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Regulatory theory and its application to trade policy: a study of ITC decision-making

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Disciplines
  • Economics
  • Political Science

Abstract

This thesis concerns the governmental regulation of internationally traded goods produced by U.S. industries. To help them compete, industries seek tariffs, quotas, and other types of non-tariff trade barriers from the government. The United States International Trade Commission plays a major role in approving and providing such restrictions. In an attempt to explain and better understand trade policy outcomes, I apply the capture theory model of regulation most recently discussed by Becker (1983) to a study of the International Trade Commission. Whether or not an industry applies for protection, and whether or not it is granted some form of trade relief by the ITC may depend on a number of political and economic factors. In this work, I seek to predict, on a basis of domestic politics, the factors that affect the demand for and supply of trade protection for U.S. industries. A nested logit model is used in the final analysis to determine if industries use utility-maximizing behavior in deciding whether or not to file a petition with the ITC, that is, if industries base their decisions on their perception of the expected utility of getting protection. I draw two major conclusions from this work. First, the policy choices of the ITC do not appear to minimize deadweight loss to society which is the hypothesis that drives Becker's model of regulation. Second, I determine from my analysis that self-selection may be a problem in predicting protectionist policy outcomes; I accept the hypothesis that industries self-select themselves in applying for protection from the ITC.

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