Is the United States a Large Country in World Trade?
Christopher S. P. Magee1
Stephen P. Magee2
Abstract
The United States is typically seen as a large country in world trade, one that is able to
influence world prices through its trade policy, but this perception has almost never been tested
directly. We examine data on world output and trade flows and find that the effects of U.S.
tariffs on world prices are negligible in most industries. In the median industry, U.S. tariffs
reduce world prices by only 0.12% while raising domestic prices by 4.7%. We present some of
the first estimates of optimal U.S. tariffs and show that optimal tariffs are typically small (3.6%
in the median industry) and are usually lower than actual tariffs. These results contradict the
popular belief that the United States fails to exploit its monopsony power in trade, and they
provide a consistent economic explanation why the United States was for many years a
champion of trade liberalization.
JEL Codes: F1, D4, L1
1
Department of Economics, Bucknell University, Lewisburg, PA 17837; phone (570) 577-1752; fax (570) 577-
3451; email: [email protected]
2
Department of Finance, University of Texas, Austin, TX 78712; phone (512) 471-5777; fax (512) 471-5073,
email: [email protected]
1
1. Introduction
Consider the following paradox. The United States is the largest country in the world
with over 21% of world income, 17.4% of world imports, and 9.9% of world exports in 2003.3
According to the standard optimal tariff argument for large countries, then, the United States
should be one of the most protectionist countries in the world. Since the 1934 Reciprocal Trade
Agreements Act, however, the United States has been one of the leading proponents of more
open borders and has tariffs that are currently among the lowest in the world.4 Is the United
States a large country in world trade? Is it failing to exploit its monopsony power in world trade
markets by setting tariffs well below their optimal levels?
The first technical criteria for largeness with respect to price effects was advanced by
Alfred Marshall (1923, p. 213) in Money, Credit and Commerce.5 He argued that Britain was a
large country in world trade because it could improve its welfare by raising its tariffs and driving
down the prices of its imports on world markets, thus increasing the British terms of trade.
Hence, the classic "large country effect" of international trade theory: large countries can raise
welfare by imposing tariffs, which allows them to buy their imports more cheaply. Thoughtful
international economists complicate their models enormously to incorporate large country
effects, presumably so that their models will apply to the United States.6
The hypothesis that the U.S. is a large country has always appeared to contradict
“America’s commitment to a system of open trade” (Irwin, 2002, p. 225) and the fact that the
U.S. was one of the leading advocates of GATT tariff reductions. If the terms of trade effect is
3 CIA World Fact Book, 2004.
4
Based on World Bank and WTO data, the United States had the 10th lowest average tariffs (unweighted) among 82
countries in 1998.
5
We are indebted to the late Charles P. Kindleberger for this reference.
6
A casual examination of papers in international economics over the period 1991-1993 indicated that about half of
them made the large-country assumption, either explicitly or implicitly.
2
an important consideration driving country tariff levels, we would expect the United States to
have higher protection than everyone else. This apparent irrationality of the U.S. favoring freer
trade than its partners is discussed in Krasner (1976) and Keohane (1984) in the international
relations literature on the U.S. hegemony. If the United States is a large country, it must have
deliberately chosen not to exercise its monopsony power and raise trade protection to optimal
tariff levels for political reasons, such as our role as a world leader. Coates and Ludema (2001)
provide another potential explanation for why a large country might have low tariffs. They show
that a home country’s liberalization can weaken import-competing interests in foreign countries
and thus raises the likelihood they will approve trade liberalization measures themselves. Under
some conditions large country unilateral tariffs are lower than small country tariffs.
This paper advances a different hypothesis to explain the contradiction between the
optimal tariff argument and U.S. commitment to open trade. We argue here that the United
States, and hence every other country in the world, is a small country and we provide evidence
that the impact of U.S. trade barriers on world prices is negligible in most industries. In
presenting some of the first estimates of optimal U.S. tariffs, we find an equally interesting
result. The optimal United States tariffs are relatively small and have been lower than actual
tariffs in most industries until recent years (during which time the U.S. commitment to a system
of free trade appears to have softened). We estimate that the optimal tariff in the median
manufacturing industry was 3.6% in 1992 while the actual tariff was 4.8%. These results
suggest that even unilateral postwar U.S. tariff would cuts have raised welfare. Beginning with
the Reciprocal Trade Agreements Act of 1934, the United States has gained even further by
inducing foreign countries to lower their trade barriers on U.S. goods through bilateral and later
GATT and WTO multilateral negotiations. This contention that the United States is a small
country provides a simpler explanation of the United States’ push for open trade policies than the
political-economic tradeoffs described in the hegemonic literature. Instead, the low optimal
tariff calculations presented in this paper indicate that it has been in the United States’ own
economic interest to pursue trade liberalization.
3
The arguments made in this paper run counter to the widespread view among economists
that the United States is a large country in world trade. Before writing this paper we also held
this view, and it is reflected in the undergraduate textbooks used in international economics.
Husted and Melvin (2001, 168), for instance, state that the United States, while it rarely tries to
use protection to influence its terms of trade, “certainly has the market power to do so.”
Carbaugh (2000) claims that the case of a country large enough to influence world prices of
imported goods “could apply to the United States … and to other economic giants, such as Japan
and the European Union.”
The empirical effect of U.S. trade barriers on world prices has been studied only rarely,
however. Hufbauer and Elliot (1994) present one of the few estimates of the impact of U.S.
tariffs on world prices for a number of different industries, with estimates ranging from a 0.8%
fall in the world price of ball bearings to an 8.3% decline in the world price of orange juice. The
authors point out that these estimates are likely to be overstated however, because they have
chosen a conservatively low estimate (3.0) of the world supply elasticity for exports to the
United States. Haynes and Stone (1983) estimate an elasticity of world supply to the U.S. of 10,
which would suggest much smaller world price effects. Moreover, the purpose of the Hufbauer
and Elliot (1994) study was to examine the costs of protection, which suggests that the industries
they investigated were chosen because they are important traded sectors with high tariffs. As a
result, the authors likely focused on industries with larger than normal terms of trade effects due
to protection.
Despite the scarcity of empirical estimates on the subject, the consensus exists among
international economists that the United States is a large country in world trade because it seems
plausible that the United States can influence prices in many world markets in the very short run.
But elementary industrial organization has long taught that the United States has monopsony
power only if it can control prices in a given world market for at least two years after a tariff
increase by preventing countries from substituting their exports away from the United States to
other markets. This paper uses measures of market concentration in trade and elasticity
4
estimates to show that the United States does not have such monopsony power in world markets.
We find that even prohibitive tariffs on all U.S. imports would cause world prices to fall by less
than two percent on average (and the United States would receive no economic gains from this
decline because it would have eliminated all its imports). In individual products, we estimate
that prohibitive U.S. tariffs would lower world prices by more than 10% in only two out of 28
industries, accounting for 6% of U.S. manufacturing imports.
The next two sections in this paper address two separate questions. First, in what
industries does the United States have the market power to influence world prices? Second, has
the United States exploited its market power by using tariffs to influence world prices?
2. Does the United States have the market power to influence world prices?
All countries with positive levels of imports can affect world prices to some degree by
changing their trade policies. For most countries, however, the impact on world prices will be
negligible and can be safely ignored. The question of a country’s market power in international
markets is thus a subjective issue of when its influence on world prices becomes large enough
that it can no longer be ignored. In this section, we first consider trade flows at an aggregate
level and then we turn to the more relevant case of individual industries.
2.1 Aggregate measures of U.S. market power
For over a half century, industrial organization economists have measured market power
in an industry using the Herfindahl-Hirshman Index (HHI) of market concentration. The HHI is
the sum of the squared market shares of suppliers in a market, with theoretical values ranging
from close to 0 (e.g., tens of thousands of small farmers) to 10,000 (one monopoly seller).
Cameron and Glick (1996. p. 194) discuss how the Federal Trade Commission uses the HHI “as
a screening device to filter out cases that require no further competitive analysis.” The U.S.
5
Justice Department and the U.S. Federal Trade Commission use the following cutoff points for
the values of the HHI in evaluating mergers in markets: 0-1,000 as being unconcentrated
markets; 1,000-1,800 as being intermediate concentration; and above 1,800 as being highly
concentrated (Carlton and Perloff, 1994, 805).
As a background check on market concentration in world trade, we calculate the HHI in
world trade markets treating each country as if it were a firm. Table 1 provides the shares of
world imports accounted for by the 20 largest importers, with the HHI calculated for world
imports and world exports in the last two rows. The table shows that the HHI equals 561 for
world imports and 415 for world exports. Both of these values are in the middle of the Justice
Department-FTC's most unconcentrated range of 0 to 1,000. Dividing the world import HHI into
10,000 gives 18 as the number of equal-sized importers in world trade. With such low market
concentration, it is clear that world trade is not concentrated on a few large sellers or buyers.
The most zealous antitrust commissioner would not be worried about the ability of even the
United States, the largest country in world trade, to manipulate prices successfully on world
markets.
For antitrust purposes, industrial organization teaches that short-run price increases will
be undone by entry and market substitution. Countries getting exploited by U.S protection will
substitute at the margin into other markets. Current practice in the United States is that a firm
accused of monopoly must be capable of not just affecting price, but maintaining those price
effects for at least two years. Thus, the standards in industrial organization for monopsony
power are higher than merely being able to influence prices in the very short-run. Instead, the
United States must be able control prices in a given industry on world markets for at least two
years. To do this would require that the United States prevent countries from substituting their
exports away from the United States to other markets as U.S. protection increased. This price
6
control is virtually impossible without the necessary condition of very high Herfindahl-Hirshman
Indexes (HHIs).
The low HHI in world trade overall suggests that the United States does not have this
ability to control prices. This conclusion does not change when we examine trade at an industry
level, which provides a more appropriate comparison to the typical industry-level HerfindahlHirshman index. Figure 1 summarizes the results of calculating the HHI for 1998 world imports
within 434 4-digit SITC industries, again treating each country as a firm. Measuring the HHI by
industry reveals that 320 of the industries, accounting for 71% of world trade flows, are
unconcentrated (HHI<1000); 94 industries, accounting for 27% of trade flows, had intermediate
levels of market concentration (1000<HHI<1800); and only 20 industries, with less than 2% of
the total import value, had highly concentrated market power by country.
Of course the United States might have some market power even if world trade flows
overall resemble a competitive industry. As Table 1 shows, the United States had a 17.4 percent
share of world imports in 2003. In industrial organization, this is insufficient for a buyer to have
monopsony power and the ability to influence prices in a market. If the United States tried to
lower world prices by raising its tariffs, foreign suppliers would substitute into the other 83
percent of the world market to offset the attempted price control by the United States. Supplier
substitutability undermines the ability of a buyer with such a small market share to control
prices. The 17% U.S. market share in trade flows is also considerably below the 50% market
share that many courts have adopted as a “prerequisite for a finding of monopoly.” (Cameron
and Glick, 1996, p. 193)
The industrial organization literature indicates that prices do not show elevated levels
(monopoly-type power) except in industries with four-firm concentration ratios above 50 percent
(Carlton and Perloff, 1994, 358). Treating each country as a firm in the world trade market,
7
world trade flows fall well short of the 50% cutoff – the four-country concentration ratio in
world imports (the U.S., Germany, China and the U.K. are the big four) is only 36%. Work on
the contestability of markets indicates that individual firms with market shares over 70 percent
may still be unable to control prices in the absence of entry and exit barriers. Further, the
industrial organization literature presumes that tacit or explicit collusion among the largest
sellers is usually required to elevate prices. In world trade, there is no evidence that large
countries collude to lower world prices by coordinated increases in protection. While exporting
countries have coordinated price increases through voluntary export restraint agreements, these
agreements have acted to raise the price of imports paid by the United States rather than
lowering the price as a monopsonist buyer should.
In short, world import markets are not very concentrated and the United States share of
world imports is too low for it to have monopsony power as a buyer. In reality, its 17% share of
world imports dramatically overstates the ability of the United States to influence world prices.
World prices are determined by world supply and demand, and the world supply of goods is
many times larger than just international trade in goods.
Thus, as long as producers can move their output between domestic sales and exports, the
U.S. market power in trade policy depends not on the U.S. share of world imports but on U.S.
imports as a share of world supply. The U.S. import share of world output is considerably
smaller than 17%. In 2003, the United States imported $1.26 TR worth of goods while world
GDP outside the U.S. was $40.43 TR.7 The market controlled by U.S. trade policy, then,
amounts to only 3.12% of the supply of potential U.S. imports. While most economists would
likely agree that this market share is too small to grant monopsony power, the United States
market power may be larger in sectors that are heavily traded because the GDP figures cited
7
CIA World Fact Book, 2004.
8
above include nontraded goods. Thus the more relevant measures of market power must be
calculated for each industry, an exercise to which we now turn.
2.2 Industry measures of market power
Here we present a simple model of world supply and demand to study the effects of U.S.
tariffs on world prices. Figure 2 illustrates the effect of a drop in U.S. imports due to tariff
protection on world prices. Let S row be the supply curve for all countries outside of the U.S.,
and Drow be the demand curve in the rest of the world. Demand outside of the U.S. plus U.S.
demand for foreign goods ( M us ) must equal the supply in the rest of the world plus the U.S.
supply into world markets ( X us ). Suppose that a U.S. trade barrier would reduce imports by
'
∆M us (from M us to M us
) if the world price remained constant. The original world equilibrium
is at point E, with a world price of Pw and quantity produced outside the U.S. of Qrow . The fall
'
, and the new equilibrium is at point
in U.S. demand shifts world demand inward to Drow + M us
'
E ' , with a world price of Pw' and quantity produced of Qrow
. We assume here that the demand
and supply curves have constant elasticities. The equations for the demand and supply curves
are:
(1)
Qd ,row + M us = P ε d
and
(2)
Qs ,row + X us = P ε s ,
where ε s is the elasticity of world supply and ε d is the world demand elasticity. Notice that
this setup is partial-equilibrium in that U.S. trade barriers do not reduce U.S. exports, as they
would in a general equilibrium model. In the long run, the fall in imports in one industry must
9
be completely offset by a decline in the country’s total exports in all industries – this is the
Lerner symmetry theorem. In a general equilibrium framework, then, the world price effects of a
trade barrier on the price of the protected good will be smaller than those predicted here because
some of the drop in the industry’s imports may be offset by a fall in its exports.
From equations (1) and (2), it is possible to solve for the percentage change in world
prices when there is a change in U.S. import demand:
1
(
)
∆M us
%∆Pw = (1 +
) ε s −ε d − 1 .
Qs ,row + X us
(3)
Since supply elasticities are positive and demand elasticities negative, the world price change
will have the same sign as ∆M us . Thus, the world price declines when U.S. imports fall due to
tariff protection. Equation (3) shows that the effect of U.S. trade barriers on world prices
depends critically on the ratio
∆M us
, or the change in U.S. imports relative to world
Qs ,row + X us
supply.
In order to measure predicted world price changes, we need estimates of demand and
supply elasticities. Demand and supply price elasticity estimates in world markets are not
available to our knowledge. Mansur and Whalley (1984) survey the empirical literature
estimating demand elasticities, and they present “central tendency” elasticity estimates for a
number of industries. We use their demand elasticity estimates as measures of the ROW price
elasticities of demand throughout the paper (each industry’s demand elasticity estimate is listed
in Table 3).
Price supply elasticity estimates are extremely rare and we have been unable to find
estimates for broad categories of manufactured goods. In order to get an estimate of the supply
elasticity among manufactured goods in world markets, we rewrite equations (1) and (2) in logs
10
and add real U.S. GDP ( Yus ) as an exogenous demand shifter. This setup is similar to the system
of supply and demand equations in Greene (1990, p. 592):
(4)
log(Qd ,row + M us ) = ε d log( Pw ) + α 2 log(Yus ) + u d
(5)
log(Qs ,row + X us ) = ε s log( Pw ) + ε s .
In order to estimate this system we use data on import prices in manufacturing between 1982 and
1992 from Feenstra (1994). Manufacturing output in 28 3-digit ISIC industries for these years is
available for 67 countries in the Trade and Production Database available at
www.worldbank.org/research/trade and described in Nicita and Olarreaga (2001).
Unfortunately, some countries have missing production data for some years. To deal with this
problem we regress (within each country) industry output on a time trend and replace missing
production values with their predicted levels from this regression. Summing over all industries
and over all countries except the U.S. provides a measure of rest of the world manufacturing
output. Greene (1990) shows that the indirect least squares estimator provides a consistent
estimate of the price elasticity of supply:
ε̂ s =
slope in regression of log(Qs,row + X us ) on log(Yus )
slope in regression of log(Pw ) on log(Yus )
. The indirect least squares estimate of
the supply elasticity in world markets is εˆ s = 0.982 .8 This estimate is clearly an imperfect
measure of the true supply elasticity in each industry, so later in the paper we present results
using a range of values for the supply elasticity.
Suppose that the U.S. raised its current trade barriers to prohibitive levels in every
industry. How much would such a drastic increase in trade barriers affect world prices on
8
This setup assumes that the supply elasticity is constant over time. Estimating the elasticity from 1982-1986
( εˆ s = 1.05 ) and from 1987-1992 ( εˆ s = 0.91 ) provides some weak evidence that the elasticity does not vary much
over time.
11
average? For a preliminary measure of the aggregate price change due to prohibitive U.S. tariffs,
we use the estimated supply elasticity of εˆ s = 0.982 , and the median demand elasticity among
the Mansur and Whalley (1984) estimates: ε d ,row = −0.659 . Kee, Nicita, and Olarreaga (2004)
provide estimates of countries’ import demand elasticities at the 6-digit HS industry level.9 The
import-weighted average elasticity across all industries in the United States is ε md ,us = −1.3 .10
The CIA World Fact Book provides 2003 estimates of U.S. trade flows: M us = $1.26 TR and
X us = $714.5 B and of world GDP outside of the U.S. of Qs ,row = $40.43 TR . Substituting these
values into equation (3) and letting ∆M = − M us = −$1.26 TR reveals the predicted world price
change: %∆Pw = −1.9% . World prices on average would fall by a little under 2% if the United
States were to block all imports (but U.S. exports remained unchanged). Reducing the supply
elasticity estimate to ε s = 0.5 would result in a world price change of %∆Pw = −2.6% while
raising the supply elasticity estimate to ε s = 2 would result in a smaller world price change of
%∆Pw = −1.2% due to prohibitive tariffs.
The current levels of U.S. imports are already restricted to some degree by protection,
however, so the maximum impact of U.S. trade protection on world prices might be larger. The
largest possible effect of U.S. protection on world prices would occur if the free-trade level of
U.S. imports were cut to zero by prohibitive tariffs. In such a case, the change in world prices
would be:
9
Special thanks go to Hiau Looi Kee for providing us with their estimates of import demand elasticities.
10
Whalley (1986) provides a “central tendency” import price elasticity in the literature that is slightly larger in
magnitude: emd
= −1.66 .
12
1
(6)
FT
(
)
M us
%∆Pw = (1 −
) ε s −ε d − 1 ,
Qs ,row + X us
FT
where M us
is the free trade level of U.S. imports. Since we do not observe the free trade level
of imports in many industries, we need to estimate it using measures of protection and U.S.
import demand elasticities. If t av is the ad valorem tariff rate in the industry, an estimate of U.S.
FT
= M us (1 − t av * ε md ) . The World Bank reports an average
imports under free trade is M us
(unweighted) ad valorem tariff of t av = 3.9% for the United States in 2002. Thus, if the U.S.
were to move from free trade to autarky, the effect on world prices would be roughly
%∆Pwmax = −2.0% . The United States would not benefit from such an increase in its terms of
trade, of course, since it is by assumption cutting off all imports. We will examine the terms-oftrade gains from optimal tariffs in the next section.
While the aggregate effect of U.S. prohibitive tariffs on world prices appear to be quite
small, the U.S. may have a greater ability to influence world prices in specific industries. We
examine the potential U.S. market power in individual industries for the year 1992 because the
Trade and Production Database has the fewest missing production values for that year. Since not
all countries in the world are included in the data set, the world output levels in each industry
will be slightly understated (and the U.S. tariff effect on world prices overstated).11 The
countries in the data set accounted for 84% of extra-U.S. world GDP in 2003.
Table 2 presents an industry-level analysis of the effect that prohibitive tariffs would
have on world prices in each sector. The first column shows 1992 U.S. imports in the industry in
millions of dollars. The second column shows the ratio of U.S. imports to supply:
M us
.
Qs ,row + X us
13
In the median manufacturing industry, U.S. imports are 4.13% of the world supply. The third
column in Table 2 presents an estimate (using equation 3) of the effect on world prices of a
prohibitive U.S. tariff. Cutting the 1992 import levels to zero would have lowered the world
prices of these imports in the median industry by 2.5%. Using supply elasticity estimates of 0.5
or 2.0 would change the price effects of prohibitive tariffs to 3.5% and 1.6%, respectively, in the
median industry. Longer-run supply elasticities may be larger (implying that world price effects
are smaller) than the estimated value near unity used in this paper since entry, exit and output
adjustments cause supply curves to be quite elastic in the long-run.
Table 2 shows that for many industries, the U.S. has little market power and thus can not
use trade policy to influence its terms of trade in any significant manner. The implication that
the United States is a small country is not true of all sectors, however. Prohibitive tariffs in the
United States would lower world prices by more than 10% in two out of 28 industries,
accounting for 6% of U.S. manufacturing imports. The largest impact of prohibitive U.S. tariffs
on world prices occurs in the footwear industry because U.S. imports account for about 19% of
the potential import supply in the industry. A prohibitive tariff in footwear would lower world
prices by 11%. The U.S. also has the potential to lower world prices by more than 8% if it cut
off all imports in the apparel, scientific equipment, and miscellaneous manufacturing goods
industries.
The industry effects of a U.S. move to autarky on world prices are illustrated in Figure 3.
For 19 out of 28 industries, the United States would not change world prices by more than 3%
even if it were to cut off all imports. For another five industries, the impact of such a move on
world prices would be between 3 and 6%. The industries with the largest dollar values of
11
The import data contain U.S. imports from all sources, not just from the other 66 countries in the data set.
14
imports – transportation equipment, electrical machinery, and non-electrical machinery – would
see a fall in world prices of between 4 and 5% if the U.S. blocked all its imports.
Columns 4, 5, and 6 in Table 2 relate to equation (6), which estimates the maximum
potential U.S. trade policy effect on world prices. Column 4 presents an estimate of U.S. imports
in each industry under a policy of free trade, while column 5 reveals the percentage of world
supply that would be taken up by U.S. imports under free trade. Column 6 presents an estimate
of how much world prices would fall in each industry if the U.S. moved from free trade to
autarky. In most industries, the maximum potential impact of U.S. trade policies on world prices
is fairly small. For 18 out of 27 industries, for example, world prices are estimated to fall by less
than 4% if the U.S. were to move from free trade to autarky. For several industries, however, the
potential world price effects are sizable. In three of the 27 industries examined, world prices
could fall by more than 10% if the U.S. were to move from free trade to autarky. In the median
manufacturing industry, a move from free trade to prohibitive tariffs would reduce the world
price by 2.8%.
The approach we have taken here is to examine the effect of U.S. trade policy on world
prices assuming that exporters do not treat foreign markets as segmented. With imperfect
competition and segmented markets, foreign firms may absorb part of tariff increases so that the
importing country gains a terms of trade advantage, as Brander and Spencer (1984) show. These
arguments have to do with imperfect competition rather than with the size of the importing
country. As Gros (1987) shows, for example, even very small importing countries can induce
foreign exporters to absorb part of a tariff increase under imperfectly competitive conditions.
Thus, the potential terms of trade gains of tariffs under imperfect competition is a separate issue
from the question of whether the United States is a large country, and we focus only on whether
the U.S. is large enough to influence world prices in competitive markets.
15
The assumption we make in this paper of a unified world market for traded goods may
not yet be a reality (although the world seems to be moving in that direction). Eaton and Kortum
(2002), for instance, estimate that there are significant geographic barriers to trade, and
counterfactual simulations of their model indicate that a unilateral tariff reduction by the United
States lowers U.S. welfare. When transportation costs increase with distance, the world
effectively shrinks so that each country conducts most of its trade within a trading region. In
such a world, the United States can easily influence the prices within its trading region (and
might have sizable optimal tariffs) without being a large country in world markets. The
assumption made in most papers and textbooks is that the United States is a large country in
world markets rather than that it is a large country in its trading region, and it is the former claim
that we examine in this paper.12
The most important result in this section is that U.S. imports, even when they are large
shares of world trade, are usually very small fractions of world output. As a result, even
prohibitive U.S. tariffs would have only minor impacts on world prices in most industries.
3. Does the United States use its trade policies to influence world prices?
3.1 Effects of United States tariffs on world prices
Equation (3) in the previous section provides a simple measure of how much current U.S.
tariffs affect world prices. If world prices do not change, then U.S. imports would fall by
∆M us = M us * t av * emd ,us due to the tariff. This change constitutes the inward shift of the
world demand curve. The resulting change in world prices is
12
Magee, Yoo, Choi and Lee (2004) examine import shares within a smaller U.S. trading region. Considering only
the United States’ 95 closest trading partners, providing 80% of U.S. imports, the U.S. import share of trade among
this group of countries was less than 30% in the vast majority of 3-digit industries and less than 50% in all of them.
16
%∆Pwtariffs
(7)
= (1 +
M us * t av * emd ,us
Qs ,row + X us
(
)
1
ε s −ε d
)
−1.
Using the aggregate values of world supply and of U.S. imports, exports, and tariffs in 2002
provides a preliminary estimate of the effect of tariffs on world prices: %∆Pwtariffs = −0.09% .
Thus, for the elasticities in this example and the total U.S. import and world output levels, the
change in world price caused by existing U.S. tariffs in the aggregate equals less than one-tenth
of one percent.
This estimate of the world price change is much smaller than the terms-of-trade effects of
U.S. tariffs estimated in Whalley (1986). He uses a general equilibrium eight-region global trade
model to estimate the effects of a 50% cut in U.S. tariffs and he concludes that the U.S. terms-oftrade would fall by 2%. Deardorff and Stern (1986), on the other hand, use a computable general
equilibrium (CGE) model and find much smaller results on the terms of trade. In fact, their
estimate is that a 50% cut in U.S. tariffs would reduce the U.S. terms-of-trade by 0.09%, a result
that is similar to our own estimates of the price effects of U.S. tariffs. In commenting on these
two papers, de Melo (1986, p. 221) criticizes the Armington CES assumption in the Whalley (W)
model, which “is clearly responsible for large terms-of-trade change reported by (W) and
deserves further scrutiny.” The very different estimates in Whalley (1986) and Deardorff and
Stern (1986) illustrate one of the weaknesses in CGE models – that the results are often very
sensitive to the model’s assumptions.
While using aggregate values for trade flows and tariffs may indicate small effects of
trade barriers on world prices, the terms of trade effects may be much larger in specific
industries, particularly for ones in which the tariff is high and import demand elasticities are
large. The first four columns in Table 3 present measures of 1992 U.S. imports as a share of
world supply, the average U.S. tariff rate in 1992, the import demand elasticity estimate from
17
Kee, Nicita, and Olarreaga (2004), and the demand elasticity estimate from Mansur and Whalley
(1984) for each of 27 3-digit ISIC manufacturing industries. The final column shows the
estimated effect of U.S. tariffs on world prices. For the vast majority of industries, U.S. trade
policies had only negligible effects on world prices. In the median industry, for example, world
prices would have risen by 0.12% if U.S. tariffs had been eliminated. Using supply elasticity
estimates of ε s = 2 or ε s = 0.5 would result in a median industry world price effect of between
0.08% and 0.18%. The small impacts on world prices are partly the result of low average tariffs
– the median industry tariff was below 5% in 1992 – and partly caused by the fact that U.S.
imports are relatively small fractions of world output in most industries. Ideally, we would like
to present estimates of the effects of U.S. nontariff barriers on world prices, but measures of the
levels of protection provided by nontariff barriers are not available. The results in Table 3
indicate, however, that world prices would fall by less than 1% in the median industry due to
nontariff barriers even if they were eight times more protective than tariffs in 1992.
Notice that in the typical industry, the vast majority of the tariff acts to raise the domestic
price in the United States, while the world price falls by only a very small amount. Figure 4
illustrates this fact using import demand and export supply curves. Because U.S. imports are a
small fraction of world consumption, there is a high elasticity of foreign export supply to the
United States. As a result, the export supply curve is very flat. The tariff drives a wedge
between world and domestic prices ( = AC), but most of this difference results in higher
domestic prices ( = AB) rather than lower world prices ( = BC). In the median industry, the U.S.
tariff raises domestic prices by 4.71% and lowers world prices by only 0.12%.
Figure 5 illustrates the effect of U.S. tariffs on world prices across industries. In 23 of
the 27 industries, world prices fall less than one-half of one percent as a result of U.S. tariffs,
while in another two industries, world prices fall less than 1%. Nearly 86% of U.S.
18
manufacturing imports came in industries in which the effect of U.S. tariffs on world prices was
less than 0.5%. U.S. tariffs lowered world price by more than 1% in only two industries
(footwear and apparel), making up about 7% of U.S. manufacturing imports. Thus, for all but a
few industries, there is little evidence that the existing U.S. tariff protection has significantly
reduced the world prices of its imports.
Magee, Yoo, Choi, and Lee (2004) test some other implications of the hypothesis that the
United States is a large country. Using data for most of the 20th century, they found that changes
in protection were not significantly correlated with changes in the U.S. terms of trade after 1934.
3.2 Optimal tariffs for the United States
There is an extensive literature investigating optimal tariffs theoretically. Mai and
Hwang (1997), for example, examine optimal tariffs when firms choose their production
locations endogenously while Coates and Ludema (2001) incorporate political economy
considerations in foreign trading partners into the analysis. Williams (1999) adds a distortionary
income tax into the model of optimal trade policies, and Chiou, Hu, and Lin (2003) introduce
consumer preferences for home-country goods. Empirical estimates of optimal tariffs, however,
are virtually nonexistent, so in this paper we ignore many of the complications in determining
optimal tariffs in the theoretical literature in order to provide some of the first empirical
estimates of U.S. optimal tariffs. We do so in the simple model presented in most international
economics textbooks.
In order to simplify the analysis, we assume that markets are competitive (so that there
are no strategic trade policy considerations) and that supply and demand curves are linear:
QS = a + bP , and QD = c − dP . Using linear demand and supply curves generates tariff effects
19
on world prices that are comparable to (but slightly larger than) those in the constant elasticity
model in the earlier sections of this paper.
Figure 6 shows the standard partial-equilibrium treatment of a large-country tariff. If the
U.S. has free trade, the world price of the good is PwFT . When the U.S. imposes specific tariff
t , the world price falls to Pw while the domestic U.S. price rises to Pw + t . The tariff leads to
welfare losses in areas A and B in the graph while area C represents a terms-of-trade gain. The
net change in welfare from the tariff is ∆W = C − A − B . The areas are determined by the
following equations:
(8)
A=
1
( Pw + t − PwFT )(QS 2 − QS FT )
2
(9)
B=
1
( Pw + t − PwFT )(QDFT − QD2 )
2
(10)
C = ( PwFT − Pw )(QD2 − QS 2 )
The effect of a tariff on home country welfare is
(11)
∂W ∂C ∂A ∂B
−
=
−
, or
∂t
∂t ∂t ∂t
∂P
∂QD2 ∂QS 2
∂W
−
] − w (QD2 − QS 2 )
= ( PwFT − Pw )[
∂t
∂t
∂t
∂t
.
∂Pw
∂QS 2 ∂QD2
1
) + ( Pw + t − PwFT )(
)]
− [(QS 2 − QS FT + QDFT − QD2 )(1 +
−
∂t
∂t
∂t
2
Let X =
M FT
Qs ,row
(−emd ,us )
and normalize the
( M us − X us )
M us
X us
)−
e s − ed (1 −
emd + e xs
Qs ,row
Qs ,row
Qs ,row
world free trade price to one: PwFT = 1 . The post-tariff world price is Pw = 1 − tX . U.S. imports
under free trade are M FT = QD FT − QS FT . Setting
tariff:
∂W
= 0 , we can solve for the optimal
∂t
20
(12)
t opt =
M FT X
(b + d )(1 − X 2 )
.
As long as demand elasticities are negative and supply elasticities are positive, it will be
the case that X ≥ 0 . In addition, the second order condition for the tariff in (12) to maximize
welfare requires that X < 1 . As a result, the optimal tariff is positive. Notice that as the
country’s imports under free trade as a fraction of world output approach zero (
M FT
→ 0 ), the
Qs ,row
variable X falls to zero as well: X → 0 . Thus, as imports under free trade become smaller
relative to the size of the world market, the optimal tariff also approaches zero.
Estimates of import demand elasticities can be used to measure the sum of the slope of
the supply curve and the negative of the slope of the demand curve:
(13)
b + d = −emd ,us
M us
,
Pus
where Pus = Pw + t = 1 − tX + t is the domestic price in the United States inclusive of the tariff.
Table 4 presents estimates of the optimal tariffs for the United States for 27
manufacturing industries. The median optimal tariff is 3.59% of the free-trade world price. The
estimated optimal tariffs range from 0.7% in the printing and publishing industry to over 18% in
the footwear industry. For more than half of the industries (16 out of 27), the estimated optimal
tariff in 1992 was lower than the existing tariff. Thus, reducing tariffs unilaterally would raise
welfare in most manufacturing industries. This welfare conclusion is the same as that in the
computable general equilibrium model in Brown, Kiyota, and Stern (2005). They find that a
unilateral move by the United States to free trade would raise U.S. welfare by 3.4% of GDP.
They do not calculate optimal tariffs, but their result that trade liberalization raises welfare
suggests that the optimal tariffs are lower than actual tariffs in most industries.
21
The third column in the table shows how much world prices would drop from their free
trade levels if the U.S. were to adopt its optimal tariff in each industry. As the table makes clear,
the terms-of-trade effects of the optimal tariff are very small in most industries. Only four
industries out of 27 would see a drop of more than 1% in the world price if the United States
were to move from free trade to its optimal tariff. The final column shows the impact of the
optimal tariff on domestic prices in the United States, which equals the optimal tariff plus the
accompanying change in the world price. Because the world price effects are so small, nearly
the entire tariff is reflected in higher domestic prices. In the median industry, for example, the
optimal tariff is 3.59%. Domestic prices rise by 3.46% while the world price falls by 0.13%.
How can it be optimal for a country to raise its own domestic prices by nearly 3.5% in
exchange for such a small drop in the world price? The answer lies in the “tyranny of triangles”
and the fact that the costs of protection in the partial-equilibrium framework are related to the
size of the tariff squared while the terms of trade gains depend directly on the size of the world
price drop. Because the costs of protection are so small in the partial-equilibrium model, it is
possible to have moderate optimal tariffs despite terms of trade effects that are almost nonexistent. If the true costs of protection are much larger, as many researchers have claimed (see
Cox and Harris, 1985, for example), then the true optimal tariffs will be much smaller.
The most important determinant of optimal tariffs across industries is the variable
M FT
, or the ratio of U.S. imports under free trade to world output. In fact, 96% of the
Qs ,row
variation in optimal tariffs across industries can be explained by differences in this variable –
regressing optimal tariffs on free trade U.S. imports as a share of world output results in
R 2 = 0.96 . Not surprisingly, actual U.S. imports as a share of world output also provides an
excellent predictor of optimal tariffs in each industry. Regressing optimal tariffs on this variable
22
(with no intercept) generates the following estimate: optimal tariff = 0.82
M us 13
. Thus, for
Qs ,row
non-manufacturing industries where elasticity estimates are not readily available, 0.82 times
imports as a share of extra-U.S. world output provides a crude (but perhaps fairly accurate)
estimate of the optimal tariff.
Is there any relationship between the optimal tariffs and the existing U.S. tariff levels?
Interestingly, Figure 7 shows that there is a strong positive correlation between the two. The
tariff is 0.4 percentage points higher for each one percentage point increase in the optimal tariff,
and the coefficient is statistically significant at the 1% level.14 For a cross-section regression
with only one explanatory variable, the fraction of the variance in tariffs explained by
differences in optimal tariffs ( R 2 = 0.41 ) is also remarkably large. As the figure shows, actual
U.S. tariffs tend to be higher than optimal tariffs in industries with low optimal tariffs. At an
optimal tariff of zero, for example, the predicted actual tariff is 3.4%.
The strong correlation between optimal and actual tariffs is consistent with a situation in
which policymakers consider the terms-of-trade gains in setting tariffs. There are other possible
explanations, however. Optimal tariffs are higher in industries in which the United States has a
comparative disadvantage (and thus large levels of imports under free trade). Political economy
considerations may also push tariff levels up in industries where imports tend to be high, as
Trefler (1993) shows. Thus, it is not clear whether the result in Figure 7 is caused by
sophisticated policymakers or by omitted factors that are correlated with both optimal tariffs and
existing tariffs.
13
This regression has R
2
= 0.97 , but R-squared values do not provide a good measure of the “goodness of fit” for
a regression line without an intercept.
14
If the four outliers are dropped from the regression, the slope rises to 0.5, while the R2 declines to 0.17.
23
4. Conclusion
Is the United States a large country in world trade? The answer clearly depends on the
industry being examined, but we have argued here that for most industries the impact of U.S.
trade policies on world prices is negligible. There are several variants of the “U.S. is a large
country” hypothesis. The most common is that a large country can influence world prices
because it has a sufficiently large share of world imports. We have shown that the U.S. share of
world imports (17.4%) is smaller than the level deemed necessary for monopsony power in the
industrial organization literature (at least 30% and often much more). Furthermore, we have
argued that it is U.S. imports as a share of world output rather than of world imports that is the
relevant criterion to judge U.S. market power. Since U.S. imports are only 3.1% of the supply of
potential imports in the aggregate, U.S. trade policy market power is severely limited.
Examining specific industries, we find that world prices in the median manufacturing
industry are lowered by only 0.12% due to U.S. tariffs. In 23 out of 27 industries, accounting for
86% of U.S. manufacturing imports, world prices fell by less than one-half of one percent due to
U.S. tariffs. The industries in which U.S. trade policy has had the most significant influence on
world prices are footwear and apparel. These are the only two industries in which the world
price effects of U.S. tariffs were larger than 1%, and they accounted for about 7% of U.S.
imports in 1992.
Despite the small effects of U.S. trade barriers on world prices in most industries, we
calculate optimal tariffs for the United States that are occasionally large. The median industry
optimal tariff, for example, is 3.59%, and 11 out of 27 industries had optimal tariffs higher than
existing tariffs in 1992. The median industry’s optimal tariff is estimated to result in a 3.46%
24
rise in the domestic price and only a 0.13% fall in the world price. Interestingly, optimal tariffs
are strongly correlated with actual U.S. tariffs across industries.
The results in this paper have important implications for the way countries set their trade
policies. We have shown here that U.S. optimal tariffs were lower than the existing tariffs in 16
of 27 manufacturing industries in 1992 and that the median industry optimal tariff is less than
4%. As a result, before the Uruguay Round tariff cuts the United States had an incentive to
liberalize unilaterally in most industries, and optimal tariff considerations did not dampen the
United States’ enthusiasm for more open markets worldwide. Only recently (when there has
been a significant weakening in the U.S. push for liberalization) has the U.S. been compelled to
weigh the gains from a multilateral trade deal in improved access to foreign markets against the
potential welfare costs of unilaterally reducing U.S. tariffs.
Since no other single country in the world currently has even half of the U.S. level of
imports, their optimal tariffs should be much smaller than those for the U.S. Thus, terms-oftrade and optimal tariff considerations are largely negligible when other countries set their trade
policies. This result strongly supports Irwin (2002, p. 63), who states that “the terms-of-trade
motive for trade restrictions has little relevance for most countries’ policies. Few countries have
the ability to manipulate their terms of trade, and most policy makers probably have little idea
what the terms of trade are.” Given the results in this paper, policy makers are rational to ignore
the terms of trade in setting tariff barriers in the vast majority of cases. The results here also
suggest that countries do not enter into GATT/WTO negotiations in order to resolve their termsof-trade incentives to beggar-thy-neighbor since these incentives are largely negligible for most
participants. Multilateral negotiations must be needed for other reasons, such as to co-opt
exporters into lobbying for trade liberalization by offering reciprocal tariff cuts abroad.
25
We have discussed several reasons (segmented markets and geographic barriers to trade)
why U.S. trade barriers may have larger impacts on world prices than those calculated in this
paper. There are likely to be other situations that could contribute to non-negligible terms of
trade gains from U.S. protection. We argue here, however, that in a competitive and unified
world market, it is unlikely that even the United States can control world prices in the vast
majority of industries.
26
Figure 1
Herfindahl indexes in international trade, 1998
Number of industries
350
320
300
250
200
150
94
100
50
20
0
<1000
1000 to 1800
above 1800
Herfindahl category
Figure 2
P
S row + X us
∆M us
E
Pw
Pw'
E’
Drow + M us
'
Drow + M us
'
Qrow
Qrow
Q
27
Figure 3
Prohibitive tariff effects on world prices in manufacturing industries
10
9
9
Number of industries
8
7
6
6
5
4
5
4
3
2
2
2
6-10
10+
1
0
0-1
1-2
2-3
3-6
% decline in world price due to a prohibitive US tariff
Figure 4
Price
A
U.S. import
demand curve
+4.71%
Effect on
U.S. price
-0.12%
Effect on
world price
Foreign export
supply curve to
the U.S.
B
C
F
Quantity of U.S. imports
28
Figure 5
Effect of US tariffs on world prices, 1992
14
12
Number of industries
12
10
8
6
6
5
4
2
2
2
0.5-1
1+
0
0-0.1
0.1-0.2
0.2-0.5
% change in world price due to tariff
Figure 6
Effect of tariffs on welfare in a large country
Sus
P
Pw+t
PwFT
A
B
C
Pw
Dus
QSFT QS2
QD2
QDFT
Q
29
Figure 7
US tariffs and optimal tariffs, 1992
14%
apparel
footwear
Actual U.S. tariff
12%
textiles
10%
plastics
8%
pottery
y = 0.3998x + 0.0343
leather
glass
2
R = 0.4106
food
6%
4%
2%
chemicals
electrical
transport machinery
b
steel
wood rubber
printing
oil
refineries
scientific miscellaneous
equipment manufactures
machinery
paper
0%
0%
2%
4%
6%
8%
10%
Optimal tariff
12%
14%
16%
18%
20%
30
Table 1: Country shares of world trade, 2003
Country
United States
Germany
China
United Kingdom
Japan
France
Italy
Canada
Hong Kong
Netherlands
Spain
South Korea
Belgium
Mexico
Singapore
Taiwan
Switzerland
Sweden
Australia
Austria
Rank
Imports ($B)
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
1260
585
397
364
347
340
271
240
230
218
197
176
173
169
122
120
102
83
83
82
Share of world
imports
17.40
8.08
5.49
5.02
4.79
4.69
3.74
3.32
3.18
3.01
2.72
2.43
2.39
2.33
1.68
1.65
1.41
1.15
1.15
1.13
7240
100.00
World
Herfindahl-Hirschman Index for imports
Herfindahl-Hirschman Index for exports
561
415
Source: CIA World Fact Book 2004, http://www.odci.gov/cia/publications/factbook/index.html,
accessed July 12, 2004.
31
Table 2: Effect of prohibitive U.S. tariffs on world prices in manufacturing, 1992
Industry
1992 U.S.
U.S.
Prohibitive Estimated
imports imports as tariff impact free trade
($ M) % of world on world
imports
supply
prices
($ M)
Other manufactures
21,500
19.01%
-10.56%
22,735
Free trade Free trade to
imports as
autarky
% of world impact on
supply
world prices
20.10%
-11.19%
Footwear
8,472
18.95%
-10.76%
9,573
21.41%
-12.21%
Apparel
Professional and
scientific equipment
Leather products
25,300
15.14%
-8.98%
28,981
17.34%
-10.33%
17,700
14.47%
-9.44%
18,523
15.14%
-9.89%
3,589
8.87%
-5.23%
3,876
9.58%
-5.66%
Transport equipment
99,500
8.34%
-4.27%
103,879
8.70%
-4.46%
Electric machinery
77,000
7.64%
-4.73%
80,313
7.97%
-4.94%
Non-elec. machinery
Pottery china
earthenware
Non-ferrous metals
71,300
7.04%
-4.45%
73,873
7.30%
-4.61%
1,833
6.79%
-4.08%
1,979
7.33%
-4.40%
10,000
5.75%
-2.76%
10,368
5.97%
-2.86%
Wood products
7,235
4.82%
-2.45%
7,499
5.00%
-2.54%
Industrial chemicals
22,200
4.77%
-2.85%
23,512
5.05%
-3.03%
Furniture
4,888
4.36%
-2.20%
5,139
4.58%
-2.31%
Rubber products
4,492
4.28%
-2.66%
4,700
4.48%
-2.79%
Textiles
15,400
3.98%
-2.62%
18,947
4.90%
-3.22%
Petroleum refineries
13,300
3.85%
-1.50%
13,452
3.90%
-1.52%
Paper
10,500
3.84%
-2.81%
10,709
3.92%
-2.87%
Plastic products
10,500
3.80%
-2.34%
11,640
4.21%
-2.60%
Glass and products
2,334
3.66%
-2.31%
2,538
3.98%
-2.51%
Fabricated metals
14,900
2.83%
-1.37%
15,707
2.98%
-1.45%
Other chemicals
11,900
2.75%
-1.62%
12,527
2.89%
-1.71%
Iron and steel
9,919
2.43%
-1.17%
10,496
2.58%
-1.24%
Beverages
Petroleum and coal
products
Food products
Other non-metallic
mineral products
4,547
2.24%
-1.38%
4,820
2.37%
-1.47%
488
1.68%
-0.67%
495
1.70%
-0.68%
16,100
1.48%
-1.00%
16,917
1.55%
-1.05%
2,158
0.84%
-0.52%
2,268
0.88%
-0.55%
949
0.79%
-0.54%
.
.
.
Printing, publishing
2,274
0.71%
-0.53%
2,320
0.72%
-0.54%
Median industry
10,250
4.13%
-2.53%
10,709
4.58%
-2.79%
Tobacco14
14
The tariff for the tobacco industry is missing for 1992 in the TRAINS data set, so the estimated imports under free
trade can not be calculated.
32
Table 3: Effect of existing U.S. tariffs on world prices in manufacturing, 1992
Industry
U.S. imports 1992 U.S. Industry import
as % of world tariff rate demand elasticity
supply
Other manufactures
19.01%
5.58%
-1.03
-0.67
Estimated effect
of U.S. tariffs on
world price
-0.59%
Footwear
18.95%
11.72%
-1.11
-0.56
-1.36%
Apparel
Professional and
scientific equipment
Leather products
15.14%
13.38%
-1.09
-0.54
-1.28%
14.47%
5.79%
-0.8
-0.62
-0.43%
8.87%
6.75%
-1.19
-0.64
-0.41%
Transport equipment
8.34%
4.08%
-1.08
-0.99
-0.18%
Electric machinery
7.64%
4.37%
-0.98
-0.62
-0.20%
Non-elec. machinery
Pottery china
earthenware
Non-ferrous metals
7.04%
3.25%
-1.11
-0.63
-0.16%
6.79%
8.00%
-0.99
-0.62
-0.32%
5.75%
3.41%
-1.08
-1.08
-0.10%
Wood products
4.82%
3.57%
-1.02
-0.97
-0.09%
Industrial chemicals
4.77%
5.20%
-1.14
-0.74
-0.17%
Furniture
4.36%
4.81%
-1.07
-0.97
-0.11%
Rubber products
4.28%
4.08%
-1.14
-0.61
-0.12%
Textiles
3.98%
10.97%
-2.1
-0.52
-0.60%
Petroleum refineries
3.85%
1.48%
-0.78
-1.56
-0.02%
Paper
3.84%
1.85%
-1.08
-0.39
-0.06%
Plastic products
3.80%
8.40%
-1.29
-0.62
-0.25%
Glass and products
3.66%
7.57%
-1.15
-0.61
-0.20%
Fabricated metals
2.83%
4.83%
-1.12
-1.08
-0.07%
Other chemicals
2.75%
3.87%
-1.36
-0.74
-0.08%
Iron and steel
2.43%
5.09%
-1.14
-1.08
-0.07%
Beverages
Petroleum and coal
products
Food products
Other non-metallic
mineral products
Printing, publishing
2.24%
6.25%
-0.96
-0.61
-0.08%
1.68%
1.75%
-0.84
-1.58
-0.01%
1.48%
6.22%
-0.82
-0.5
-0.05%
0.84%
4.02%
-1.27
-0.61
-0.03%
0.71%
1.81%
-1.12
-0.37
-0.01%
4.13%
4.83%
-1.10
-0.62
-0.12%
Median
ed
Sources: demand elasticity estimates from Mansur and Whalley (1984); import demand elasticity
estimates from Kee, Nicita, and Olarreaga (2004)
33
Table 4: Optimal tariffs in manufacturing industries
Industry
Other manufactures
5.58%
1992
Optimal
tariff
14.72%
Footwear
11.72%
18.40%
-2.92%
15.48%
Apparel
Professional and scientific
equipment
Leather products
13.38%
16.11%
-2.14%
13.97%
5.79%
12.60%
-1.14%
11.45%
6.75%
7.68%
-0.60%
7.07%
Transport equipment
4.08%
5.43%
-0.29%
5.14%
Electric machinery
4.37%
6.33%
-0.36%
5.97%
Non-elec. machinery
3.25%
5.72%
-0.34%
5.38%
Pottery china earthenware
8.00%
6.16%
-0.32%
5.84%
Non-ferrous metals
3.41%
3.49%
-0.12%
3.36%
Wood products
3.57%
3.13%
-0.09%
3.04%
Industrial chemicals
5.20%
3.85%
-0.15%
3.70%
Furniture
4.81%
2.93%
-0.08%
2.85%
Rubber products
4.08%
3.59%
-0.13%
3.46%
Textiles
10.97%
5.16%
-0.41%
4.75%
Petroleum refineries
1.48%
1.75%
-0.02%
1.72%
Paper
1.85%
3.64%
-0.14%
3.50%
Plastic products
8.40%
3.71%
-0.15%
3.56%
Glass and products
7.57%
3.48%
-0.12%
3.36%
Fabricated metals
4.83%
1.82%
-0.03%
1.79%
Other chemicals
3.87%
2.16%
-0.06%
2.10%
Iron and steel
5.09%
1.58%
-0.03%
1.55%
Beverages
Petroleum and coal
products
Food products
Other non-metallic mineral
products
Printing, publishing
6.25%
1.99%
-0.03%
1.95%
1.75%
0.77%
0.00%
0.76%
6.22%
1.43%
-0.01%
1.42%
4.02%
0.72%
-0.01%
0.71%
1.81%
0.70%
-0.01%
0.69%
4.83%
3.59%
-0.13%
3.46%
Median industry
1992 U.S.
tariff rate
Estimated effect of
optimal tariffs on
world price
-1.97%
Estimated effect of
optimal tariffs on
U.S. domestic price
12.75%
34
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