Policy Research Working Paper Series: (with an Application to Uruguay)
Issue #3 · Jan 1992 ·
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By imposing floor prices on imports, the procedures for reference and minimum export prices jeopardize trade liberalization efforts by creating the impression that tariff cuts are greater than they are. Reference prices add to the distortions created by a pure tariff system, by distorting relative domestic prices - by promoting the domestic consumption of higher- quality goods and the domestic production of lower- quality goods.