The United States is a Small Country in World Trade
Christopher S. P. Magee 1
Stephen P. Magee 2
Abstract
Despite being the largest country in world trade and thus presumably having high optimal
tariffs, the United States has been a champion of free trade since the 1930’s, with low and
declining levels of protection. This paradox suggests that the United States is failing to
exploit its monopsony power by levying optimal tariffs. We use data on world output
and trade flows and find that the influence of U.S. tariffs on world prices is negligible in
most industries. In the median manufacturing industry, U.S. tariffs reduce world prices
by only 0.12%. We also find that optimal tariffs are typically small (3.6% in the median
manufacturing industry) and are lower than existing U.S. tariffs in most industries. It is
no puzzle that the United States has long been a champion of free trade – U.S. tariffs
raise domestic prices, but with negligible reductions in world prices.
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% of world imports, and 10% 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? We show in this paper that by several different measures and for most
industries, the United States is a small country because the impact of its trade barriers on
world prices is negligible.
The results in this paper are contrary to the widespread view that the United
States is a large country in world trade. In their undergraduate textbook International
Economics, for instance, Husted and Melvin (2001, 168) 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.” These authors represent
well the views of the profession and our own views before we wrote this paper.
The belief among international economists that the United States is a large
country in world trade is very plausible considering that it is the world’s largest importer
and can reasonably be assumed to influence prices in many world markets in the short
run. But the industrial organization literature has taught for a half century that the United
States has monopsony power only if it can control prices in a given world market for a
3 CIA World Fact Book, 2004.
Based on World Bank and WTO data, the United States has the 10th lowest average tariffs (unweighted)
among 82 countries in 1998.
4
2
nontransitory period after a tariff increase by preventing countries from substituting their
exports away from the United States to other markets. Both concentrations measures and
calculations based on elasticity estimates in this paper confirm that the United States is
not a large country because it does not have such monopsony power in world markets.
Even with prohibitive tariffs on all U.S. imports, we find that world prices would only
fall by 4 percent and the United States would receive no economic gains because it would
have eliminated all its imports. In individual products, 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.
Very few papers have attempted to determine empirically whether U.S. trade
policies influence world prices. Hufbauer and Elliot (1994) calculate 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. Broda, Limao, and Weinstein (2006), on the other hand, estimate much
lower export supply elasticities and conclude that many countries have market power in
world trade. A more extensive discussion of their results appears later in the paper.
Edgeworth (1894), Bickerdike (1907) and Marshall (1923, 213) 5 all showed that
large countries in world trade could improve their welfare by raising tariffs and driving
down the world prices of their imports. Thoughtful international economists have since
complicated their models to incorporate large country effects, presumably so that their
models would apply to the United States. 6
5
We are indebted to the late Charles P. Kindleberger for the reference to Alfred Marshall’s (1923) paper.
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.
6
3
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 an important consideration driving country tariff levels, we would expect
the United States to have higher protection than everyone else. The 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. In this
literature, the United States chose not to exercise its monopsony power and raise our
protection to optimal tariff levels for political reasons, such as our role as a hegemonic
world leader. Another theory advanced to reconcile the apparent contradiction between
high optimal and low actual tariffs in the United States is provided by Coates and
Ludema (2001). They show that home country liberalization can weaken importcompeting 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 for
the vast majority of industries, the United States, like every other nation in the world, is a
small country. We show that if world markets are integrated, then U.S. tariffs have
negligible impacts on world prices. We also estimate that optimal U.S. tariffs are
between 3 and 4 percent in the median industry. Thus, actual U.S. tariff levels are above
optimal levels in most industries, and it is a misconception to see the United States as
surrendering its monopsony power. Only in recent years (during which time the U.S.
commitment to a system of free trade appears to have softened) have tariffs in some
industries dropped below their optimal levels. As a result, U.S. welfare has unilaterally
increased as it cut protection over the past 70 years. Beginning with the Reciprocal
Trade Agreements Act of 1934, the United States has gained even further by inducing
4
foreign countries to lower their trade barriers on U.S. goods through bilateral and later
GATT and WTO multilateral negotiations. Thus, our estimates provide a simpler
explanation of the United States’ push for open trade policies than the political-economic
tradeoffs required in the hegemonic literature.
This paper addresses 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? The next
two sections explore these questions, and section 4 concludes.
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 in the short run by changing their trade policies. For most countries, however, the
nontransitory impact on world prices will be negligible because of exit and substitution to
other markets. The question of an importing country’s market power in international
markets is directly related to the question of monopoly and monopsony power studied by
industrial organization economists.
The vast majority of industrial organization studies have been about monopoly,
but the lessons carry over directly to monopsony. All oligopoly and monopolistically
competitive firms can raise the price of their output but they do not have monopoly
power unless they can maintain the high price for a sustained period of time using
barriers to entry. Absent barriers to entry, existing suppliers and market entrants will
drive elevated prices back to competitive levels. For the case here, the United States
cannot exercise monopsony power using its tariffs unless it can drive down world prices
and then keep them down. Foreign exporters may accept lower prices in the short run to
continue exporting to the United States but if the price in world markets does not decline,
5
then they will eventually shift their exports to alternative destinations unless something
prevents them from doing so.
So what are the standards for monopoly power in U.S. antitrust law and practice?
The U.S. Justice Department Guidelines 7 for horizontal mergers defines a product market
as a collection of products within which a firm or group of firms exercising monopoly
power could successfully implement a "small but significant and nontransitory" increase
in price. The Guidelines read: “In attempting to determine objectively the effect of a
‘small but significant and nontransitory’ increase in price, the Agency, in most contexts,
will use a price increase of five percent lasting for the foreseeable future.” 8
The Guidelines do not directly specify the length of the “foreseeable future” 9 but
on the questions of competitive entry they read: “The Agency generally will consider
timely only those committed entry alternatives that can be achieved within two years
from initial planning to significant market impact.” 10 Jorde and Teece 11 have argued that
“the DOJ one year and two-year rules are too short for almost any case of serious
technological advance.” For high tech products, they suggest a four-year period as the
length of time that prices would have to be elevated in a monopolized market.
Carlton and Perloff (2005, 679), in their industrial organization text, define
market power as “the ability to set price profitably above the competitive price.” They
7 http://www.ftc.gov/bc/docs/horizmer.htm#N_6_
8 This is called the “SSNIP test,” which defines a relevant market as one worth monopolizing, that is, one
in which a monopolist could increase its profits with a small but significant and nontransitory increase in
price.
9 However, there are indications of relevant time periods from the discussions of entry in the guidelines. If
prices were to be elevated by monopoly power following a merger, the government is concerned with how
fast the anticompetitive prices might be reduced by entry.
10 Even if the entry of new or constrained capacity may require more than two years, however, the Agency
still sees new entry as pricing discipline that might deter monopoly pricing: “If entry only can occur
outside of the two year period, the Agency will consider entry to be timely so long as it would deter or
counteract the competitive effects of concern within the two year period and subsequently.”
11 http://www.ftc.gov/opp/global/jorde2.shtm
6
point out that because the extent of a firm’s market power is difficult to determine,
“courts and economists often use market share as a rough guide to whether a firm has
market power.” Bradburd and Over (1982) report critical values for the four-firm
concentration ratio of 50% to 60%, above which industry prices increase. Further, the
U.S. courts have adopted a 50% market share as a “prerequisite for a finding of
monopoly.” (Cameron and Glick, 1996, p. 193) Carlton and Perloff (2005, 6) indicate
that it is virtually impossible to control prices in contestable markets in which firms can
enter and exit rapidly, even with only one or a few firms present.
Table 1 provides the shares of world imports in 2003 accounted for by the 20
largest importers, with the four-country concentration ratio for world imports and exports
(36%) near the bottom of the table. 12 As Table 1 shows, the United States had a 17
percent share of world imports in 2003. This falls far short of 50% standard required in
the United States for monopsony power and the ability to control 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. Supplier substitutability
undermines the ability of a buyer with such a small market share to control prices.
In addition to concentration ratios, a second measure of market power is
commonly used by industrial organization economists and the U.S. Federal Trade
Commission in its analysis of mergers -- the Herfindahl-Hirshman Index (HHI). The
HHI is the sum of the squared market shares of suppliers in a market, with theoretical
values ranging from near 0 (tens of thousands of small farmers) to 10,000 (one monopoly
12
The four-country concentration ratio in world imports is only 36%, but that would be relevant only if the
United States colluded with the next three largest importers (German, China and the United Kingdom) to
drive down world prices using protection. We are unaware that this has ever happened. Exporting countries
have coordinated price increases through voluntary export restraint agreements with the United States and
other countries, but these agreements have acted to raise the prices received by the those exporters rather
7
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. 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: 01,000 means a market is not concentrated; 1,000-1,800 means intermediate concentration;
and above 1,800 means it is highly concentrated (Carlton and Perloff, 2005, 645).
The last two rows in Table 1 show that the HHI equals 561 for world imports and
415 for world exports. Both of these values are in the middle of the Justice DepartmentFTC's most competitive range of 0 to 1,000. With such low market concentration, it is
clear that world trade is not concentrated.
The conclusion above does not change when we examine trade at an industry
level. Figure 1 summarizes the results of calculating the HHI for 1998 world trade in 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
not concentrated, 94 industries (accounting for 27% of trade flows) had intermediate
levels of market concentration, and only 20 industries (with less than 2% of the total
import value) had highly concentrated market power by country. 13
In short, world import markets are not concentrated and the United States share of
world imports is too low for it to have monopsony power. In reality, this 17% share of
world imports dramatically overstates the ability of the United States to influence world
than lowering the prices they receive as would be the case if the United States was exercising its power as a
monopsonist.
13 More detailed calculations for some of the results in this paper can be found in Magee, Yoo, Choi and
Lee (2008). They examine U.S. shares of world trade for exporters geographically closest to the United
States. They found that United States import shares are less than 30% for over 80% of the total trade in that
geographic area. For none of the products in that geographic market did the United States import share
exceed 50%.
8
prices. World prices are determined by world supply and demand, and the world supply
of goods is many times larger than the existing international trade flows.
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 the total world supply of a good. In 2003, the United States
imported $1.26 TR worth of goods while world goods produced output outside the U.S.
were valued at $17.3 TR. 14 The market controlled by U.S. trade policy, then, amounts to
only 7.3% of the supply of potential U.S. imports. The United States market power may
be larger in sectors that are heavily traded because the goods output cited above includes
nontraded goods. Based on the standards outlined in the industrial organization
literature, however, the United States does not have sufficiently high market shares for
monopsony power and the ability to control prices in world markets.
We turn now to a simple model of world supply and demand that reveals more
directly the effect 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 ΔM 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 in U.S. demand shifts
14
World GDP outside the U.S. in 2003 equaled $40.43 trillion according to the CIA World Fact Book,
2004. Lipsey (2006, 14) reports that world goods output equaled 42.7% of world GDP in 1985-90. The
product of these numbers yields $17.3 trillion as a rough estimate of 2003 non-U.S. world goods output.
9
'
the demand inward to Drow + M us
, and the new equilibrium is at point E ' , with a world
'
price of Pw' and quantity produced of Qrow
. We assume here that the demand and supply
curves have constant elasticities (similar results emerge when there are linear demand
curves). The equations for the demand and supply curves are:
(1)
Qd ,row + M us = P ε d
(2)
Qs ,row + X us = P ε s ,
where ε s is the elasticity of supply in the rest of the world and ε d is the demand
elasticity. Because the world demand curve includes U.S. imports, this demand elasticity
will be a weighted average of the ROW price elasticity of demand ( ε d ,row ) and the U.S.
import demand elasticity ( ε md ):
(3)
εd =
ε d ,row Qd ,row + ε md M us
Qd ,row + M us
.
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
must be completely offset by a decline in the country’s total exports (in all industries). In
a general equilibrium framework, then, the world price effects of the trade barriers will
be smaller than those predicted here because some of the drop in the industry’s imports
may be offset by a fall in exports.
Setting equations (1) and (2) equal to each other and solving for the percentage
change in the world price reveals:
1
(4)
(
)
ΔM us
%ΔPw = (1 +
) ε s −ε d − 1
Qs ,row + X us
10
Since supply elasticities are positive and demand elasticities negative, the world price
change will have the same sign as ΔM us . Thus, the world price declines when U.S.
imports fall due to tariff protection. Equation (4) shows that the effect of U.S. trade
barriers on world prices depends critically on the ratio
ΔM us
, or the change in
Qs ,row + X us
U.S. imports relative to world 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 estimates (listed in Table 3 for each
industry) as measures of the ROW price elasticities of demand throughout the paper.
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 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):
(5)
log(Qd ,row + M us ) = ε d log( Pw ) + α 2 log(Yus ) + u d
(6)
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 described in Feenstra (1996). Manufacturing output in 28 3-digit ISIC
industries for these years is available for 67 countries in the Trade and Production
Database described in Nicita and Olarreaga (2001). Unfortunately, some countries have
11
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 is a consistent estimate of
the price elasticity of supply: εˆs =
slope in regression of log(Qs ,row + X us ) on log(Yus )
slope in regression of log( Pw ) on log(Yus )
.
Using our data over the period 1982-1992, we get a supply elasticity estimate in world
markets of εˆ s = 0.982 . This estimate is clearly an imperfect measure of the true supply
elasticity in each industry, so later in the paper we discuss the impact on our price change
estimates of using alternative values for the supply elasticity.
Suppose that the United States 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 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. 15 The import-weighted
average elasticity across all industries in the United States is ε md ,us = −1.3 . 16 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 world goods outside of the U.S. are estimated to be
15
Special thanks go to Hiau Looi Kee for providing us with their estimates of import demand elasticities.
Whalley (1986) provides a “central tendency” import price elasticity in the literature that is slightly
larger in magnitude: e md = −1.66 .
16
12
Q s ,row = $17.3 TR . Substituting these values into equation (4) reveals the predicted
world price change if imports dropped to zero: % ΔPw = −4.1% . World prices on average
would fall by about 4% if the United States were to block all imports (but U.S. exports
remained unchanged). Using a supply elasticity estimate of ε s = 0.5 would result in a
world price change of % ΔPw = −5.8% while raising the supply elasticity estimate to
ε s = 2 would result in a world price change of % ΔPw = −2.5% due to prohibitive tariffs.
While the aggregate effect of U.S. prohibitive tariffs on world prices appears to be
quite small, the U.S. may have a greater ability to influence world prices in specific
industries. We examine the year 1992 because the Trade and Production Database has
the fewest missing production values for that year. The countries in the data set
accounted for 84% of extra-U.S. world GDP in 2003. Because not all countries in the
world are included in the data set, the world output levels in each industry are
understated (and the U.S. tariff effect on world prices overstated).
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
the ROW supply:
M us
Qs ,row+ X us
. 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 4) of the effect of a prohibitive U.S. tariff on world prices. Cutting the 1992
import levels to zero would have lowered the world prices of 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.
13
It may be safe to assume that supply elasticities are higher than unity in the long
run. Elementary microeconomics teaches that entry, exit and output adjustments cause
supply curves to be quite elastic even in the medium run, especially on world markets.
Higher supply elasticity estimates would mean U.S. tariffs have smaller impacts on world
prices than those in Table 2.
Table 2 shows that the U.S. has little market power in most, but not all, sectors.
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 5% if it cut off all imports
in the apparel, scientific equipment, leather products, and miscellaneous manufacturing
goods industries. The Justice Department market definition Guidelines use a sustained
5% increase in market price in addressing the monopoly question. As a monopsony
buyer, the U.S. has the ability to change market prices by more than 5% in only five
industries, accounting for 16% of U.S. manufacturing imports, even if it adopts
prohibitive tariffs.
The 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 imports: transportation equipment, and electrical and non-electrical
machinery, would see a fall in world prices of between 4 and 5% if the U.S. blocked all
its imports.
14
The approach we have taken here is to examine the effect of U.S. tariffs on world
prices assuming that exporters do not treat foreign markets as segmented. With imperfect
competition and segmented markets, foreign firms might absorb part of tariff increases so
that the importing country gains a terms of trade advantage, as in Brander and Spencer
(1984). These arguments have to do with imperfect competition rather than with the size
of the importing country. As Gros (1987) shows, for example, very small importing
countries might 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. The presence of imperfect competition does not weaken the
conclusions of this paper. All of results from the Justice Department and U.S. antitrust
standards for market shares and market power reported above and the American
empirical evidence of elevated prices in concentrated markets apply equally to markets
with and without imperfect competition.
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) while leaving the
15
prices of goods trading in other regional markets unchanged. 17 Claiming that the United
States is a large country in its region is not the same as claiming it is a large country in
the world trade market, however. The latter claim is the one that is most often made in
textbook treatments of optimal tariff arguments and the one that we examine in this
paper.
In fact, the geographically large world market actually reinforces the view that the
U.S. is a small country in world trade. First, many exporters to the United States are very
far away so that high transport costs are already an impediment. A U.S. attempt to
exploit them further with high protection would induce them to switch their exports to
closer and more convenient destinations. Second, industrial organization studies show
that the larger the market, the harder to exercise market power because of easier entry
and exit and more competitive alternatives. Carlton and Perloff (2005, 135) report that
“the existing evidence shows that cartels are often found in smaller geographic markets.”
Posner’s (1970) study of cartels from 1890 through 1969 showed that 47% were in local
or regional markets; 38% were nationwide and only 9% involved foreign trade.
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. Foreign exporters do not have to switch to other export destinations; they can
also sell more in their own countries, where transport costs are minimal.
3. Do United States trade policies influence world prices?
17
Magee, Yoo, Choi and Lee (2004) examine this geographic market question. Considering only the
United States’ closest trading partners, providing 80% of U.S. imports, the U.S. import share of trade
16
3.1 Effects of United States tariffs on world prices
Equation (4) 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 the tariff
would reduce U.S. imports by ΔM us = M us * t av * emd ,us . This change constitutes the
inward shift of the world demand curve. The resulting change in world prices is
(7)
%ΔPwtariffs
= (1 +
M us * t av * emd ,us
Qs ,row + X us
(
)
1
ε s −ε d
)
−1.
The World Bank reports an average (unweighted) ad valorem tariff of t av = 3.9% for the
United States in 2002. Substituting the aggregate values for each variable reported in
section 2 into equation (7) provides a preliminary estimate of the effect of tariffs on
world prices: % ΔPwtariffs = −0.21% . Thus, for the elasticities in this example, a normal
tariff, and the total U.S. import and world output levels, the drop in world price caused by
existing U.S. tariffs in the aggregate equals roughly two-tenths 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 eightregion global trade model to estimate the effects of a 50% cut in U.S. tariffs and he
concludes that the U.S. terms-of-trade would fall by 2%. Deardorff and Stern (1986) also
use a computable general equilibrium 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
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.
17
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.”
While the overall effect of U.S. tariffs on world prices is negligible in the estimate
presented above, 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 U.S. imports as a share of world
supply, the average U.S. tariff rate, the import demand elasticity estimate from 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 has only negligible effects on world prices. In the median
industry, for example, eliminating U.S. tariffs would raise world prices by 0.12%. 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. Because of a lack of data, we do not present estimates of the effects
of U.S. nontariff barriers on world prices. The results in Table 3 indicate, however, that
world prices would fall by less than 1% in the median industry unless nontariff barriers
were over eight times more protective than tariffs in 1992.
Figure 4 illustrates the effect of U.S. tariffs on world prices. 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.
manufacturing imports came in industries in which the effect of U.S. tariffs on world
18
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 (2008) test some implications of the hypothesis that
the United States is a large country. The authors show that changes in an industry’s tariff
protection are not correlated with changes in the U.S. industry terms of trade during the
1980s. Using data for most of the 20th century, the authors also found that changes in
protection did not significantly affect 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 much rarer, so in this paper we ignore many of
the complications in determining optimal tariffs in the theoretical literature in order to
provide 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
19
linear: QS = a + bP , and QD = c − dP . Using linear demand and supply curves
generates tariff effects on world prices that are comparable to those in section 3.1.
Figure 5 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 a 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
ΔW = C − A − B . The optimal tariff is set when
∂ΔW ∂C ∂A ∂B
=
−
−
= 0 . The areas
∂t
∂t ∂t ∂t
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 marginal increase in the tariff on country welfare is
∂P
∂QD2 ∂QS 2
∂ΔW
−
] − w (QD2 − QS 2 )
= ( PwFT − Pw )[
∂t
∂t
∂t
∂t
(11)
.
∂Pw
∂QS 2 ∂QD2
1
) + ( Pw + t − PwFT )(
)]
− [(QS 2 − QS FT + QD FT − QD2 )(1 +
−
∂t
∂t
2
∂t
Let X =
M FT
Qs ,row
(−emd ,us )
and
M us
X us
( M us − X us )
e s − ed (1 −
emd + e xs
)−
Qs ,row
Qs ,row
Qs ,row
normalize the world free trade price to one: PwFT = 1 . The post-tariff world price is
20
Pw = 1 − tX . U.S. imports under free trade are M FT = QD FT − QS FT , and we can
replace c − a = M FT + (d + b) . Setting
t opt =
(12)
∂ΔW
= 0 , we can solve for the optimal tariff:
∂t
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
equation (12) 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 variable X falls to zero as well: X → 0 . Thus, as imports under free
Qs ,row
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 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.
21
The third column in the table shows how much world prices would drop from
their free trade levels if the United States 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%.
The most important determinant of optimal tariffs across industries is the ratio of
U.S. imports under free trade to world output. Not surprisingly, actual U.S. imports as a
share of world output provides an excellent predictor of optimal tariffs in each industry.
Regressing optimal tariffs on this variable (with no intercept) generates the following
estimate: optimal tariff = 0.82
M us
, with R 2 = 0.97 . Thus, for industries where
Qs ,row
elasticity estimates are not readily available, 0.82 times imports as a share of extra-U.S.
world output provides a crude estimate of the optimal tariff.
Is there any relationship between the optimal tariffs and the existing U.S. tariff
levels? Interestingly, Figure 5 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. 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.
22
Dropping the four outliers in the graph (those with optimal tariffs above 10%) causes the
coefficient on the optimal tariff to increase to 0.5, but the statistical significance declines
(the new p-value is p = 0.052 ).
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 5 is caused by sophisticated policymakers or by omitted
factors that are correlated with both optimal tariffs and existing tariffs.
Broda, Limao, and Weinstein (2006) provide one of the few other papers that
attempt to estimate optimal tariffs, and they also find that actual and optimal tariffs are
positively correlated. In other ways, however, their paper finds results that are exactly
the opposite of those in this paper. For the United States, they estimate that the optimal
tariffs are 160% for the median differentiated good and 41% for the median commodity.
They also estimate export supply elasticities faced by 15 countries that are not members
of the WTO, and their estimates suggest that the optimal tariffs in the median industry
range from 90% in Lebanon to nearly 300% in Paraguay. While these estimates are
surprisingly large (Paraguay has less than 0.04% of world imports), the authors indicate
that they are based on a linear tariff formula and thus are likely to overstate the true
optimal tariffs. In essence, though, their results suggest that almost no countries are
small in world trade, while this paper argues that not even the United States is large.
23
There are several explanations for the dichotomous results in the two papers.
Broda, Limao, and Weinstein use yearly data to estimate export supply elasticities for
varieties of each good, where a variety is a good imported from a particular exporting
country. They estimate relatively low elasticities on most goods, meaning that even
small importing countries have market power over their trading partner’s products. As
the authors point out, this result can be explained if goods are strongly differentiated by
their source of origin or if trade costs rise sharply with distance so that international
markets are segmented and countries have regional market power. Another possible
explanation is that longer-run elasticities are likely to be much larger, and countries’
market power considerably smaller. Since the industrial organization literature suggests
that control of prices over a period of two years or more may be necessary for
monopolistic behavior, the longer-run elasticities may be more relevant measures of
market power.
The low elasticity estimates in Broda, Limao, and Weinstein (2006), although
obtained using much more sophisticated techniques, are actually similar to results from
earlier studies in the 1970s and 1980s. As Athukorala and Riedel (1991) describe, “The
‘consensus view’ … is that the price elasticity of export demand, almost everywhere, is
between -0.5 and -1.0.” That consensus view suggests that almost no country in the
world is a small one in international trade, and it implies that countries should tax their
exports (if the price elasticity of export demand is -1, then the optimal export tax is
100%), just as Broda, Limao, and Weinstein’s results suggest that countries should tax
imports. Athukorala and Riedel (1991) show, however, that South Korea fits many
predictions of the small country hypothesis even though simple elasticity estimates find a
low price elasticity of demand for its exports. Riedel (1988) finds a similar result for
24
Hong Kong. 18 Thus, it may be that estimates of elasticities based on yearly data overstate
countries’ market power in the long run. The phenomenon of low estimated price
elasticities, known as “elasticity pessimism in international trade,” has been around for
over 50 years since Guy Orcutt’s (1950) classic paper.
This paper has assumed that there is a unified world market and goods from
different origins are substitutable over the longer run. Because international markets are
contestable, meaning there is free entry and exit, countries face strong competition from
rival exporters. These assumptions are close to textbook models of trade which
emphasize long run effects. These simple standard models and industrial organization
economics provide what we believe is the best description of world markets in the long
run, namely that the United States is a small country. Taken together, the results in this
paper and those in Broda, Limao, and Weinstein (2006) suggest that the terms of trade
argument for tariffs needs to be modified to emphasize the importance of product
differentiation, segmented world markets, and imperfect competition. As this paper
argues, however, the standard terms of trade argument based solely on country size is
flawed because no country has the ability to control prices over sustained periods in a
competitive world market.
4. Conclusion
Is the United States a large country in world trade? We have argued here that for
most industries the impact of U.S. trade policies on world prices in the long run 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
18 We are grateful to an anonymous referee for pointing us to these last three references.
25
sufficiently large share of world imports. We have shown that the U.S. share of world
imports (17%) is smaller than the level deemed necessary for monopsony power in the
industrial organization literature (at least 50%). 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 as a share of the potential
supply of goods is only 7.3%, 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.
The results in this paper have important implications for the way countries set
their trade policies. In the United States, the median industry optimal tariff is 3.59%, and
16 out of 27 industries had tariffs higher than the optimal level in 1992. As a result, for
many years 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 has the U.S. had to weigh the gains from a
multilateral trade deal in improved access to foreign markets against the terms of trade
costs of reducing U.S. tariffs.
Since no other 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, termsof-trade and optimal tariff considerations are largely negligible when other countries set
26
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 terms-of-trade incentives to beggarthy-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.
We have discussed several reasons (segmented markets, product differentiation,
and imperfect competition) why, in the absence of a competitive and integrated world
market, U.S. trade barriers may have an impact on the prices that foreign exporters
receive. Based on the standards set in the industrial organization literature, however,
world trade flows in most industries are highly competitive. The contention that world
markets are unified, or that “The world is flat” in the words of Thomas Friedman (2005),
is also a plausible description of the global economy, particularly in the long run. Under
these conditions, even the United States cannot significantly influence world prices in the
vast majority of industries. In other words, the United States is a small country in world
trade.
27
Figure 1
Herfindahl indexes in international trade, 1998
350
320
number of industrie
300
250
200
150
94
100
50
20
0
<1000
1000 to 1800
above 1800
Herfindahl category
Figure 2
P
S row + X us
ΔM us
E
Pw
Pw'
E’
Drow + M us
'
Drow + M us
'
Qrow
Qrow
Q
28
Figure 3
Prohibitive tariff effects on world prices in manufacturing industries
10
9
9
Number of industries
8
7
6
6
5
5
4
4
3
2
2
6-10
10+
2
1
0
0-1
1-2
2-3
3-6
% decline in world price due to a prohibitive US tariff
Figure 4
Effect of US tariffs on world prices, 1992
14
12
Number of industries
12
10
8
6
6
5
4
2
2
0.5-1
1+
2
0
0-0.1
0.1-0.2
0.2-0.5
% change in world price due to tariff
29
Figure 5
Effect of tariffs on welfare in a large country
P
Sus
Pw+t
A
PwFT
B
C
Pw
Dus
QSFT
QS2
QD2
Q
QDFT
Figure 6
US tariffs and optimal tariffs, 1992
14%
apparel
footwear
Actual U.S. tariff
12%
textiles
10%
plastics
8%
pottery
glass
y = 0.3998x + 0.0343
leather
2
R = 0.4106
food
6%
chemicals
electrical
transport machinery
b
steel
4%
miscellaneous
manufactures
wood rubber
machinery
printing
2%
paper
oil
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
Four-country concentration ratio for imports
Four-country concentration ratio for exports
Herfindahl-Hirschman Index for imports
Herfindahl-Hirschman Index for exports
35.99
30.37
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
Food products
Beverages
1992 U.S. imports
($ M)
16,100
U.S. imports as % of
Prohibitive tariff
world supply
impact on world prices
1.48%
-1.00%
4,547
2.24%
-1.38%
Tobacco
949
0.79%
-0.54%
Textiles
15,400
3.98%
-2.62%
Apparel
25,300
15.14%
-8.98%
Leather products
3,589
8.87%
-5.23%
Footwear
8,472
18.95%
-10.76%
Wood products
7,235
4.82%
-2.45%
Furniture
4,888
4.36%
-2.20%
Paper
10,500
3.84%
-2.81%
Printing, publishing
2,274
0.71%
-0.53%
Industrial chemicals
22,200
4.77%
-2.85%
Other chemicals
11,900
2.75%
-1.62%
Petroleum refineries
13,300
3.85%
-1.50%
Petroleum and coal
products
Rubber products
488
1.68%
-0.67%
4,492
4.28%
-2.66%
Plastic products
10,500
3.80%
-2.34%
Pottery china earthenware
1,833
6.79%
-4.08%
Glass and products
2,334
3.66%
-2.31%
Other non-metallic mineral
products
Iron and steel
2,158
0.84%
-0.52%
9,919
2.43%
-1.17%
Non-ferrous metals
10,000
5.75%
-2.76%
Fabricated metals
14,900
2.83%
-1.37%
Non-electric machinery
71,300
7.04%
-4.45%
Electric machinery
77,000
7.64%
-4.73%
Transport equipment
99,500
8.34%
-4.27%
Professional and scientific
equipment
Other manufactures
17,700
14.47%
-9.44%
21,500
19.01%
-10.56%
Median industry
10,250
4.13%
-2.53%
32
Table 3: Effect of existing U.S. tariffs on world prices in manufacturing, 1992
Industry
U.S. imports as
% of world
supply
1.48%
1992 U.S.
tariff rate
Industry import
demand elasticity
ed
6.22%
-0.82
-0.50
Estimated effect
of U.S. tariffs on
world price
-0.05%
Beverages
2.24%
6.25%
-0.96
-0.61
-0.08%
Textiles
3.98%
10.97%
-2.10
-0.52
-0.60%
Apparel
15.14%
13.38%
-1.09
-0.54
-1.28%
Leather products
8.87%
6.75%
-1.19
-0.64
-0.41%
Footwear
18.95%
11.72%
-1.11
-0.56
-1.36%
Wood products
4.82%
3.57%
-1.02
-0.97
-0.09%
Furniture
4.36%
4.81%
-1.07
-0.97
-0.11%
Paper
3.84%
1.85%
-1.08
-0.39
-0.06%
Printing, publishing
0.71%
1.81%
-1.12
-0.37
-0.01%
Industrial chemicals
4.77%
5.20%
-1.14
-0.74
-0.17%
Other chemicals
2.75%
3.87%
-1.36
-0.74
-0.08%
Petroleum refineries
3.85%
1.48%
-0.78
-1.56
-0.02%
Petroleum and coal
products
Rubber products
1.68%
1.75%
-0.84
-1.58
-0.01%
4.28%
4.08%
-1.14
-0.61
-0.12%
Plastic products
3.80%
8.40%
-1.29
-0.62
-0.25%
Pottery china
earthenware
Glass and products
6.79%
8.00%
-0.99
-0.62
-0.32%
3.66%
7.57%
-1.15
-0.61
-0.20%
Other non-metallic
mineral products
Iron and steel
0.84%
4.02%
-1.27
-0.61
-0.03%
2.43%
5.09%
-1.14
-1.08
-0.07%
Non-ferrous metals
5.75%
3.41%
-1.08
-1.08
-0.10%
Fabricated metals
2.83%
4.83%
-1.12
-1.08
-0.07%
Non-elec. machinery
7.04%
3.25%
-1.11
-0.63
-0.16%
Electric machinery
7.64%
4.37%
-0.98
-0.62
-0.20%
Transport equipment
8.34%
4.08%
-1.08
-0.99
-0.18%
Professional and
scientific equipment
Other manufactures
14.47%
5.79%
-0.80
-0.62
-0.43%
19.01%
5.58%
-1.03
-0.67
-0.59%
Median
4.13%
4.83%
-1.10
-0.62
-0.12%
Food products
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
1992 U.S.
tariff rate
Food products
6.22%
1992
Optimal
tariff
1.43%
Beverages
6.25%
1.99%
-0.03%
1.95%
Textiles
10.97%
5.16%
-0.41%
4.75%
Apparel
13.38%
16.11%
-2.14%
13.97%
Leather products
6.75%
7.68%
-0.60%
7.07%
Footwear
11.72%
18.40%
-2.92%
15.48%
Wood products
3.57%
3.13%
-0.09%
3.04%
Furniture
4.81%
2.93%
-0.08%
2.85%
Paper
1.85%
3.64%
-0.14%
3.50%
Printing, publishing
1.81%
0.70%
-0.01%
0.69%
Industrial chemicals
5.20%
3.85%
-0.15%
3.70%
Other chemicals
3.87%
2.16%
-0.06%
2.10%
Petroleum refineries
1.48%
1.75%
-0.02%
1.72%
Petroleum and coal
products
Rubber products
1.75%
0.77%
0.00%
0.76%
4.08%
3.59%
-0.13%
3.46%
Plastic products
8.40%
3.71%
-0.15%
3.56%
Pottery china earthenware
8.00%
6.16%
-0.32%
5.84%
Glass and products
7.57%
3.48%
-0.12%
3.36%
Other non-metallic mineral
products
Iron and steel
4.02%
0.72%
-0.01%
0.71%
5.09%
1.58%
-0.03%
1.55%
Non-ferrous metals
3.41%
3.49%
-0.12%
3.36%
Fabricated metals
4.83%
1.82%
-0.03%
1.79%
Non-elec. machinery
3.25%
5.72%
-0.34%
5.38%
Electric machinery
4.37%
6.33%
-0.36%
5.97%
Transport equipment
4.08%
5.43%
-0.29%
5.14%
Professional and scientific
equipment
Other manufactures
5.79%
12.60%
-1.14%
11.45%
5.58%
14.72%
-1.97%
12.75%
Median industry
4.83%
3.59%
-0.13%
3.46%
Estimated effect of
optimal tariffs on
world price
-0.01%
Estimated effect of
optimal tariffs on
U.S. domestic price
1.42%
34
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