Tariff-rate quotas are more likely to stay than be negotiated away
The Uruguay Round of trade negotiations, concluded in 1994, created tariff-rate quotas for agriculture with the expectation that they would be a stepping stone to freer trade. Instead, most of those TRQs are still in place and new WTO members have added 43 more, says a report by three USDA researchers.
Under TRQs, a country allows imports of a specified volume of a commodity at a low or no tariff rate but is then allowed to charge higher duties on imports that exceed the trigger level. “They were expected to form the basis for WTO negotiations on further tariff reductions and quota increases,” write economists Jayson Beckman, Fred Gale, and Tani Lee.
There are 1,125 TRQs in place at present, according to the Economic Research Service report, and they tend to fall into two categories, with little middle ground. Some 36% of TRQs had “fill” rates of less than 20%, meaning imports amounted to less than 20% of the tariff-free volume; 40% of TRQs had fill rates above 80%. Only 6% had fill rates in the middle, from 40% to 60%.
Low fill rates tended to be associated with imports that cost more than domestic products. High fill rates suggested opportunities for larger imports if the quotas were expanded or if tariffs were lowered on imports above the trigger level.
“The present study found that 13% of all TRQs … may be hindered by impediments such as transaction costs associated with gaining access to quotas or other nontariff barriers,” said the report. The 13% included grain TRQs for China. The United States has accused China of ploys that make it difficult to utilize the duty-free quotas.
The report, “Agricultural Market Access Under Tariff-Rate Quotas,” is available here.