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Auctioning U.S. Import Quotas, Foreign Response, and Alternative Policies
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Abstract
In this paper we quantify the potential revenue available to the U.S. from auctioning import quotas, and the resulting drop in foreign producer surplus relative to free trade. Previous estimates of auction revenue are in the range of 37−5.15billionfor1986or1987.Usingsimulationresultsfromcomputablepartialorgeneralequilibriummodels,wefindthatthisrevenuegainwouldbeattheexpenseofalargedropinforeignproducersurplus.Ignoringtextilesandapparel,thepotentialauctionrevenueis1 3-2.15 billion, and the foreign loss is 0.5−O.7billionrelativetofreetrade.Onealternativetoauctionquotasisasystemoftariff−ratequotas,whicharedesignedtokeepsuppliercountrieswelfareequaltothatinfreetrade.Wecalculatethatthetariff−ratequotascouldraise067-1.55 billion in revenue for the U.S. While this amount is less than available through auction quotas, it could still fund a significant program of worker adjustment, and would mitigate the foreign response.