'Effective Competition' and the Harmonized Tariff System : An Application to the Variable Import Levies Established by the European Community's Common Agricultural Policy on Rice

The Harmonized System (HS), developed beginning in 1970, attempted to establish categories for "like" goods at different levels aggregation and similarity in the market. This is not dissimilar to the concept of relevant product market competition policy. But the HS, even with up to !0 category digits, has fallen far short of only including competing or even substitutable goods as high as the 8-digit level. This is illustrate for rice in the European Community where variant that are not even in the same genus, are included in the same 8-digit categories and face tariffs that protect goods that are not even competitors. Agricultural commodities are much more complex than previously thought--indeed they are differentiated products. We illustrate this for rice under the European Community tariff system. The analytical dictate is to subject putatively similar goods to standard Industrial Organization empirical tests, such as hedonic modeling, and tests of own- and cross-elasticity using models such as the Almost Ideal Demand System (AIDS). Sort of this, statistical tests like covariance and correlation are useful