The Protectionist Bias of Duty Drawbacks and the New Regionalism
AbstractIn a political-economy setting where tariffs and duty drawbacks are endogenously chosen through industry lobbying, it is shown that full duty-drawbacks are granted to exporters who use imported intermediates in their production. This in turn decreases their incentives to counter-lobby against high tariff on their inputs. In equilibrium, higher tariffs will be observed on these goods. The creation of a regional block will change the political equilibrium. Duty-drawbacks will be eliminated on intra-regional exports, which in turn will lead to lower tariffs for goods used as inputs by intra-regional exporters. Evidence from Mercosur suggests that the elimination of duty-drawbacks for intra-regional exports, led to increased counter-lobbying by users of intermediate products. In its absence the common external tariff would have been on average 3.5 percentage points (25 percent) higher.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2559.
Date of creation: Sep 2000
Date of revision:
Contact details of provider:
Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
Find related papers by JEL classification:
- F11 - International Economics - - Trade - - - Neoclassical Models of Trade
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- F15 - International Economics - - Trade - - - Economic Integration
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.:
- Olarreaga, Marcelo & Soloaga, Isidro & Winters, Alan, 1999. "What's behind MERCOSUR's common external tariff?," Policy Research Working Paper Series 2231, The World Bank.
- Pravin Krishna, 1998.
"Regionalism And Multilateralism: A Political Economy Approach,"
The Quarterly Journal of Economics,
MIT Press, vol. 113(1), pages 227-250, February.
- Pravin Krishna, . "Regionalism and Multilaterialism: A Political Economy Approach," Working Papers 96-5, Brown University, Department of Economics.
- Arvind Panagariya, 2000. "Preferential Trade Liberalization: The Traditional Theory and New Developments," Journal of Economic Literature, American Economic Association, vol. 38(2), pages 287-331, June.
- Ethier, Wilfred J, 1998. "The New Regionalism," Economic Journal, Royal Economic Society, vol. 108(449), pages 1149-61, July.
- Jaime MELO DE & Olivier CADOT & OLARREAGA, 1996.
"Lobbying and the Structure of Protection,"
- Cadot, O & de Mela, J & Olarreaga, M, 1996. "Lobbying and the Structure of Protection," Research Papers by the Institute of Economics and Econometrics, Geneva School of Economics and Management, University of Geneva 96.18, Institut d'Economie et Econométrie, Université de Genève.
- Cadot, Olivier & de Melo, Jaime & Olarreaga, Marcelo, 1997. "Lobbying and the Structure of Protection," CEPR Discussion Papers 1574, C.E.P.R. Discussion Papers.
- Grossman, Gene M & Helpman, Elhanan, 1994.
"Protection for Sale,"
American Economic Review,
American Economic Association, vol. 84(4), pages 833-50, September.
- Grossman, G.M. & Helpman, E., 1992. "Protection for Sale," Papers 21-92, Tel Aviv.
- Gene M. Grossman & Elhanan Helpman, 1992. "Protection For Sale," NBER Working Papers 4149, National Bureau of Economic Research, Inc.
- Grossman, G.M. & Helpman, E., 1992. "Protection for Sale," Papers 162, Princeton, Woodrow Wilson School - Public and International Affairs.
- Grossman, Gene & Helpman, Elhanan, 1993. "Protection for Sale," CEPR Discussion Papers 827, C.E.P.R. Discussion Papers.
- Elhanan Helpman, 1995.
"Politics and Trade Policy,"
NBER Working Papers
5309, National Bureau of Economic Research, Inc.
- Olarreaga, Marcelo & Soloaga, Isidro, 1998.
"Endogenous Tariff Formation: The Case of Mercosur,"
CEPR Discussion Papers
1848, C.E.P.R. Discussion Papers.
- Veall, Michael R & Zimmermann, Klaus F, 1994. "Goodness of Fit Measures in the Tobit Model," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 56(4), pages 485-99, November.
- Rodrik, Dani, 1995. "Political economy of trade policy," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 28, pages 1457-1494 Elsevier.
- Anne O. Krueger & Sarath Rajapatirana, 1999. "The World Bank Policies Towards Trade and Trade Policy Reform," The World Economy, Wiley Blackwell, vol. 22(6), pages 717-740, 08.
- Cadot, Olivier & de Melo, Jaime & Olarreaga, Marcelo, 2001.
"Can bilateralism ease the pains of multilateral trade liberalization?,"
European Economic Review,
Elsevier, vol. 45(1), pages 27-44, January.
- Cadot, O. & de Melo, J. & Olarreaga, M., 1998. "Can Bilateralism Ease the Pains of Multilateral Trade Liberalization?," Research Papers by the Institute of Economics and Econometrics, Geneva School of Economics and Management, University of Geneva 98.11, Institut d'Economie et Econométrie, Université de Genève.
- Cadot, Olivier & de Melo, Jaime & Olarreaga, Marcelo, 1998. "Can Bilateralism Ease the Pains of Multilateral Trade Liberalization?," CEPR Discussion Papers 1878, C.E.P.R. Discussion Papers.
- Michalopoulos, Constantine, 1999. "Trade policy and market access issues for developing countries : implications for the Millennium Round," Policy Research Working Paper Series 2214, The World Bank.
- Anne O. Krueger, 1993. "Free Trade Agreements as Protectionist Devices: Rules of Origin," NBER Working Papers 4352, National Bureau of Economic Research, Inc.
- Giovanni Maggi & Pinelopi Koujianou Goldberg, 1999.
"Protection for Sale: An Empirical Investigation,"
American Economic Review,
American Economic Association, vol. 89(5), pages 1135-1155, December.
- Levy, Philip I, 1997. "A Political-Economic Analysis of Free-Trade Agreements," American Economic Review, American Economic Association, vol. 87(4), pages 506-19, September.
- Panagariya, Arvind, 1990. "Input tariffs and duty drawbacks in the design of tariff reform," Policy Research Working Paper Series 336, The World Bank.
- Dickins, William T, 1990. "Error Components in Grouped Data: Is It Ever Worth Weighting?," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 328-33, May.
- Wilfred J. Ethier, 1998. "Regionalism in a Multilateral World," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1214-1245, December.
- Freund, Caroline, 2000. "Multilateralism and the endogenous formation of preferential trade agreements," Journal of International Economics, Elsevier, vol. 52(2), pages 359-376, December.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.