Abstract

Before we review some recent developments in strategic trade policy, we should first explain the concept of strategic trade policy. Underlying is the assumption of some kind of market imperfection such as oligopolistic or monopolistic industries. Then “government intervention can raise national welfare by shifting oligopoly rents from foreign to domestic firms… (and therefore) government policies can serve the ‘strategic’ purpose of altering the subsequent incentives of firms, acting as a deterrent to foreign competitors” (Krugman (1989) pp. 1201–1202). Under perfect competition, such rents are competed away. Within this framework a possible rationale for the so-called ‘new protectionism’ can be given.KeywordsTrade PolicyForeign FirmDomestic FirmPrice DiscriminationIntermediate GoodThese keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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