Is the U.S. Import Tariff on Brazilian Ethanol Justifiable?

The United States has used tax credits and mandates to promote ethanol production. To offset the tax credits received by imported ethanol, the United States instituted an import tariff. This study provides insights about the quantitative nature of a U.S. trade policy that would establish a free-market price for ethanol, given the U.S. ethanol mandate and tax credit. The theoretical results from a horizontally related ethanol-gasoline partial equilibrium model show that the United States should provide an import subsidy rather than impose a tariff. The empirical results quantify that this import subsidy is 9 cents, instead of a 57 cent import tariff, per gallon of ethanol.ethanol imports, mandate, subsidy, tariff, tax credit, International Relations/Trade, Resource /Energy Economics and Policy,

Seafood Import Demand in the Caribbean Region

Cointegration analysis and an Error Correction Model are used to estimate aggregate seafood import demand functions for selected Caribbean countries. The results show that seafood import demand is price elastic. Exchange rate has a negative effect on seafood import quantity. Income and tourist arrivals have positive impacts on seafood imports. Seafood import negatively affects domestic fishery production. Tariff and production support policies reduce seafood imports, and enhance domestic production. Both policies increase producer surplus, but a tariff reduces consumer surplus, and a production expansion policy increases consumer surplus. A production expansion subsidy is a more appropriate policy instrument than a tariff for small open economies, like the Caribbean States, to increase domestic production and generate net economic surplus.Seafood, import demand, cointegration, economic surplus, Agricultural and Food Policy, International Relations/Trade, Q17, Q22, C32,

Tariff, Growth, and Welfare

We develop a two-country (Home and Foreign) by two-good (consumption good and investment good) by one factor (capital) endogenous growth model with international knowledge spillover to study the relationship between an import tariff and economic growth and welfare. First, unlike the past literature, we do not need to make an assumption such that the growth rates between countries are identical in a balanced growth path (BGP). Second, we show that there exists a unique and saddle-point BGP with both countries being incompletely specialized. Third, a higher import tariff on the consumption good in the domestic country may boost (reduce) the rate of economic growth when the foreign (domestic) country has an absolute advantage in the investment good. Finally, a rise in the tariff rate by one country may improve world welfare under some parameter spaces.two-country endogenous growth model, international knowledge spillover, import tariff, economic growth, welfare

ON THE EQUIVALENCE OF IMPORT TARIFF AND QUOTA: THE CASE OF RICE IMPORT IN TAIWAN

This paper extends the existing theory on the equivalence of import tariff and quota. If the equivalence is defined on the domestic price level (weak equivalence), then either the zero conjectural variation for domestic country or a perfectly competitive market will be sufficient to support this equivalence. If the equivalence is defined both on the same domestic price level as well as tariff rate (strong equivalence), then the conditions are that either domestic country acts as a Cournot competitor and foreign country is a price taker, or both domestic and foreign country are price takers. An empirical spatial-equilibrium trade model is constructed to simulate the impacts of import tariff and quota. Using Taiwan¡¦s rice import as an example, the empirical results show that if Taiwan switches from the quota system to tariff system, the domestic rice price as well as total social welfare can be increased given the same import volume.International Relations/Trade,

TARIFF RATE IMPORT QUOTAS, DOMESTIC MARKET STRUCTURE AND AGRICULTURAL SUPPORT PROGRAM: THE CASE OF TAIWANESE RICE IMPORT

After joining the WTO in 2002, Taiwan allowed rice imports for the first time by implementing an import quota subject to a special safeguard tariff. In 2003, the import quota was expanded to a two-tier tariff rate import quota system. Although Taiwan maintained land set-asides and domestic support prices for producer sales to the State Trading Enterprise, the latter was limited to importing only 65 percent of the import quota with the rest sold to private traders. This sudden transformation of the Taiwanese import regime and rice market along with the government proposal for a "strategic alliance" amongst traders highlights the importance of studying the effects of policy reforms in the framework of imperfect domestic market structure. The purpose of this paper is to analyze Taiwanese rice policy reforms using a computational partial equilibrium model. The impact of import controls, price supports, land set-aside and alternative market structures are assessed, including the potential change in regimes within the tariff quota system. Our results show that the "strategic alliance" proposed by the agricultural authority will further distort the domestic market. Elimination of the domestic support price and land set-aside improves social welfare independent of the market structure while a change in the market structure towards competition is always social welfare improving regardless of domestic policy instruments. But the policy regime of the tariff quota (the in-quota tariff versus the out-of-quota tariff versus the quota) and hence social welfare is sensitive to changes in both domestic policy instruments and market structure.tariff rate quota, strategic alliance, domestic support, market structure, Agricultural and Food Policy, International Relations/Trade, Q17, Q18,

Ethanol Trade between Brazil and the United States

The United States has used tax credit and mandate to promote ethanol production. To offset the tax credit availed by the imported ethanol, the United States instituted an import tariff. This study ascertains the appropriate U.S. ethanol import tariff corresponding to the U.S. domestic policies by setting the policy-induced ethanol price equal to the free market price. The theoretical results from a horizontally-related ethanol-gasoline partial equilibrium model of three countries (the United States, Brazil, and the Rest of the World) show that the United States should provide an import subsidy rather than impose a tariff. The empirical results quantify that this import subsidy is $0.10, instead of a$0.57 import tariff, per gallon of ethanol.ethanol imports, mandate, subsidy, tariff, tax credit, International Relations/Trade, F13,

Administrative Delays as Barriers to Trade

One domestic firm and one foreign firm must decide when to introduce their new product to the home market. The home government may apply an import tariff, an administrative delay, or both to the product of the foreign firm. We show that, while both the tariff and administrative delay can ensure the socially optimal timing of entry, the administrative delay is the less efficient instrument for maximising home welfare. If trade liberalization constrains the import tariff to be below its domestically optimal level, we show that the optimal administrative delay leads to lower levels of world welfare than the optimal tariff, so that trade liberalization can be welfare decreasing.

Armington elasticities and tariff regime: An application to European Union rice imports

Most of the European Union’s (EU) import sources for rice are in developing countries and the least-developed countries (LDCs). The EU has moreover made a commitment to allow duty-free and quota-free access to rice imports originating in the LDCs from September 2009 onward. The purpose of this article is to answer two questions – First: Does the inclusion of import tariffs in the specification lead to different estimated Armington elasticities? Second: When a discriminating tariff is introduced, what happens to the market share of large rice exporters to the EU, especially to the market share of poor countries? Consequently, we present the Armington model, derived from a constant elasticity of substitution (CES) utility function, and a non-homothetic CES utility functional form, which is more flexible. Then, we estimate the Armington model, with and without the inclusion of a tariff, and we compare the elasticities. Lastly, we model five scenarios with different discriminating import tariff rates to calculate the changes in the market access of large rice exporters to the EU. Our empirical results show that it is worthwhile to consider non-homothetic preferences and import tariffs. When the model is estimated, ignoring the import tariffs and the non-homothetic parameter, results may be biased and of uncertain validity. Furthermore the simulation findings demonstrate that in spite of a large difference between import tariff rate of Suriname and other countries (scenario V), its market access would not change greatly. This may be caused by supply side problems like poor infrastructures, weak technology and small capacity production in LDCs.Armington elasticity, tariff discrimination, non-homothetic, utility function, EU, rice.

Welfare vs. Market Access: The Implications of Tariff Structure for Tariff Reform

We show that the effects of tariff changes on welfare and import volume can be fully characterized by their effects on the generalized mean and variance of the tariff distribution. Using these tools, we derive new results for welfare- and market-access-improving tariff changes, which imply two 'cones of liberalization' in price space. Because welfare is negatively but import volume positively related to the generalized variance, the cones do not intersect, which poses a dilemma for trade policy reform. Finally, we show that generalized and trade-weighted moments are mutually proportional when the trade expenditure function is CES.

Trade Restrictiveness and Deadweight Losses from U.S. Tariffs, 1859-1961

This paper calculates the Anderson-Neary (2005) trade restrictiveness index (TRI) for the United States using nearly a century of data. The results show that the standard import-weighted average tariff understates the TRI, defined as the uniform tariff that yields the same welfare loss as the existing tariff structure, by about 75 percent. The static deadweight welfare loss from the U.S. tariff structure is about one percent of GDP after the Civil War, but falls almost continuously thereafter to less than one-tenth of one percent of GDP by the early 1960s. On average, import duties resulted in a welfare loss of 40 cents for every dollar of revenue generated, slightly higher than contemporary estimates of the marginal welfare cost of taxation.