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Abstract
The agricultural trade liberalization proposal known as 'tariffication' aims at converting
all existing non-tariff barriers (NTBs) to trade into bound tariffs, and to reduce these tariffs
over time. This is in tune with the original philosophy of the General Agreement on Tariffs
and Trade (GATT) and it calls for a dramatic overhaul of existing agricultural policies in
many developed countries. The main economic issues that arise with tariffication stem from
the non-equivalence of tariffs and NTBs in a number of scenarios. This paper analyzes
non-equivalence arising from the existence of: imperfect competition in importing countries;
price instability in importing and exporting countries; and, inefficient allocation of quantitative
restrictions. It is shown that in all these cases the definition of an appropriate 'equivalent
tariff to be used in tariffication is not straightforward, and that in general this equivalent
tariff cannot be computed on the basis of only observed price differences between countries.
Tariff-rate quotas, which are meant to be the main tool of implementation of tariffication
according to the existing proposal, are analyzed in some detail. Concerning the relationship
between tariffication and the other elements of the trade liberalization package, it is shown
that tariffication would limit the scope of export subsidy policies. It is also shown that the
existence of production and export subsidies makes observed price gaps between countries of
questionable value in setting equivalent tariff levels. Finally, it is argued that the main focus
of tariffication should be the conversion of NTBs to acceptable long-run (bound) tariffs rates,
and considerable flexibility in this conversion process could be exercised in the transition
period.