Protective Effects of Discriminatory Quantitative Restrictions

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Abstract
This paper investigates analytically and empirically how the market response of upgrading makes discriminatory quantitative restrictions (QRs) relatively less effective than an alternative trade restriction of tariff in protecting domestic industry. The case of the orderly marketing arrangements (OMAs) on nonrubber shoes of the U.S. with Taiwan and Korea is investigated empirically on the basis of a condition identified in the analysis. It turns out that the QRs become relatively more costly alternative for securing additional output than tariff. An inference is that the equivalence proposition between QRs and tariff can be broken down even in competitive condition when trade restrictions are discriminatory and the adjustments of quality mix are taken into account. [420]

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