Rules versus Discretion in Trade Policy: An Empirical Analysis
Robert W. Staiger
We test empirically for evidence that government tariff-setting behavior
depends on the degree of discretion with which policy-makers are endowed. We
do this by studying government tariff choices under two distinct environments.
One environment is that of tariffs set under the Escape Clause (Section 201 of
the U.S. Trade Act of 1974). We argue that these decisions afford the
government with ample opportunity to reoptimize, and with correspondingly
little ability to commit. The other environment is the Tokyo Round of GATT
negotiations and the determination of the set of exclusions from the general
formula cuts. We argue that these decisions provided the government with a
much diminished opportunity to reoptimize, and with a correspondingly greater
ability to commit. Comparing decisions made in these two environments allows
us to ask whether the degree of policy discretion has a measurable impact on
trade policy decisions. Our findings suggest that it does.
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