Transcript Slide 1
A classification of trade barriers 1. 2. Taxonomy Breakdown of effects Equivalence and non-equivalence of tariffs & QRs 1. 2. 3. 4. Perfect competition Monopoly World price volatility QR administration: licence allocation and efficiency QRs: incidence & measurement issues 1. 2. 3. QR cost estimates: a few examples Quality upgrading Using the gravity equation to assess the effect of QRs A Classification of trade barriers 1. Taxonomy Trade barriers “Dissipative” barriers Technical Barriers to Trade Sanitary & Phytosanitary standards “Foreign-capture” barriers Price undertakings Non-tariff barriers (NTB) VERs “Domesticcapture” barriers Quotas Quantitative Restrictions (QR) Noncontingent tariffs: • MFN • Preferential Contingent tariffs: • antidumping • countervailing • safeguard clauses Equivalence and non-equivalence of tariffs & QRs 1. Perfect competition Tariff under competition Prices Domestic demand Marginal cost World price plus tariff Tariff A B C D World price Quantities Quantity imported Equivalence and non-equivalence of tariffs & QRs 1. Perfect competition Quota under competition Prices Domestic demand Residual (after-quota) demand Marginal cost Domestic price A B C D World price Quantities Quota Equivalence and non-equivalence of tariffs & QRs 2. Monopoly Tariff under monopoly Prices Domestic demand Marginal revenue Marginal cost World price plus tariff Tariff A B C D Quantities Quantity imported World price Equivalence and non-equivalence of tariffs & QRs 2. Monopoly Quota under monopoly Prices Domestic demand Residual (after-quota) domestic demand Marginal cost Domestic price C A D World price Quantities Quota B Use of Non-Tariff Barriers (NTBs) (a) Ad-valorem equivalent of core NTBs, by GDP/capita of using country (b) AVE of agricultural price-support measures Source: Kee, Nicita & Olarreaga 2006a Equivalence and non-equivalence of tariffs & QRs 3. World price volatility Tariff at low price Prices Domestic demand Marginal cost Tariff Low world price Quantities Equivalence and non-equivalence of tariffs & QRs 3. World price volatility Tariff at high price Prices Domestic demand Marginal cost Tariff High world price Quantities Equivalence and non-equivalence of tariffs & QRs 3. World price volatility Quota at low price Prices Domestic demand Marginal cost Domestic price Low world price Quantities Quota Equivalence and non-equivalence of tariffs & QRs 3. World price volatility Quota at high price Prices Domestic demand Marginal cost High world price = domestic price Quantities Quota (not binding) Actual imports 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: k M ki i k M ki Tki OTRI Source: Kee, Nicita & Olarreaga 2006a Existing barriers (tariffs + AVE of NTBs) OTRI and MA-OTRI by level of income (a) OTRI (b) MA-OTRI Overall protection: OTRI and MA-OTRI in agriculture Source: Kee, Nicita & Olarreaga 2006a QRs: incidence and measurement issues 2. Using the gravity equation to assess the effect of QRs Bananas “Third-country” tariff-quota 2.2 m tons @ 75 ECU/ton ACP quota EU OST quota tariff-free price support 857,700 tons 854,000 tons Exporting country breakdown “F.A. countries”: • Costa Rica 23.4% • Columbia 21% • Nicaragua 3% • Venezuela 2% Other countries 50.6% - 90,000 tons Dom. Rep. Belize 90,000 tons Ivory Coast Cameroon Licence allocation breakdown (by type of operator) Category C: 3.5% New entrants Category A: 66.5% Category B: 30% “Dollar” importers ACP/OST importers Primary Custom clearers/ importers 57% ripeners 43% Rent-sharing (a) (tariff-quota) €/ton SEU SACP pEU S$(t) S$ p* + t p* DEU (a) (tariff-quota) Million tons Q$ = 2.65 QACP = 0.85 €/ton QEU SEU SACP pEU S$(t) S$ Total rents p* + t p* DEU Rents to US companies Million tons Rents to European companies Q$ = 2.65 QACP = 0.85 QEU (a) (tariff-quota) (b) (tariff only at rate tPG) €/ton €/ton SEU SACP SACP pEU pEU S$(t) S$ tPG p* + t p* DEU €75/t in-quota tariff tPG SACP + SEU SACP + SEU + S$ (tPG) S$ DEU Million tons Q$ = 2.65 QACP = 0.85 QEU (b) (tariff only at rate tPG) €/ton SACP SEU S$ (tPG) pEU tPG S$ DEU Million tons QACP > 0.8 Q$ < 2.65 QEU “Tariffication” of a quota: EU bananas PG estimates compared Table 5a. Raboy’s estimates Raboy Internal price External price US Norway EU MFN Price gap IP-US IP-Norway IP-EU MFN 1999 2000 624 2001 656 2002 Average 614 631 542 546 542 598 589 583 549 747 612 563 627 579 82 78 82 58 67 73 65 -133 2 68 4 52 Table 5b. Borrel and Bauer’s estimates 2000 624 560 64 Borrel-Bauer Internal price External price Price gap Table 5c. NERA’s estimates NERA Internal price External price Price gap 1999 506 246 260 2000 538 260 278 2001 550 286 264 2002 Average 488 521 255 262 233 259 The gravity model of international trade Distant Large country Large country Close by Small country Distant Distant ln X ijt 0 1 ln Y it 2 ln Y jt 3 ln d ijt 4 ln 1 t ijt 8Qijt u ijt . I 5 i 6 I 7t j Large country Estimating the price effect of QRs: bananas 2. Interpreting the gravity estimates: trade-reduction effect of QR 1 if quota applies Q otherwise 0 Regression estimates ln Vˆ i Q ˆi X i 0.642Q (1.1) ˆ X 0.642 VˆQ e iQ i i VˆQ 0.642 e 0.526 (which implies ln 0.642) ˆi X i ˆ ˆ i Q VNQ VNQ e Trade-reduction effect of the quota: VˆNQ VˆQ 1 0.526 0.474 Vˆ NQ i.e. -47% Estimating the price effect of QRs: bananas 2. Interpreting the gravity estimates: tariff equivalent of QR Use again regression estimates ln Vˆt i ˆi X i 1.324 ln 1 t so (0.1) Vˆt ln 1.324 ln 1 t ˆ V0 . Combine this with what we had from previous slide 0.642 1.324 ln 1 t and get 1 t e0.485 1.624 so that t = 0.624. Thus, the estimated ad-valorem equivalent of the quota, in percentage terms, is 62.4%. Applied to a unit value of €496/ton, this gives a specific-tariff equivalent of €310 per ton. Gravity regression results, 08/02/05 Dep. var.: trade value “Tariffication” of a quota: EU bananas Gravity estimation log (1+t), applied Huber -1.261 (-2.69) log (1+t), unconstrained log (1+t), constrained MFN quota dummy Framework Agr. dummy ACP dummy Ivory Coast*time trend Cameroon*time trend log distance log importer's GDP log exporter's GDP log importer's exch. rate log exporter's exch. rate Constant Huber -0.515 (-3.28) 0.395 (1.42) 0.993 (4.73) 0.157 (2.51) 0.26 (3.64) -1.269 (-20.89) 0.729 (2.71) 0.251 (1.19) -0.034 (-0.39) 0.086 (2.79) -321.06 (-2.55) Observations 6'970 R-squared 0.62 Cook-Weisberg chi-sq. Implied tariff equiv. (€/ton) 221 With €75/ton in-quota tariff 296 Implied elasticity of substitution All tariffs 2.26 QR-constrained market Unconstrained market -1.136 (-2.12) -1.485 (-2.15) -0.459 ** (-2.3) 0.387 (1.39) 0.998 ** (4.74) 0.156 * (2.49) 0.258 ** (3.6) -1.271 **(-20.92) 0.723 * (2.69) 0.252 (1.2) -0.035 (0.41) 0.085 ** (2.77) -11.742 * (-1.51) 6'983 0.62 158 233 2.14 2.49 * * * ** * ** ** ** **