Working Paper: CEPR ID: DP514
Authors: Robert Staiger; Guido Tabellini
Abstract: We test for evidence that US trade policy depends on the degree of government discretion. We do this by studying US tariff choices under two distinct environments. One is that of tariffs set under the Escape Clause (section 201 of the US Trade Act of 1974). The other is the Tokyo Round of GATT negotiations and the determination of the set of exclusions from the general formula cuts. We argue that the second environment provides much more capacity to commit than the first one. Comparing decisions made in these two environments allows us to ask whether the degree of policy commitment has a measurable impact on trade policy. Our findings suggest that it does.
Keywords: credibility; time consistency; tariffs; commitment
JEL Codes: 400; 410
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Ability to commit under the Tokyo Round of GATT negotiations (F13) | Lower tariffs (F19) |
| Escape clause procedures (Y60) | Higher tariffs (F19) |
| Wage bill relative to the value of consumption (J31) | Probability of protection under the escape clause (D18) |
| Stronger commitments (D79) | More predictable and stable tariff policies (F13) |