Pitfalls in the Theory of International Trade Policy: Concertina Reforms of Tariffs, and Subsidies to High-Technology Industries.

This paper explores the links between international trade theory and the practice of trade and industrial policy in open economies, with special attention to three areas where theoretical lessons have been misunderstood in policy debates. The author argues that the 'concertina rule' for tariff reform justifies reductions in high tariffs but not moves toward uniformity and particularly not increases in low tariffs. He shows that the basic principles of tariff reform are the same in unilateral, multilateral, and customs union contexts. Finally, the author suggests that the theory of strategic trade policy does not justify subsidies to high-technology industries. Copyright 1998 by The editors of the Scandinavian Journal of Economics.