882 research outputs found

    Antebellum Tariff Politics: Coalition Formation and Shifting Regional Interests

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    Throughout U.S. history, import tariffs have been put on a sustained downward path in only two instances: from the early-1830s until the Civil War and from the mid-1930s to the present. This paper analyzes how the movement toward higher tariffs in the 1820s was reversed for the rest of the antebellum period. Tariff politics in Congress during this period was highly sectional: the North supported high tariffs, the South favored low tariffs, and the West was a %u201Cswing%u201D region. In the 1820s, a coalition between the North and West raised tariffs by exchanging votes on import duties for spending on internal improvements. President Andrew Jackson effectively delinked these issues and destroyed the North-West alliance by vetoing several internal improvements bills. South Carolina%u2019s refusal to enforce the existing high tariffs sparked the nullification crisis and paved the way for the Compromise Tariff of 1833, which promised to phase out tariffs above 20 percent over a nine year period. Although Congress could not credibly commit itself to the staged reductions or maintaining the lower duties, the growing export interests of the West %uF818 due, ironically, to transportation improvements that made agricultural shipments economically viable %uF818 gave the region a stake with the South in maintaining a low tariff equilibrium. Thus, the West%u2019s changing position on trade policy helps explain the rise and fall of tariffs over this period.

    The Welfare Cost of Autarky: Evidence from the Jeffersonian Trade Embargo, 1807-1809

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    The United States came close to complete autarky in 1808 as a result of a self-imposed embargo on international shipping from December 1807 to March 1809. Monthly prices of exported and imported goods reveal the embargo's striking effect on commodity markets and allow a calculation of its welfare effects. A simple general equilibrium calculation suggests that the embargo cost about 8 percent of America's 1807 GNP, at a time when the trade share was about 13 percent (domestic exports and shipping earnings). The welfare cost was lower than the trade share because the embargo did not completely eliminate trade and because domestic producers successfully shifted production toward previously imported manufactured goods.

    Trade Restrictiveness and Deadweight Losses from U.S. Tariffs, 1859-1961

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    This paper calculates the Anderson-Neary (2005) trade restrictiveness index (TRI) for the United States using nearly a century of data. The results show that the standard import-weighted average tariff understates the TRI, defined as the uniform tariff that yields the same welfare loss as the existing tariff structure, by about 75 percent. The static deadweight welfare loss from the U.S. tariff structure is about one percent of GDP after the Civil War, but falls almost continuously thereafter to less than one-tenth of one percent of GDP by the early 1960s. On average, import duties resulted in a welfare loss of 40 cents for every dollar of revenue generated, slightly higher than contemporary estimates of the marginal welfare cost of taxation.

    The Impact of Federation on Australia's Trade Flows

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    In 1901, six Australian states joined together in political and economic union, creating an internal free trade area and adopting a common external tariff. This paper investigates the impact of federation on Australia's internal and international trade flows by studying changes in the "border effect" over this time. This is possible because Australian states reported intra-Australian trade prior to 1901 and for eight years after federation. The results indicate that federation itself produced little change in Australia's trade patterns, but that the border effect increased substantially between 1906 and 1909 when the protectionist Lyne Tariff was imposed.

    Tariff Incidence in America's Gilded Age

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    In the late nineteenth century, the United States imposed high tariffs to protect domestic manufacturers from foreign competition. This paper examines the magnitude of protection given to import-competing producers and the costs imposed on export-oriented producers by focusing on changes in the domestic prices of traded goods relative to non-traded goods. Because the tariffs tended to increase the prices of non-traded goods, the degree of protection was much less than indicated by nominal rates of protection; the results here suggest that the 30 percent average tariff on imports yielded a 15 percent implicit subsidy to import-competing producers while effectively taxing exporters at a rate of 11 percent. The paper also finds that tariff policy redistributed large amounts of income (about 9 percent of GDP) across groups, although the impact on consumers was only slightly negative because they devoted a sizeable share of their expenditures to exportable goods. These findings may explain why import-competing producers pressed for even greater protection in the face of already high tariffs and why consumers (as voters) did not strongly oppose the policy.

    Tariffs and Growth in Late Nineteenth Century America

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    Were high import tariffs somehow related to the strong U.S. economic growth during the late nineteenth century? This paper examines this frequently mentioned but controversial question and investigates the channels by which tariffs could have promoted growth during this period. The paper shows that: (i) late nineteenth century growth hinged more on population expansion and capital accumulation than on productivity growth; (ii) tariffs may have discouraged capital accumulation by raising the price of imported capital goods; (iii) productivity growth was most rapid in non-traded sectors (such as utilities and services) whose performance was not directly related to the tariff.

    Changes in U.S. Tariffs: Prices or Policies?

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    In the century after the Civil War, roughly two-thirds of U.S. dutiable imports were subject to specific duties whose ad valorem equivalent was inversely related to the price level. This paper finds that import price fluctuations easily dominate commercial policies (changes in rates of import duty) in bringing about changes in the average U.S. tariff from 1865-1973. About three-quarters of the post-Smoot Hawley decline in U.S. tariffs, for example, can be attributed to higher import prices, the remainder to negotiated reductions in tariff rates.

    Interpreting the Tariff-Growth Correlation of the Late Nineteenth Century

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    Recent research has documented a positive relationship between tariffs and growth in the late nineteenth century. Such a correlation does not establish a causal relationship between tariffs and growth, but it is tempting to view the correlation as constituting evidence that protectionist or inward-oriented trade strategies were successful during this period. This paper argues that such a conclusion is unwarranted and that the tariff-growth correlation should be interpreted with care. First, several individual country experiences in the late nineteenth century are not consistent with the view that import substitution promoted growth. For example, the two most rapidly expanding, high tariff countries of the period Argentina and Canada grew because capital imports helped stimulate export-led growth in agricultural staples products, not because of protectionist trade policies. Second, most land-abundant countries (such as Argentina and Canada) imposed high tariffs to raise government revenue, and revenue tariffs have a different structure than protective tariffs. The fact that labor-scarce, land-abundant countries had a high potential for growth and also tended to impose high revenue-generating tariffs confounds the inference that high tariffs were responsible for their strong economic performance during this period.
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