rents to European companies Rent-sharing

p EU S ACP + S EU S ACP S$S$ t PG (b) (tariff only at rate t PG ) p EU S EU S ACP S$S$ t PG Q $ < 2.65Q ACP > 0.8 (b) (tariff only at rate t PG ) S ACP + S EU + S $ (t PG ) S $ (t PG ) Q EU D EU Million tons /ton 75/t in-quota tariff S EU S ACP S$S$ Q $ = 2.65 t PG p* + t p EU p* Million tons /ton Q ACP = 0.85 (a) (tariff-quota) Q EU D EU S $ (t)

Tariffication of a quota: EU bananas

The gravity model of international trade Large country Small country Close by Distant

Estimating the price effect of QRs: bananas 2. Interpreting the gravity estimates: trade-reduction effect of QR

Estimating the price effect of QRs: bananas 2. Interpreting the gravity estimates: tariff equivalent of QR

Tariffication of a quota: EU bananas Gravity estimation

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