SIMULTANEOUS REFORM OF TARIFFS AND QUOTAS

J. Peter Neary

Abstract

This paper presents a general result for simultaneous reform of tariffs and quotas in a small open economy, where some of the quota rents do not accrue to domestic residents. Absent highly perverse income effects, welfare must rise following a uniform proportionate reduction in tariffs and a uniform proportionate relaxation of quotas, weighted by their rent-retention parameters. Previous results are shown to be special cases of this one, and its implications for practical policy advice and its relationship with the policy of "tariffication" of quotas are noted.

JEL Codes: F13

Keywords: International trade policy; piecemeal policy reform; tariffs and quotas; tariffication of quotas; trade liberalisation; voluntary export restraints.

Forthcoming in Review of International Economics, December 2006.

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