4 - How developing countries are implementing tariff-rate quotas

Summary

The tariff-rate quota, or TRQ, emerged in the latter part of Uruguay Round negotiations over the Agreement on Agriculture as a sanctioned policy option. Under a TRQ, a country sets a low tariff on imports up to a minimum quantity, and a higher tariff on imports above that quantity. The agreement sets the higher of 3–5 percent of domestic consumption or the level of historical imports as each country's “minimum access commitment,” or the quantity subject to the lower tariff. Considerable controversy has emerged over the effectiveness of this trade policy instrument, and how it might be reformed in subsequent WTO negotiations, with particular concerns raised on issues related to administering and implementing TRQs.

This chapter investigates implementation of TRQs by developing countries. We first consider issues that give insight into how and why developing countries have adopted TRQs in a manner different from that found for the United States, the European Union (EU), and other developed countries. We then present data and experience on trade policy reform and on changes in imports, both in- and above-quotas, for the fourteen developing countries reporting on the use of TRQs to the World Trade Organization (WTO). These observations allow us to develop a series of hypotheses and some conclusions on the issues critical to TRQ administration and to future agricultural trade liberalization.

Issues in TRQ adoption

The TRQ was a compromise between two objectives – tariffication and market access.