The welfare effect of tariff rate reductions in a many country world

Hatta, Tatsuo; Fukushima, Takashi

doi:10.1016/0022-1996(79)90019-9

Cited by 34 publications

(14 citation statements)

References 10 publications

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“…We also know that under the constant tariff scheme, the third country effects are nonnegative, i.e., To answer to this question, we consider a tariff system in which when countries i and j sign an FTA, they select their individual external tariff rates t i and t j so as to maximize their joint social welfare, whereas all other countries keep their status quo tariffs. 11 In the presence of transfers, it is reasonable for countries that sign an new FTA to select their individual tariffs so as to maximize their joint welfare, since the transfer between them determines each country's share of the maximized "pie." Now, it follows from Lemma 5 that…”

Section: Proof Pick Any Pair I J ∈ N and Let ∆Umentioning

confidence: 99%

“…Mutual tariff elimination by any pair of countries benefits these countries as a whole unless industrial commodities are highly substitutable from one another, so that they sign an FTA in that case if a transfer between them is possible. Hatta and Fukushima (1979) and Fukushima and Kim (1989) show that proportional reduction of all tariff rates of all countries improves the world welfare. 2 To be more strict, the world welfare improves if all the countries in the world (i) reduce all their ad valorem tariff rates proportionally (Hatta and Fukushima, 1979) or (ii) reduce all their specific rates of tariffs and subsidies proportionally (Fukushima and Kim, 1989).…”

Section: Introductionmentioning

confidence: 99%

“…Hatta and Fukushima (1979) and Fukushima and Kim (1989) show that proportional reduction of all tariff rates of all countries improves the world welfare. 2 To be more strict, the world welfare improves if all the countries in the world (i) reduce all their ad valorem tariff rates proportionally (Hatta and Fukushima, 1979) or (ii) reduce all their specific rates of tariffs and subsidies proportionally (Fukushima and Kim, 1989). However, Kowalczyk (1989) demonstrates that the world welfare may decline if all countries proportionally reduce all of their ad valorem tariff rates and subsidies.…”

Section: Introductionmentioning

confidence: 99%

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Free Trade Networks With Transfers*

Furusawa

Konishi

2005

Japanese Econ Rev

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The paper investigates the network of bilateral free trade agreements (FTA) in the context of a network formation game with transfers. Furusawa and Konishi (2002) show that without international transfers, countries with different industrialization levels may not sign an FTA, so that the global free trade network, in which every pair of countries sign an FTA, is not pairwise stable in general. We show in this paper that even if the world consists of fairly asymmetric countries, the global free trade network is pairwise stable when transfers between FTA signatories are allowed. Moreover, it is the unique pairwise stable network unless industrial commodities are highly substitutable from one another. * This paper is partly prepared for Konishi's invited lecture at the Annual Meeting of the Japanese Economic Association at Meiji University, Tokyo, 12-13 October, 2003. We gratefully acknowledge financial support from the Japan Society for Promotion of Science research. Furusawa also gratefully acknowledges financial supports from the Seimeikai Foundation and the Ministry of Education, Culture, Sports, Science and Technology of Japan (the 21st Century Center of Excellence Project on the Normative Evaluation and SocialChoice of Contemporary Economic Systems). We are grateful to Richard Baldwin and other participants of Hitotsubashi Conference on International Trade and FDI for helpful comments. We also greatly benefit from discussions with Tomoya Mori who is working with us on a dynamic extension of this model. We acknowledge helpful comments from an anonymous referee, and thank Sabina Pogorelec and Yoichi Sugita for their research assistance.

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Section: Proof Pick Any Pair I J ∈ N and Let ∆Umentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Free Trade Networks With Transfers*

Furusawa

Konishi

2005

Japanese Econ Rev

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“…33 This problem is common to most models of international trade and is emphasized, e.g., by Hatta and Fukushima (1979), p. 504.…”

Section: {34)mentioning

confidence: 98%

Indirect Tax Policy in the European Community: An Economic Analysis

Haufler¹,

Schneider²

1992

Studies in International Economics and Institutions

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Abstract:The paper evaluates two alternative tax principles that could be applied in the European Community's internal market after the abolition of border controls. The first option is a 'mixed tax principle' which subjects purchases by VAT-registered traders to the tax rate of the destination country, while purchases made by final consumers are taxed in the country of origin. The second alternative is a 'general origin principle' which subjects purchases by both final consumers and traders to the country of origin's tax rate.It is shown that the mixed tax principle will distort production decisions when tax rates differ between countries. Furthermore, countries may perceive an incentive for strategic tax setting in order to improve their terms of trade or increase the domestic tax base. The general origin principle avoids the problems associated with the differential tax treatment of traders and final consumers. It is found, however, that this method poses other and probably even more serious problems in a more realistic setting, so that its application in the internal market is not recommended.

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“…A number of authors derive conditions under which a gradual multi-lateral reform of tariffs would cause a Pareto improvement. Hatta and Fukushima (1979) give conditions under which a proportional decrease of ad valorem tariffs in all countries improves welfare in a world with two goods and two countries. Fukushima and Kim (1989) and Turunen-Red and Woodland (1991) extend the analysis to arbitrary numbers of goods and countries.…”

Section: Relation To the Literaturementioning

confidence: 99%

Hierarchical Trade and Endogenous Price Distortions

Gersbach

Haller

2007

SSRN Journal

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We study the allocation of commodities through a two-stage hierarchy of competitive markets. Groups or countries trade at global prices while individuals within a group trade at local prices. We identify the free trade and the autarky equilibrium as polar cases. We show that no other two-stage market equilibria exist if the commodity space is two-dimensional. An example demonstrates that other, so-called intermediate equilibria exist for three-dimensional commodity spaces. The example also exhibits endogenous price distortions in third countries when some countries follow distortionary trade policies. We give two existence proofs for intermediate equilibria in higher dimensions. Each proof provides an explicit construction of special classes of intermediate equilibria.

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The welfare effect of tariff rate reductions in a many country world

Cited by 34 publications

References 10 publications

Free Trade Networks With Transfers*

Free Trade Networks With Transfers*

Indirect Tax Policy in the European Community: An Economic Analysis

Hierarchical Trade and Endogenous Price Distortions

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