Specific and Ad Valorem Tariffs Are Not Equivalent in Trade Wars.

This note argues that when two countries choose optimal tariffs in a trade war, specific tariffs are not equivalent to ad valorem tariffs even if all markets are competitive. In particular, it shows that if a country's trading partener switches a specific tariff to an an valorem tariff that yields the same revenue at the initial trade point, the former country has an incentive to lower its tariffs.

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Year of publication:	1996
Authors:	Lockwood, B. ; Wong, K.Y.
Institutions:	Business School, University of Exeter
Subject:	TRADE POLICY \| INTERNATIONAL TRADE

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Series:	Discussion Papers.
Type of publication:	Book / Working Paper
Notes:	9 pages
Classification:	F10 - Trade. General ; F11 - Neoclassical Models of Trade ; F13 - Commercial Policy; Protection; Promotion; Trade Negotiations
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10008852250