Trade policy and its impact on quality of imports

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This paper examines the role of trade policies in influencing a foreign monopolist's decision on price, quantity and, in particular, the quality of its product. We show that a specific tariff leads to higher quality, whereas an ad-valorem tariff usually does the opposite. Quotas and specific tariffs are shown to be equivalent, and both dominate an ad-valorem tariff in terms of welfare. We also show that subjecting imports to minimum quality requirements hampers national welfare. Finally, we present a comprehensive ranking of all the policy instruments considered in this paper.