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Rules versus Discretion in Trade Policy: An Empirical Analysis

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Robert W. Staiger
Guido Tabellini

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Abstract

We test empirically for evidence that government tariff-setting behavior depends on the degree of discretion with which policy-makers are endowed. We do this by studying government tariff choices under two distinct environments. One environment is that of tariffs set under the Escape Clause (Section 201 of the U.S. Trade Act of 1974). We argue that these decisions afford the government with ample opportunity to reoptimize, and with correspondingly little ability to commit. The other environment is the Tokyo Round of GATT negotiations and the determination of the set of exclusions from the general formula cuts. We argue that these decisions provided the government with a much diminished opportunity to reoptimize, and with a correspondingly greater ability to commit. Comparing decisions made in these two environments allows us to ask whether the degree of policy discretion has a measurable impact on trade policy decisions. Our findings suggest that it does.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3382.

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Date of creation: Jun 1990
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Publication status: published relationship to a non-chapter. This should not happen. Please contact NBER.
Handle: RePEc:nbr:nberwo:3382

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