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Lobbying for a common external tariff from inside and out

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  • Subhayu Bandyopadhyay
  • Sajal Lahiri

Abstract

We consider the interactions between domestic lobbying and two types of cross-border lobbying in a Customs Union (CU). The two types of cross-border lobbying are (i) lobbying from firms in one CU country to the governments of other CU countries, and (ii) that from firms outside the CU. We focus on the determination of the common external tariff (CET) in a two-stage game-theoretic model. When firms within the CU cooperate in lobbying, a sufficient condition for the CET to be higher compared to the noncooperative case is that the CU firms' lobbying is a strategic substitute for the lobbying done by the non-union firms. Furthermore, the same strategic substitutabilty condition is sufficient to ensure that the CET must rise, when stricter regulations are imposed on lobbying from outside the CU.

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Bibliographic Info

Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2012-061.

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Date of creation: 2012
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Handle: RePEc:fip:fedlwp:2012-061

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Keywords: Free trade ; Tariff;

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  1. Grossman, G.M. & Helpman, E., 1992. "Protection for Sale," Papers 162, Princeton, Woodrow Wilson School - Public and International Affairs.
  2. Hillman, Arye L, 1982. "Declining Industries and Political-Support Protectionist Motives," American Economic Review, American Economic Association, vol. 72(5), pages 1180-87, December.
  3. Grossman, Gene M & Helpman, Elhanan, 1995. "The Politics of Free-Trade Agreements," American Economic Review, American Economic Association, vol. 85(4), pages 667-90, September.
  4. Riezman, Raymond, 1979. "A 3 x 3 model of customs unions," Journal of International Economics, Elsevier, vol. 9(3), pages 341-354, August.
  5. Gatsios, Konstantine & Karp, Larry, 1995. "Delegation in a general equilibrium model of customs unions," European Economic Review, Elsevier, vol. 39(2), pages 319-333, February.
  6. Mayer, Wolfgang, 1984. "Endogenous Tariff Formation," American Economic Review, American Economic Association, vol. 74(5), pages 970-85, December.
  7. Maurice Schiff & L. Alan Winters, 2003. "Regional Integration and Development," World Bank Publications, The World Bank, number 15172, August.
  8. Stoyanov, Andrey, 2009. "Trade policy of a free trade agreement in the presence of foreign lobbying," Journal of International Economics, Elsevier, vol. 77(1), pages 37-49, February.
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