Protection and Retaliation: Changing the "Rules of the Game"
An examination of the macroeconomic, political, and institutional environment of the 1930s and the 1980s suggests a set of stylized facts associated with periods of trade tension and incidents of trade retaliation. Periods of macroeconomic stress precipitate changes in the conduct of and implementation of U.S. trade policy, which then can lead to escalating trade tension, protectionist measures, and perhaps retaliation. Macroeconomic stress, especially when linked to external events, decreases the political benefits of following a liberal trade policy and changes the economic consequences of following a particular trade strategy. As a result, it may be difficult for trading partners to predict the conduct of U.S. trade policy. Moreover, in reexamining its commitment to free trade, the United States may change its response to policies abroad. Finally, the United States may not only deviate from its established behavioral norms, but may also stray from the consensual international code of trade conduct. ; These stylized relationships between macroeconomic environment and political and institutional pressures are applied to a simple game-theory paradigm. Changes in the environment and balance of political power change the elements of a payoff matrix. The policy implications of the model are that the United States should, subject to the constraints of a democracy, make clear both the direction of its trade policy and the magnitudes of any penalties. Much of the tit-for-tat trade retaliation observed in recent months may represent just such a communications effort.
(This abstract was borrowed from another version of this item.)
Volume (Year): 18 (1987)
Issue (Month): 1 ()
|Contact details of provider:|| Postal: |
Phone: (202) 797-6000
Fax: (202) 797-6004
Web page: http://www.brookings.edu/economics.aspx
More information through EDIRC
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.:
- Robert C. Feenstra & Jagdish N. Bhagwati, 1982. "Tariff Seeking and the Efficient Tariff," NBER Chapters, in: Import Competition and Response, pages 245-262 National Bureau of Economic Research, Inc.
- Kuga, Kiyoshi, 1973. "Tariff retaliation and policy equilibrium," Journal of International Economics, Elsevier, vol. 3(4), pages 351-366, November.
- Mayer, Wolfgang, 1981. "Theoretical Considerations on Negotiated Tariff Adjustments," Oxford Economic Papers, Oxford University Press, vol. 33(1), pages 135-53, March.
- Mayer, Wolfgang, 1984. "Endogenous Tariff Formation," American Economic Review, American Economic Association, vol. 74(5), pages 970-85, December.
- Robert E. Baldwin, 1982. "The Political Economy of Protectionism," NBER Chapters, in: Import Competition and Response, pages 263-292 National Bureau of Economic Research, Inc.
- 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.
When requesting a correction, please mention this item's handle: RePEc:bin:bpeajo:v:18:y:1987:i:1987-1:p:311-335. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jennifer Ambrosino)
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.