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Tariff protection in developed and developing countries: a cross-sectional and longitudinal analysis

  • John A. C. Conybeare (a1)

Four political models (the international system, rational domestic economic policy, intragovemmental politics, and interest group influence) may explain the cross-national structure of average nominal levels of tariffs on manufactures. Using available data measuring or approximating the explanatory variables for the time periods 1902 and 1971, selected hypotheses were tested in regression equations. The 1971 tariff levels are best predicted by rational economic policy variables while for 1902, international power variables provide the best predictions of the tariff. In general, the causal forces influencing the cross-national pattern of tariff levels appear to have shifted in the 20th century from those indicating international power to those measuring domestic politico-economic development. These results provide evidence relevant to some of the general propositions about size and development suggested by the contemporary political economy literature. They also lend support to those who argue that a rising level of international interdependence has resulted in long-term changes in the pattern of influences on national public policies.

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I would like to thank Peter Katzenstein and two anonymous reviewers for helpful comments leading to the revision of this paper.

1. See Krasner, S. D., “State Power and the Structure of Foreign Trade,” World Politics 28 (1976): 317–47; Keohane, R. O., “The Theory of Hegemonic Stability and Changes in International Economic Regimes, 1967–1977,” in Holsti, Ole R., Siverson, Randolph M., and George, Alexander L., eds., Change in the International System (Boulder: Westview, 1980), pp. 131–62.

2. Kreuger, A. O., “The Political Economy of the Rent-Seeking Society,” American Economic Review 64 (1974): 291303.

3. Pincus, J. J., “Pressure Groups and the Pattern of Tariffs,” Journal of Political Economy 83 (1975): 757–78; Caves, R. E., “Canada's Tariff Structure,” Canadian Journal of Economics 9 (1976); 279300; Anderson, K. and Baldwin, R. E., “The Political Market for Tariff Protection in Industrial Countries: New Empirical Evidence,” mimeo (Canberra: Australian National University, 1980). The World Bank studies examined Australia, Belgium, Canada, Japan, Netherlands, Sweden, U.K., United States, and West Germany.

4. Ray, E. J., “The Optimum Commodity Tariff and Tariff Rates in Developed and Less Developed Countries,” Review of Economics and Statistics 56 (1974): 369–77; Ray, “Tariff and Nontariff Barriers in the United States and Abroad,” ibid. 63 (1981): 161–68. Ray's finding Tariff protection 443 that foreign tariffs are negatively related to labor intensity of production is inconsistent with the results reported by Anderson, and Baldwin, , “Political Market,” pp. 1920, though this may be due to the averaging method Ray employs in “Tariff and Nontariff Barriers.”

5. See Little, I., Scitovsky, T., and Scott, M., Industry and Trade in Some Developing Countries (London: Oxford University Press, 1970), pp. 162–63.

6. Finger, J. M., “GATT Tariff Concessions and the Exports of Developing Countries,” Economic Journal 84 (1974): 566–75.

7. Ray, , “Optimum Commodity Tariff,” pp. 372–73.

8. See Ray, , “Tariff and Nontariff Barriers,” and Ray, , “The Determinants of Tariff and Nontariff Trade Restrictions in the United States,” Journal of Political Economy 89 (1981): 105–21.

9. The effects of the international system on domestic policies, including the effects of military power relative to the rest of the system, are discussed in Gourevitch, P. A., “The Second Image Reversed: The International Sources of Domestic Politics,” International Organization 32 (1978): 881912.

10. Kindleberger, C. P., The World in Depression (Berkeley: University of California Press, 1973), and Krasner, “State Power.”

11. See Lipson, C., “The Transformation of Trade: The Sources and Effects of Regime Change,” International Organization 36 (1982), p. 420.

12. Katzenstein, P. J., “Capitalism in One Country? Switzerland in the International Economy,” Cornell University Western Societies Program, Occasional Paper no. 13 (Ithaca, N.Y., 01 1980), pp. 113–26. A shortened version appears in International Organization 34 (1980): 507–37.

13. See, for example, Maizels, A., Industrial Growth and World Trade (Cambridge: Cambridge University Press, 1971), pp. 141–44.

14. Olson, M., The Rise and Decline of Nations (New Haven: Yale University Press, 1982), pp. 118–45.

15. Thompson, E. A., “An Economic Basis for Aiding Certain Industries,” Journal of Political Economy, 87 (1979): 136. Military reasons have also been cited as a factor contributing to the tariff levels of the interwar period; see Liepman, H., Tariff Levels and the Economic Unity of Europe (1938; Philadelphia: Porcupine Press, 1980), pp. 365–66.

16. International Monetary Fund, Government Finance Statistics Yearbook 5 (1981), pp. 1920.

17. Cameron, D., “The Expansion of the Public Economy: A Comparative Analysis,” American Political Science Review 72 (1978), p. 1253.

18. See Olson, M., The Logic of Collective Action (Cambridge: Harvard University Press, 1965).

19. Comparing the industrial concentration data provided by Pryor, F. L., “An International Comparison of Concentration Ratios,” Review of Economics and Statistics 54 (1972), p. 131, and the trade concentration indices provided by Johnston, R. J., The World Trade System: Some Enquiries into Its Spatial Structure (New York: St. Martin's, 1976), pp. 166–68.

20. See Cooper, R. N., The Economics of Interdependence (New York: McGraw-Hill, 1968), pp. 5981.

21. Ray, , “Determinants,” p. 107.

22. See Anderson, and Baldwin, , “Political Market,” pp. 1920. Again, there is some inconsistency with the findings of Ray in “Tariff and Nontariff Barriers,” who reported that U.S. tariffs were positively associated with industrial concentration.

23. Bauer, R. A., Pool, I. de Sola, and Dexter, L. A., American Business and Public Policy (Chicago: Aldine, 1963), especially chap. 15.

24. Hartigan, J. C. and Tower, E., “Trade Policy and the American Income Distribution,” Review of Economics and Statistics 64 (1982): 261–69. The analytic theory of tariffs, income distribution, and rent-seeking has been summarized and extended in Magee, S. P. and Brock, W. A., “A Model of Politics, Tariffs and Rent Seeking in Equilibrium,” paper presented to the International Economic Association, Sixth World Congress of Economists, Mexico City, 7 08 1980.

25. See Little Scitovsky, , and Scott, , Industry and Trade, pp. 162–68.

26. On threats and power in tariff diplomacy around the turn of the century, see Hoffman, Ross J. S., Great Britain and the German Trade Rivalry 1875–1914 (1933; New York: Russell, 1964).

27. Keohane and Nye imply the association of linkage with periods of power asymmetry in their suggestion that “complex interdependence” reduces the fungibility of military power and hence the utility of strategies based on the linkage of military power to other issues. Dominant powers, they suggest, will clearly be more affected by the decline in the utility of military force, while small powers may continue to attempt linkage strategies. See Keohane, R. O. and Nye, J. S., Power and Interdependence (Boston: Little, Brown, 1976), pp. 3032.

28. Chenery, H. B. and Taylor, L., “Development Patterns: Among Countries and Over Time,” Review of Economics and Statistics 50 (1968): 391416; Olson, Rise and Decline.

29. Katzenstein, “Capitalism”; see Pryor, “International Comparison,” for concentration ratios. The reader may note that the correlation between CON and TAR cited earlier for Pryor's sample of mainly large, industrial countries was strongly negative. However, if the sample were to be expanded to include the 6 small developed countries omitted from Pryor's sample (Denmark, Norway, Finland, Austria, Australia, New Zealand), the correlation between concentration and tariffs may tend to a positive value-given that these omitted countries have a high average tariff level and (according to Pryor's theory) should be industrially concentrated.

30. The government revenue figure comes from IMF, Government Finance, p. 31.

31. See, for example, Morse, E. L., Modernization and International Relations (New York: Free Press, 1976).

32. The evidence presented here, being limited to two points in time, does not, of course, imply anything about the degree of linearity in the process whereby economic variables have become more influential than size of power variables.

33. The relative usefulness of military and economic power over time has been discussed by, among others, Knorr, K., Power and Wealth: The Political Economy of International Power (New York: Basic Books, 1973).

34. See, for example, Keohane and Nye, Power and Interdependence.

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International Organization
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