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Trade Wars and Trade Talks with Data

  • Ralph Ossa
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    How large are optimal tariffs? What tariffs would prevail in a worldwide trade war? How costly would be a breakdown of international trade policy cooperation? And what is the scope for future multilateral trade negotiations? I address these and other questions using a unified framework which nests traditional, new trade, and political economy motives for protection. I find that optimal tariffs average 62 percent, world trade war tariffs average 63 percent, the government welfare losses from a breakdown of international trade policy cooperation average 2.9 percent, and the possible government welfare gains from future multilateral trade negotiations average 0.5 percent. Optimal tariffs are tariffs which maximize a political economy augmented measure of real income.

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    File URL: http://www.nber.org/papers/w17347.pdf
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    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17347.

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    Date of creation: Aug 2011
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    Publication status: published as “Trade Wars and Trade Talks with Data” American Economic Review, forthcoming
    Handle: RePEc:nbr:nberwo:17347
    Note: EFG ITI
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    1. Grossman, Gene & Helpman, Elhanan, 1993. "Protection for Sale," CEPR Discussion Papers 827, C.E.P.R. Discussion Papers.
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    5. Kyle Bagwell & Robert W. Staiger, 2006. "What Do Trade Negotiators Negotiate About? Empirical Evidence from the World Trade Organization," NBER Working Papers 12727, National Bureau of Economic Research, Inc.
    6. Hamilton, Bob & Whalley, John, 1983. "Optimal tariff calculations in alternative trade models and some possible implications for current world trading arrangements," Journal of International Economics, Elsevier, vol. 15(3-4), pages 323-348, November.
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    8. Pinelopi Koujianou Goldbe & Giovanni Maggi, 1997. "Protection for Sale: An Empirical Investigation," NBER Working Papers 5942, National Bureau of Economic Research, Inc.
    9. Carlo Perroni & John Whalley, 2000. "The new regionalism: trade liberalization or insurance?," Canadian Journal of Economics, Canadian Economics Association, vol. 33(1), pages 1-24, February.
    10. Christian Broda & Nuno Limao & David E. Weinstein, 2008. "Optimal Tariffs and Market Power: The Evidence," American Economic Review, American Economic Association, vol. 98(5), pages 2032-65, December.
    11. Lorenzo Caliendo & Fernando Parro, 2012. "Estimates of the Trade and Welfare Effects of NAFTA," NBER Working Papers 18508, National Bureau of Economic Research, Inc.
    12. Justin R. Pierce & Peter K. Schott, 2012. "Concording U.S. Harmonized System categories over time," Finance and Economics Discussion Series 2012-16, Board of Governors of the Federal Reserve System (U.S.).
    13. Alvarez, Fernando & Lucas, Robert Jr., 2007. "General equilibrium analysis of the Eaton-Kortum model of international trade," Journal of Monetary Economics, Elsevier, vol. 54(6), pages 1726-1768, September.
    14. Kyle Bagwell & Robert W. Staiger, 2009. "Delocation and Trade Agreements in Imperfectly Competitive Markets," NBER Working Papers 15444, National Bureau of Economic Research, Inc.
    15. Kyle Bagwell & Robert W. Staiger, 1997. "An Economic Theory of GATT," NBER Working Papers 6049, National Bureau of Economic Research, Inc.
    16. Jonathan Eaton & Samuel Kortum, 2002. "Technology, Geography, and Trade," Econometrica, Econometric Society, vol. 70(5), pages 1741-1779, September.
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