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Effective Protection of British Industry

  • Nicholas Oulton
Part of the Trade Policy Research Centre book series

Abstract

The purpose of this chapters is to estimate the level of protection accorded to British industry on the eve of entry into the European Community, concentrating particularly on tariff protection for manufactured goods. As the theory of effective protection provides the method by which the problem will be attacked, the second section therefore discusses and develops the theory before we turn, in the third section, to considering the available data and the problems of estimation.

Keywords

Effective Rate Effective Protection Public Assistance Tariff Rate Commodity Group 
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Notes and References

  1. 1.
    I should like to thank Max Corden for helpful comments and suggestions and Stuart Jackson for programming the calculations for me. I am grateful also to Duncan Kitchin for drawing my attention to new sources of data and for other advice. The present chapter grew out of an earlier study which appeared as Government Economic Service Occasional Paper No. 6 by N. Oulton, Tariffs, Taxes and Trade in the U.K.: the Effective Protection Approach (London: HMSO, 1973).Google Scholar
  2. 2.
    In addition to the estimates in Oulton, op. cit., there have been four other calculations of effective protection in Britain. These appeared in Bela Balassa, “Tariff Protection in Industrial Countries: an Evaluation”, Journal of Political Economy, Chicago, December 1965, Robert E. Baldwin, Non-Tariff Barriers of International Trade (Washington: George Allen & Unwin for the Brookings Institution, 1971), T. S. Barker and S. S. Han, “Effective Rates of Protection for United Kingdom Production”, Economic Journal, London, June, 1971, and P. D. Kitchin, “Effective Rates of Protection for United Kingdom Manufacturing in 1963 and 1968”, unpublished (1974). These studies differ in aim and scope from the present one as well as employing different data and methods of estimation. For example, Balassa used Belgian input—output tables, Baldwin the 1954 British tables, Barker and Han the 1963 British tables and Kitchin both the 1963 and 1968 tables, whereas the present study uses only the 1968 tables. Amongst the earlier studies only Baldwin presents post-Kennedy Round estimates, and none includes estimates of effective protection for exportables or employs the Leith method for importables, as does this study. The present estimates also give a more detailed breakdown of commodities than do the earlier ones. The paper by Kitchin is closest in methodology and data but is concerned with a different range of issues (see note 13).Google Scholar
  3. 2.
    In addition to the estimates in Oulton, op. cit., there have been four other calculations of effective protection in Britain. These appeared in Bela Balassa, “Tariff Protection in Industrial Countries: an Evaluation”, Journal of Political Economy, Chicago, December 1965, Robert E. Baldwin, Non-Tariff Barriers of International Trade (Washington: George Allen & Unwin for the Brookings Institution, 1971)Google Scholar
  4. T. S. Barker and S. S. Han, “Effective Rates of Protection for United Kingdom Production”, Economic Journal, London, June, 1971Google Scholar
  5. P. D. Kitchin, “Effective Rates of Protection for United Kingdom Manufacturing in 1963 and 1968”, unpublished (1974). These studies differ in aim and scope from the present one as well as employing different data and methods of estimation. For example, Balassa used Belgian input-output tables, Baldwin the 1954 British tables, Barker and Han the 1963 British tables and Kitchin both the 1963 and 1968 tables, whereas the present study uses only the 1968 tables. Amongst the earlier studies only Baldwin presents post-Kennedy Round estimates, and none includes estimates of effective protection for exportables or employs the Leith method for importables, as does this study. The present estimates also give a more detailed breakdown of commodities than do the earlier ones. The paper by Kitchin is closest in methodology and data but is concerned with a different range of issues (see note 13).Google Scholar
  6. 3.
    The original article on effective protection theory is W. M. Corden, “The Structure of a Tariff System and the Effective Protective Rate”, Journal of Political Economy, Chicago, June 1966.Google Scholar
  7. Excise taxes were introduced into the analysis by H. G. Grubel and H. G. Johnson, “Nominal Tariffs, Indirect Taxes and Effective Rates of Protection: the Common-Market Countries, 1959”, Economic Journal London, December 1967. My treatment in this section also leans heavily on the theoretical discussion in Balassa et al., The Structure of Protection in Developing Countries (Baltimore: Johns Hopkins Press, 1971)Google Scholar
  8. on W. M. Corden, The Theory of Protection (Oxford: Clarendon Press, 1971). Effective protection theory has its critics also; see for example J. N. Bhagwati and T. N. Srinivasan, “The general equilibrium theory of effective protection and resource allocation”, Journal of International Economics, No. 3, Amsterdam, 1973.Google Scholar
  9. 8.
    J. Clark Leith, “Substitution and Supply Elasticities in Calculating the Effective Protective Rate”, Quarterly Journal of Economics, Cambridge, Mass., November 1968.Google Scholar
  10. 17.
    Balassa, S. Guisinger and D. Schydlowsky, “The Effective Rates of Protection and the Question of Labour Protection in the United States: a Comment”, Journal of Political Economy. Chicago, September–October 1970.Google Scholar
  11. 23.
    The data for these tests come from the following sources. Effective and nominal tariffs are from Table 3.7. Numbers employed in each industry and the concentration ratios are taken from Department of Trade and Industry, Report on the Census of Production 1968 (London: HMSO, 1972). Exports, imports, the value of output and value added derive from Tables B and C of the previously cited 1968 Input-Output Tables. In the absence of measures of the capital stock, capital intensity is proxied by value added per person employed. The results reported here contrast with those of F. Witthans for the United States (“Estimates of effective rates of protection for United States industries in 1967”, Review of Economics and Statistics, Vol. 60, Cambridge, Mass., 1973); he found a significant positive correlation between nominal tariffs and labour intensity and a negative one between the export ratio and a measure of the bias in the protective structure against exports.Google Scholar
  12. 25.
    For an account of the progress of free trade legislation, see P. Matthias, The First Industrial Nation: an Economic History of Britain 1700–1914 (London: Methuen, 1969).Google Scholar
  13. 26.
    See A. J. P. Taylor, English History: 1914–1945 (Oxford: Clarendon Press, 1965) p. 228.Google Scholar
  14. 27.
    For a factual survey of British tariff history in the interwar period, see National Institute of Economic and Social Research, Trade Regulations and Commercial Policy of the United Kingdom (London: Cambridge University Press, 1943).Google Scholar
  15. For the political background, see Deryck Abel, A History of British Tariffs 1923–42 (London: Heath Cranton, 1945).Google Scholar
  16. 28.
    The account given here of the IDAC draws on Sir Herbert Hutchinson, Tariff-making and Industrial Reconstruction: An Account of the Work of the Import Duties Advisory Committee 1932–39 (London: George G. Harrap, 1965). Sir Herbert was the Committee’s Secretary.Google Scholar
  17. 31.
    For a relatively favourable evaluation, see Derek H. Aldcroft, The Inter-War Economy: Britain 1919–39 (London: B. T. Batsford, 1970).Google Scholar

Copyright information

© Trade Policy Research Centre and Institut für Weltwirtschaft an der Universität Kiel 1976

Authors and Affiliations

  • Nicholas Oulton

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