Welfare analysis of economic agents in distribution before and after FTA; imported grape, orange

Hanul Park

Journal of Rural Development/Nongchon-Gyeongje, 2014, vol. 37, issue 01

Abstract: This study examined and compared the effect of tariff reduction under Free Trade Agreements(FTAs) on the surplus of producers, consumers, and distributors, and on the change in price and marketing margin in a distribution channel, using an Equilibrium Displacement Model(EDM). As a result, consumer’s surplus is increased in imported grape and orange markets when the surplus is measured on a total volume basis, but consumer’s surplus is decreased in the imported grape market when the surplus is measured on a per unit basis. Also, an increase in marketing margins lead to increase price at retail level, although the import price is decreased by tariff reduction under FTA, which implies that tariff reduction or elimination does not leads to decrease price at retail level due to an increase in marketing margins. This suggests that most economic benefits from tariff reduction associated with imported agricultural products concentrated to marketing margins, and that establishing an efficient distribution system will be necessary in order to equally distribute the benefits of tariff reduction over various economic agents in a society.

Keywords: International; Relations/Trade (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:ags:jordng:330619

DOI: 10.22004/ag.econ.330619

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