Liberalizing International Agricultural Trade: The Political Economy of Tariff Rate Quotas

Liberalizing international agricultural trade has consistently been a difficult political proposition. After the establishment of the General Agreement on Tariffs and Trade (GATT) in 1948, it took nearly five decades for governments to collectively embark on agricultural reform, which began in 1995 within a multilateral setting following the successful conclusion of the Uruguay Round (UR) of negotiations. With respect to improving agricultural market access and tariff liberalization, two significant achievements of the UR – anchored in the WTO Agreement on Agriculture (AoA) – were the elimination of non-tariff border measures facilitated through the modality of tariffication, and the comprehensive binding of customs duties on all agricultural products in Members’ Schedules of Concessions. However, the immediate market access gains from the UR were relatively modest. To enable access to each other’s markets – particularly for sensitive sectors like grains, meat, dairy, and sugar, which had often been protected by non-tariff measures (NTMs) and were therefore subject to tariffication – participating Members established ‘minimum access opportunities’ equivalent to 5% of domestic consumption in importing countries, based on the 1986–88 reference period. In cases where countries already offered greater access than this threshold, they were required to maintain existing levels. To implement these minimum (or current) access commitments, Members in practice relied systematically on the instrument of tariff rate quotas (TRQs). More than one thousand TRQs were established in Members’ agricultural schedules under the UR, and they continue to play a key role in facilitating market access for highly sensitive products. TRQs allow exporters to access markets at lower tariffs – albeit up to an agreed quantity – thus offering political reassurance to importers against potential import surges. Interestingly, several regional trade agreements (RTAs) (such as free trade agreements or customs unions) also rely on TRQs to provide market access for sensitive agricultural products at reduced rates, rather than committing to full tariff elimination, as a way to address political sensitivities surrounding agricultural liberalization. This paper examines the important continuing role of TRQs in enabling agricultural tariff liberalization within the multilateral trading system, while also highlighting several practical concerns raised by exporting countries regarding the administration of TRQs by importing countries. The article also alludes to possible remedial mechanisms within the multilateral trading system to address these concerns. The reduction in tariffs over the years – and the resulting non-application of a majority of TRQs in several Members’ schedules of concessions, due to the loss of the tariff advantage they originally afforded – suggests a possible path forward: the elimination of dual tariffs under TRQs in favour of a single tariff.