Tariffs, quotas and terms-of-trade: The case of New Zealand

This paper reports quantitative information on the effects of tariffs and quotas on prices of individual goods. The analyses uses the natural experiment provided by a comprehensive unilateral trade policy reform in New Zealand to examine the response of foreign exporters to an incident of liberalisation that is unique in the developed world. The price effects bf tariffs and quotas are estimated using a multidestination 7-digit longitudinal product-level dataset on export values and quantities. The effects are found to be by no means equivalent: Whereas tariffs display no significant effect, the impact that quantitative restrictions have on the terms-of-trade of the country that imposes them are unequivocally detrimental and quantitatively important. (C) 1998 Elsevier Science B.V. All rights reserved.