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Import tariff led export under-invoicing: A paradox

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  • Amit K. Biswas

Abstract

Prolonged worldwide economic depression forces some economists and policy makers to demand tougher regulation to protect their domestic economy. If implemented, this may lead to a high-tariff regime that ruled the pre-globalised world economy. This paper examines the consequences of a tariff protected trade regime. It takes up the case of trade misreporting phenomena under the framework of protected regime. It builds up a basic trade mis-invoicing model and then develops collusion between underreporting traders of partner countries. I show that high tariff barrier gives incentives not only to the importers but also to the exporters to gain by underreporting the trade statistics. Interestingly, this paper shows that even if foreign exchange is fully floated, underground foreign exchange market can be created and exporters may rationally underreport without any gain through black market premium -- a departure from conventional theory.

Suggested Citation

  • Amit K. Biswas, 2012. "Import tariff led export under-invoicing: A paradox," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 21(3), pages 347-360, April.
    • Handle: RePEc:taf:jitecd:v:21:y:2012:i:3:p:347-360
    DOI: 10.1080/09638199.2010.486077
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    References listed on IDEAS

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    1. Biswas, Amit K. & Marjit, Sugata, 2007. "Preferential trade and mis-invoicing: Some analytical implications," International Review of Economics & Finance, Elsevier, vol. 16(1), pages 130-138.
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    Cited by:

    1. Biswas, Amit K. & von Hagen, Jürgen & Sarkar, Sandip, 2022. "FDI Mismatch, trade Mis-reporting, and hidden capital Movements: The USA - China case," Journal of International Money and Finance, Elsevier, vol. 120(C).
    2. Janus, Thorsten, 2024. "Does export underreporting contribute to the resource curse?," World Development, Elsevier, vol. 181(C).
    3. Subhasish Das & Amit K. Biswas, 2021. "Trade Mis-Invoicing Between India & USA: An Empirical Exercise," Foreign Trade Review, , vol. 56(1), pages 7-30, February.
    4. Samir Kumer Das & Amit K. Biswas, 2023. "Trade Data Falsification and Informal Capita Movement: A Study of Bangladesh with Major Asian Trade Partners," Foreign Trade Review, , vol. 58(4), pages 467-483, November.
    5. Das, Subhasish & Biswas, Amit K., 2023. "Can authorities curtail falsified trade & investment data that hide capital movements? Evidence from flows between BRICS and the USA," Journal of Policy Modeling, Elsevier, vol. 45(5), pages 957-974.

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