United States Effective Tariffs and Labor's Share

ANALYSIS and interpretation of the nature of the tariff schedules of the United States and other developed countries serve two important functions. First, it serves to check the empirical relevance of the factorproportions theory of trade, which predicts that an economy's relatively scarce factor has incentive to seek protection from international competition. Second, it discloses the nature of the tariff protection that stands between the export industries of the developing countries and the markets of the United States and other developed countries. ' Recent estimates of effective tariff rates, which take into account not only the tariff on imports competitive with an industry's output but also tariffs on the industry's inputs, have increased our knowledge of the protective effect of the tariff systems of some developed countries. This paper offers an interpretation of the pattern of effective protection that differs from those offered heretofore and that appears to be consistent with the results of other research in international trade. One lesson of a decade's research on the basis of international trade is that labor skills are important, or that the homogeneous labor assumption has not served us well. Among other explanations of his scarce-factor paradox, Leontief (1954, p. 26) considered the possibility that American labor could be so much more productive than foreign labor that the United States would be relatively labor-abundant. Leontief (1956, p. 399) offered evidence that when labor requirements by five levels of skill were employed, 1947 U.S. export production was relatively skill-intensive compared with import-competing production. Keesing (1965, 1966) has reported similar results for 1957 and 1962 U.S. foreign trade in manufactures. Kravis (1956b, p. 14) found that wages in major U.S. export industries are higher than both the national average and wages in import-competing industries; moreover, "Relatively higher wages have characterized exported manufactures for over half a century. " Kenen (1965, pp. 45658) has "dispatched" the Leontief paradox by capitalizing at 9 per cent the excess earnings (over the lowest skill group, laborers) of higher-skill labor requirements in 1947 U.S. export and import-competing production; because export production is skill-intensive, the total capital (tangible plus human) requirements per man-year are less in import-competing production than in export production. Travis (1964, p. 109) has estimated that "there was less than one-half as much capital per worker in France in 1956 as in the United States in 1947," a result that conforms with the general belief that the United States is capital-abundant even in comparison with other developed countries. These results suggest that the United States is both (tangible) capital-abundant and skilled-labor-abundant relative to her trading partners,2 and that this explains the skill-intensity of her exports, and the capital-intensity of her exports when human capital is included in total capital requirements. One implication of this hypothesis is that U.S. industries with relatively high proportions of unskilled labor in their factor requirements will seek relatively higher pro-