WTO Agricultural Tariffication with Lessons for Tariff Adoption

According to the Uruguay Round Agreement on Agriculture (URAA), all agricultural non-tariff trade barriers should be converted into equivalent tariffs and further, reduced over time. However each member country has the authority to choose the tariff types when it converts NTBs to tariffs such as ad valorem tariff and specific tariff. The paper tries to find the reason for the choice of a certain type of tariff in the process of tariffication after the UR negotiation on agriculture. To achieve this goal, the paper analyses the effects of tariffication of a fixed quota into tariffs on price, trade and welfare in a number of scenarios related to the sources of uncertainty. In this paper, we examine the nonequivalence of specific tariff and ad valorem tariff, which are general type of tariffs used in the most of countries. The paper has shown that the two types of tariffs selected by tariffication of import quota are not generally equivalent in both their effects on price and trade stability and welfare with the trade model under uncertainty. The main conclusion of this study is that there is no general presumption that one tariff regime is superior to the other tariff regime under conditions of uncertainty. The precise source of uncertainty and the properties of the relevant demand and supply functions might affect the determination of tariff type selected after tariffication of non-tariff barriers.