Pre-tax car prices are particularly low in EU countries with high registration taxes but no car production, meaning that the tax is equivalent to an import tariff and induces international price discrimination. The paper develops a theorectical model to analyse the European Commission's policy of facilitating arbitrage and thereby reducing car price differences. The effects on prices, quantitie...

Much trade liberalization involves large and small countries. This paper presents a formal comparison of the economic welfare effects for the small and large country from unilateral free trade by the small country, from a free trade agreement, and from preferential access to the large country’s market. I show that it matters for the welfare effects of these strategies whether the small country ...

We analyze the effect of the Byrd Amendment, which amended the US Tariff Act of 1930 to allow revenue from antidumping duties to be distributed to domestic import-competing firms. In an international duopoly framework it is shown that it urges the home firm to restrict output so that the foreign firm increases output and that revenue from the duties increases. Consequently, not only the home fi...

This paper uses the methodology developed in Kehoe and Ruhl (2013) to measure the change in the extensive, or new goods, margin of trade between Japan and China after China’s entry into the World Trade Organization in 2001. The new goods account for 15.9% of Japanese exports to China and 22% of Chinese exports to Japan after trade liberalization. For the case of Chinese exports to Japan, a time...

Trade subject to predation generates externalities within and between markets. Efficient tax, infrastructure and enforcement policies internalize the net externality — more trade ⇒ fewer predators but drawn to trade at rising cost. The balance is positive (negative) as enforcement is weak (strong). Dual economies pair weak Periphery and strong Core enforcement markets. Efficient taxation and in...

Analyses of trade quotas typically assume that the quota restricts the flow of some nondurable good. Many real-world quotas, however, restrict the stock of durable imports. We consider the cases where (1) anyone is free to export against such quotas and where (2) only those allocated portions of the total quota are free to export against such quotas. Recent econometric investigations of such qu...

This paper explores the welfare consequences of foreign investment taxation in a small open economy, based on the notion that the true productivity of imported capital may be unknown to policy-makers. It is shown that while asymmetric information between capital importers and the host government precludes the use of a productivity specific policy measure, an across-the-board policy suffers from...

Using a competitive two-country two-commodity monetary model with optimizing agents in which persistent unemployment arises, this paper examines the effects of trade restrictions on consumption and employment in the two countries. When facing unemployment, a country tends to impose an import restriction so that domestic firms will increase production and raise employment. However, this policy i...

In this paper we study the optimal import policy in an oligopolistic market with a given number of quantity-setting firms. In the absence of fixed costs, we show that if the policy instrument is an import quota, the optimal policy is either free trade or autarky, while if the instrument is a tariff the optimal policy is neither free trade nor autarky. In the case of fixed costs, we show that co...

States with weak institutions can lose from trade with strong states when trade is subject to predation. The happy liberal idea of trade fostering better institutions and peace can be turned on its head. The Ricardian model of trade subject to predation offered here implies imperialism without capital, contra Marxists. Weak and poor South trades with strong and rich North. Poor South labor is a...