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The United States is a Small Country in World Trade

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  • Christopher S. P. Magee
  • Stephen P. Magee
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    Abstract

    Despite being the largest country in world trade and thus presumably having high optimal tariffs, the United States has long had low and declining levels of protection. This paradox suggests that the United States is failing to exploit its monopsony power by levying optimal tariffs. Using data on world output and trade flows, we find that the United States is a small country in world trade in that its trade policies have negligible impacts on world prices. In the median manufacturing industry, US tariffs reduce world prices by only 0.12%. United States optimal tariffs are also typically small (3.6% in the median industry) and are lower than existing US tariffs in most industries. It is no puzzle that the United States has been a champion of free trade since the 1930s-the United States, like other small countries, benefits economically from tariff reductions. Copyright � 2008 The Authors. Journal compilation � 2008 Blackwell Publishing Ltd.

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    Bibliographic Info

    Article provided by Wiley Blackwell in its journal Review of International Economics.

    Volume (Year): 16 (2008)
    Issue (Month): 5 (November)
    Pages: 990-1004

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    Handle: RePEc:bla:reviec:v:16:y:2008:i:5:p:990-1004

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    Cited by:
    1. Barbara Dluhosch & Daniel Horgos, 2012. "(When) Does Tit-for-Tat Diplomacy in Trade Policy Pay Off?," FIW Working Paper series 085, FIW.
    2. Erich Gundlach & Albert de Vaal, 2010. "Look Before You Leap: The Economics of Free Trade and Income Redistribution," Kiel Working Papers 1583, Kiel Institute for the World Economy.
    3. Barbara Dluhosch & Stefanie Krause, 2013. "Diversity and the disinterest in trade liberalization: on the prospects of self-enforcing cooperation," Journal of Evolutionary Economics, Springer, vol. 23(2), pages 455-475, April.
    4. Opp, Marcus M., 2010. "Tariff wars in the Ricardian Model with a continuum of goods," Journal of International Economics, Elsevier, vol. 80(2), pages 212-225, March.
    5. Bekkers, Eddy & Francois, Joseph, 2012. "Bilateral Exchange Rates and Jobs," CEPR Discussion Papers 8906, C.E.P.R. Discussion Papers.
    6. Elizaveta Archanskaia & Guillaume Daudin, 2012. "Heterogeneity and the Distance Puzzle," Working Papers DT/2012/09, DIAL (Développement, Institutions et Mondialisation).

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