WELFARE COST OF AN OIL IMPORT FEE

This paper examines the impacts on the US. oil market of a $5-per-barrel tariff on imported crude oil. The analysis shows that the United States currently is a price taker in the world oil market. This means that "optimal tariff" arguments for an oil import fee have no validity. The author also argues that any economic losses that oil supply disruptions generate are better addressed with alternative policy tools. To forecast the effects of the tariff on US. production, the author uses a domestic oil supply model that she developed elsewhere. She calculates the resulting gains in producer surplus and then combines them with an estimate of consumer surplus losses and government revenues so as to yield an estimate of the tariff's welfare cost. This welfare cost amounts to approximately $17 billion (in present-value terms) over the 1988–1998 period.     

Tariffs versus quotas in the presence of imperfect competition and cross‐border externalities

Abstract.  We consider trade policies intended to affect the production of a foreign monopolist that generates negative externalities. We derive the optimal tariff and optimal import quota and examine which policy measure should be used to maximize domestic welfare. We find that if the domestic government does not have full information on the foreign firm's production method and if cross‐border externalities exist, import quotas are in some cases preferable to tariffs. Otherwise, however, tariffs are preferable to quotas. JEL Classification: F13, F18     

ALTERNATIVE OPTIMAL TRADE POLICIES IN THE PRESENCE OF FOREIGN INPUT MONOPOLY

Abstract.  This paper develops a generalized three-country model with downstream and upstream industries to analyze optimal import and export trade policies in the presence of monopoly distortion in a foreign intermediate input market. It shows that the import tariff and export tax are linearly dependent. Thus, the optimal choice of the tariff gives rise to the same results as the optimal choice of the export tax, which implies that the domestic government, to avoid tariff retaliation, can use export tax as a substitute for the import tariff.     

Revenue-Constrained Combination of an Optimal Tariff and Duty Drawback

A duty drawback is an export subsidy determined as a percentage of the tariffs paid on the imported inputs used in its production. This paper examines the revenue-constrained optimal tariff structure in a small open economy including a duty drawback as a trade policy tool. This paper has two main aims. First, we show that the revenue-constrained optimal combination of tariff and duty drawback for a given revenue level is not unique. Second, we show that if the optimal import tariff rates are all positive when the duty drawback rate is zero, then the optimal import tariff rates are always positive when the duty drawback is positive.     

Research and development and trade policies for product innovation in the presence of foreign competition

This paper examines two policy instruments — a matching grant and import tariffs — for encouraging research and development (R&D) in product innovation by a domestic firm when it faces foreign competition. We do so by developing a theoretical model of product innovation where R&D effort is endogenous and its outcome uncertain. We examine the effects of a reduction in import tariffs on private expenditure on R&D, on public support for such R&D, and on total R&D expenditure. We find that in response to a reduction in import tariffs, the domestic firm always reduces its private R&D investments, but the total level of R&D expenditure (i.e., including public support) might go up depending on the level of tariffs. In particular, we find that it will go up if the initial level of tariff is higher than a critical level. When tariff is endogenous, we find that the socially optimal level of tariffs is positive. One finding that is of particular interest is that supporting private attempts to product innovate in the form of a matching grant program leads to a socially optimal level of product R&D.     

Lobbying, corruption and “optimal” tariff

This paper explores how a government officer enacts “optimum” import policy when confronting lobbies on trade policies from both domestic and foreign firms in a transition economy. Two results are found: firstly, if the inducement from the foreign firm on the government officer works, then the optimum tariff is negative, that is, import subsidy. However, this subsidy will turn to a positive tariff rate with the increasing lobbying inducement from domestic firms. Secondly, zero tariff duty is not an optimum choice under most circumstances. Besides, an asymmetric result is that when these two firms’ marginal costs are different, the optimum policy is to levy an import tariff on the one whose marginal cost is relatively small, while the other firm will get an import subsidy.     

A Partial Equilibrium Analysis of Trade with Decreasing Transport Costs

Decreasing transport costs are incorporated in the standard partial equilibrium analysis of trade by allowing the divergence—introduced by transport costs—between export and import price to decrease with the volume of trade. When the excess demand (supply) curve is steeper than the long run average cost curve for imports (exports), we observe that an import (export) tariff raises (lowers) the domestic price by an amount exceeding the tariff. Further, when the excess demand (Supply) curve is less steep than the long run average cost curve for imports (exports), the possibility exists that an import (export) tariff may lower (raise) the domestic price. These results lead to the important conclusion that tariffs cannot be used as measures of nominal protection across industries. [F10]     

Optimal policy for environmental goods trade in asymmetric oligopolistic eco-industries

In this paper, we examine the optimal structure of an environmental tax to pollution, a production subsidy to a domestic eco-industry, and an import tariff on environmental goods (EGs) in a two-country model where the home country imports EGs from the foreign country. Home and foreign firms that produce EGs engage in Cournot competition. We then assume that the number of the home local firms which produce EGs is constant, but that of the foreign firms is variable. Our main findings are as follows: (I) The optimal environmental tax level may be lower than the Pigouvian level even if the tax has a positive impact on the output of EGs produced by a domestic firm. (II) The optimal tariff level may be positive when the country implements the first best policy combination in a closed economy regarding the environmental tax and the subsidy. (III) The optimal subsidy level may be positive, and then the subsidy may be substitutive for the import tariff on EGs.     

The Environmental Conundrum of Rare Earth Elements

Clean technologies, such as solar panels and wind turbines, help to curb global emissions, but they require dirty inputs for their production—i.e., mining rare earth elements (REEs) pollutes local environments. REEs are also the object of rent-shifting strategic trade policies, as highlighted by a recent WTO ruling against China’s quotas and tariffs on exports of REEs. We construct a three-country trade model with an environmental damage function, in order to examine the effects of three policies with different implications for the equilibrium quantities of dirty inputs and clean technologies: a downstream subsidy, an upstream export tariff, and an upstream pollution tax. We relate the welfare implications of the policies to the parameters of the damage function and to the number of downstream competitors. The effects of a unilateral policy switch from an export tariff to a domestic pollution tax, as suggested by China’s reaction to the WTO challenge, are also examined.     

Mergers and Trade Policy under Oligopoly

For an oligopolistic industry, the effects of mergers on the domestic country's optimal trade policy are analyzed. If the domestic country pursues an optimal trade policy then it will always lose as a result of a foreign merger. The optimal domestic response to a foreign merger is to decrease (increase) the tariff if demand is concave (convex) and to increase the production subsidy. The foreign merger reduces foreign welfare when the domestic country pursues its optimal trade policy. The optimal domestic response to a domestic merger is to leave the tariff unchanged and to increase the production subsidy.     

关税减让政策对我国进口的影响

中国加入WTO后,关税减让协议的逐步实行对我国进口贸易产生了极大影响.研究结果表明,关税与我国进口贸易额之间存在着高度的负相关关系,在影响我国进口效应的诸多因素中.关税起到了主要作用,但并非唯一因素.而关税减让在影响我国进口商品结构方面的作用不大.可见,在优化我国进口商品结构方面还需要其他政策措施的辅助与调整.     

Heterogeneity of imported intermediate inputs and labour: evidence from India’s input tariff liberalization

This article explores whether the nature of imports matters when examining the effects of trade on plant-level labour outcomes. Previous literature that examines this question mainly considers imported intermediate inputs as a homogenous group and is unable to reach a consensus on the effects of input tariff liberalization on employment and wages of skilled and unskilled workers. Exploiting detailed product-level information available on intermediate inputs from plant-level data for the Indian manufacturing sector, I distinguish between plants that import mainly for quality considerations as opposed to plants that seek imports as cheaper alternatives to domestic inputs. I find that strong complementarities exist between skilled workers and imported inputs for plants importing high-quality inputs. For plants importing intermediate inputs mainly as a cost-cutting strategy, input tariff liberalization leads to an increase in employment of both skilled and unskilled workers, but a decline in skill composition. This can best be explained as a strategy that achieves economies of scale. On average, as input tariffs liberalize, importing plants employ more workers and pay higher wages than non-importing plants.     

出口导向贸易政策与发展中国家间FDI竞争——基于寡占竞争模型的理论分析

文章建立了一个两国竞争模型,重点分析了进口关税与出口补贴等战略贸易政策对发展中国家吸引FDI竞争的影响。研究发现:(1)当两国都采取出口补贴的外资激励政策时,工资水平和进口关税对发展中国家间FDI竞争并没有直接影响;(2)对全要素生产率较高的国家来说,当两国的关税水平都较高时,出口补贴政策增加流向本国的FDI,而当两国关税水平大幅下降后,出口补贴政策反而不利于本国FDI竞争。文章的结论对当前我国战略引资和出口退税等政策的调整具有重大的指导意义。     

A short-run econometric analysis of the demand and import supply of a horticultural good: tomatoes

This paper considers the problem of estimating the short-run effects of nominal tariff and domestic production levels on the levels of imports and final market prices of fresh tomatoes in the UK during the period 1959–1968. Prior to EEC entry, tariff production was used as the main policy instrument for horticultural support; horticultural goods being exempt from guarantee or intervention price schemes. In retrospect it would, therefore, seem useful to consider the theoretical requirements for its effective use in such a market situation. The paper consists of two parts. The first section discusses a simple comparative-static specification of a simultaneous equation market model determining the prices and import levels of a single horticultural good and goes on to derive measures of the effects of tariff rate and domestic production changes on market equilibrium. The second section presents several sets of alternative estimates of the specified market model and calculated effects for the specific case of fresh tomatoes during the period 1965–68     

Dynamic Interactions in Trade Policy in a Differential Game Model of Tariff Protection

This paper develops a two‐country dynamic game model of tariff protection to reconsider optimal trade policies and their implications for welfare. The authors show that an import subsidy is optimal in the feedback Nash equilibria, which results in a curious possibility that the domestic market is monopolized by the foreign firrm. However, welfare comparisons among Nash equilibria, free trade, and autarky reveal that feedback Nash equilibria involve higher welfare than both autarky and free trade, i.e. dynamic noncooperative choices of policy serve as tacit policy coordination and ensure larger trade gains relative to free trade.     

Trade shocks,industrial growth,and electrification in early 20th-century China

How does demand from the industrial sector promote the diffusion of electricity? Using newly digitized data on Chinese power plants from 1912 to 1935, we examine the impact of a trade shock, which protected the domestic manufacturing sector from import competition, on the adoption of electricity. To establish a causal relationship, we exploit time variations in imported manufactured goods caused by China's unexpected recovery of tariff autonomy in 1929 and cross-sectional variations in local access to treaty ports. We find that the reduction in manufactured imports resulted from the tariff shock led to the expansion of the local electricity sector. Further analysis suggests that the booming domestic industrial sector rather than population agglomeration was the key channel for the effect.     

Employment Risk and Optimal Trade Policies

This paper considers trade policies and welfare in a Harris–Todaro model with risk-averse workers. Workers are assumed to have identical and homothetic preferences, but their incomes differ, depending on whether and where they are employed. When workers are equally valued, maximizing social utility is equivalent to maximizing the utility of a rural worker. An optimal policy consists of a production subsidy on the exportable and an import tariff. This model explains the widespread use of import tariffs on manufactured goods along with production subsidies on the export sectors in many LDCs.
JEL Classification Numbers: F13, D8.     

Relaxing CAFE: Foreign direct investment,NAFTA and domestic product standards

This paper studies the effects of domestic product standards on the offshoring behaviour of automotive firms. In particular, we examine an important non‐tariff barrier to trade within US fuel economy policy—the Corporate Average Fuel Economy (CAFE) “two‐fleet rule.” By leveraging the removal of the two‐fleet rule upon implementation of NAFTA and exploiting a policy discontinuity based on vehicle characteristics, we present evidence that the costs of offshoring were reduced to a larger degree for varieties that were subject to US fuel economy rules. Specifically, we estimate that prices fell between 5% to 10% for varieties subject to the CAFE two‐fleet rule relative to varieties that were exempt from the rule. These effects are persistent, not present for manufacturers that did not offshore prior to NAFTA and are robust to variety‐specific trends. These effects also reconcile the post‐NAFTA differences in implied compliance costs between cars and trucks for our treatment manufacturer (Chrysler). Overall, the results highlight the potential costs of regional enforcement of otherwise location‐neutral product standards, which may act as a barrier to natural patterns of efficient specialization.     

Second-best trade policies in Cournot oligopoly

In this paper we study the optimal import policy in an oligopolistic market with a given number of quantity-setting firms. In the absence of fixed costs, we show that if the policy instrument is an import quota, the optimal policy is either free trade or autarky, while if the instrument is a tariff the optimal policy is neither free trade nor autarky. In the case of fixed costs, we show that contrary to the traditional protectionist argument, a restrictive import policy might increase domestic welfare by increasing domestic consumers' surplus, instead of increasing domestic profits.     

TARIFFS AND IMPORTS MISINVOICING UNDER OLIGOPOLY

Mismatch of trade statistics between developed and developing countries indicate a substantial misinvoicing of trade figures, primarily by developing country traders. This is due to the inflexible exchange rate regimes, severe import restrictions and export subsidies prevailing in Less Developed Countries (LDCs). In this paper, we focus on import underinvoicing due to high tariff barriers in a market where domestic producers compete with importers. Specifically, we examine how tariff levels, market structure and government intervention (in the form of intensity of monitoring and severity of penalties) affect the levels of underinvoicing. We also look at the optimal levels of import tariff and instruments of government intervention in these circumstances.