- Elgar original reference
Edited by William A. Kerr and James D. Gaisford
Chapter 23: Tariff Rate Quotas
23 Tariﬀ rate quotas David Skully Deﬁnition A tariﬀ-rate quota (TRQ) is a two-level tariﬀ. During a speciﬁed period, it allows a speciﬁed volume of imports at the lower tariﬀ and charges additional imports the higher tariﬀ. In many languages TRQs are called ‘contingent tariﬀs’ which emphasizes that the tariﬀ applied is contingent on the cumulative volume of trade.1 A TRQ has four components: (a) an in-quota tariﬀ (also called a low-tier tariﬀ); (b) an over-quota tariﬀ (also called a high-tier tariﬀ); (c) a quota that speciﬁes the volume of imports charged the in-quota tariﬀ; and (d) a method of administration. For example, a TRQ could allow one million tonnes of salt to be imported at a onecent-per-kilo tariﬀ and charge a one-dollar-per-kilo tariﬀ on any additional salt imports. Since a dollar-per-kilo tariﬀ on salt would likely prevent imports beyond one million tonnes, this TRQ appears to be no diﬀerent from a regular or absolute quota of a million tonnes. The distinction is that under an absolute quota it would be legally impossible for imports to exceed the million-tonne quota, whereas a TRQ allows imports to exceed the one-million-tonne quota. It might be economically irrational to import at the higher tariﬀ, but it is legally possible. Mechanics Figures 23.1, 23.2 and 23.3 illustrate how a TRQ imposes disincentives on trade. The twolevel tariﬀ results in a stepped import supply function. Imports within the quota are charged the lower tariﬀ (t), and over-quota imports...
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