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Dynamics and Discriminatory Import Policy

  • Ted To

    (University of Warwick)

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Although the GATT prohibits discriminatory import tariffs, it includes means for circumventing this prohibition. The previous literature uses static models and discriminatory tariffs increase welfare. In a dynamic model, if governments lack the ability to precommit, this is not necessarily true. For example, with consumer switching costs, tariffs are higher for firms with higher market share. Rationally expecting such policies, firms price less aggressively. If switching costs are significant relative to asymmetries, then higher prices can result in lower importing country welfare. Thus it may be in interests of importers to abide by the GATT MFN principle.

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Paper provided by EconWPA in its series International Trade with number 9602001.

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Length: 14 pages
Date of creation: 10 Feb 1996
Date of revision: 28 Nov 1998
Handle: RePEc:wpa:wuwpit:9602001
Note: forthcoming in Candian Journal of Economics; Type of Document - LaTeX; prepared on IBM PC; to print on any; pages: 14; figures: none
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  1. Klemperer, Paul, 1995. "Competition When Consumers Have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade," Review of Economic Studies, Wiley Blackwell, vol. 62(4), pages 515-39, October.
  2. Gruenspecht, Howard K., 1988. "Dumping and dynamic competition," Journal of International Economics, Elsevier, vol. 25(3-4), pages 225-248, November.
  3. repec:tpr:qjecon:v:101:y:1986:i:2:p:383-406 is not listed on IDEAS
  4. Anderson, James E, 1992. "Domino Dumping, I: Competitive Exporters," American Economic Review, American Economic Association, vol. 82(1), pages 65-83, March.
  5. James A. Brander & Barbara J. Spencer, 1984. "Export Subsidies and International Market Share Rivalry," NBER Working Papers 1464, National Bureau of Economic Research, Inc.
  6. Paul Klemperer, 1987. "The Competitiveness of Markets with Switching Costs," RAND Journal of Economics, The RAND Corporation, vol. 18(1), pages 138-150, Spring.
  7. Gatsios, Konstantine, 1990. "Preferential tariffs and the 'most favoured nation' principle: A note," Journal of International Economics, Elsevier, vol. 28(3-4), pages 365-373, May.
  8. Jonathan Eaton & Gene M. Grossman, 1983. "Optimal Trade and Industrial Policy Under Oligopoly," NBER Working Papers 1236, National Bureau of Economic Research, Inc.
  9. To, Theodore, 1994. "Export subsidies and oligopoly with switching costs," Journal of International Economics, Elsevier, vol. 37(1-2), pages 97-110, August.
  10. Choi, Jay Pil, 1995. "Optimal tariffs and the choice of technology Discriminatory tariffs vs. the 'Most Favored Nation' clause," Journal of International Economics, Elsevier, vol. 38(1-2), pages 143-160, February.
  11. Dick, Andrew R, 1991. "Learning by Doing and Dumping in the Semiconductor Industry," Journal of Law and Economics, University of Chicago Press, vol. 34(1), pages 133-59, April.
  12. Hong Hwang & Chao-Cheng Mai, 1991. "Optimum Discriminatory Tariffs under Oligopolistic Competition," Canadian Journal of Economics, Canadian Economics Association, vol. 24(3), pages 693-702, August.
  13. Bhagwati, Jagdish N. & Brecher, Richard A. & Dinopoulos, Elias & Srinivasan, T. N., 1987. "Quid pro quo foreign investment and welfare : A political-economy-theoretic model," Journal of Development Economics, Elsevier, vol. 27(1-2), pages 127-138, October.
  14. Gene Grossman & Elhanan Helpman, 1994. "Foreign Investment with Endogenous Protection," NBER Working Papers 4876, National Bureau of Economic Research, Inc.
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