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Optimal Tariff Policy on Imports from Multinationals

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  • PETER SVEDBERG

Abstract

Using partial equilibrium analysis, it is shown that for small countries there is an optimal tariff on imports from a monopolistic multinational. There is also (under specified circumstances) a tariff at which the multinational finds subsidiary production more profitable than exports: the switchover tariff. The interaction between the optimal and switchover tariffs is analyzed from the small country's welfare standpoint. The conclusion is that there is not one, but a variety of possible optimal policies for the country: trade at the optimal tariff, with or without prohibition of subsidiary production, or tariff‐protected subsidiary production.

Suggested Citation

  • Peter Svedberg, 1979. "Optimal Tariff Policy on Imports from Multinationals," The Economic Record, The Economic Society of Australia, vol. 55(1), pages 64-67, March.
    • Handle: RePEc:bla:ecorec:v:55:y:1979:i:1:p:64-67
    DOI: 10.1111/j.1475-4932.1979.tb02203.x
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    Cited by:

    1. McCalman, Phillip, 2023. "Robust trade policy to offset foreign market power," European Economic Review, Elsevier, vol. 154(C).
    2. Feenstra, Robert C., 1989. "Symmetric pass-through of tariffs and exchange rates under imperfect competition: An empirical test," Journal of International Economics, Elsevier, vol. 27(1-2), pages 25-45, August.
    3. Brander, James A. & Spencer, Barbara J., 1984. "Trade warfare: Tariffs and cartels," Journal of International Economics, Elsevier, vol. 16(3-4), pages 227-242, May.
    4. Feenstra, Robert C., 1995. "Estimating the effects of trade policy," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 30, pages 1553-1595, Elsevier.
    5. Corden, W. Max, 1990. "Strategic trade policy : how new? how sensible?," Policy Research Working Paper Series 396, The World Bank.
    6. Vishwasrao, Sharmila & Gupta, Srabana & Benchekroun, Hassan, 2007. "Optimum tariffs and patent length in a model of North-South technology transfer," International Review of Economics & Finance, Elsevier, vol. 16(1), pages 1-14.
    7. Carsten Kowalczyk, 1990. "Monopoly and Trade Policy," NBER Working Papers 3475, National Bureau of Economic Research, Inc.
    8. Davies, Ronald B., 2013. "The silver lining of red tape," Journal of Public Economics, Elsevier, vol. 101(C), pages 68-76.
    9. Yang, Quanfa & Cheng, Liyun, 2008. "Import tariff, intellectual property right protection and foreign merger," Economic Modelling, Elsevier, vol. 25(6), pages 1225-1231, November.
    10. Bletschacher, Georg, 1991. "Ansätze strategischer Handels- und Industriepolitik: Ein Überblick," Kiel Working Papers 487, Kiel Institute for the World Economy (IfW Kiel).
    11. Fiamohe, Rose & Diallo, Souleymane & Diagne, Aliou & Agossadou, Arsene, 2015. "Impact of the ECOWAS Common External Tariff on the Rice Sector in West Africa," 2015 Conference, August 9-14, 2015, Milan, Italy 211632, International Association of Agricultural Economists.
    12. Santiago J. Rubio & María Dolores Alepuz, 2005. "Foreign Monopolies And Tariff Agreements Under Integrated Markets," Working Papers. Serie AD 2005-38, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    13. Baldwin, Robert E, 1992. "Are Economists' Traditional Trade Policy Views Still Valid?," Journal of Economic Literature, American Economic Association, vol. 30(2), pages 804-829, June.
    14. Kala Krishna, 1990. "Making Altruism Pay in Auction Quotas," NBER Working Papers 3230, National Bureau of Economic Research, Inc.
    15. Natalia Zugravu-Soilita, 2018. "The impact of trade in environmental goods on pollution: what are we learning from the transition economies’ experience?," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 20(4), pages 785-827, October.
    16. Hasanat Shah, Syed & Ahmad Nawaz, Hakro, 2006. "Economic rationale, trade impact and extent of antidumping – case study of Pakistan," MPRA Paper 35817, University Library of Munich, Germany, revised 2007.
    17. Alain-Désiré Nimubona, 2012. "Pollution Policy and Trade Liberalization of Environmental Goods," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 53(3), pages 323-346, November.
    18. Ahmed Nawaz Hakro & Syed Hasanat Shah, 2007. "Economic Rationale, Trade Impact and Extent of Antidumping – A Case Study of Pakistan," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 12(1), pages 79-98, Jan-Jun.
    19. Dobrin R. Kolev & Thomas J. Prusa, 1997. "Tariff Policy for a Monopolist Under Incomplete Information," NBER Working Papers 6090, National Bureau of Economic Research, Inc.
    20. Brander, James A., 1995. "Strategic trade policy," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 27, pages 1395-1455, Elsevier.
    21. Gene M Grossman & Elhanan Helpman, 2021. "When Tariffs Disrupt Global Supply Chains," Working Papers 274, Princeton University, Department of Economics, Center for Economic Policy Studies..
    22. Rishi R. Sharma, 2018. "Optimal tariffs with inframarginal exporters," Review of International Economics, Wiley Blackwell, vol. 26(4), pages 768-783, September.
    23. Santiago Rubio, 2011. "On Capturing Rent from a Non-renewable Resource International Monopoly: Prices Versus Quantities," Dynamic Games and Applications, Springer, vol. 1(4), pages 558-580, December.
    24. Natalia Zugravu-Soilita, 2016. "Trade in environmental goods and sustainable development: What are we learning from the transition economies’ experience?," Working Papers 2016.16, FAERE - French Association of Environmental and Resource Economists.

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