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Dynamics and Discriminatory Import Policy

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  • Theodore To
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Abstract

Although the GATT prohibits discriminatory import tariffs, it includes means for circumventing this prohibition. The previous literature uses static models and discriminatory tariffs increase welfare. In a dynamic model, if governments lack the ability to precommit, this is not necessarily true. For example, with consumer switching costs, tariffs are higher for firms with higher market share. Rationally expecting such policies, firms price less aggressively. If switching costs are significant relative to asymmetries, then higher prices can result in lower importing country welfare. Thus it may be in interests of importers to abide by the GATT MFN principle

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Bibliographic Info

Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 32 (1999)
Issue (Month): 4 (August)
Pages: 1057-1068

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Handle: RePEc:cje:issued:v:32:y:1999:i:4:p:1057-1068

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  1. Brander, James A. & Spencer, Barbara J., 1985. "Export subsidies and international market share rivalry," Journal of International Economics, Elsevier, vol. 18(1-2), pages 83-100, February.
  2. Bhagwati, Jagdish N. & Brecher, Richard A. & Dinopoulos, Elias & Srinivasan, T. N., 1987. "Quid pro quo foreign investment and welfare : A political-economy-theoretic model," Journal of Development Economics, Elsevier, vol. 27(1-2), pages 127-138, October.
  3. To, T., 1993. "Export subsidies and oligopoly with switching costs," Discussion Paper 1993-40, Tilburg University, Center for Economic Research.
  4. Choi, Jay Pil, 1995. "Optimal tariffs and the choice of technology Discriminatory tariffs vs. the 'Most Favored Nation' clause," Journal of International Economics, Elsevier, vol. 38(1-2), pages 143-160, February.
  5. Jonathan Eaton & Gene M. Grossman, 1983. "Optimal Trade and Industrial Policy Under Oligopoly," NBER Working Papers 1236, National Bureau of Economic Research, Inc.
  6. Gene Grossman & Elhanan Helpman, 1994. "Foreign Investment with Endogenous Protection," NBER Working Papers 4876, National Bureau of Economic Research, Inc.
  7. To, T., 1993. "Infant Industry Protection with Learning-by-Doing," Discussion Paper 1993-26, Tilburg University, Center for Economic Research.
  8. Klemperer, Paul, 1995. "Competition When Consumers Have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade," Review of Economic Studies, Wiley Blackwell, vol. 62(4), pages 515-39, October.
  9. Gatsios, Konstantine, 1990. "Preferential tariffs and the 'most favoured nation' principle: A note," Journal of International Economics, Elsevier, vol. 28(3-4), pages 365-373, May.
  10. Paul Klemperer, 1987. "The Competitiveness of Markets with Switching Costs," RAND Journal of Economics, The RAND Corporation, vol. 18(1), pages 138-150, Spring.
  11. Hong Hwang & Chao-Cheng Mai, 1991. "Optimum Discriminatory Tariffs under Oligopolistic Competition," Canadian Journal of Economics, Canadian Economics Association, vol. 24(3), pages 693-702, August.
  12. Dick, Andrew R, 1991. "Learning by Doing and Dumping in the Semiconductor Industry," Journal of Law and Economics, University of Chicago Press, vol. 34(1), pages 133-59, April.
  13. Gruenspecht, Howard K., 1988. "Dumping and dynamic competition," Journal of International Economics, Elsevier, vol. 25(3-4), pages 225-248, November.
  14. Anderson, James E, 1992. "Domino Dumping, I: Competitive Exporters," American Economic Review, American Economic Association, vol. 82(1), pages 65-83, March.
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Cited by:
  1. Elder, Erick & To, Ted, 1999. "Consumer switching costs and private information," Economics Letters, Elsevier, vol. 63(3), pages 369-375, June.
  2. Horn, Henrik & Mavroidis, Petros C., 2001. "Economic and legal aspects of the Most-Favored-Nation clause," European Journal of Political Economy, Elsevier, vol. 17(2), pages 233-279, June.

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