Trade Policy | Kristy Buzard

Large-scale tariff reductions within the framework of the General Agreement on Tariffs and Trade (GATT) have come as a result of a series of eight rounds of negotiations that began in 1947. Bown and Irwin (2017) have documented the available data---all applied tariffs---and found it to be frustratingly sparse. Somewhat surprisingly, data on the tariff commitments made by the GATT signees has not been widely available, preventing empirical studies on the workings of the GATT and the dynamics of this important episode of trade liberalization. We have been able to locate the original documents that contain the consolidated tariff schedules for each GATT round. To date, we have digitized and standardized the tariff data for the first five rounds for the United States as well as the Smoot Hawley tariffs that were in effect in the United States before the start of the GATT. Work is underway to add the Kennedy, Tokyo and Uruguay rounds for the U.S. and all rounds for several other countries. We summarize this rich data and study the patterns across time and industries.

Kristy Buzard, Ross Jestrab, Zeyuan (Victor) Xiong

Under Pressure: Intractable Trade Conflicts and Korea — Pneumatic Valves

Abstract

The Appellate Body (AB) report in Korea–Pneumatic Valves is among the most structurally complex of recent trade remedies reports. The AB weaves a complicated web to explicate the intricacies of the relationship among the relevant provisions on injury determination in anti-dumping disputes in the midst of a contentious and long-running series of disputes between two close regional trading powers. This Article first examines the Korean investigation and its significance in economic terms. Second, it analyzes the AB's conclusions on Article 6.2 of the Dispute Settlement Understanding regarding the panel request and the significance of the AB's treatment. Third, it studies the AB's comments on the panel's anti-dumping calculations where the AB amplifies its prior pronouncements on the elements of injury and causation. Finally, the Article situates this dispute in the broader political debates playing out both at the AB and between the two disputing parties.

Kristy Buzard, Kathleen Claussen

How Trade-Restrictive Is Standardized Packaging? Economic and Legal Implications of the WTO Panel Reports in Australia–Tobacco Plain Packaging

Abstract

The lengthy and long-awaited WTO Panel Reports in Australia–Tobacco Plain Packaging contain a host of material for reflection, particularly in relation to the Agreement on Technical Barriers to Trade (TBT) and the Agreement on Trade-Related Aspects of Intellectual Property Rights. While two of the Panel Reports proceed to appeal, we consider with respect to the two adopted Panel Reports the Panel's reasoning in relation to Article 2.2 of the TBT, focusing on the meaning of trade-restrictiveness. This concept central to WTO law has been under-examined to date, and these Panel Reports demonstrate some of the complexities in identifying trade-restrictive measures, particularly where they are non-discriminatory. The Panel found that Australia's measures restrict trade because they contribute to their objective of reducing tobacco consumption. Therefore, any equally effective alternative will similarly restrict trade. This curious result under TBT Article 2.2 may be particular to non-discriminatory measures that target ‘socially bad’ products such as tobacco.

Kristy Buzard, Tania Voon

Explaining Gradualism in Trade Agreements: A Political Economy Approach

Abstract

A notable feature of many international trading relationships is the gradual way in which barriers to trade have been dismantled in the post-war period (Bhagwati, 1988). Most notably, large-scale tariff reductions within the framework of the GATT/WTO have come as a result of a series of nine rounds of negotiations that began in 1947. From a theoretical point of view, it is not clear why this process should either proceed in stages or be inherently time consuming. But if one begins from the assumption that free trade is efficient, it makes sense to look for mechanisms related to whatever frictions have led to trade being restricted in the first place. I argue that one important reason that inefficient tariffs are maintained is the exertion of political power by inefficient import-competing industries. When an industry encounters a shock to its support such as a key politician losing an election or an important committee position, its ability to maintain its current level of protection is reduced. The resulting loss of protection and therefore rents can lead to erosion of future political power and accompanying protection. I will make this argument using a dynamic model of political economy. I plan to provide supportive evidence from peril point investigations in the early rounds of the GATT negotiations.

Kristy Buzard

The U.S. -- Tax Incentives Dispute: Subsidies and Investment Promotion Reaching New Heights in the Aviation Sector: The US--Tax Incentives Dispute

Abstract

This paper analyzes the most recent WTO Appellate Body (AB) report in a series of disputes between the US and the EU over government support to aircraft manufacturers Boeing and Airbus. The measures under dispute in US–Tax Incentives were investment promotion subsidies provided to Boeing by the State of Washington. The EU contended that the Washington State subsidies, which were conditioned on Boeing locating production of specific parts of its new 777X program within the state, were prohibited import substitution subsidies. The AB took this case as an opportunity to consolidate WTO case-law on import substitution subsidies. It confirmed a single legal standard for export promotion and import substitution subsidies but with a stricter requirement for a finding of a violation in the case of import substitution subsidies. We argue that the AB, in allowing the subsidies to Boeing, unnecessarily blurred the distinction between contingency in law and contingency in fact by ruling that identifying a condition requiring the use of domestic inputs would be a necessary element for a determination of a de facto contingency. This appears to be an unduly formalistic view that leaves little legal space for any de facto contingency claim in the future.

Kristy Buzard, Panagiotis Delimatsis

Temporary Trade Barriers: When Will They End?

Abstract

{Under WTO law, temporary trade barriers such as antidumping duties must be removed after a period of four or five years. However, under rather vague legal conditions, they can be renewed. This institutional environment provides the structure to carefully study the determinants of the extit{length} of protection. We present a theoretical political-economy model of the renewal process and find that the probability a temporary trade barrier will be renewed decreases in the level of trade agreement tariffs and is also likely to decrease in the level of the anti-dumping duties. An increase in an industry's profitability is shown to increase the probability of renewal also increases. Lobbying effort also increases the probability for a fixed strength of the lobby, while the strength of the lobby itself has more nuanced effects on the renewal probability.

Kristy Buzard

Self-enforcing Trade Agreements and Lobbying

Abstract

'In an environment where international trade agreements must be enforced via promises of future cooperation, the presence of an import-competing lobby has important implications for optimal punishments. When lobbies work to disrupt trade agreements, a Nash reversion punishment scheme must balance two conflicting objectives. Longer punishments help to enforce cooperation by increasing the government's costs of defecting, but, because the lobby prefers the punishment outcome, this also incentivizes lobbying effort and with it political pressure to break the agreement. Thus the model generates an optimal length for Nash reversion punishments, and it depends directly on the political influence of the lobbies. Trade agreement tariffs are shown to be increasing in the political influence of the lobbies, as well as their patience levels.'

Kristy Buzard

Trade Agreements in the Shadow of Lobbying

Abstract

This paper presents a model of international trade agreements in which the executive branches of each government negotiate agreements while the legislative branches, subject to political pressure from firms, can disrupt them. Lobbying is in the style of Grossman and Helpman's ‘Protection for Sale’ model with a new feature: all actors face uncertainty arising from the complexity of the legislative process. I demonstrate that the higher the executives set tariffs in a trade agreement, the less effort lobbies put forth to prevent its ratification. Thus trade agreements act as a domestic political commitment device: executives set relatively high tariffs to discourage lobbying and increase the chance that the agreement will be ratified. The model sheds light on the empirical puzzle surrounding governments’ welfare weights in the Grossman and Helpman model and provides a new explanation for failures to ratify trade agreements.

Kristy Buzard