Lobbying for a Common External Tariff from Inside and Out

FRB of St. Louis Working Paper No. 2012-061A

16 Pages Posted: 5 Jan 2013

See all articles by Subhayu Bandyopadhyay

Subhayu Bandyopadhyay

Federal Reserve Bank of St. Louis - Research Division; IZA Institute of Labor Economics; West Virginia University

Sajal Lahiri

Southern Illinois University Carbondale - Department of Economics

Date Written: December 18, 2012

Abstract

We consider the interactions between domestic lobbying and two types of cross-border lobbying in a Customs Union (CU). The two types of cross-border lobbying are (i) lobbying from firms in one CU country to the governments of other CU countries, and (ii) that from firms outside the CU. We focus on the determination of the common external tariff (CET) in a two-stage game-theoretic model. When firms within the CU cooperate in lobbying, a sufficient condition for the CET to be higher compared to the noncooperative case is that the CU firms' lobbying is a strategic substitute for the lobbying done by the non-union firms. Furthermore, the same strategic substitutabilty condition is sufficient to ensure that the CET must rise, when stricter regulations are imposed on lobbying from outside the CU.

Keywords: Free Trade Area, Customs Union, Preferential Trading Agreements, Domestic lobbying, Cross-border lobbying, External tariffs

JEL Classification: F13

Suggested Citation

Bandyopadhyay, Subhayu and Lahiri, Sajal, Lobbying for a Common External Tariff from Inside and Out (December 18, 2012). FRB of St. Louis Working Paper No. 2012-061A. Available at SSRN: https://ssrn.com/abstract=2196593 or http://dx.doi.org/10.2139/ssrn.2196593

Subhayu Bandyopadhyay (Contact Author)

Federal Reserve Bank of St. Louis - Research Division ( email )

411 Locust St
PO Box 442
St. Louis, MO 63011
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

West Virginia University ( email )

Morgantown, WV 26506-6025
United States
304-293-7879 (Phone)
304-293-7061 (Fax)

Sajal Lahiri

Southern Illinois University Carbondale - Department of Economics ( email )

MC 415
1000 Faner Drive
Carbondale, IL 62901
United States

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