Choked by Red Tape? The Political Economy of Wasteful Trade Barriers
Giovanni Maggi, Yale UniversityEvent part of the Research Seminar Series and Geneva Trade and Development Workshop
As part of the Geneva Trade and Development Workshop, the International Economics Departments at the Graduate Institute is pleased to invite you to a talk by Giovanni Maggi (Yale University), who will give a presentation on the "Choked by Red Tape? The Political Economy of Wasteful Trade Barriers".
Authors: Giovanni Maggi, Monika Mrázová and J. Peter Neary
Abstract: Rational politically-motivated governments may have incentives to impose trade barriers that yield no revenue (red-tape barriers, or “RTBs”), if a trade agreement can constrain tariffs but not RTBs. We show that the extent of tariff liberalization is limited by the need to prevent such wasteful behaviour, but that RTBs may nonetheless emerge in equilibrium, if the tariff commitments are not fully contingent. When RTBs are used, they are likely to “choke” trade in some goods, implying that the extensive margin is key for understanding the impact of RTBs; but non-prohibitive RTBs can also arise if import demand is sufficiently concave. The frequency of RTBs tends to be higher if the variance in political pressure is higher and if the agreement is re-optimized less frequently. Within the lifespan of an agreement, globalization (a fall in natural trade costs) tends to induce declines in RTBs, but if import demand is sufficiently concave, such declines may get reversed. The main insights apply to both domestic- commitment-motivated as well as terms-of-trade-motivated trade agreements.
The workshop will take place on Tuesday 21 March 2017 from 12:30 to 13:30 at the Graduate Institute (Maison de la Paix, 2 Chemin Eugene Rigot, Petal 2, Room S4). Sandwiches and drinks will be available as of noon at the Cafeteria.
Registration is mandatory including for people with WTO accreditation. If you wish to attend, please fill the online form at at the latest by cob on 20 March 2017.
More details can be found here.
Venue: Room P2-S4, (Maison de la paix).