Minimum quality levels and import tariffs

In a vertically differentiated duopoly the use of import tariffs by an importing country decreases domestic welfare if import tariffs are chosen once the firms have made their quality decisions. In this paper we propose import tariffs that are contingent on some minimum quality level (MQL) being met. A firm is taxed if it fails to meet these MQL. Import tariffs conditional on fulfilling the MQL are welfare improving over free trade. Investment in quality increases, market coverage goes up and consumer surplus increases. Firm profits decrease relative to free trade under such tariffs

PROFILES OF TARIFFS IN GLOBAL AGRICULTURAL MARKETS

High protection for agricultural commodities in the form of tariffs continues to be the major factor restricting world trade. The large differences in average tariffs across countries make it possible for farmers in one country to benefit from tariff protection while farmers in other countries lose income because of lower prices resulting from those tariffs. This report provides the first comprehensive analysis of agricultural tariffs and tariff-rate quotas (limits on imported goods) across a large number of countries and commodities and finds that high average tariffs create barriers to markets for U.S. and other farmers.market access, megatariffs, tariff profiles, over-quota tariffs, in-quota tariffs, tariff-rate quotas, World Trade Organization, International Relations/Trade,

Wright tariffs in the spanish electricity industry: The case of residential consumption.

This paper develops a capacity price model for the Spanish electricity industry and presents utilization level tariffs as an example of duration tariffs (Wright tariffs) when duration is aproximated by the ratio of consumption to power used. With this model and with the data on residential consumption of electricity several optimal t\\'o part tariffs for the residential level of utilization considering several hypothesis on the configuration of the generating equipment are computed. This allows for the estimation of the degree of optimality of the current tariff and to obtain an aproximation of efficiency losses caused by the existing regulatory regime.Capacity princing; Wright tariffs; Residential electricity;

Trade Wars and Trade Talks with Data

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.

The Market Reaction to Trump\u27s Trade War

This event study looks at the market reaction to the global trade tensions that began in the first half of 2018. The events regarding new developments around the use of tariffs are organized in chronological order, and the stocks of certain impacted companies are looked at to see if they were positively or negatively affected by the news. To summarize the market reaction to tariffs, I use a zero cost portfolio consisting of long positions in those expected to be positively impacted and short positions in those expected to be negatively impacted. If this portfolio sees a larger return on the day of a given event, it is considered that the market reacted more severely to the news. For a further breakdown, the events are grouped together by the countries involved with the event and by the type of event. I look at tariffs imposed by the United States, the European Union, Canada, Mexico, and China. The event types include announcements of plans for new tariffs, announcements of exemptions from tariffs, and the formal implementation of tariffs. I find that the most significant market reaction took place in the early months of the trade war, which is evident in that there appears to be the widest spread in returns between those positively and those negatively impacted during this time. As the trade war dragged on in 2018, tariffs were imposed on a broader range of products, and the market reaction became less severe. This information could be useful to traders and asset managers going forward as it appears much of the impact of these tariffs is already reflected in stock prices

Heterogeneous Productivity Response to Tariff Reduction: Evidence from Brazilian Manufacturing Firms

This paper studies the effects of trade liberalization on the evolution of firm productivity. The productivity of each firm was estimated using an unbalanced panel data of 4,484 Brazilian manufacturing firms from 1986 to 1998, following the procedure first proposed by Olley and Pakes (1996) and further developed by Levinsohn and Petrin (2003). First, the effect of nominal tariffs on firms' productivity levels is identified. After controlling for the endogeneity of nominal tariffs, the estimated coefficient for tariffs in the productivity equation turns out to be negative. Second, a measure of tariffs on inputs is added in the productivity equation. The coefficient associated with tariffs on inputs is also negative, and the inclusion of this new variable reduces the size of the estimated coefficient of nominal tariffs. Thus, it seems that, along with the increased competition, the new access to inputs that embody better foreign technology also contributes to productivity gains after trade liberalization. Third, it is shown that there is a huge degree of heterogeneity of responses to trade liberalization. The effect of the tariff reductions depends heavily on observed and unobserved characteristics of the firm.

MFN status and the choice of tariff regime

The gradualist approach to trade liberalization views the uniform tariffs implied by MFN status as an important step on the path to free trade. We investigate whether a regime of uniform tariffs will be preferable to discriminatory tariffs when countries engage in non-cooperative interaction in multilateral trade. The analysis includes product differentiation and asymmetric costs. We show that with the cost asymmetry the countries will disagree on the choice of tariff regime. When the choice of import tariffs and export subsidies is made sequentially the uniform tariff regime may not be sustainable, because of an incentive to deviate to a discriminatory regime. Hence, an international body is needed to ensure compliance with tariff agreement

Interpreting the Tariff-Growth Correlation of the Late Nineteenth Century

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.

Non-Tariff Barriers and Trade Liberalization

This paper shows that governments have no incentive to introduce non-tariff barriers when they are free to set tariffs but they do when tariffs are determined cooperatively. We then show three results. First, with trade liberalization, there is a progression from using tariffs only to quotas, and to antidumping constraints (when quotas are jointly eliminated). Second, there is a narrowing of the range of industries in which each instrument is used. Third,the degree of tariff liberalization and of replacement of tariffs by NTBs depend on industry characteristics.These results are roughly in line with the empirical evidence.Tariffs, Trade Policy, Reciprocal Dumping, Quotas, Antidumping

A theory of dynamic tariff and quota retaliation

This paper establishes relationships between static Nash equilibria and dynamic Markov perfect equilibria of tariff and quota retaliation games. In supermodular games where tariffs are strategic complements, the steady state of every, symmetric Markov perfect equilibrium must have lower tariffs than in the static equilibrium. If tariffs are strategic substitutes, tariffs in the dynamic game are higher than in the static equilibrium. The supermodular case is extended to quota competition. Instead of the well-known non-equivalence between tariff and quota retaliation outcomes under complete myopia, in some circumstances, free trade can be supported in the steady state of a Markov perfect equilibrium, regardless of whether policies employed are quotas or tariffs. We reach the conclusion that the effect of introducing dynamics crucially depends on whether the policy instruments employed by the countries are strategic substitutes or complements irrespective of whether they are tariffs or quotas.Foreign trade policy; Tariff; Quota; Retaliation; Dynamic Game; Markov perfect equilibrium; Supermodular games