The political economy of the tariff : Canada in the Kennedy Round

Several studies have been conducted on the political economy of the tariff setting process. Although the result of these studies have been individually informative they have been collectively inconclusive. This is attributable both to the difficulty in developing a model which effectively describes real life, and the ensuing problem of attaining the appropriate data once a model is developed. A new model for explaining the tariff setting process, which is based largely on these earlier works, is developed for this thesis. This model tests three separate hypotheses which influence the tariff setting process. They are: 1) industry pressure groups 2) the comparative disadvantage of an industry 3) the minimization of displacement cost This model for tariff determination is applied to both nominal and effective rates of protection and changes in tariffs. The goal is to identify a particular hypothesis which explains the tariff structure and changes in tariffs. This analysis is conducted for pre-Kennedy Round nominal and effective tariffs and changes in tariffs that resulted from these negotiations. The Kennedy Round offers an interesting case for measuring changes in the determination of tariffs as it was in this round of negotiations that Canada was given exemption from the linear reduction strategy designed out for these talks. This unique role gave Canadian negotiators a certain amount of manouverability with which to streamline their strategy for reductions. To measure changes in tariffs a unique variable is constructed from tariff item data outlining concessions given by Canada in the Kennedy Round. The .constructed variable is the ratio of commodity items in an industry significantly affected by these negotiations and total imports for that industry. As such, it is a measure of the breadth of tariff concessions in an industry. This variables allows for the retesting of previous hypotheses which measure the size of tariff concessions. This thesis gives a cross sectional analysis of 100 standard industrial classification industries using ordinary least squares regression techniques. The results support the hypothesis that the structure of tariffs in Canada prior to the Kennedy Round was a function of comparative disadvantage variables. This historical development was likely a function of broad national policy interests. The results for tariff changes, as measured by the breadth of concessions, reveal little change in the motives behind negotiators in the Kennedy Round. Although special interests were inspired by the opportunity to negotiate in these talks the eventual outcome shows an overall maintenance of the pre-round determination of tariffs.Land and Food Systems, Faculty ofGraduat