The case of reduction in ad valorem tariffs as a trade liberalization policy is considered in this article. It is shown that the reduction leads to a higher quality of imports, ceteris paribus. This hypothesis was tested on the case of Japanese beef imports from the United States and Australia. U. S. beef, according to the results of Gallup surveys, is considered by Japanese consumers to be a high quality product, while Australian beef is considered to be a low quality product. Empirical results support the hypothesis. Moreover, the recent domination of U. S. beef in the Japanese market is further explained by increasingly more efficient U. S. beef production relative to Australian production and a strong income effect, where an increase in per capita income leads to more demand for higher quality products.

Interest has grown in analyzing the impact of national imports of foreign beef on state agricultural sectors. In this study, an interfaced Hawaiian-national model is simulated for a change in national beef imports. Hawaiian and national impacts demonstrate wide variation in both sign and magnitude. Usefulness of state models is emphasized for situations where state impacts of national policies are of interest.

This paper considers an application of the differential approach to Japanese demand for beef imports from 1970 to 1993. Results of homothetic demand and negative (significant) own-price elasticities indicate that the Japanese did not discriminate against Australian beef, but the decrease in Australia's trade shares was due to changes in relative prices.