Tariffs, horizontal regulatory standards and protection against foreign competition
journal contributionposted on 21.05.2014 by Huw Edwards
Any type of content formally published in an academic journal, usually following a peer-review process.
This paper focuses on a regulator's choice between setting a pure, horizontal technical barrier to trade (HTBT) or a tariff in a linear, Cournot duopoly, where a foreign firm competes with a local rival. Where a country is free to impose a tariff, it will not impose a HTBT. Only under a limited set of circumstances will the profit-shifting effect be sufficient to lead to total exclusion of the foreign firm: in other conditions, the country will set a tariff yielding some revenue. By contrast, if tariffs are constrained by international agreement, then the importing country will set an HTBT to exclude the foreign firm if and only if tariffs are reduced below a threshold level. Trade liberalisation agreements which only cover tariffs can reduce, rather than increase global welfare.
- Business and Economics