IDEAS home Printed from https://ideas.repec.org/p/fip/feddwp/9323.html

Retaliation, liberalization, and trade wars: the political economy of nonstrategic trade policy

Author

Listed:
  • David M. Gould
  • Graeme L. Woodbridge

Abstract

In this paper, we examine the dynamic process behind protection, retaliation, and trade wars. Consistent with empirical evidence on the development of trade policies, we model policy decisions as an outcome of political contests within two trading nations, rather than as an outcome of a strategic game between two governments. Uncertainty about the incidence and success of retaliation yields a dynamic political equilibrium in which one country imposes a tariff that increases gradually over time. Eventually, the cost of the tariff to the other country's exporting interests induces retaliation. We show that depending on the characteristics of the markets in the two countries, retaliation may encourage liberalization or may cause a trade war.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • David M. Gould & Graeme L. Woodbridge, 1993. "Retaliation, liberalization, and trade wars: the political economy of nonstrategic trade policy," Working Papers 9323, Federal Reserve Bank of Dallas.
    • Handle: RePEc:fip:feddwp:9323
    Note: Published as: Gould, David M. and Graeme L. Woodbridge (1998), "The Political Economy of Retaliation, Liberalization and Trade Wars," European Journal of Political Economy 14 (1): 115-137.
    as

    Download full text from publisher

    File URL: https://www.dallasfed.org/~/media/documents/research/papers/1993/wp9323.pdf
    File Function: Full text
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Grossman, Gene M & Helpman, Elhanan, 1995. "Trade Wars and Trade Talks," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 675-708, August.
    2. George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
    3. Richardson, J. David, 1990. "The political economy of strategic trade policy," International Organization, Cambridge University Press, vol. 44(1), pages 107-135, January.
    4. Lipson, Charles, 1982. "The transformation of trade: the sources and effects of regime change," International Organization, Cambridge University Press, vol. 36(2), pages 417-455, April.
    5. Marvel, Howard P & Ray, Edward J, 1983. "The Kennedy Round: Evidence on the Regulation of International Trade in the United States," American Economic Review, American Economic Association, vol. 73(1), pages 190-197, March.
    6. Richard Harris, 1985. "Why Voluntary Export Restraints Are 'Voluntary.'," Canadian Journal of Economics, Canadian Economics Association, vol. 18(4), pages 799-809, November.
    7. Mayer, Wolfgang, 1984. "Endogenous Tariff Formation," American Economic Review, American Economic Association, vol. 74(5), pages 970-985, December.
    8. Ray, Edward John, 1987. "The Impact of Special Interests on Preferential Tariff Concessions by the United States," The Review of Economics and Statistics, MIT Press, vol. 69(2), pages 187-193, May.
    9. Quibria, M G, 1989. "Neoclassical Political Economy: An Application to Trade Policies," Journal of Economic Surveys, Wiley Blackwell, vol. 3(2), pages 107-136.
    10. Cassing, James & McKeown, Timothy J. & Ochs, Jack, 1986. "The Political Economy of the Tariff Cycle," American Political Science Review, Cambridge University Press, vol. 80(3), pages 843-862, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hallett Andrew Hughes & Braga C. A. Primo, 1994. "The New Regionalism and the Threat of Protectionism," Journal of the Japanese and International Economies, Elsevier, vol. 8(4), pages 388-421, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gould, David M. & Woodbridge, Graeme L., 1998. "The political economy of retaliation, liberalization and trade wars," European Journal of Political Economy, Elsevier, vol. 14(1), pages 115-137, February.
    2. Christis G. Tombazos, 2003. "Unprotective Tariffs, Ineffective Liberalization, and Other Mysteries: An Investigation of the Endogenous Dimensions of Trade Policy Formation in Australia," Southern Economic Journal, John Wiley & Sons, vol. 70(1), pages 49-74, July.
    3. David M. Gould & Graeme L. Woodbridge, 1995. "Building trade barriers and knocking them down: the political economy of unilateral trade liberalizations," Working Papers 9505, Federal Reserve Bank of Dallas.
    4. kishore gawande & pravin krishna, 2005. "The Political Economy of Trade Policy: Empirical Approaches," International Trade 0503003, University Library of Munich, Germany.
    5. Helpman, E., 1995. "Politics and Trade Policy," Papers 30-95, Tel Aviv - the Sackler Institute of Economic Studies.
    6. Pokrivcak, Jan, 2007. "Economics and Political Economy of Regional Trade Agreements," Working Papers 7286, TRADEAG - Agricultural Trade Agreements.
    7. Wenshou Yan & Kaixing Huang, 2022. "Geographic politics, loss aversion and trade policy: The case of cotton in China," The World Economy, Wiley Blackwell, vol. 45(9), pages 2854-2881, September.
    8. Olper, Alessandro, . "The political economy of trade-related regulatory policy: environment and global value chain," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 5(3).
    9. Francois, Joseph & Nelson, Douglas R., 2014. "Political support for trade policy in the European Union," European Journal of Political Economy, Elsevier, vol. 36(C), pages 243-253.
    10. Brainard, S. Lael & Verdier, Thierry, 1997. "The political economy of declining industries: Senescent industry collapse revisited," Journal of International Economics, Elsevier, vol. 42(1-2), pages 221-237, February.
    11. Alexandr Knobel, 2010. "Factors of important Tariff Information," Research Paper Series, Gaidar Institute for Economic Policy, issue 143P.
    12. Giacomo A. M. Ponzetto & Maria Petrova & Ruben Enikolopov, 2008. "The Dracula effect: voter information and trade policy," Economics Working Papers 1296, Department of Economics and Business, Universitat Pompeu Fabra, revised Oct 2020.
    13. repec:bge:wpaper:514 is not listed on IDEAS
    14. Lake, James & Linask, Maia K., 2016. "Could tariffs be pro-cyclical?," Journal of International Economics, Elsevier, vol. 103(C), pages 124-146.
    15. Fritz Breuss, 2004. "WTO Dispute Settlement: An Economic Analysis of Four EU–US Mini Trade Wars—A Survey," Journal of Industry, Competition and Trade, Springer, vol. 4(4), pages 275-315, December.
    16. Pravin Krishna & Devashish Mitra, 2003. "Reciprocated Unilateralism in Trade Policy: An Interest-Group Approach," NBER Working Papers 9631, National Bureau of Economic Research, Inc.
    17. Robert Pahre, 1998. "Reactions and Reciprocity," Journal of Conflict Resolution, Peace Science Society (International), vol. 42(4), pages 467-492, August.
    18. Pushan Dutt & Devashish Mitra, 2009. "Explaining Agricultural Distortion Patterns," World Bank Publications - Reports 28159, The World Bank Group.
    19. Nuno Limão & Patricia Tovar, 2018. "Policy choice: Theory and evidence from commitment via international trade agreements," World Scientific Book Chapters, in: Policy Externalities and International Trade Agreements, chapter 6, pages 179-198, World Scientific Publishing Co. Pte. Ltd..
    20. Bagwell,K. & Staiger,R.W., 1999. "Multilateral trade negotiations, bilateral opportunism and the rules of GATT," Working papers 6, Wisconsin Madison - Social Systems.
    21. Ronald Fischer, 2008. "Política comercial estratégica en el mercado aéreo chileno," Documentos de Trabajo 246, Centro de Economía Aplicada, Universidad de Chile.

    More about this item

    Keywords

    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:feddwp:9323. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Amy Chapman (email available below). General contact details of provider: https://edirc.repec.org/data/frbdaus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.