Seminario 23/11 – Behzad Hezarkhani (Southampton Business School, University of Southampton): Global Agricultural Supply Chains under Tariff-Rate Quotas

Información

The tariff rate quota (TRQ) is a common market access instrument in global agricultural trade that allows a predetermined quantity of a product to be imported at a lower tariff rate than the rate typically applied to that product. In this study, we examine the design and administration of TRQ systems from an operations management perspective and analyze how they impact market access, fill-rate, and expected revenue for policy makers. We formulate non-cooperative games associated with the two most common TRQ administration methods, namely, licensing and first-come, first-served (FCFS) systems, and characterize Nash equilibria of the importers’ strategies. Our analysis indicates that information lags and long lead times can result in total imports at equilibrium being less than the target quantity in licensing systems, i.e., under-utilization, and more than the quota limit in FCFS systems, i.e., over-utilization. To address these issues, we introduce and model a dual TRQ system and obtain the conditions that lead to its superiority over both licensing and FCFS systems. Using a case study of the UK and the EU imported beef market and associated customs data, we validate our analytical findings and decipher the patterns of arrival and mixture of imports. Drawing upon the analytical findings, our numerical study provides an explanation for the sub-optimality of the current TRQ systems and suggests feasible modifications to transform the existing parallel systems into dual TRQ systems. This would enhance the expected revenue for policy makers while maintaining the functionality of the TRQ systems. Our findings offer practical insights for agricultural traders to reassess their supply chain strategies by analyzing the logistical implications of TRQ systems and understanding their competition.