Gallagher, Paul W.

American Journal of Agricultural Economics Vol. 80 no. 2 (January 1998): 325-336.

Trade uncertainty occurs when quality changes or when Administrative Trade Barriers (ATBs) cause a chance that a commodity will not enter the import market. Trade uncertainty adversely affects marketing firms and commodity trade. But arbitrage still precludes the distribution of rents to middlemen. An exporter subsidy may correct price distortions and expand trade towards the highest world welfare. The case for intervention appears strongest in thin markets with a low number of trade transactions and perishable commodities. Nonetheless, promoting trade liberalization before other interventions may still make sense when ATBs are present because reduced trade uncertainty also improves world welfare.