U.S. TRQs for Peanuts, Sugar, and Tobacco: Historical Allocation

U.S. peanut, sugar, and tobacco tariff rate quotas (TRQs) are aflocated to suppliers on an historical market share basis. Once allocated they become difficuk to redistribute to accommodate changes in comparative advantage among suppliers. The distribution of trade departs increasingly from the tariff-equivalent distribution advocated by the WTO principle of nondiscrimination. Article X111of the GATT regarding the rules for historical allocation is examined and applied to four cases of historical allocation: domestic tobacco quota and TRQs for peanuts, sugar and tobacco. The difference between the law enforcement objective of the WTO and the Pareto optimization objective assumed by economists is stressed throughout. Before delving into the analysis of U.S, tariff rate quotas, it is best to survey the basic facts. The United States has formally notified the World Trade Organization (WTO) of 54 tariff rate quotas (TRQs). They maybe divided into seven groups as reported in table 1. The beef TRQ replaces the 1979 Meat Import Act, repealed as part of the Uru-guay Round Agreement. The TRQs for green ol-ives and satsumas in airtight containers are carried over from earlier bilateral trade disputes. The to-bacco TRQ is the U.S. response to a GATT ruling against U.S. domestic content regulations for ciga-rettes (discussed in the section on tobacco below). These first three groups are exceptions to the gen-eralizations that follow. Each of the four remaining groups finds the ori-gin of its TRQs in a quota imposed to sustain a domestic price support program. Most resulted from the tarificatiorr of the quantitative restric-tions previously in place under Section 22 of the Agricultural Adjustment Act of 1933. Section 22 allowed the President to impose fees or quantita-tive restrictions on imports of products that could David Skully is an economist with the USDA’s Economic Research Service. The views expressed in the paper are solely the author’s. They do not represent the official position of the Economic Research Service