Tariff Bargaining

Abstract

Traditional international trade thoery can readily demonstrate that, if a country has imposed an irrational tariff (a country that is facing a perfectly elastic foreign offer curve — see Chapter 6), that country would be able to improve on its own welfare position simply by adopting a unilateral tariff reduction. It would seem understandable, therefore, that the late Professor Johnson was haunted by the question as to

why, if reduction of tariffs is economically beneficial, tariff negotiators always regard a tariff reduction as a concession that must be compensated by reciprocal tariff reductions by the other party to the bargain.†