Can Duty Drawbacks Have a Protectionist Bias? Evidence from MERCOSUR

Cadot, Olivier ; de Melo, Jaime ; Olarreaga, Marcelo

World Bank, Washington, DC

关键词: ANTI-TRADE;    AVERAGE TARIFF;    BARGAINING MODEL;    COMMON MARKET;    CONSTANT RETURNS TO SCALE;   

DOI  :  10.1596/1813-9450-2523
RP-ID  :  WPS2523

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

Duty drawback (or rebate) systems,reduce or eliminate the duties paid on imported intermediategoods, or raw materials used in the production of exports.When a firm imports an intermediate product for use in theproduction of an export good, tariff payments on theimported intermediate good are either waived (dutydrawback), or returned to the producer once the finalproduct is exported (rebate). These incentive systems areoften justified on the grounds that they tend to correct theanti-trade bias imposed by high tariff levels. The problemwith this line of reasoning is that it assumes that tariffsare predetermined policy variables; if they were, theeasiest way to reduce their anti0trade bias would be toeliminate them. But this is rarely done because existinglevels of protection correspond to a political economyequilibrium, difficult to modify in the presence of lobbyingpressures. The authors show that in a political economysetting, where tariffs and duty drawbacks are endogenouslychosen through industry lobbying, full duty drawbacks aregranted to exporters that use imported intermediate goods intheir production. This in turn decreases their incentives tocounter-lobby against high tariffs on their inputs. Indeed,under a full duty drawback regime, tariffs on intermediategoods are irrelevant to exporters, because they are fullyrebated. In equilibrium, higher tariffs will be observed onthese goods. Creating a regional trading block, alters theincentives by eliminating duty drawbacks on intra-regionalexports, which leads to lower tariffs for goods thatintra-regional exporters use as inputs. Evidence fromMERCOSUR suggests that eliminating duty drawbacks forintra-regional exports, would lead to increasedcounter-lobbying against protection of intermediateproducts. The authors estimate that without this mechanism,the common external tariff would have been 3.5 percentagepoints (25 percent) higher on average.