A general equilibrium analysis of US foreign trade policy

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Bibliographic Information

A general equilibrium analysis of US foreign trade policy

Jaime de Melo, David Tarr

MIT Press, c1992

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Note

Bibliography: p.[261]-276

Includes indexes

Description and Table of Contents

Description

Using applied general equilibrium methods to analyze recent debates about the conduct of US foreign trade policy, de Melo and Tarr show that in terms of costs to the economy and to consumers, non-tariff barriers in textiles, automobiles, and steel have more than reversed the benefits of cumulative tariff liberalization achieved in successive postwar GATT rounds. The authors' model is the first large-scale computer simulation of the effects of changes in US import quotas. It begins with perfect competition, proceeds to imperfect factor markets, and then introduces increasing returns to scale and imperfect product markets. The basic model and its variants are carefully explained to show how valuable and sensible a tool the model is for analyzing trade policy and to facilitate understanding of the construction of a general equilibrium model. Tables and figures are used extensively to illustrate the principles involved. A detailed introduction takes up trade policy issues, argues for the superiority of a general equilibrium approach, and surveys previous studies of the cost of protection. The chapters that follow describe the basic general equilibrium model and its extensions and application to specific policies and industries. The authors summarize their results by explaining the costs per job protected by quotas, the estimated costs of all quantitative restrictions, and the computations of tariffs with a welfare cost equivalent to that of quotas.

Table of Contents

  • Part 1 Recent issues in U.S. foreign trade policy: policy issues
  • why a general equilibrium model?
  • previous studies of the cost of protection. Part 2 Trade policy analysis in a one-sector general equilibrium model with product differentiation: product differentiation and specialization
  • a one-sector model with differentiated trade
  • comparative statics - a graphical analysis of terms-of-trade, transfer, and tariff changes
  • a digression - choice of numeraire and the real exhange rate
  • costs of protection in the one-sector model
  • trade policy and resource shifts in the presence of product differentiation. Part 3 The basic general equilibrium trade model: overview of the model
  • equations of the basic trade model
  • modeling of quantitative restrictions
  • welfare measure
  • definition of the welfare measure
  • the real exchange rate. Part 4 Quota premium rates and rent capture: who captures the quota rents?
  • quota rent estimates in textiles and apparel
  • quota rent estimates for automobiles from Japan and Europe
  • voluntary export restraints on steel. Part 5 Welfare costs of U.S. quotas in textiles and apparel, automobiles, and steel in the basic model: elasticity specification
  • removing quotas on textiles and apparel
  • removing voluntary export restraints on Japanese automobiles
  • imposing voluntary export restraints on steel
  • joint removal of quotas in the three sectors
  • introducing terms-of-trade effects
  • comparisons with earlier estimates
  • liberalization with endogenous quota permia and sectoral rationing of steel. Part 6 Welfare costs of quantitative restrictions under different factor market assumptions: labour-leisure choice
  • welfare costs of quotas in steel and automobiles in the presence of wage distortions
  • modeling labour unions in the automobile and steel sectors
  • short-run welfare costs of quotas in textiles and apparel, automobiles and steel
  • welfare costs of quotas with international capital mobility
  • the welfare measure and labour-leisure trade-off
  • derivation of labour union wage differential. Part 7 Welfare costs of quantitative restrictions with imperfect competition in automobiles and steel: evidence on economies of scale and pricing rules in steel and automobiles
  • modifications to the basic model to accommodate imperfect competition
  • welfare costs of quantitative restrictions with imperfect competition
  • derivation of the price elasticity of demand. Part 8 Revenue-raising taxes - evaluation of alternative strategies for taxing petroleum industries: recent proposals for taxing petroleum industries
  • adaptation of the basic model to the energy sector
  • revenue and welfare effects of tax proposals
  • efficient taxation of petroleum industries. Part 9 Conclusions: summary of results
  • costs per job protected by quota protection
  • estimated costs of all quantitative restrictions
  • computation of tariffs with a welfare cost equivalent to that of quotas
  • directions for future research.

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