Investigating Canadian Chicken Importers' Preferences Towards TRQ Import Licensing Mechanisms

The Agreement on Agriculture ratified at the end of the Uruguay Round of WTO negotiations called for the conversion of non-tariff barriers to trade into bound tariffs. This tariffication would have resulted in excessively high tariffs, which would have threatened historic market access levels if not for WTO member countries agreeing to introduce tariff-rate quotas (TRQs). TRQs are two-tier tariffs. Imports below an agreed quota are taxed at a usually low (or zero) in-quota tariff rate while imported commodities in excess of the quota level are taxed at the higher (often prohibitive) over-quota tariff rate. In the process of implementing TRQs, WTO members failed to explicitly regulate TRQ administration procedures. As a result, numerous administration procedures for allocating import licenses were developed in many countries. Importing activities in the Canadian chicken industry have been regulated with a TRQ since 1995. Firms holding the right to import chicken products at the in-quota tariff can potentially enjoy significant rents due to the spread between domestic and world prices. The magnitude of these rents depends upon a number of domestic factors such as market concentration in the processing and retail sectors, production technology, farm output regulation, and so on. This analysis evaluates the preferences of Canadian chicken importers towards TRQ import licensing mechanisms and provides insights about importers’ attitudes towards Canadian trade policy in the chicken sector