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Effects of Restraining Steel Exports from the Republic of Korea and Other Countries to the United States and the European Economic Community


  • Tarr, David G


In this article a model is developed to evaluate the impact on an exporting country of a restraint imposed on its export by an importing economy in the context of a three-region model of world trade in a single product. The welfare changes in any of the three regions in the model and in the global economy can be evaluated.The model is applied to the restraints imposed on steel exports from the Republic of Korea to the United States and the European Economic Community (EEC). The United States and the EEC are found to have incurred significant losses as a result of the restraints. The largest part of these losses are quota rents transferred to Korea and the rest of the world. Under reasonable parameter assumptions, Korea and the rest of the world obtain net gains from the quotas, because the resource misallocation costs are smaller than the quota rents.The model is modified to analyze a tariff barrier rather than a quantitative restraint. It is found that an “equivalent” tariff on steel transforms Korea and the rest of the world from net gainers to net losers as a result of a restraint.
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Suggested Citation

  • Tarr, David G, 1987. "Effects of Restraining Steel Exports from the Republic of Korea and Other Countries to the United States and the European Economic Community," World Bank Economic Review, World Bank Group, vol. 1(3), pages 397-418, May.
  • Handle: RePEc:oup:wbecrv:v:1:y:1987:i:3:p:397-418

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    Cited by:

    1. Amelung, Torsten, 1988. "The impact of steel protection in industrialized countries on Brazil's export capacity," Kiel Working Papers 321, Kiel Institute for the World Economy (IfW).
    2. Chong-Hyun Nam, 1993. "Protectionist U.S. Trade Policy and Korean Exports," NBER Chapters,in: Trade and Protectionism, NBER-EASE Volume 2, pages 183-222 National Bureau of Economic Research, Inc.
    3. Erzan, Refik & Goto, Junichi & Holmes, Paula, 1989. "Effects of the multifibre arrangement on developing countries'trade : an empirical investigation," Policy Research Working Paper Series 297, The World Bank.
    4. Tarr,David, 1992. "Regional integration under VERs : when trade diversion is unambiguously beneficial," Policy Research Working Paper Series 839, The World Bank.
    5. Robert C. Feenstra, 1989. "Auctioning U.S. Import Quotas, Foreign Response, and Alternative Policies," NBER Working Papers 2839, National Bureau of Economic Research, Inc.
    6. de Melo, Jaime & Winters, L Alan, 1990. "Voluntary Export Restraints and Resource Allocation in Exporting Countries," World Bank Economic Review, World Bank Group, vol. 4(2), pages 209-233, May.
    7. Rehbein, Kathleen & Starks, Laura T., 1995. "Changes in U.S. trade policies: the wealth effects on Japanese steel firms," Japan and the World Economy, Elsevier, vol. 7(3), pages 309-327, September.

    More about this item

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations


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