Global agricultural supply chains and trade mechanisms

The food and agribusiness industry accounts for almost 10% of global consumer spending and has an estimated total value of USD 8 trillion. Given its considerable contribution to the gross domestic product, governments employ a diverse range of trade instruments to balance their product deficits while protecting domestic producers.

When considering the imports into a market, the policy makers often consider a critical volume of imports beyond which imports become too much. Imposing an absolute quota is one way to deal with problem, however, the World Trade Organization (WTO) members as part of the 1996 Uruguay Round Agreement on Agriculture forbade the use of quantitative trade restrictions.

Among alternative mechanisms in agricultural international trade, tariff rate quotas (TRQs) constitute an interesting case and have been the centre of attention in bilateral and multilateral trade negotiations. A TRQ includes a two-tiered tariff, which applies a lower tariff for imports up to a specified quota limit and a higher tariff for subsequent imports above the quota limit.

In this research, we investigate the dynamics of TRQ systems while incorporating logistics and supply chain management perspectives.

The logistical factors play a significant role in global agricultural supply chains and, hence, are taken into consideration by importers when choosing their import strategies. Motivated by the real-world application of the TRQ systems, we discuss how logistical factors, such as lead-time, transportation channels, and warehousing influence the behaviour of global agricultural supply chains and affect the overall performance of TRQ systems under an FCFS administration.

Publications

Hezarkhani, B., S., Asian, A. Mansouri. Global Agricultural Supply Chains under Tariff Rate Quotas. Working paper.