Interdependence of Trade Policies in General Equilibrium

Moynihan Institute of Global Affairs 

Trade, Development and Political Economy presents

Interdependence of Trade Policies in General Equilibrium

If governments are banned from using certain trade policy instruments, they may resort to other instruments to compensate for their lost policy space. Using a multi-industry general-equilibrium Ricardian trade model the authors find that: (i) Restricting export subsidies/taxes leads to trade liberalization, but restricting import tariffs in isolation has no such effect; (ii) If export subsidies are already restricted, negotiated tariff cuts in a subset of industries lead to unilateral cuts in other industries; and (iii) A free trade agreement that precludes the use of trade taxes may lead to the adoption of wasteful trade barriers by welfare-maximizing governments. Fitting our model to trade data for 40 major countries, we show that these effects are quantitatively significant.

Mostafa Beshkar

Indiana University - Bloomington

Mostafa  Beshkar is Associate Professor of Economics at Indiana University – Bloomington. His research and teaching interests center on International Trade, with a special emphasis on trade policy and institutions for international trade cooperation. Professor Beshkar’s work has appeared in top Economics  field  journals such as the Journal of International Economics and general interest journals like the American Economic Journal: Microeconomics. He holds a Ph.D. in Economics from Vanderbilt University.

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