Trade composition effects of the EU tariff structure: beef imports from Mercosur

Abstract

The EU tariff schedule includes many specific and composite tariffs as well as tariff-rate quotas (TRQs). Hence, different patterns of trade liberalisation might have different consequences for both producers and consumers through changes in the composition of trade. We illustrate the issues at stake in the beef sector, focusing on Mercosur exports to the EU. We model import demand for different qualities in the presence of TRQs and derive comparative static results showing the consequences of different patterns of bilateral and multilateral trade liberalisation. If the EU treats beef as a 'sensitive product' in a possible WTO Doha Round Agreement, imports would be lower, despite the accompanying TRQ expansion, than with larger tariff cuts. TRQ expansion would, however, increase the high-quality bias in beef imports and welfare losses, whereas a cut in the specific tariff would reduce this bias.