NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Rules versus Discretion in Trade Policy: An Empirical Analysis

Robert W. Staiger, Guido Tabellini

NBER Working Paper No. 3382
Issued in June 1990
NBER Program(s):   ITI   IFM

We test empirically for evidence that government tariff-setting behavior depends on the degree of discretion with which policy-makers are endowed. We do this by studying government tariff choices under two distinct environments. One environment is that of tariffs set under the Escape Clause (Section 201 of the U.S. Trade Act of 1974). We argue that these decisions afford the government with ample opportunity to reoptimize, and with correspondingly little ability to commit. The other environment is the Tokyo Round of GATT negotiations and the determination of the set of exclusions from the general formula cuts. We argue that these decisions provided the government with a much diminished opportunity to reoptimize, and with a correspondingly greater ability to commit. Comparing decisions made in these two environments allows us to ask whether the degree of policy discretion has a measurable impact on trade policy decisions. Our findings suggest that it does.

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Document Object Identifier (DOI): 10.3386/w3382

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