Smoke in the (Tariff) Water

As the economic crisis deepened and widened, fears of a return to the protectionist spiral of the 1930s become more common. However, an important difference between the 1930s and today is the existence of the World Trade Organization and the legal limits it imposes on the protectionist responses mem...

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Bibliographic Details
Published in:World economy 2011-02, Vol.34 (2), p.248-264
Main Authors: Foletti, Liliana, Fugazza, Marco, Nicita, Alessandro, Olarreaga, Marcelo
Format: Article
Language:English
Subjects:
Economic conditions
Economic Crises
Economic crisis
Fear
Free trade and protection
International organizations
International trade
Left Wing Politics
Obligation
Protectionism
Regulation
Studies
Tariff
Tariff policy
Tariffs
Trade policy
Trade relations
Violations
Water
World Trade Organization
WTO
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Summary:As the economic crisis deepened and widened, fears of a return to the protectionist spiral of the 1930s become more common. However, an important difference between the 1930s and today is the existence of the World Trade Organization and the legal limits it imposes on the protectionist responses members can pursue. The first objective of this paper is to assess the extent to which applied tariffs can be legally raised without violating bound tariff obligations and compare it with what is economically feasible. The second objective is the examination of whether individual countries have taken advantage of these legal tariff hikes as protectionist responses during economic crises, after the creation of the WTO. Results suggest that the policy space left when looking at what is economically possible is indeed quite large. However, in the recent past little of the available policy space has been used by countries suffering from an economic crisis.
ISSN:0378-5920
1467-9701
DOI:10.1111/j.1467-9701.2010.01318.x