Abstract
Since 2012, despite the fact that tariff rate quotas (TRQ) in the form of dried peppers has not been imported, the imports of pepper-related items such as low- tariff frozen peppers (27%) and other sauces (45%) have increased, there has been a problem in the domestic pepper industry, in which the domestic self-sufficiency rate has declined. The purpose of this study was to find out whether the operation of chili pepper TRQ has the effect of suppressing the imports of pepper-related items from China. We analyzed the import substitution effect (import suppression effect) through causal analysis of the imports of red pepper TRQ, frozen peppers, and other sauces using the structural equation model analysis method. As a result of the hypothetical scenario analysis, when the government imports and releases 7,185 tons of pepper TRQ in 2019/20 (scenario), private imports were estimated to decrease by only 3,060 tons. In other words, the import substitution effect between imported items was estimated to decrease about 2,079 tons of private dried peppers, and about 981 tons of imported pepper-related items. There was an effect of suppressing the imports of pepper-related items such as frozen peppers, but it was analyzed to be insignificant. That reason was that the replacement substitution elasticity of the pepper-related items for TRQ import was less than 1 (inelastic). Therefore, it is judged that the government's operation of the pepper TRQ is preferably focused on stabilizing domestic prices rather than focusing on import control of pepper-related items.
