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Pitfalls in the Theory of International Trade Policy: Concertina Reforms of Tariffs and Subsidies to High Technology Industries

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J.P. Neary

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Abstract

This paper explores the links between international trade theory and the practice of trade and industrial policy in open economies, with special attention to three areas where theoretical lessons have been misunderstood in policy debates. I argue that the 'concertina rule' for tariff reform justifies reductions in high tariffs, but not moves towards uniformity, and particularly not increases in low tariffs. I show that the basic principles of tariff reform are the same in unilateral, multilateral and customs union contexts. Finally, I show that the theory of strategic trade policy does not justify export subsidies to high-technology industries.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0346.

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Date of creation: May 1997
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Handle: RePEc:cep:cepdps:dp0346

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Anderson, James E & Neary, J Peter, 1992. "Trade Reform with Quotas, Partial Rent Retention, and Tariffs," Econometrica, Econometric Society, vol. 60(1), pages 57-76, January. [Downloadable!] (restricted)
  2. Neary, J Peter & Schweinberger, Albert G, 1986. "Factor Content Functions and the Theory of International Trade," Review of Economic Studies, Blackwell Publishing, vol. 53(3), pages 421-32, July. [Downloadable!] (restricted)
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  3. Diewert, W E & Turunen-Red, A H & Woodland, A D, 1989. "Productivity- and Pareto-Improving Changes in Taxes and Tariffs," Review of Economic Studies, Blackwell Publishing, vol. 56(2), pages 199-215, April. [Downloadable!] (restricted)
  4. 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. [Downloadable!] (restricted)
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  5. Leahy, Dermot & Neary, J Peter, 1998. "Strategic Trade and Industrial Policy Towards Dynamic Oligopolies," CEPR Discussion Papers 1968, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  6. Falvey, Rodney E., 1988. "Tariffs, quotas and piecemeal policy reform," Journal of International Economics, Elsevier, vol. 25(1-2), pages 177-183, August. [Downloadable!] (restricted)
  7. Rod Falvey, 1994. "Revenue enhancing tariff reform," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 130(1), pages 175-190, March. [Downloadable!] (restricted)
  8. Smith, Alasdair, 1982. "Some simple results on the gains from trade, from growth and from public production," Journal of International Economics, Elsevier, vol. 13(3-4), pages 215-230, November. [Downloadable!] (restricted)
  9. Brander, James A., 1995. "Strategic trade policy," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 27, pages 1395-1455 Elsevier. [Downloadable!] (restricted)
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  10. Neary, J. Peter, 1994. "Cost asymmetries in international subsidy games: Should governments help winners or losers?," Journal of International Economics, Elsevier, vol. 37(3-4), pages 197-218, November. [Downloadable!] (restricted)
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  11. Neary, J Peter, 1995. "Trade Liberalisation and Shadow Prices in the Presence of Tariffs and Quotas," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(3), pages 531-54, August. [Downloadable!] (restricted)
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  12. Deaton, Angus, 1979. "The Distance Function in Consumer Behaviour with Applications to Index Numbers and Optimal Taxation," Review of Economic Studies, Blackwell Publishing, vol. 46(3), pages 391-405, July. [Downloadable!] (restricted)
  13. Eaton, Jonathan & Grossman, Gene M, 1986. "Optimal Trade and Industrial Policy under Oligopoly," The Quarterly Journal of Economics, MIT Press, vol. 101(2), pages 383-406, May. [Downloadable!] (restricted)
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  14. Leahy, Dermot & Neary, J Peter, 1995. "International R&D Rivalry and Industrial Strategy without Government Commitment," CEPR Discussion Papers 1199, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  15. Stern, Nicholas, 1986. "A Note on Commodity Taxation: The Choice of Variable and the Slutsky, Hessian and Antonelli Matrices (SHAM)," Review of Economic Studies, Blackwell Publishing, vol. 53(2), pages 293-99, April. [Downloadable!] (restricted)
  16. Turunen-Red, Arja H & Woodland, Alan D, 1991. "Strict Pareto-Improving Multilateral Reforms of Tariffs," Econometrica, Econometric Society, vol. 59(4), pages 1127-52, July. [Downloadable!] (restricted)
  17. Leahy, Dermot & Neary, J Peter, 1995. "Public Policy Towards R&D in Oligopolistic Industries," CEPR Discussion Papers 1243, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  18. Kemp, Murray C. & Wan, Henry Jr., 1976. "An elementary proposition concerning the formation of customs unions," Journal of International Economics, Elsevier, vol. 6(1), pages 95-97, February. [Downloadable!] (restricted)
  19. Sandmo, Agnar, 1974. "A Note on the Structure of Optimal Taxation," American Economic Review, American Economic Association, vol. 64(4), pages 701-06, September. [Downloadable!] (restricted)
  20. Hatta, Tatsuo, 1977. "A Theory of Piecemeal Policy Recommendations," Review of Economic Studies, Blackwell Publishing, vol. 44(1), pages 1-21, February. [Downloadable!] (restricted)
  21. Dixit, Avinash K, 1970. "On the Optimum Structure of Commodity Taxes," American Economic Review, American Economic Association, vol. 60(3), pages 295-301, June. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Bureau, Jean-Christophe & Salvatici, Luca, 2002. "WTO Negotiations on Market Access in Agriculture: A Comparison of Alternative Tariff Cut Scenarios for the EU and the US," 2002 International Congress, August 28-31, 2002, Zaragoza, Spain 24883, European Association of Agricultural Economists. [Downloadable!]
  2. Jean-Christophe Bureau & Luca Salvatici, 2001. "Agricultural Trade Restrictiveness in the European Union and the United States," Center for Agricultural and Rural Development (CARD) Publications 01-wp277, Center for Agricultural and Rural Development (CARD) at Iowa State University. [Downloadable!]
    Other versions:
  3. Salvatici, Luca & Cipollina, Maria, 2006. "Measuring Protection: Mission Impossible?," Working Papers 18876, TRADEAG - Agricultural Trade Agreements. [Downloadable!]
    Other versions:
  4. Raimondos-Moller, Pascalis & Woodland, Alan D., 2004. "Non-Preferential Trading Clubs," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  5. Peter Neary & Ainars S¡lesers & Edward G. Krubasik & John M. Weekes, 2003. "Advancing Global Trade: Pro Liberalisation and Development," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 4(2), pages 52-67, October. [Downloadable!]
  6. Kreickemeier, Udo & Raimondos-Møller, Pascalis, 2006. "Concertina Reforms with International Capital Mobility," CEPR Discussion Papers 5888, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  7. J. Peter Neary, 2000. "International Trade and the Environment - Theoretical and Policy Linkages," Working Papers 200018, School Of Economics, University College Dublin. [Downloadable!]
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  8. James E. Anderson & J. Peter Neary, 2004. "Welfare versus Market Access: The Implications of Tariff Structure for Tariff Reform," Boston College Working Papers in Economics 601, Boston College Department of Economics. [Downloadable!]
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  9. James E. Anderson & J. Peter Neary, 2004. "Welfare vs. Market Access: The Implications of Tariff Structure for Tariff Reform," NBER Working Papers 10730, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. Monika Mrazova, 2009. "Trade negotiations when market access matters," Economics Series Working Papers 447, University of Oxford, Department of Economics. [Downloadable!]
  11. James E. Anderson & J. Peter Neary, 1998. "The Mercantilist Index of Trade Policy," Working Papers 199813, School Of Economics, University College Dublin. [Downloadable!]
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  12. J Peter Neary, 2003. "Europe on the Road to Doha - Towards a New Global Trade Round," Working Papers 200317, School Of Economics, University College Dublin. [Downloadable!]
  13. repec:bep:eaptop:v:4:y:2004:i:1:p:1152-1152 is not listed on IDEAS
  14. Chris Jones & Oliver Morrissey & Doug Nelson, . "African Trade Policy in the 1990s: Political Economy or Technocratic Reforms?," Discussion Papers 08/01, University of Nottingham, CREDIT. [Downloadable!]
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