Policy and Performance in International Trade: Papers of the Sixth Annual Conference of the International Economics Study Group

222 Pages·1983·19.351 MB·English

by  John Black, L. Alan Winters (eds.)

POLICY AND PERFORMANCE IN INTERNATIONAL TRADE
This volume contains seven papers on the link between economic policy
and economic performance in international trade. The papers are both
theoretical and empirical and the countries considered include the USA,
the UK, Ireland, Australia, and many from East Asia and Latin America.
Several papers deal with the effects of tariffs on economic performance.
The almost universal conclusion is that they have less impact than is often
thought. In modern developed economies tariffs are small relative to other
distortionary taxes and exchange-rate fluctuations. Similarly, during the
nineteenth century they are shown to have been both too small and too
steady to explain the broad swings that occurred in economic activity.
The current arguments for protection in Britain are also examined. Since
tariffs would affect none of the basic determinants of trade performance,
little could be expected of such a policy in isolation.
Among the other issues considered are the role of the exchange rate
in small open economies, the inability of much trade theory to explain
trading performance, and the reasons for the huge success of the small
East Asian economies.
Overall the book provides a wide-ranging assessment of the factors that
determine trading success and through it economic performance.
International Economics Study Group volumes published by Macmillan
TRADE AND PAYMENTS ADJUSTMENT UNDER FLEXIBLE
EXCHANGE RATES
Edited by John P. Martin and Alasdair Smith
CURRENT ISSUES IN COMMERCIAL POLICY AND DIPLOMACY
Edited by John Black and Brian Hindley
INTERNATIONAL CAPITAL MOVEMENTS
Edited by John Black and John H. Dunning
POLICY AND PERFORMANCE IN INTERNATIONAL TRADE
Edited by John Black and L. Alan Winters
The International Economics Study Group (IESG) is one of several study
groups in economics in the UK, funded by grants from the Social Science
Research Council. The IESG was founded in 1972 on the initiative of Max
Carden and David Wall. Since 1978 it has been administered through the
University of Exeter. It operates through a programme of about eight half
day seminars each academic year, held at the London School of Eco
nomics, and an annual Conference each September held at the University
of Sussex Conference Centre, Isle of Thorns, Sussex. The IESG provides a
forum in which professional economists from British universities, poly
technics, government departments, banks and business meet to discuss
research papers both by members and by foreign visitors. The IESG
Committee for 1980-81 consisted by John Black (Chairman), L. Alan
Winters (Secretary), Brian Hindley, Alasdair Smith and David Wall.
POLICY AND
PERFORMANCE IN
INTERNATIONAL TRADE
Papers of the Sixth Annual Conference
of the International Economics Study
Group
Edited by
John Black
and
L. Alan Winters
©International Economics Study Group 1983
Softcover reprint of the hardcover 1st edition 1983 978-0-333-32771-5
All rights reserved. No part of this publication may be
reproduced or transmitted, in any form or by any means,
without permission
First published 1983 by
THE MACMILLAN PRESS LTD
London and Basingstoke
Companies and representatives
throughout the world
ISBN 978-1-349-17208-5 ISBN 978-1-349-17206-1 (eBook)
DOI 10.1007/978-1-349-17206-1
Contents
List of Tables vii
List of Figures X
Notes on the Contributors xi
Introduction xii
Tariff Protection and Economic Performance in the
Nineteenth Century Forrest Capie 1
I Trade policies in the nineteenth century 2
II Statistical evidence 4
III Effective protection 12
IV Exchange rates and protection 18
V Conclusions 19
VI Appendix 20
2 Trade Policy, Economic Performance, and Britain's Economic
Pro b1ems Brian Hindley 25
I Tariffs and growth: historical experience 25
II The rationale of protection 29
III Protection and investment 38
3 The Effects of Domestic Tax/Subsidies and Import Tariffs on the
Structures of Protection in the United States, United Kingdom
and Japan Alan V. Deardorff and Robert M. Stern 43
I Brief description of the model 44
II Conceptual framework 47
III R~~ ~
IV Conclusions 58
V Appendix: equations of the model 59
4 Competitiveness and Economic Performance: the Irish
Experience Dermot McAleese 65
I Measuring competitiveness 69
II Assessing the effects of competitiveness 76
v
vi Contents
III Policy implications 83
IV Appendix 87
5 Floating Exchange Rates, Inflation and Selective
Protectionism: their Effects on the Competitiveness
of Australian Industry John S. Marsden and G. Hollander 92
I Introduction and summary 92
II Scope and plan 93
III Pressures on price and cost competitiveness 94
IV Devaluation, inflation and competitiveness 104
V Changes in competitiveness and import flows 111
VI Industry-specific exchange rates, selective protectionism
and cost pressures 116
VII Concluding comments 123
6 East Asian and Latin American Export Performance in Industrial
Country Markets in the 1970s Vasilis Panoutsopoulos 130
I Introduction 130
II The general economic environment and overall performance 130
III Exports of manufactures from East Asia and Latin America
to industrial countries 134
IV Reasons for the differences in performance 160
7 Economic Methodology, Trade Theory and Policy
Jitendralal Borkakoti 170
I Introduction 170
II On economic methodology 171
III Causes of international trade: the Ricardian hypothesis 174
IV The Heckscher-Ohlin-Samuelson hypothesis 179
V The neo-technology hypothesis 182
VI An application of the MSRP 187
VII The role of assumptions 189
VIII Gains from trade and assumptions 190
IX Economic theory and economic policy 192
X Conclusions 193
Index 200
List of Tables
l.la World trade and its distribution 5
l.lb Distribution of world industrial production 6
1.2 Distribution of National Product among three major sectors 6
1.3 Nominal tariff rates and economic growth 8
1.4 Trade ratios 10
lAl Protection levels and growth rates 20
1A2 Tariffs and economic growth: regression results 22
3.1 1973 Net tax/subsidy rates and pre-Tokyo round nominal
tariffs for the US, Japan and UK by ISIC sector 46
3.2 United States: the protective effects of domestic taxes
and import tariffs 50
3.3 Japan: the protective effects of domestic taxes and
import tariffs 52
3.4 United Kingdom: the protective effects of domestic taxes
and import tariffs 54
4.1 Selected macroeconomic indicators for the Irish economy,
1970-80 68
4.2 Annual average increase in hourly earnings in
manufacturing for selected countries, 1960-80 74
4.3 Ireland's competitiveness index, 1970-80 75
4.4 Profit margin index for traded goods 78
4.5 Capital expenditure in Irish manufacturing sector by
majority-owned affiliates of US corporations 79
4.6 Compensation per employee in Ireland relative to major
EEC countries, 1978-82 83
4A1 Partner country weights under various weighting formulae 87
5.1 Movements in manufacturing costs in own currencies:
Australia and major trading partners, 1969-80 98
5.2 Nominal rates of assistance and disparities in nominal rates
for broad groups of manufacturing industries 101
5.3 Movements in Australian exchange rate, 1969-81 102
5.4 Components of change in price competitiveness of
Australian manufacturing, 1968-9 to 1973-4 and
1973-4 to 1977-8 104
vii
viii List of Tables
5.5 Inflation and the exchange rate: 1969-80 110
5.6 Change in components of price competitiveness for
manufacturing industries in Australia: 1968-9 to 1973-4
and 1973-4 to 1977-8 121
6.1 Structure of East Asian and Latin American economies 132
6.2 Total merchandise exports for East Asia and major East
Asian countries 135
6.3 Total merchandise exports for Latin America and
Caribbean and major Latin American countries 136
6.4 Total merchandise exports and growth rates for East Asia
and major East Asian countries 137
6.5 Exports of manufactures for East Asia and major East Asian
countries 139
6.6 Total merchandise exports and growth rates for Latin
America and Caribbean and major Latin American countries 140
6.7 Exports of manufactures for Latin America and Caribbean
and major Latin American countries 141
6.8 Direction of exports of manufactures of major Latin American
and East Asian countries 142
6.9 Exports of manufactures of major Latin American countries
to industrial countries 143
6.10 Exports of manufactures of major East Asian countries to
industrial countries 145
6.11 Comparisons of the growth rates of exports of manufactures
between the groups of East Asian and Latin American
countries 146
6.12 Share of imports in the apparent consumption of
manufactured goods in industrial countries, 1970-9 148
6.13 Share of imports in the apparent consumption of
manufactured goods in industrial countries, by major
product groups, 1970-9 149
6.14 Export performance of exports of manufactures for East
Asian and Latin American countries 152
6.15 Exports of manufactures (excluding coffee and non-ferrous
metals) of East Asia and major East Asian countries 154
6.16 Exports of manufactures (excluding coffee and non-ferrous
metals) of Latin America and Caribbean and major Latin
American countries 155
6.17 Exports of manufactures (excluding coffee and non-ferrous
metals) of major East Asian countries to the industrial
countries 156
List of Tables ix
6.18 Exports of manufactures (excluding coffee and non-ferrous
metals) of major Latin American countries to the industrial
countries 157