Working Paper: CEPR ID: DP7219
Authors: Olivier Cadot; Akiko Suwa-Eisenmann; Jacques Gallezot
Abstract: This paper looks for firm-level evidence that high rates of protection breed concentration of firm activities into highly protected sectors, endogenously generating vested interests in the maintenance of protection. We combine data on the EU?s trade protection for food and agricultural products measured by ad-valorem equivalents (AVEs) with survey data on France?s agri-food sector to show that indeed, small and mid-size firms and cooperatives in that sector are heavily concentrated in product lines protected by tariff-rate quotas (TRQs) at high rates. Those firms and cooperatives can be expected to be at the forefront of resistance to multilateral tariff cuts, in particular in the meat and dairy sectors. Overcoming their resistance would call for targeted adjustment assistance.
Keywords: Agriculture; Concentration; Trade Protection
JEL Codes: F13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| High levels of trade protection (measured by AVEs) (F14) | Increased concentration of firm activities in specific sectors (L19) |
| High levels of trade protection (measured by AVEs) (F14) | Firms are more likely to be undiversified and politically resistant to tariff reductions (F12) |
| Increased concentration of firm activities in specific sectors (L19) | Higher lobbying power against tariff cuts (F13) |
| High levels of trade protection (measured by AVEs) (F14) | U-shaped relationship with concentration (D30) |
| Low trade protection (F13) | Decreased concentration of firm activities in specific sectors until a turning point (L19) |
| Turning point (around 120% AVE) (C22) | Concentration increases again (D30) |
| Cooperatives heavily reliant on TRQs (Q13) | Increased concentration in protected sectors (L59) |