The liberalization of tariff rate quotas under oligopolistic competition

Several proposals for liberalising agricultural tariff rate quotas (TRQs) have been proposed within the WTO Doha Development Round. The literature suggests that the effectiveness of liberalisation depends upon which of the three elements of a TRQ constrains imports. Most contributions assume perfect competition. This article uses an oligopoly two-stage capacity constrained model, in which the mode of competition is endogenous, to investigate the impact of different liberalisation options of TRQs, that is, the reduction in the in-quota and out-of-quota tariffs and the expansion of the quota. This article shows that consideration of the nature of competition between traders may provide unconventional conclusions about the effectiveness of the various TRQ liberalisation options; furthermore, the article shows how an increase in the number of rivals, under certain circumstances, may be more effective in increasing trade than reducing tariffs