In this study, we have analyzed welfare effects of tariff rate quotas on sugar based on the welfare effects model of tariff. The goals of tariff rate quotas are generally the stabilization of supply-demand and domestic price level through the increase...
In this study, we have analyzed welfare effects of tariff rate quotas on sugar based on the welfare effects model of tariff. The goals of tariff rate quotas are generally the stabilization of supply-demand and domestic price level through the increase in imports caused by lowering tariff rate on the specific import goods
Looking at the result of analysis on sugar, after application of tariff rate quotas, import of sugar increased, unit price of import fell and domestic price of sugar was stabilized. From those circumstances, tariff rate quotas on sugar seemed to have attained a desired effects. But, it maybe makes more sense that most of those effects were resulted by the stabilization of international price of raw sugar or the increase in production and exports of sugar in main countries. Meanwhile, sugar industry has a typical oligopoly market structure which is dominated by three large companies. Thats why the price of domestic sugar goods did not significantly drop, despite the increase in sugar imports and a decline in the unit price of import and raw sugar prices, but rather domestic sales volume of sugar production enterprises increased slightly.
Consequently, it is hard to accept that application of tariff rate quotas on sugar had significant contribution to the economic welfare increase, despite the increase in sugar import and a decline in domestic price. And it maybe caused by the oligopolistic structure of the sugar industry.