TRADE POLICY UNDER IMPERFECT COMPETITION: AN ASSESSMENT OF THE TRQ ON LAMB MEAT

The United States imposed a tariff-rate quota (TRQ) on lamb meat in July 1999. Early analysis suggested the possibility that lamb growers could lose welfare via the creation of packer market power. This paper considers how subsequent events modify that analysis. Observed prices suggest reduced pass-through. Lamb prices are unchanged and more stable. Using an annual quota instead of a quarterly quota reduces the opportunity for market conduct switching. Early termination of the TRQ to comply with the WTO rulings magnifies any welfare loss. Assistance payments prevent welfare losses to growers with little impact on the market.