This is important because one of top arguments for tariffs in a globalized world is to disincentivize anyone from undercutting prices by committing environmental or labor rights violations. Example: US timber companies have to follow environmental laws and pay a living wage. But their competitors overseas might not so they can flood the market with cheap timber. A tariff can level the playing field so that US companies can compete in the US market without stooping to illegal/immoral behavior.
That's probably the only plausible theory I've heard for the place of tariffs in a free market. But this paper shows that it's not happening that way in practice. Exactly the opposite. Countries seem eager to benefit from exploitation as long as it happens outside their borders.
This is important because one of top arguments for tariffs in a globalized world is to disincentivize anyone from undercutting prices by committing environmental or labor rights violations. Example: US timber companies have to follow environmental laws and pay a living wage. But their competitors overseas might not so they can flood the market with cheap timber. A tariff can level the playing field so that US companies can compete in the US market without stooping to illegal/immoral behavior.
That's probably the only plausible theory I've heard for the place of tariffs in a free market. But this paper shows that it's not happening that way in practice. Exactly the opposite. Countries seem eager to benefit from exploitation as long as it happens outside their borders.
(2020)