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International Coordination of Trade Policy

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  • J. David Richardson

Abstract

The General Agreement on Tariffs and Trade (GATT) is a coordination compact. Tariff bindings illustrate a mechanism for making commitments credible. Reciprocity illustrates a means for redistributing cooperative gains. The Most-Favored-Nation (MFN) principle illustrates an attempt to keep coordination "virtuous" (cooperative) rather than "vicious" (collusive). Yet international trade policy coordination has clearly become more difficult. The postwar hegemonic environment has evolved into a more general strategic environment with several influential governments and blocs. Such coalitions are a natural evolutionary development, yet one that inexorably undermines MFN. Economic developments make a country's comparative advantage increasingly sensitive to sectoral predation by others, especially through subsidies and performance requirements aimed at mobile multinational firms, which are themselves internationally coordinated. Immobile workers and others correspondingly bear the burdens of sharper adjustments, and look to government to turn its trade policy narrowly inward in order to ease their load. Such "domestication" of trade policy is the antithesis of international coordination, and runs the risk of creating a strategic paralysis of recurring unproductivity. What changes might restore the liberalizing impetus of trade policy coordination? Several are considered in the paper. One is extension of the "Codes" approach to multilateral negotiations under the GATT, especially to Subsidies and Safeguards . Many reflections in the paper are framed in categories from recent economic thinking about policy coordination in "strategic" environments -- those with small numbers of self-consciously interdependent agents. The paper argues that these are the appropriate environments in which to analyze international coordination of trade policy.

Suggested Citation

  • J. David Richardson, 1987. "International Coordination of Trade Policy," NBER Working Papers 2293, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:2293
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    1. Julio.J. Nogu├ęs & Andrzej Olechowski & L. Alan Winters, 2015. "The Extent of Nontariff Barriers to Industrial Countries' Imports," World Scientific Book Chapters,in: Non-Tariff Barriers, Regionalism and Poverty Essays in Applied International Trade Analysis, chapter 2, pages 29-47 World Scientific Publishing Co. Pte. Ltd..
    2. Paul Krugman, 1986. "Strategic Trade Policy and the New International Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262610450, January.
    3. Feenstra, Robert C, 1987. " Incentive Compatible Trade Policies," Scandinavian Journal of Economics, Wiley Blackwell, vol. 89(3), pages 373-387.
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    5. Krishna, Kala, 1989. "Trade restrictions as facilitating practices," Journal of International Economics, Elsevier, vol. 26(3-4), pages 251-270, May.
    6. Gilles Oudiz & Jeffrey Sachs, 1984. "Macroeconomic Policy Coordination among the Industrial Economies," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 15(1), pages 1-76.
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    8. 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.
    9. Alan V. Deardorff & Robert M. Stern, 2009. "The Effects of the Tokyo Round on the Structure of Protection," World Scientific Book Chapters,in: Globalization And International Trade Policies, chapter 14, pages 483-519 World Scientific Publishing Co. Pte. Ltd..
    10. Peter A. Diamond, 1982. "Protection, Trade Adjustment Assistance, and Income Distribution," NBER Chapters,in: Import Competition and Response, pages 123-150 National Bureau of Economic Research, Inc.
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    12. Staiger, Robert W & Tabellini, Guido, 1987. "Discretionary Trade Policy and Excessive Protection," American Economic Review, American Economic Association, vol. 77(5), pages 823-837, December.
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    Cited by:

    1. Tabellini, Guido, 1990. "Domestic politics and the international coordination of fiscal policies," Journal of International Economics, Elsevier, vol. 28(3-4), pages 245-265, May.
    2. George Furstenberg, 1991. "Scoring the success of sanctions," Open Economies Review, Springer, vol. 2(3), pages 305-313, October.

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