IDEAS home Printed from https://ideas.repec.org/p/fth/dublec/97-26.html
   My bibliography  Save this paper

Pitfalls in the Theory of International Trade Policy: Concertina Reforms of Tariffs, and Subsidies to High-Technology Industries

Author

Listed:
  • Neary, J. P.

Abstract

This paper explores the links between international trade theory and the practice of trade and industrial policy in open economies, with special attention to three areas where theorical lessons have been misunderstood in policy debates. I argue that the "concertina rule" for tariff reform justifies reductions in high tariffs but not moves towards uniformity and particularly not increases in low tariffs. I show that the basic principles of tariff reform are the same in unilateral, multilateral and customs union contexts. Finally, I suggest that the theory of strategic trade policy does not justify subsidies to high-technology industries.

Suggested Citation

  • Neary, J. P., 1997. "Pitfalls in the Theory of International Trade Policy: Concertina Reforms of Tariffs, and Subsidies to High-Technology Industries," Papers 97/26, College Dublin, Department of Political Economy-.
    • Handle: RePEc:fth:dublec:97/26
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. d'Aspremont, Claude & Jacquemin, Alexis, 1988. "Cooperative and Noncooperative R&D in Duopoly with Spillovers," American Economic Review, American Economic Association, vol. 78(5), pages 1133-1137, December.
    2. Neary, J Peter & Leahy, Dermot, 2000. "Strategic Trade and Industrial Policy towards Dynamic Oligopolies," Economic Journal, Royal Economic Society, vol. 110(463), pages 484-508, April.
    3. Leahy, Dermot & Neary, J Peter, 1996. "International R&D Rivalry and Industrial Strategy without Government Commitment," Review of International Economics, Wiley Blackwell, vol. 4(3), pages 322-338, October.
    4. Leahy, Dermot & Neary, J Peter, 1997. "Public Policy towards R&D in Oligopolistic Industries," American Economic Review, American Economic Association, vol. 87(4), pages 642-662, September.
    5. Neary, J Peter, 1995. "Trade Liberalisation and Shadow Prices in the Presence of Tariffs and Quotas," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(3), pages 531-554, August.
    6. Sandmo, Agnar, 1974. "A Note on the Structure of Optimal Taxation," American Economic Review, American Economic Association, vol. 64(4), pages 701-706, September.
    7. Anderson, James E & Neary, J Peter, 1992. "Trade Reform with Quotas, Partial Rent Retention, and Tariffs," Econometrica, Econometric Society, vol. 60(1), pages 57-76, January.
    8. Barbara J. Spencer & James A. Brander, 1983. "International R & D Rivalry and Industrial Strategy," Review of Economic Studies, Oxford University Press, vol. 50(4), pages 707-722.
    9. Neary, J. Peter, 1994. "Cost asymmetries in international subsidy games: Should governments help winners or losers?," Journal of International Economics, Elsevier, vol. 37(3-4), pages 197-218, November.
    10. Jonathan Eaton & Gene M. Grossman, 1986. "Optimal Trade and Industrial Policy Under Oligopoly," The Quarterly Journal of Economics, Oxford University Press, vol. 101(2), pages 383-406.
    11. Fudenberg, Drew & Tirole, Jean, 1984. "The Fat-Cat Effect, the Puppy-Dog Ploy, and the Lean and Hungry Look," American Economic Review, American Economic Association, vol. 74(2), pages 361-366, May.
    12. Rod Falvey, 1994. "Revenue enhancing tariff reform," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 130(1), pages 175-190, March.
    13. Tatsuo Hatta, 1977. "A Theory of Piecemeal Policy Recommendations," Review of Economic Studies, Oxford University Press, vol. 44(1), pages 1-21.
    14. James E. Anderson & Arja Turunen-Red, 1999. "Trade Reform with a Government Budget Constraint," International Economic Association Series, in: John Piggott & Alan Woodland (ed.), International Trade Policy and the Pacific Rim, chapter 9, pages 217-244, Palgrave Macmillan.
    15. Nicholas Stern, 1986. "A Note on Commodity Taxation: The Choice of Variable and the Slutsky, Hessian and Antonelli Matrices (SHAM)," Review of Economic Studies, Oxford University Press, vol. 53(2), pages 293-299.
    16. Leahy, Dermot & Neary, J Peter, 1999. "R&D Spillovers and the Case for Industrial Policy in an Open Economy," Oxford Economic Papers, Oxford University Press, vol. 51(1), pages 40-59, January.
    17. W. E. Diewert & A. H. Turunen-Red & A. D. Woodland, 1989. "Productivity- and Pareto-Improving Changes in Taxes and Tariffs," Review of Economic Studies, Oxford University Press, vol. 56(2), pages 199-215.
    18. Brander, James A., 1995. "Strategic trade policy," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 27, pages 1395-1455, Elsevier.
    19. Smith, Alasdair, 1982. "Some simple results on the gains from trade, from growth and from public production," Journal of International Economics, Elsevier, vol. 13(3-4), pages 215-230, November.
    20. Angus Deaton, 1979. "The Distance Function in Consumer Behaviour with Applications to Index Numbers and Optimal Taxation," Review of Economic Studies, Oxford University Press, vol. 46(3), pages 391-405.
    21. Brander, James A. & Spencer, Barbara J., 1985. "Export subsidies and international market share rivalry," Journal of International Economics, Elsevier, vol. 18(1-2), pages 83-100, February.
    22. Turunen-Red, Arja H & Woodland, Alan D, 1991. "Strict Pareto-Improving Multilateral Reforms of Tariffs," Econometrica, Econometric Society, vol. 59(4), pages 1127-1152, July.
    23. Kemp, Murray C. & Wan, Henry Jr., 1976. "An elementary proposition concerning the formation of customs unions," Journal of International Economics, Elsevier, vol. 6(1), pages 95-97, February.
    24. Falvey, Rodney E., 1988. "Tariffs, quotas and piecemeal policy reform," Journal of International Economics, Elsevier, vol. 25(1-2), pages 177-183, August.
    25. J. Peter Neary & Albert G. Schweinberger, 1986. "Factor Content Functions and the Theory of International Trade," Review of Economic Studies, Oxford University Press, vol. 53(3), pages 421-432.
    26. Dixit, Avinash K, 1970. "On the Optimum Structure of Commodity Taxes," American Economic Review, American Economic Association, vol. 60(3), pages 295-301, June.
    Full references (including those not matched with items on IDEAS)

    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. Neary, J Peter & Leahy, Dermot, 2000. "Strategic Trade and Industrial Policy towards Dynamic Oligopolies," Economic Journal, Royal Economic Society, vol. 110(463), pages 484-508, April.
    2. J. Neary, 2006. "International Trade and the Environment: Theoretical and Policy Linkages," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 33(1), pages 95-118, January.
    3. Delia Ionascu & Kresimir zigic, 2005. "Free trade versus strategic trade as a choice between two 'second best' policies: A symmetric versus asymmetric information analysis," International Economic Journal, Taylor & Francis Journals, vol. 19(3), pages 417-446.
    4. J. Peter Neary & Paul O'Sullivan, 1999. "Beat 'em or Join 'em? Export Subsidies versus International Research Joint Ventures in Oligopolistic Markets," Scandinavian Journal of Economics, Wiley Blackwell, vol. 101(4), pages 577-596, December.
    5. Kresimir Zigic, 2011. "Strategic Interactions in Markets with Innovative Activity: The Cases of Strategic Trade Policy and Market Leadership," CERGE-EI Books, The Center for Economic Research and Graduate Education - Economics Institute, Prague, edition 1, number b06, November.
    6. Dermot Leahy & J. Peter Neary, 2001. "Robust rules for industrial policy open economies," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 10(4), pages 393-409.
    7. Leahy, Dermot & Neary, J Peter, 2001. "Robust Rules for Industrial Policy in Open Economies," CEPR Discussion Papers 2731, C.E.P.R. Discussion Papers.
    8. Kresimir Zigic, 2001. "Strategic Trade Policy, the "Committed" versus "Non-Committed" Government, and R&D Spillovers," CERGE-EI Working Papers wp177, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    9. Yoon, Jeong & Choi, Kangsik, 2018. "Why do export subsidies still exist? R&D and output subsidies," Japan and the World Economy, Elsevier, vol. 45(C), pages 30-38.
    10. Dewit, Gerda & Leahy, Dermot, 2004. "Rivalry in uncertain export markets: commitment versus flexibility," Journal of International Economics, Elsevier, vol. 64(1), pages 195-209, October.
    11. Delia Ionascu & Kresimir Zigic, 2001. "Strategic Trade Policy and Mode of Competition: Symmetric versus Asymmetric Information," CERGE-EI Working Papers wp174, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    12. Pascalis Raimondos-Møller & Alan Woodland, 2014. "Steepest ascent tariff reform," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 55(1), pages 69-99, January.
    13. Dermot Leahy & J. Neary, 2009. "Multilateral subsidy games," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 41(1), pages 41-66, October.
    14. Praveen Kujal & Juan Ruiz, 2003. "International Trade Policy towards Monopolies and Oligopolies," International Trade 0302002, University Library of Munich, Germany, revised 24 Mar 2003.
    15. Bouamra-Mechemache, Zohra & Chavas, Jean-Paul & Cox, Thomas L. & Requillart, Vincent, 2001. "Interregional Analysis Of The Impacts Of Eliminating European Union Milk Production Quotas," 2001 Annual meeting, August 5-8, Chicago, IL 20677, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    16. Praveen Kujal & Juan Ruiz, 2003. "Cost Effectiveness of R&D and the Robustness of Strategic Trade Policy," International Trade 0302001, University Library of Munich, Germany, revised 04 Feb 2003.
    17. Giammario Impullitti, 2007. "International Schumpeterian Competition and Optimal R&D subsidies," Economics Working Papers ECO2007/55, European University Institute.
    18. Anderson, James E & Bannister, Geoffrey J & Neary, J Peter, 1995. "Domestic Distortions and International Trade," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(1), pages 139-157, February.
    19. Hoefele, Andreas, 2016. "Endogenous product differentiation and international R&D policy," International Review of Economics & Finance, Elsevier, vol. 41(C), pages 335-346.
    20. Jean‐Paul Chavas & Zohra Bouamra Mechemache, 2006. "The Economic Efficiency of Policy Reform and Partial Market Liberalization under Transaction Costs," Bulletin of Economic Research, Wiley Blackwell, vol. 58(3), pages 161-191, July.

    More about this item

    Keywords

    TRADE LIBERALIZATION;

    JEL classification:

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

    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:fth:dublec:97/26. 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: . General contact details of provider: https://edirc.repec.org/data/educdie.html .

    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: Thomas Krichel (email available below). General contact details of provider: https://edirc.repec.org/data/educdie.html .

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.