Disguised Protectionism, Global Trade Rules and Alien Invasive Species |
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Authors: | Michael Margolis Jason F Shogren |
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Institution: | (1) Economic Research & Statistics Division (ERSD), World Trade Organization (WTO), Centre William Rappard, Rue de Lausanne 154, 1211 Geneva 21, Switzerland;; |
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Abstract: | Current international law strongly favors policies designed to make imports safer (e.g., in terms of invasive species) over
policies explicitly designed to discourage imports. We show that this preference may be counterproductive. A externality in
trade is incorporated into a political-economy model of policy formation. Nations can address the externality by inspecting
cargo and imposing a fine on contaminated imports. We compare the equilibrium when inspection is the only policy option relative
to the equilibrium that emerging when nations may also manipulate the tariff. Ruling out the tariff causes socially excessive
stringency in general, social welfare losses if domestic supply is highly inelastic, and in some circumstances an increase
in the real tariff, measured as the difference between world and domestic prices. |
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Keywords: | |
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