IMPERFECT COMPETITION, TRADE POLICY AND PROCESSED AGRICULTURAL PRODUCTS: SOME INITIAL RESULTS

This paper applies some recent developments in international trade theory to processed agricultural product markets. Theoretical results are derived showing that when such markets are characterized by imperfect competition, there may be a case for government intervention in the form of subsidies and tariffs. In order to provide some empirical background, a simulation model is used to assess the level of an optimal tariff on U.S. cheese imports. The implications of this analysis for the liberalization of agricultural trade are also considered.