Shipping the Good Beef Out: EU Trade Liberalization to Mercosur Exports

MARÍA PRISCILA RAMOS; JEAN-CHRISTOPHE BUREAU; LUCA SALVATICI

Bahía Blanca

Encuentro; XLII Reunión Anual de la AAEP; 2007

Asociación Argentina de Economía Política

The European Union tariff schedule includes a large number of specific and composite tariffs as well as many tariff-rate quotas (TRQs), which affect the composition of imports. By altering price ratios between products with different unit values, both can generate the typical Alchian-Allen "shipping the good apples out" effect in foreign countries´ exports to the EU. Different patterns of trade liberalization, either through tariff reduction or an expansion in preferential-access quotas, might have different consequences for producers and consumers because of changes in the composition of trade. We illustrate the issues at stake in the beef sector, focusing on Mercosur exports to the EU. We model import demand for different qualities in the presence of a TRQ and we derive comparative statics results for changes in various policy variables.