To, Theodore (1998) Dynamics and discriminatory import policy. Working Paper. University of Warwick. Centre for the Study of Globalisation and Regionalisation, Coventry.

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Abstract

Although the General Agreement on Trade and Tariffs prohibits discriminatory import tariffs, GATT rules include means by which this prohibition can be circumvented. The previous literature use static models to show that discriminatory tariffs increase welfare. In a dynamic model, this is not necessarily true. For example, with consumer switching costs, current market share is valuable. In this case, discriminatory tariffs are higher for firms with a higher market share. In expectation of such policies, firms price less aggressively. If switching costs are significant relative to exporting country asymmetries then this adverse affect on incentives can result in lower importing country welfare. This suggests that it might be in the interests of importers to abide by the GATT MFN principle.

Item Type:	Working or Discussion Paper (Working Paper)
Subjects:	H Social Sciences > HF Commerce J Political Science > JZ International relations
Divisions:	Faculty of Social Sciences > Centre for the Study of Globalisation and Regionalisation
Library of Congress Subject Headings (LCSH):	General Agreement on Tariffs and Trade (Organization), Tariff, International trade, Endogenous growth (Economics), Market share
Series Name:	Working papers (University of Warwick. Centre for the Study of Globalisation and Regionalisation)
Publisher:	University of Warwick. Centre for the Study of Globalisation and Regionalisation
Place of Publication:	Coventry
Date:	May 1998
Number:	No.07/
Number of Pages:	21
Status:	Not Peer Reviewed
Access rights to Published version:	Open Access
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URI:	http://wrap.warwick.ac.uk/id/eprint/2118

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