ON THE ANALYTICAL FRAMEWORK OF TARIFFS AND TRADE POLICY

Abstract

This chapter presents an analytical framework of tariffs and trade policy. It also presents the common analytical framework that exists in the recent literature on international trade policy. as many policy questions can be handled either by the comparative statics procedure in which policy tools are taken as shift parameters of the equilibrium system or by obtaining the conditions for certain optimization problems, the success of the offer-curve analysis is quite remarkable. However, this tool also has weaknesses that are common in many geometric analyses: (a) the basic assumption and logical steps in the analysis are often concealed in the usual manner that the curves are drawn, and (b) it is hard to extend the analysis to situations that are more complicated than the analytical framework incorporated in the usual offer curve technique. For the latter point, it may suffice to point out the difficulties involved in analyzing such questions as domestic distortions and non-traded commodities by means of the offer curve. The chapter discusses two problems in trade theory: (1) that of domestic distortions and (2) that of non-traded commodities.