International Marketing Margins for Agricultural Products: The Case of Trade Uncertainty with Perishable Products or Administrative Trade Barriers

Paul W. Gallagher

Staff General Research Papers Archive from Iowa State University, Department of Economics

Abstract: Trade uncertainty occurs when quality changes or when Administrative Trade Barriers (ATBs) cause a chance that a commodity will not enter the import market. Trade uncertainty adversely affects marketing firms and commodity trade. But arbitrage still precludes the distribution of rents to middlemen. An exporter subsidy may correct price distortions and expand trade towards the highest world welfare. The case for intervention appears strongest in thin markets with a low number of trade transactions and perishable commodities. Nonetheless, promoting trade liberalization before other interventions may still make sense when ATBs are present because reduced trade uncertainty also improves world welfare.

Date: 1998-01-01
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Published in American Journal of Agricultural Economics, January 1998, vol. 80 no. 2, pp. 325-336

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