IDEAS home Printed from https://ideas.repec.org/p/fip/fedgif/309.html
   My bibliography  Save this paper

Protection and retaliation: changing the rules of the game

Author

Listed:
  • Catherine L. Mann

Abstract

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.

Suggested Citation

  • Catherine L. Mann, 1987. "Protection and retaliation: changing the rules of the game," International Finance Discussion Papers 309, Board of Governors of the Federal Reserve System (U.S.).
  • Handle: RePEc:fip:fedgif:309
    as

    Download full text from publisher

    File URL: http://www.federalreserve.gov/pubs/ifdp/1987/309/default.htm
    Download Restriction: no

    File URL: http://www.federalreserve.gov/pubs/ifdp/1987/309/ifdp309.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. 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.
    2. Harry G. Johnson, 1953. "Optimum Tariffs and Retaliation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 21(2), pages 142-153.
    3. 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.
    4. Kuga, Kiyoshi, 1973. "Tariff retaliation and policy equilibrium," Journal of International Economics, Elsevier, vol. 3(4), pages 351-366, November.
    5. Mayer, Wolfgang, 1981. "Theoretical Considerations on Negotiated Tariff Adjustments," Oxford Economic Papers, Oxford University Press, vol. 33(1), pages 135-153, March.
    6. Mayer, Wolfgang, 1984. "Endogenous Tariff Formation," American Economic Review, American Economic Association, vol. 74(5), pages 970-985, December.
    7. Jagdish N. Bhagwati, 1982. "Import Competition and Response," NBER Books, National Bureau of Economic Research, Inc, number bhag82-1, March.
    8. 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.
    9. -, 1986. "Agenda = Agenda," Series Históricas 8749, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    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. Kris James Mitchener & Kevin Hjortshøj O'Rourke & Kirsten Wandschneider, 2022. "The Smoot-Hawley Trade War," The Economic Journal, Royal Economic Society, vol. 132(647), pages 2500-2533.
    2. Kris James Mitchener Author e-mail: kmitchener@scu.edu & Kirsten Wandschneider Author e-mail: kirsten.wandschneider@univie.ac.at & Kevin Hjortshøj O’Rourke Author e-mail: akevin.orourke@nyu.edu, 2021. "The Smoot-Hawley Trade War," Working Papers 20210061, New York University Abu Dhabi, Department of Social Science, revised Mar 2021.
    3. Antoine Bouët, 1989. "Politique tarifaire : le cœur et le nucléolus du jeu interne comme fonction de réaction du jeu externe," Revue Économique, Programme National Persée, vol. 40(5), pages 791-816.

    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. Bagwell,K. & Staiger,R.W., 2000. "GATT-think," Working papers 19, Wisconsin Madison - Social Systems.
    2. Robert W. Staiger & Kyle Bagwell, 1999. "An Economic Theory of GATT," American Economic Review, American Economic Association, vol. 89(1), pages 215-248, March.
    3. Pravin Krishna & Devashish Mitra, 2003. "Reciprocated Unilateralism in Trade Policy: An Interest-Group Approach," NBER Working Papers 9631, National Bureau of Economic Research, Inc.
    4. Bin, Sheng, 2000. "The Political Economy of Trade Policy in China," Working Papers 10/2000, Copenhagen Business School, Department of Management, Politics & Philosophy.
    5. Helpman, E., 1995. "Politics and Trade Policy," Papers 30-95, Tel Aviv - the Sackler Institute of Economic Studies.
    6. Bekkers, Eddy & Francois, Joseph & Rojas-Romagosa, Hugo, 2019. "Trade Wars: Nobody Expects the Spanish Inquisition," Papers 1234, World Trade Institute.
    7. kishore gawande & pravin krishna, 2005. "The Political Economy of Trade Policy: Empirical Approaches," International Trade 0503003, University Library of Munich, Germany.
    8. Jagdish Bhagwati, 1989. "Is free trade passé after all?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 125(1), pages 17-44, March.
    9. Antoine Bouët, 1989. "Politique tarifaire : le cœur et le nucléolus du jeu interne comme fonction de réaction du jeu externe," Revue Économique, Programme National Persée, vol. 40(5), pages 791-816.
    10. Weck-Hannemann, Hannelore, 1989. "Protectionism in direct democracy," Discussion Papers, Series II 79, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
    11. Vanzetti, David & Kennedy, John O.S., 1989. "Optimal Retaliation in International Commodity Markets," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 57(01-02-03), pages 1-25, December.
    12. Robert C. Feenstra & Tracy R. Lewis, 1991. "Negotiated Trade Restrictions with Private Political Pressure," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(4), pages 1287-1307.
    13. Robert C. Feenstra & Tracy R. Lewis, 1991. "Distributing The Gains From Trade With Incomplete Information," Economics and Politics, Wiley Blackwell, vol. 3(1), pages 21-39, March.
    14. Egger, Hartmut & Fischer, Christian, 2020. "Increasing resistance to globalization: The role of trade in tasks," European Economic Review, Elsevier, vol. 126(C).
    15. Ralph Ossa, 2011. "A "New Trade" Theory of GATT/WTO Negotiations," Journal of Political Economy, University of Chicago Press, vol. 119(1), pages 122-152.
    16. Eromenko, Igor, 2010. "Accession to the WTO. Computable General Equilibrium Analysis: the Case of Ukraine. Part I," MPRA Paper 67476, University Library of Munich, Germany.
    17. Davidson, Carl & Matusz, Steven J. & Nelson, Douglas R., 2007. "Can compensation save free trade?," Journal of International Economics, Elsevier, vol. 71(1), pages 167-186, March.
    18. Pyne, Derek, 2006. "Microfoundations of Influencing Public Opinion: Lobbying and Voting for Trade Policies," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 21, pages 551-576.
    19. Jong-Wha Lee & Phillip Swagel, 2000. "Trade Barriers And Trade Flows Across Countries And Industries," The Review of Economics and Statistics, MIT Press, vol. 79(3), pages 372-382, August.
    20. Pravin Krishna & Devashish Mitra, 2016. "Reciprocated unilateralism in trade reforms with majority voting," World Scientific Book Chapters, in: The Political Economy of Trade Policy Theory, Evidence and Applications, chapter 8, pages 147-159, World Scientific Publishing Co. Pte. Ltd..

    More about this item

    Keywords

    International trade; Game theory;

    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:fedgif:309. 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: Ryan Wolfslayer ; Keisha Fournillier (email available below). General contact details of provider: https://edirc.repec.org/data/frbgvus.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.