Trade Protection in the Rice Industry: Implications of Tariffs on Rice Imports in Timor Leste (East Timor)

Abstract

The aim of this research is to examine the implications of tariffs on imported rice on social welfare in Timor Leste (TL). Tariffs on imports are used by the government to encourage domestic rice production to attain self-sufficiency and for economic development for the country (World Bank 2002). Tariffs cause distortions in the rice price of the local market. They increase the price so that only rice producers benefit, while society's welfare as a whole is reduced. In this study, an attempt is made to examine this problem. The objective is to investigate the effect of tariffs on community welfare. A quantitative investigation of gains and losses for both consumers and produces will be undertaken using applied welfare analysis. Based on comparative-static, an equation to measure welfare changes will be formulated and estimated to examine whether tariffs influence social welfare and what other factors may also influence social welfare. Policy recommendations will then be made based on the results of welfare analysis.