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Which Country Loses The Least In A Trade War?

  • Gaisford, James D.
  • Kerr, William A.

Trade actions, which can generally be claimed as trade wars, appear to be on the rise. This is particularly true in the case of agricultural commodities. It is a common perception that large countries will be the victors in such contests and this clearly affects the trade strategies of small countries, including Australia. The relationship between free-trade and trade-war pay-offs in the context of a prisoner's dilemma is explored in this paper. It is shown why neither a favourable terms of trade movement, a flatter import demand curve nor a larger population is, on its own, a sufficient condition for a relative victory in a trade war. The implications for small country trade strategies are then discussed.

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Article provided by Australian Agricultural and Resource Economics Society in its journal Australian Journal of Agricultural Economics.

Volume (Year): 36 (1992)
Issue (Month): 03 (December)

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Handle: RePEc:ags:ajaeau:22389
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  1. Gaisford, J., 1989. "Which Country Loses The Least In A Trade War?," Papers 122, Calgary - Department of Economics.
  2. Kenneth S. Chan, 1988. "Optimum Trade Policies and Retaliation," Canadian Journal of Economics, Canadian Economics Association, vol. 21(2), pages 427-33, May.
  3. Copeland, Brian R., 1989. "Tariffs and quotas : Retaliation and negotiation with two instruments of protection," Journal of International Economics, Elsevier, vol. 26(1-2), pages 179-188, February.
  4. Mayer, Wolfgang, 1984. "Endogenous Tariff Formation," American Economic Review, American Economic Association, vol. 74(5), pages 970-85, December.
  5. Robert C. Feenstra, 1986. "Incentive Compatible Trade Policies," NBER Working Papers 1977, National Bureau of Economic Research, Inc.
  6. Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
  7. Rodriguez, Carlos Alfredo, 1974. "The non-equivalence of tariffs and quotas under retaliation," Journal of International Economics, Elsevier, vol. 4(3), pages 295-298, August.
  8. Mayer, Wolfgang, 1981. "Theoretical Considerations on Negotiated Tariff Adjustments," Oxford Economic Papers, Oxford University Press, vol. 33(1), pages 135-53, March.
  9. Kyle Bagwell & Robert W. Staiger, 1989. "A Theory of Managed Trade," Discussion Papers 801, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  10. John Kennan & Raymond Riezman, 2013. "Do Big Countries Win Tariff Wars?," World Scientific Book Chapters, in: International Trade Agreements and Political Economy, chapter 4, pages 45-51 World Scientific Publishing Co. Pte. Ltd..
  11. Markusen, James R & Wigle, Randall M, 1989. "Nash Equilibrium Tariffs for the United States and Canada: The Roles of Country Size, Scale Economies, and Capital Mobility," Journal of Political Economy, University of Chicago Press, vol. 97(2), pages 368-86, April.
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