Tariff determination in general equilibrium : a bargain-theoretic approach to policy modelling (original) (raw)
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Political-Economy Arguments for a Uniform Tariff
International Economic Review, 1993
Uniform tariffs have become increasingly popular in recent years, yet their economic rationale is not strong. We identify and evaluate three sets of reasons as to why governments may prefer tariff uniformity as a means of alleviating political motives for excessive protection. First, a free-rider effect may be conducive to less lobbying under a uniform tariff regime than under a regime in which tariffs are allowed to differ. Second, an input-price effect may dampen the enthusiasm of final-goods producers for import protection. Third, a precommitment effect may increase the cost to a future government of protecting favored sectors. None of these arguments provides an unambiguous, airtight case for tariff uniformity. The decision on uniformity has to be made on a case-by-case basis.
The Political Economy of the Tariff Cycle
American Political Science Review, 1986
How can protectionism and “free” trade succeed one another? Our answer focuses on the changing balance of private actors' political demands. These actors acquire interests in tariff policies because their assets are spatially concentrated, and trade in these assets is subject to various limitations. Actors in regions experiencing no new investment in an established industry (“old” regions) have interests that sometimes differ from those in regions where there is new investment. We show that old regions have no reason to be involved in tariff politics at business cycle peaks; during troughs, whether a state becomes more or less protectionist depends, ceteris paribus, on the relative political strength of old import-competing and old exporting interests. If old import-competing industries outweigh the old exporters, then protection will tend to increase at the trough and decrease at the peak of a business cycle; the opposite result occurs when old exporters are more influential.
Political influence motives and the choice between tariffs and quotas
Journal of International Economics, 1985
Tariffs and quotas are not symmetric under a variety of circumstances. This paper pursues the implications of one such circumstance --domestic market power --for the political choice of protectionist instrument in the context of a political support maximization model. Tariffs dominate quotas in the political model in the absence of revenue seeking motives. In the presence of revenue seeking, ambiguity arises but limits can be placed on the range of tariff or quota levels. Also, some welfare implications emerge. 0022-1996/85/$3.30 © 1985, Elsevier Science Publishers B.V.
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SSRN Electronic Journal, 2000
During the past half century, multilateral trade liberalization has reduced tariffs to historically low levels. The Received Theory of multilateral trade agreements, based solely on terms-oftrade externalities between national governments, offers an explanation that has become the conventional wisdom among international trade theorists. But this explanation displays two puzzles that render it inconsistent with actual trade policy and actual trade agreements: the Terms-of-Trade Puzzle and the Anti-Trade-Bias Puzzle. This paper addresses intergovernmental political externalities in a model with terms-of-trade externalities. The model resolves the Terms-of-Trade Puzzle if and only if political externalities dominate terms-of-trade externalities. But it resolves the Anti-Trade-Bias Puzzle, and delivers results consistent with what we actually observe, only if terms-of-trade externalities play no role whatsoever.
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Canadian Journal of Economics/Revue Canadienne d`Economique, 2002
In this paper we compare the orthodox optimal tariff formula with the appropriate welfare-maximizing tariff when there are a few producing or importing firms. The welfaremaximizing tariff can be very low, voire negative in some cases, while in others it can even exceed the maximum-revenue tariff. The relationship between the welfare-maximizing tariff and the number of firms need not be monotonically increasing, because the tariff is not strictly used to internalize terms of trade externality. It is also used to manipulate cost asymmetries between producing and importing firms. Welfare-maximizing specific tariffs are never worse than their ad valorem counterparts. JEL Classification F13, L13
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The purpose of this paper is to examine the international trade cooperation in order to determine the sustainable cooperative tariff rates in a political economy perspective. This paper establishes a tariff-setting game among two countries as a two-phase game: negotiation phase and implementation phase. Our results show the following points. First, the sustainable cooperative tariff rate depends on the political weight placed by government on domestic import-competing industry, on the political influence of the foreign export industry and on the economic stakes of domestic tariff policy in these two sectors. Second, international cooperation is sustainable when governments involved in tariff negotiation are patient enough. Third, difference in patience affects the relative bargaining power of governments.
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SSRN Electronic Journal, 2000
During the past half century, multilateral trade liberalization has reduced tariffs to historically low levels. The Received Theory of multilateral trade agreements, based solely on terms-oftrade externalities between national governments, offers an explanation that has become the conventional wisdom among international trade theorists. But this explanation displays two puzzles that render it inconsistent with actual trade policy and actual trade agreements. This paper introduces intergovernmental political externalities into a model with terms-of-trade externalities. It delivers results consistent with what we actually observe, and thus resolves the puzzles, if and only if political externalities dominate terms-of-trade externalities.
Journal of International Economics, 2003
This paper is about the determination of common external tariffs (CETs) in customs unions (CUs). We first examine how the relationship between preferences over CET levels, technology and the distribution of factor ownership in a CU is conditioned by the rule that determines the disposition of tariff revenues. We then explore how majority voting at the country level translates these preferences into an equilibrium CET. Among other things, we find that, when revenues are partitioned in proportion to members' imports, tariff preferences may be polarized, the trade patterns of some CU members may be endogenous, and, as a result, their payoff functions may not be single-peaked. This leads to voting outcomes that dramatically differ from those arising under other sharing rules (e.g., the 'population' and 'consumption' rules) and raises the possibility of a Condorcet paradox.