Administrative Delays as Barriers to Trade

42 Pages Posted: 1 Nov 2001

See all articles by Pierre Regibeau

Pierre Regibeau

University of Essex - Department of Economics; Centre for Economic Policy Research (CEPR)

Katharine Rockett

University of Essex - Department of Economics; Centre for Economic Policy Research (CEPR)

Date Written: October 2001

Abstract

We study a two-country model where two firms, one domestic and the other foreign, must decide when to introduce their new product into the market. The home government may apply an import tariff, an administrative delay or both to the product of the foreign firm. An administrative delay imposes a waiting period between the time when the quality of the foreign product is determined and the time when the product can actually be sold. Our main interest is the differential effect of the tariff and the administrative delay on the timing of new product introductions and the resulting changes in home, foreign and world welfare. We show that administrative delays are less efficient instruments for maximizing home welfare than tariffs. With a tariff, the home government can affect the timing of entry to ensure that the domestic firm moves first at the socially optimal date. Although an optimally chosen delay can achieve the same pattern of introduction, it does not yield any tariff revenues. As a result, if the tariff may be set optimally, administrative delays are not used in a discriminatory manner. If trade liberalization constrains the import tariff to be below its domestically optimal level, discriminatory administrative delays may become part of the optimal policy of the home country. As the optimal delay policy leads to lower levels of world welfare than the optimal tariff, trade liberalization can be welfare decreasing.

Keywords: Administrative delays, home, foreign and world welfare, tariff revenues

JEL Classification: F13, H25

Suggested Citation

Regibeau, Pierre and Rockett, Katharine, Administrative Delays as Barriers to Trade (October 2001). CEPR Discussion Paper No. 3007. Available at SSRN: https://ssrn.com/abstract=289262

Pierre Regibeau (Contact Author)

University of Essex - Department of Economics ( email )

Wivenhoe Park
Colchester CO4 3SQ
United Kingdom
+44 1206 872 731 (Phone)
+44 1206 873 598 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Katharine Rockett

University of Essex - Department of Economics ( email )

Wivenhoe Park
Colchester CO4 3SQ
United Kingdom
+44 1206 873 333 (Phone)
+44 1206 873 724 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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