Production Cost Asymmetry, Minimum Access and Reciprocal Dumping

Abdessalem Abbassi, Lota Tamini and Ahlem Dakhlaoui

No 161214, Working Papers from University of Laval, Center for Research on the Economics of the Environment, Agri-food, Transports and Energy (CREATE)

Abstract: In this article we propose a bilateral dumping model in which the minimum access level is endogenous. Regions compete with one another using Cournot conjectures and engage in interregional dumping as in Brander and Krugman’s (1983) reciprocal dumping model. International trade is hindered by restrictive Tariff rate Quota (TRQs). The model features two regions and one product. We derive the conditions under which it is optimal to observe interregional trade and those under which trade does not exist. The results show that the world price and the difference in production costs between regions play an important role in determining whether bilateral trade exists. In the presence of bilateral trade, the region with the largest market size will obtain the largest share of import volumes permitted under the minimum access system while in the absence of interregional trade, the distribution of import permits between regions will also depends on the product cost asymmetry. When only the most efficient region exports to the least efficient region, production costs asymmetry, transaction costs and world price level determine whether the smaller or larger region obtains the larger share of product import allowed under minimum access commitment. In all cases, we show that in a country like Canada, creation of “artificial barriers” to interprovincial trade of products under supply management system lowers the welfare of at least one of the regions, along with the global welfare.

Keywords: International; Relations/Trade (search for similar items in EconPapers)
Pages: 33
Date: 2013-12
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://ageconsearch.umn.edu/record/161214/files/CREATE2013-7.pdf (application/pdf)

Related works:
Working Paper: Production Cost Asymmetry, Minimum Access and Reciprocal Dumping (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:ulavwp:161214

DOI: 10.22004/ag.econ.161214

Access Statistics for this paper

More papers in Working Papers from University of Laval, Center for Research on the Economics of the Environment, Agri-food, Transports and Energy (CREATE) Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().