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

Abstract

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,