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TRQ Expansion-Creating Opportunities for Trade?

Posted by Harry de Gorter on July 10th, 2007

Many WTO Members have submitted proposals pertaining to the formulae for tariff and subsidy cuts and exceptions in the Doha Round to influence a draft modalities text being prepared by Crawford Falconer, the chair of the WTO agricultural negotiations. As reported, one such proposal on market access put forth by the EU, dated June 29, called for a complex formula for calculating the size of new import quotas countries would grant in exchange for reductions in tariffs on commodities.

According to the proposal, multiple factors would determine the size by which quotas are expanded, including the share of imports in domestic consumption, the extent to which the product was being protected from regular tariff reduction rates, the elasticity of import demand, and import penetration.

Given the complexity of the EU proposal, some have said that it is unclear whether it would offer trading partners any real increased opportunities in market access. I have put forth this same argument in a technical note titled, "One Important Issue on TRQ Expansion," which suggests that the proposed formula for determining TRQ expansion may, in many cases, provide no real trade compensation for tariffs cuts not taken. This is the case when over-the-quota imports already exist, and when the quota expansion does not take into account the pre-existing over-quota imports, along with the induced level of over-quota imports from tariff cuts taken. Given these two concerns, we would do well to seriously consider modifying the proposed EU formula to ensure that real market access is created going forward in the Doha negotiations.

Harry de Gorter is an associate professor at Cornell University, and teaches and conducts research on the political economy and applied welfare economics of agricultural trade policy.

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