retaliation bargaining and the pursuit of free and fair trade that domestic political economic factors are important determinants of a nation s trade barriers has been empirically well established however the question of how effective strategically retaliatory trade barriers are in deterring foreign protectionism has received far less systematic empirical attention in this article we use bilateral nontariff barrier ntb data between the united states and five developed partner countries japan france germany italy and the united kingdom to systematically examine the effectiveness of strategic retaliation we employ a simultaneous tobit model where the home and foreign ntb levels are determined endogenously in a bilateral game the model provides estimates of deterrence coefficients that is the reduction in foreign trade barriers as a result of u s retaliation which we use to characterize the nature of bilateral ntb games our hope is that the empirical results presented here which have realistic though controversial implications will inform u s trade policy

could tariffs be pro cyclical abstract conventional wisdom says that tariffs are counter cyclical we analyze the relationship between business cycles and applied mfn tariffs using a disaggregated product level panel dataset covering 72 countries between 2000 and 2011 strikingly and counter to conventional wisdom we find that tariffs are pro cyclical further investigation reveals that this pro cyclicality is driven by the tariff setting behavior of developing countries tariffs are acyclical in developed countries we present evidence that pro cyclical market power drives the pro cyclicality of tariffs in developing countries providing further evidence of the importance of terms of trade motivations in explaining trade policy

a political economic analysis of congressional voting patterns on nafta this paper delves into the question of the determinants of congressional voting on nafta it uses a logit model to examine both house and senate votes and is able to use district specific estimates in the former it finds only very limited support for the thesis that narrowly defined employment gainers and losers were important determinants of congressional voting patterns though some substantial support that districts that were highly agricultural or already possessed a substantial hispanic population and skilled labor force and had the most to gain from the general effects of nafta lead to a positive effect on the probability that a member of the house would vote affirmatively contributions from labor unions lowered the likelihood of affirmative votes political partisanship and ideological positions apparently had little effect on the votes a representative s political capital had a marginally significant effect on the probability on an affirmative vote but it performed positively in the senate and negatively in the house

understanding international trade policies an emerging synthesis the international trade problems of the 1980s stimulated an expansion of scholarship on trade policies by economists and political scientists at least four distinct theoretical perspectives weave their way through recent literature that concentrates on the united states emphasizing market conditions policy beliefs and values national political institutions and global structures respectively new studies in each of these traditions advance beyond the work of their predecessors but none of the perspectives has yet proved adequate as a single unifying vehicle nevertheless we can also see clear movement toward a synthesis with single works blending insights from several traditions thus the books under review do not all fall neatly into the familiar exclusive categories of economics or political science the emerging synthesis needs strengthening in several ways including the development of conditioning hypotheses that will reduce remaining apparent confusions

the government procurement agreement implications of economic theory this paper analyzes the provisions of the new agreement on government procurement gpa drawing insights from trade theory and recent developments in the economics of information and law a central conclusion is that in a world where imperfectly informed procurers purchase from imperfectly competitive firms on behalf of imperfectly informed tax payers it is not easy to devise rules which would be optimal in all situations nevertheless the non discriminatory provisions of the gpa seem to approximate closely the rules which would maximize global welfare a significant benefit of the gpa is in helping to overcome national agency problems in procurement by creating mechanisms for reciprocal international monitoring supported by multilateral enforcement there is however scope for improvement first the gpa does not equip bidders for government contracts to vault over trade restrictions so the creation of genuine international competition for government procurement remains crucially dependent on the liberalization of trade secondly weaknesses remain in the enforcement mechanism these include the low level of compensation to a successful challenger the absence of restrictions on settlements and the lack of provision for challenge and review of bail outs the paper proposes certain improvements this abstract was borrowed from another version of this item

public expenditure international specialisation and agglomeration abstract it is widely recognised that public sector purchasers tend to favour domestic suppliers we study the consequences of such home biased public procurement on international specialisation using a general equilibrium model with a monopolistically competitive sector we find that a country will specialise in that sector if it has relatively large home biased procurement the pull effect furthermore home biased procurement can counter agglomeration forces in that sector and thereby attenuate the overall degree of international specialisation the spread effect our empirical analysis conducted on input output data for the european union yields supporting evidence for the pull effect and some support for the spread effect

foreign direct investment and the demand for protection in the united states over the past decade foreign direct investment fdi in the united states has grown dramatically changing the composition of many u s industries and bringing foreignowned firms into the domestic political process presumably fdi also has affected the politics of protection by both altering the domestic coalitions around protectionist demands and shifting the potential benefits that protectionism is likely to bring to understand this process we create and test a model that examines the level of inward investment and the extent to which this investment either complements or substitutes for existing import levels import complementing investment we suggest will cause a split in protectionist demands with local producers favoring protectionism and foreign investors pushing for free trade import substituting investment by contrast will create convergent interests between local and foreign producers in both cases inward fdi reshuffles traditional alliances and demands for protection challenging many prevailing views about protectionism in the united states

exchange rates and industry demands for trade protection the recent confrontation between china and the united states over currency policy illustrates a broader phenomenon exchange rate misalignments tend to spill over into trade policy although previous studies have shown that aggregate protectionist activity is positively related to the level of the real effective exchange rate we explore this relationship at the industry level several industry specific characteristics determine the protectionist response to exchange rate changes including the degree of exchange rate pass through the level of import penetration and the share of imported intermediate inputs in total industry inputs we find that the marginal effect of currency appreciation on the number of industry level antidumping petitions is positive and significant only for industries with high pass through therefore exchange rates appear to induce demands for trade barriers only in industries where competitiveness is directly harmed by currency appreciation

discriminatory public procurement policy and cost reduction incentives abstract discriminating in favor of domestic suppliers in the award of government procurement contracts is a widespread practice in this paper we extend the previous analysis of mcafee and mcmillan 1989 government procurement and international trade journal of international economics 26 291 308 and branco 1994 favoring domestic firms in procurement contracts journal of international economics 37 65 80 by considering in the same model the bidding competition stimulation effect and the favoritism effect we prove that the optimal policy can be implemented by a modified vickrey auction or by a complex modified first price auction we also consider that firms can reduce their cost by a nonobservable effort we show that taking moral hazard into account does not modify the awarding rule but that the government must use the payment rule to require a greater level of effort from the favored firm

firms and tariff regime change explaining the demand for protection although it is commonly argued that there is a connection between tariff levels and business conditions this hypothesis has not been subjected to systematic empirical analysis or given any theoretical basis the author presents two complementary theories of the movement of tariff levels in response to changing business conditions both explain tariff changes in terms of the changing political demands of business firms and both rely on the business cycle to drive these changing demands one theory is a conventional argument about changing opportunities for entry and exit the other treats firms as satisficers the theories yield similar predictions preliminary empirical analysis while consistent with both does not differentiate between them

testing theories of regime change hegemonic decline or surplus capacity two theories explain changes in the international regimes for major economic sectors a theory of hegemonic stability explains sectoral change as a consequence of ebbing hegemony a theory of surplus capacity attributes regime shifts to a serious global problem with excess production capacity in the sector the history of the world automobile industry shows that surplus capacity offers the better prediction and explanation for the timing of regime changes however a synthesis of the two theories is even more satisfactory hegemonic decline is a necessary but not sufficient condition for change surplus capacity in the absence of a hegemon creates the conditions necessary for change

the concentration of capabilities and international trade over the course of the previous two decades political scientists have become increasingly interested in the relationship between international politics and global trade much of the literature on this topic centers on the effects of a hegemonic distribution of power on commerce hegemonic stability theorists argue that hegemony is a necessary condition for the existence of a liberal economic order and that in the absence of a hegemon a liberal international economy is particularly difficult to establish and maintain however a growing number of theoretical and empirical critiques have been leveled against the gemonic stability theory and the issue of whether hegemony helps shape patterns of global trade continues to be the topic of heated debate

growth waves systemic openness and protectionism there is a distinctively repetitive quality about trade policy problems domestic economic growth slows producers seek protection against foreign competitors and national decision makers raise barriers to trade while at the same time criticizing their counterparts in other governments for engaging in similar practices because trade is one of the more important topics in international and comparative political economy and because this scenario has played itself out more than a few times it is not surprising that a number of theorists have sought to model the underlying processes thought to produce movements toward and away from protectionism by now a variety of different types of approaches ranging from the cognitive to the systemic have been tried systemic structure ideas and ideology surplus capacity business cycles and shifts in elite orientation and domestic coalitions in response to external crises have been emphasized as principal theoretical foci our position is that the different levels of analysis and alternative foci all have merit and utility what they lack is an appreciation for the underlying systemic processes that link together these various facets of the political economy we seek to develop a theoretical argument that explicates these underlying processes the argument centers on recurring growth waves characterized in alternating pattern by the ascent of system leaders and the subsequent successful attempt of technological followers to catch up with the leaders the downturns of the growth waves produce conditions favoring protectionism but we contend the form and the intensity of protectionism that are likely to be produced will depend on which of the two types of growth waves is in progress ascent waves are characterized by the emergence of new technological leaders and a consequent increase in the gap between the leaders and the technological followers during the periods of structural transition and intense

the political economy of the tariff cycle how can protectionism and free trade succeed one another our answer focuses on the changing balance of private actors political demands these actors acquire interests in tariff policies because their assets are spatially concentrated and trade in these assets is subject to various limitations actors in regions experiencing no new investment in an established industry old regions have interests that sometimes differ from those in regions where there is new investment we show that old regions have no reason to be involved in tariff politics at business cycle peaks during troughs whether a state becomes more or less protectionist depends ceteris paribus on the relative political strength of old import competing and old exporting interests if old import competing industries outweigh the old exporters then protection will tend to increase at the trough and decrease at the peak of a business cycle the opposite result occurs when old exporters are more influential

the limitations of structural theories of commercial policy if a structural theory is one that purports to explain behavior in terms of environmental conditions and that largely eschews analysis of the internal processes of decision makers then it is difficult to identify a theory of commercial policy which is not structural most microeconomic theory is structural so are most balance of power theories in the realm of theories of commercial policy hegemonic stability theories as well as some recently developed theories of international tariff levels fit this description in the latter category judith goldstein s work which attempts to account for american commercial policy in terms of the ideology of american central decision makers and charles kindleberger s ambitious sketch of a general theory of 19th century tariff changes in terms of the diffusion of liberal ideology constitute lonely examples of nonstructural research strategies

tariffs and growth in the late 19th century the paper estimates the correlation between tariffs and economic growth in the late 19th century in the context of three types of growth equation unconditional convergence equations conditional convergence equations and factor accumulation models it does so for a panel of ten countries between 1875 and 1914 tariffs were positively correlated with growth in these countries during this period economic theory is ambiguous as regards the relationship between trade policy and growth the growth literature of the past decade has produced an impressive array of models in which protection can either increase or reduce long run growth rates grossman and helpman 1991 rivera batiz and romer 1991 stokey 1991 young 1991 such theoretical ambiguity invites empirical research while new growth theory is ambiguous on the subject the new empirical growth literature has produced a consensus that free trade is positively associated with growth based on evidence from the late 20th century but see rodrlguez and rodrik 1999 for a sceptical review of the literature the clear

government procurement and international trade abstract we model the bidding for a government contract in which there is imperfect competition each bidder is better informed about his own costs than either his rival bidders or the government and the distribution of the domestic firms costs differs from the distribution of foreign firms costs because of comparative advantage effects we find that the government minimizes its expected procurement cost by operating a price preference policy not necessarily purchasing from the lowest bidder

unemployment collective bargaining and the demand for protection there is a widespread consensus among nonacademic observers that labor unions with large numbers of unemployed members have been central actors in political coalitions demanding protectionist trade policies since the mid 1970s in advanced industrial societies yet trade unions and unemployment are hardly mentioned in most theories of the politics of international trade the purpose of this paper is to develop a theoretical framework for understanding the importance of unemployment as a determinant of protectionist demands that is consistent with optimizing behavior on the part of union members and firms models of labor negotiations derived from cooperative bargaining theory are used to illustrate why the material benefits of protection received by union members and their employers in protected industries increase when union members are unemployed even when workers are risk neutral and capital is immobile

the march of an economic idea protectionism isn t counter cyclic anymore conventional wisdom holds that protectionism is counter cyclic tariffs quotas and the like grow during recessions while that may have been a valid description of the data before the first world war it is now inaccurate since the second world war protectionism has not been counter cyclic tariffs and non tariff barriers simply do not rise systematically during downturns i document this new stylised fact with a panel of data covering over 180 countries and 40 years using over a dozen measures of protectionism and six of business cycles i test and reject a number of potential reasons why protectionism is no longer counter cyclic a diagnosis of exclusion leads me to believe that modern economics may well be responsible for the decline in protectionism s cyclic behaviour economists are more united in their disdain for protectionism than virtually any other concept this in turn leaves one optimistic that the level of protectionism will continue to decline along with its cyclicality andrew k rose

toward a business cycle model of tariffs a modified interest group model links movements in tariffs to changes in the level of economic activity within nations this model is introduced and tested for tariff behavior in the 19th and early 20th centuries in three nations the united states great britain and germany empirical analysis lends strong support to the model s central thesis that tariffs are sensitive to movements within a business cycle tariff changes occurring in the three nations with the exception of british tariff increases generally conform to the expectations of the model furthermore business cycle sensitivity provides an explanation of the behavior of tariffs superior to two prominent alternatives those based on ideology and on hegemonic stability

trade and the variety of democratic institutions students of comparative politics have long acknowledged the importance of such institutional factors as electoral systems parliamentary versus presidential rule and the strength of parties but they have either regarded the institutions as given or have explained them entirely in domestic terms associating proportional representation for example with the intensity of social cleavages in economically advanced democracies however these institutional aspects can be plausibly linked to dependence on trade proportional representation the parliamentary system strong parties and large electoral districts have survival value for developed democracies exposed to trade that the recently revived agitation for proportional representation in the united kingdom has been cast explicitly in terms of economic necessity and dependence on trade adds force to this argument and suggests the need for further historical research on other cases of institutional adaptation and change

labour market discrimination on the basis of health an application to uk data an analysis of wage discrimination is carried out on the basis of health on uk data with a number of important modifications first selection is controlled for into both health and labour market status second the direct effect of health upon productivity is accounted for and third discrimination is examined with regard to participation as well as wages the question of selection into health status is found to be of little empirical importance but taking account of selection into labour market status and the direct impact of health upon productivity leads to a fall in measured discrimination the paper finds similar results with regard to participation it is also examined whether these effects differ across age and gender

the limits of international organization systematic failure in the management of international relations contributors to the literature on international organization io have traditionally been overly optimistic about the ability of multilateral management to stabilize in ternational relations and have tended to ignore the destabilizing effects of io while recent revisionist scholarship has acknowledged both the potential for organizational failure and the conditionality of management it has tended to focus on how io fails within specific issue areas and institutions this article offers a typology of the inherent systematic failures of io across issue areas and institutions and thereby seeks to bridge the gaps in our understanding of why many different institutions and managerial schemes have adverse effects it argues that io is prone to failure 1 when it attempts to manage complex tightly coupled systems of relations and issues 2 when it serves as a substitute either for more substantive and long term resolutions to international problems or for responsible domestic or foreign policy 3 when it intensifies international disputes and 4 when it generates moral hazard in offering a general theoretical approach to understanding the destabilizing effects of io the analysis is intended to serve both as a focal point for understanding critical approaches to the study of io and as an alternative rationale for eliminating the excesses of multilateral management

promoting fair competition in public procurement abstract if a government cares for local firms profit but not for foreign firms foreign firms will be discriminated against when competing for government procurement contracts foreign firms will be chosen less often and when chosen earn less profit than local firms we analyze a more central authority s policies against such discrimination given a situation in which a government has private information on product quality and the competing firms have private information on own costs necessary and sufficient conditions for free revelation of quality information are derived finally optimal policy when these conditions are not satisfied is characterized and discussed

auction design and favoritism abstract the theory of auctions has ignored the fact that often auction designers not the principal design auctions in a multi attribute auction the auction designer may bias his subjective evaluation of quality or distort the relative weights of the various attributes to favor a specific bidder an ancient concern in the procurement of weapons in the auctioning of government contracts and in the purchase of electricity by regulated power companies the paper analyzes the steps to be taken to reduce the possibility of favoritism it is first shown that in the absence of favoritism quality differentials among firms are more likely to be ignored if the auction designer has imperfect information about the firm s costs second if the auction designer may collude with only one bidder the other bidders should be chosen if they are at least as efficient as the former bidder and no hard information about quality differentials is released by the auction designer that would justify fair discrimination in favor of the former bidder last if the auction designer can collude with any bidder the optimal auction tends to a symmetric auction in which quality differentials are ignored the possibility of favoritism reduces the auction designer s discretion and makes the selection process focus on non manipulable monetary dimensions of bids

taxation and the political economy of the tariff traditional accounts of u s tariff policy emphasize trade strategies and interest group politics this article makes a departure it opens with an observation up until world war i the tariff was the largest single source of federal government revenues it then explores the significance of tariffs as taxes theoretically and empirically in its first part the article develops a theory of taxation politics and applies it to the tariff in its second part it submits the theory to an empirical test modeling changes in u s tariff rates from 1829 to 1940 the politics of tariff revision it argues followed from two characteristics of the tariff as tax from the extent of the treasury s dependence upon it and from the distributive pattern of its burdens and benefits taken together the article concludes revenue dependence and distributive incidence account for several diverse aspects of american tariff policy including the structure of its coalitions the shifts in its objectives and the timing of its innovations