How does Tariff-rate quota modelling affect CGE results?: an application for MIRAGE

IVAN DECREUX; MARIA PRISCILA RAMOS

West Lafayette

Conferencia; 10th Annual Conference on Global Economic Analysis; 2007

Purdue University

Since the Uruguay Round Agricultural Agreement (URAA), tariff-rate quotas (TRQ?s) have become the most useful trade policy instrument to improve agricultural market access by controlling at the same time import volumes. This is the case of many agricultural markets where the level of protection is very high, such as for beef or sugar in the European Union or in the United States. Until now, MIRAGE CGE model only take into account the exogenous quotarents calculated at HS6 level using MAcMap database. The detailed information about TRQ?s rents is then aggregated to the chosen level of GTAP data aggregation. Moreover, the model assumes that the quota rents are allocated entirely to exporters, this is a strong hypotheses because the quota rent allocation changes, not only from one country to another, but also between products according to different TRQ administration methods.Unfortunately, this methodology does not lead to shift from one TRQ regime toanother when trade policy changes (i.e. a quota volume increase for very sensitiveagricultural products or a tariff reduction.)In order to improve the TRQ treatment in MIRAGE we model them as bilateral TRQ at HS6 level using MAcMapHS6-v2 database. Assuming a simple scenario of bilateral trade agreement between the European Union and MERCOSUR, we test the previous TRQ modelling and we compare its results with the present versions of MIRAGE. The welfare and trade results will give us an idea of the biases introduced by the negligence of TRQ modelling.