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Trade taxes and international investment

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  • Emily J. Blanchard

Abstract

This paper demonstrates that international investment disturbs the conventionally understood equivalence between import tariffs and export taxes. Fundamentally, remittances to foreigners introduce an additional pecuniary channel between countries so that two‐good Lerner Symmetry generally will not hold. Moreover, because tariffs subsidize investors in the local import competing sector while export taxes can extract rent from foreign investors in the export sector, the pattern of international investment will influence government preferences over trade policy instruments as well as levels. Notably, trade tax symmetry is restored by introducing a third policy tool in the form of a direct a tax on international remittances. Ce mémoire montre que l'investissement international bouscule l'équivalence canonique présumée entre tarifs à l'importation et taxe à l'exportation. Fondamentalement, des versements aux étrangers ouvrent un canal additionnel entre pays qui fait que la Symétrie de Lerner ne tient plus. De plus, parce que les tarifs subventionnent les investisseurs dans le secteur national protégé, alors que la taxe à l'exportation peut extraire une rente des investisseurs étrangers dans le secteur d'exportation, le pattern d'investissement international va influencer les préférences du gouvernement quant à l'usage d'un instrument de politique commerciale ou un autre et quant à la vigueur avec laquelle il sera utilisé. La symétrie des taxes sur le commerce international est restaurée en introduisant un troisième intrument de politique sous la forme d'une taxe directe sur les versements internationaux.

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  • Emily J. Blanchard, 2009. "Trade taxes and international investment," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 42(3), pages 882-899, August.
    • Handle: RePEc:wly:canjec:v:42:y:2009:i:3:p:882-899
    DOI: 10.1111/j.1540-5982.2009.01531.x
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    References listed on IDEAS

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    Cited by:

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    2. Joseph Francis Francois & Miriam Manchin, 2013. "Lerner meets Gravity," UCL SSEES Economics and Business working paper series 123, UCL School of Slavonic and East European Studies (SSEES).
    3. Egbert, Henrik & Naqvi, Nadeem, 2011. "Market-dependent production set," MPRA Paper 33829, University Library of Munich, Germany.
    4. Arnaud Costinot & Iván Werning, 2017. "The Lerner Symmetry Theorem: Generalizations and Qualifications," NBER Working Papers 23427, National Bureau of Economic Research, Inc.
    5. Blanchard, Emily J., 2010. "Reevaluating the role of trade agreements: Does investment globalization make the WTO obsolete?," Journal of International Economics, Elsevier, vol. 82(1), pages 63-72, September.
    6. Blanchard, Emily J., 2015. "A Shifting Mandate: International Ownership, Global Fragmentation, and a Case for Deeper Integration under the WTO," World Trade Review, Cambridge University Press, vol. 14(1), pages 87-99, January.
    7. Blanchard, Emily J., 2014. "What global fragmentation means for the WTO: Article XXIV, behind-the-border concessions, and a new case for WTO limits on investment incentives," WTO Staff Working Papers ERSD-2014-03, World Trade Organization (WTO), Economic Research and Statistics Division.

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