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Dynamics and Discriminatory Import Policy

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  • To, Ted

Abstract

Although the General Agreement on Trade and Tariffs prohibits discriminatory import tariffs, GATT rules include means by which this prohibition can be circumvented. The previous literature use static models to show that discriminatory tariffs increase welfare. In a dynamic model, this is not necessarily true. For example, with consumer switching costs, current market share is valuable. In this case, discriminatory tariffs are higher for firms with a higher market share. In expectation of such policies, firms price less aggressively. If switching costs are significant relative to exporting country asymmetries then this adverse affect on incentives can result in lower importing country welfare. This suggests that it might be in the interests of importers to abide by the GATT MFN principle.

Suggested Citation

  • To, Ted, 1998. "Dynamics and Discriminatory Import Policy," CSGR Working papers series 07/98, Centre for the Study of Globalisation and Regionalisation (CSGR), University of Warwick.
  • Handle: RePEc:wck:wckewp:07/98
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    References listed on IDEAS

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    Cited by:

    1. Adina Georgeta Ponea, 2020. "Jurisprudential Analysis in Matters of Discrimination. Jurisdictional Competence of the National Council for Combating Discrimination," Proceedings of the 19th International RAIS Conference, October 18-19, 2020 007ap, Research Association for Interdisciplinary Studies.
    2. Horn, Henrik & Mavroidis, Petros C., 2001. "Economic and legal aspects of the Most-Favored-Nation clause," European Journal of Political Economy, Elsevier, vol. 17(2), pages 233-279, June.
    3. Elder, Erick & To, Ted, 1999. "Consumer switching costs and private information," Economics Letters, Elsevier, vol. 63(3), pages 369-375, June.

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    More about this item

    Keywords

    discriminatory tariffs; endogenous protection; switching costs; market share.;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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