AN EVALUATION OF THE EFFECT OIf THE DIILON
RDUND ON THE UNIT VALUE/IND WINNIE 0F
‘ UNITED STATES IMPORTS {IND EXPORTS

- Thesis for the Degree of Ph. D.
MICHIGAN STATE UNIVERSITY
ROBERT GOODMAN
1970

”4694‘“ I LIBRARY ‘

5’ Michigan brat:
University

      

This is to certify that the

thesis entitled

An Evaluation of the Effect of the Dillion Round
on the Unit Vaiue and Volume of United States
Imports and Exports

presented by

Robert Goodman

has been accepted towards fulfillment
of the requirements for

Ph.D. degree in Economics

,I-1'70“”r’fi/L7Z‘Jla4~ Wtw

Major professor

 

/ 5‘ I § .
Date/lint" 2Z5 /7éi

0-169

ABSTRACT

AN EVALUATION OF THE EFFECT OF THE DILLON
ROUND ON THE UNIT VALUE AND VOLUME OF
UNITED STATES IWPORTS AND EXPORTS

By

Robert Goodman

The objective of this investigation is to measure
the effects of multilateral tariff reductions on the
foreign trade sector of the American economy. In addi-
tion to yielding figures on price and quantity changes
of total exports and imports, the study is disaggregated
into several commodity groups, permitting us to observe
differential effects of tariff changes between groups
which are subject to different elasticities.

A comparison of average price and quantity trends
between products subject to tariff reductions and closely
related commodities not receiving concessions reveals the
effect of tariff liberalization on the unit value and
volume of United States' imports. Least—squares regres—
sion analysis is used to develop demand functions in
order to determine the "tariff sensitivity" of United

States' exports.

Furthermore, a measure of the net effect of the
1960-61 Tariff Conference on the United States' terms of
trade is constructed, and estimates are made of the
welfare and employment effects resulting from these
negotiations.

The results indicate that, while certain commodity
categories were significantly affected by the reduction
of tariff barriers, in the aggregate, the tariff con-
cessions negotiated at the Dillon Round had a relatively

minor effect on the American economy.

AN EVALUATION OF THE EFFECT OF THE DILLON
ROUND ON THE UNIT VALUE AND VOLUME OF

UNITED STATES IMPORTS AND EXPORTS

By

Robert Goodman

A THESIS

Submitted to
Michigan State University
in partial fulfillment of the requirements
for the degree of

DOCTOR OF PHILOSOPHY

Department of Economics

1970

562.725”
7—4-70

t/ Copyright by
Robert Goodman
1970

ACKNOWLEDGMENTS

First, I would like to express my gratitude for the
valuable criticism and fruitful suggestions of my advisors:
Professor Mordechai E. Kreinin, Professor Charles P.
Larrowe and Professor Jan Kmenta. I also must thank
Dr. Peter Lloyd, who made many helpful comments on the
original draft of this thesis. I am also indebted to
the Federal Reserve Bank of New York, which, in addition
to granting me a leave of absence, provided all the
facilities and clerical help needed to complete the
dissertation. In addition, I must thank the patient
and dedicated typist who struggled through the many drafts
of the work, Miss Janet Huzil. Finally, I would like to
thank my wife, Meri, whose encouragement was a source of
constant inspiration.

The responsibility for all the errors and, hope-

fully, some of the valid contributions are my own.

ii

TABLE OF CONTENTS

ACKNOWLEDGMENTS . . . . . . . . . . . . . ii

LIST OF TABLES . . . . . . . . . . . . . v
Chapter

I. INTRODUCTION . . . . . . . . . . . . 1

II. UNITED STATES COMMERCIAL POLICY . . . . . 3

The Trade Agreements Program . . . . . . 3

The 1958 Extension 7

The "Dillon" Round . ll

. The Dillon Round and the European Economic
Community . . . . . . . . . . . . 14

III. RECENT STUDIES OF PAST NEGOTIATIONS . . . . 20

IV. METHODOLOGY AND EMPIRICAL PROCEDURE . . . . 39
United States Imports . . . . . . . . 39

United States Exports . . . . . . . . 52

Demand Factors . . . . . . . . . . 52

Supply Factors . . . . . . 53
Specification of Export Function . . . . 5A

Data . . . . . . . . . . . . . . 63

V. THE EFFECT OF THE DILLON ROUND ON UNITED
STATES IMPORTS . . . . . . . . . . . 66

VI. THE EFFECT OF THE DILLON ROUND ON UNITED
STATES EXPORTS . . . . . . . . . . . 81

Summary--The Effects of the Dillon Round on

United States Trade . . . . . . . . . 87

VII. THE EFFECT ON THE DILLON ROUND ON THE
DOMESTIC ECONOMY . . . . . . . . . . 91
Static Welfare Effect . . . . . . . . . 91
The Terms of Trade . . . . . . . . . . 102
Employment Effect . . . . . . . . . . 108

iii

Chapter
VIII.

APPENDIX A
APPENDIX B

BIBLIOGRAPHY

SUMMARY AND CONCLUSIONS

iv

113
125
129
ISA

LIST OF TABLES

Table

l. U.S. Imports in 1960 from Countries Negotiating
with U.S. in the Reciprocal Phase of the 1960—61
Tariff Conference . . . . . . . .

2. Trade with the U.S. of Countries from which
Direct Concessions were Obtained in the 1960-61
Tariff Conference . . . . . . . . . .

3. Imports, Dutiable and Free, by Economic Classes,
19147, 1953) 1956 o o o o o o o o o o

A. Index of Volume of Imports into the United States
of Products Whose Tariffs were Reduced by the
Torquay Agreement, of Similar Products with no
Tariff Reductions, and All Finished Manufactured

Imports . . . . . . . . . . . . .
5. Price and Quantity Changes of Imported Commodities

A. Between 1954 and 1956 B. Between 1955 and

1959 . . . . . . . . . . .

6. Nominal and Effective Tariff Rates, by Country,
1962 . . . . . . . . . . . . . .

7. The Effects of Tariff Concessions on the Prices
and Volume of United States Imports . . .

8. Test of Significance of Observed Differences
Between the Means of the Tariff—Reduced Group
and the Non-Reduced Group--All Commodities

9. Test of Significance of Observed Difference
Between the Means of the Tariff-Reduced Groups
and the Non-Reduced Groups--By Commodity

Groups . . . . . . . . . . .
10. Commodity Groups Experiencing Major Increases in

Imports as a Consequence of the Dillon

Round . . . . . . . . . . . . .

Table

11.

12.

13.

1“.

Summary of Equations for U.S. Exports by Commodity

and Destination 82
The Effect of Tariff Concessions on the Volume of
United States Exports . . . . . . . . . 88

Changes in United States Industrial Trade as a
Result of the 1960—61 Negotiations . . . . 89

Employment Effects of the 1960-61 Tariff

Conference . . . . . . . . . lll

vi

CHAPTER I

INTRODUCTION

It has long been recognized in the pure theory of
international trade that the complete elimination of
trade barriers would lead to the optimization of world
welfare to the benefit of all. However, while theoret-
ically appealing, nationalistic self-interest severely
hampered efforts to reduce restrictions on trade flows.
Only with the ratification of the General Agreement on
Tariffs and Trade in 1947, were the ground rules laid
for meaningful negotiations between interested parties
on the reduction and elimination of impediments to free
trade. Thus, multilateral collective bargaining was
seen as a feasible and practical approach to this complex
task. Under its auspices six rounds of tariff negotia-
tion have taken place--Geneva, 1947; Annecy, 1949;
Torquay, 1951: and Geneva, in 1956, 1960-61; and
1964-67.

Under the authorization of the 1958 extension of
the Reciprocal Trade Agreements Act, the United States
negotiated tariff concessions at the 1960-61 Geneva

Conference (Dillon Round). In this thesis, I will

R.)

investigate the effect of multilateral tariff reduction
on the unit value and volume of the imports and exports
of the United States, and construct a measure of the gain
or loss in the United States terms of trade. As a second
step, I shall estimate the net change in welfare and
employment resulting from these negotiations.

Chapter II will place the 1958 extension of the
Reciprocal Trade Agreements Act in historical perspective.
An in—depth discussion of the Act itself will then provide
an adequate background in which to View the 1960-61
negotiations. In Chapter III, I will review and criti-
cally examine previous studies concerning similar
negotiations.

The method and empirical procedure employed in
this thesis will be discussed in Chapter IV. Chapters V
and VI will present the results of the investigation by
considering the impact of the 1960—61 negotiations upon
U.S. imports and exports, respectively. Chapter VII
will be reserved for an examination of the effects of
the Dillon Round with respect to welfare, the terms of
trade and employment.

Chapter VIII will explore the implications of our

findings for future U.S. tariff policy.

CHAPTER II

UNITED STATES COMMERCIAL POLICY

The Trade Agreements Program

 

Since the Passage of the Tariff Act of 1930, it has
been the policy of the United States Congress to enter
into trade agreements with foreign governments. The
original Act limited this authority to a period of three
years from June 12, 1934, the date of enactment of the
Act. Known as the Reciprocal Trade Agreements Act it
authorized the President to sign commercial agreements
with other nations reducing existing U.S. duties by as
much as 50 per cent in exchange for parallel concessions.
Subsequently, the Act was amended, extending the authority
of the President as it became clear to the Congress that
only through healthy international relations could a

sound domestic economy be maintained.1

 

1The original Act limited the authority of the
President to enter into foreign trade agreements to a
period of three years from June 12, 1934, the date of
enactment of the Act (48 Stat. 943). The President's
authority to enter into foreign trade agreements has
been extended from time to time as follows: Pub. Res.
No. 10, 75th Cong., for 3 years from June 1937 (50
Stat. 24); Pub. Res. No. 61, 76th Cong., for 3 years
from June 12, 1940 (54 Stat. 107); Pub. Law 66, 78th
Cong., for 2 years from June 12, 1943 (57 Stat. 125);

In no sense, however, did the Reciprocal Trade
Agreement program contemplate the complete abandonment
of protection. In 1948, the 80th Congress inserted the
peril-point requirement into the Act. While this clause
was eliminated in 1949, it was restored in 1951, and the
escape clause was also written into law. Under the
peril-point provision, the United States Tariff Commission
was required to investigate and determine, in advance of
any negotiation, the limit of "safe bargaining" beyond
which tariff reduction may imperil any branch of home
industry. Duties were not to be cut if such action
threatened serious injury to American industry. Moreover,
the escape clause required an upward adjustment of a duty
reduced as a result of negotiations if serious injury
were shown to have resulted from that reduction. Upon a
finding by the Tariff Commission that a product on which
a concession had been granted was being imported in such
increased quantities, either absolute or relative, as to
cause or threaten serious injury to the competing

domestic industry, the President was authorized to

 

Pub. Law 130, 79th Cong., for 3 years from June 12, 1945
(59 Stat. 410): Pub. Law 307, 8lst Cong., for 3 years
from June 12, 1948 (63 Stat. 697); Pub. Law 50, 82nd
Cong., for 2 years from June 12, 1951 (65 Stat. 72); Pub.
Law 215, 83rd Cong., for 1 year from June 12, 1953 (67
Stat. 472); Pub. Law 464, 83rd Cong., for 1 year from
June 12, 1954 (68 Stat. 360): Pub. Law 86, 84th Cong.,
from June 12, 1955 until the close of June 30, 1958 (69
Stat. 162); and Pub. Law 85-686, until the close of June
1962 (72 Stat. 673). In July, 1962, the Trade Expansion
Act renewed this authority for 5 years until June, 1967-

withdraw or modify the concession. Thus, protection
could be restored even though the output of American
industry was growing, provided only that imports were
growing faster. Since 1949 the number of applications
per year has ranged between six and twelve. In 1960
seventeen cases were initiated eight of which were the
outgrowth of peril-point investigations.2
Later extensions of the Trade Agreement Act went
further by defining an industry as the producers of
single products, thus making it relatively simple for
a multiple product industry to claim injury even though
increased foreign competition was limited to only one
of its several products.3
Reinforcing the protectionist policy embodied in
the escape clause was the insertion of the National
Security clause in the 1955 extension of the Act. The
withdrawal or modification of a concession was authorized

when such a concession induced increases in imports in

such quantitities so as to threaten the national security.

 

2See, I. Kravis, "Trade Agreement Excape Clause",
American Economic Review, June, 1954; and w. B. Kelly,
"The Expanded Trade Agreements Escape Clause, 1955-61,"
Journal of Political Economy, February, 1962.

3The 1955 act (69 Stat. 162) defines the "domestic
industry" as "that portion or subdivision of the producing
organizations manufacturing, assembling, processing,
extracting, growing, or otherwise producing like or
directly competitive products or articles in commercial
quantities." Thus, the Tariff Commission was to confine
its investigations to that part of the operations of
multiproduct producers who make a particular article.

 

 

The law (National Defense Amendment of 1955) however,
defines almost any adverse effect on economic welfare,
such as increased unemployment, loss of government
revenues, or loss of skills or investment, as consti-
tuting impairment of national security.

In sum, the Trade Agreements Act and related
legislation sought to expand American exports by an
exchange of concessions, but it continued to afford
effective protection for most domestic industries
encountering foreign competition. Most importantly,
U.S. legislation refused to tolerate injury to domestic
producers from such competition. Any such injury, real
or threatened, was not to be tolerated. These two
philosophies, namely trade liberalization and "no injury"
to domestic industry appear to be incompatible with the
concept of economic efficiency, if indeed this is the
goal to be sought through tariff negotiations. However,
if political considerations were the prime movers of
U.S. commercial policy during this period, they become

quite consistent.“

 

“The dual nature of U.S. tariff policy has been
stressed by D. Humphrey, American Imports, New York,
1955; p. 107, and M. E. Kreinin, Alternative Commercial
Policies, MSU International Business and Economic Studies,

1957; p. 18.

 

The 1958 Extension

 

This thesis focuses on the 1958 extension of this
legislation, since it was under its authority that the
United States negotiated the trade agreements at Geneva
in 1960-61. With the expiration of the 1955 extension
of the Act, the Administration asked for a five-year
extension coupled with tariff-cutting authority of 25
per cent (or, alternatively, three percentage points).
This decision was heavily influenced by the emergence
of the European Economic Community (EEC). The integration
schedule called for the reduction of inter-community
tariff rates by 30 per cent by 1963. It was feared that
with the lowered rates among the Six, the United States
would be put at a distinct competitive disadvantage,
affecting some $3.2 billions of American goods, or almost
20 per cent of all United States exports if we use the
1957 figures. At the same time that the six countries
lowered their internal barriers to each other, by 30 per
cent, they were to begin erecting a common external
tariff (CXT) to outside products.5 As Senator Douglas
saw it, "the only way American exports can compete in
this market is if the United States has the authority

to negotiate to get their common external tariff lowered

 

5The proposed CXT was to be an arithmetic average
of the tariffs of the six countries existing prior to
January 1, 1958.

at the same relative rate as the internal rates are
lowered, or by 30 per cent in the first four to five-year
period.6

The first stage of the CXT was due to go into effect
on January 1, 1962. Negotiations between the United
States and the Common Market were to begin in late 1960.
If Congress acted favorably on the President's request,
the full 25 per cent authority could be used since no
part would have expired. Furthermore, this authority,
with its carry-over provision which permitted tariff cuts
negotiated during the five—year period to be put into
effect any time after that period, would have put the
United States close to parity with the 30 per cent
authority of the Common Market.

On August 20, 1958, following extensive hearings
before the House Ways and Means Committee and the Senate
Finance Committee, Congress passed the Trade Agreements
Extension Act of 1958. However, this Act fell short of
the Administration's request. Under its auspices the
President was authorized to negotiate trade agreements
with foreign governments for a period of four years
from the close of June 30, 1958 through June 30, 1962.
Under this legislation, any rate as of July 1, 1958

could be reduced in not more than four annual stages by

 

685th Congress Second Session, Senate Report 1838,
July 15, 1958.

one of the following three alternatives: (1) by not more
than 20 per cent; (2) by not more than two percentage
points or its equivalent in the case of specific duties;
or (3) down to 50 per cent ad yglgrgm. The latter two
alternatives are significant in cases where the rates
prevailing in 1958 were below 10 per cent or above 62.5
per cent respectively. In the case of any duty to which
(1) or (2) applied, no amount of decrease becoming
initially effective at one time was to exceed 10 per cent
or 1 percentage point ad valorem of the rate of duty
existing on July 1, 1958, respectively. Where the decrease

was down to 50 per cent gg valorem the decrease was not to

exceed one-third of the total amount of the reduction under '

the foreign trade agreement.

The new legislation strengthened the "no injury"
concept (i.e., tariff liberalization with a minimum of
injury to domestic industry) by extending the time period
for peril-point investigations from 120 days to six
months. Peril point studies were to be made prior to
negotiations for new trade agreements and provide the
President with factual information and recommendations
regarding the level below which the tariff rate on each
product could not be lowered without causing or threatening
injury to the industries producing them. The two month
extension was seen as an aid to the Tariff Commission

insofar as it enabled the Commission to make more complete

10

investigations of a large number of commodities at one
time. To further protect domestic industries and to
facilitate peril point inquiries, the Tariff Commission
was given the power to subpoena any and all documents
or records pertinent to the subject matter under
investigation. In the event that the peril point
investigation revealed that an industry was threatened
by import of a product which had been the subject of a
trade agreement, that industry could file for immediate
escape-clause relief. This relief could be in the form
of an increase in the duty or an additional import
restriction. Furthermore, by allowing a narrow definition
of the market, the legislation permitted an industry to
apply for escape-clause relief by showing only that a
small segment of the industry had sustained injury.

The National Security Amendment was modified so
that no action would be taken to reduce the duty on an
article if the President found that such a reduction
would threaten to impair the national security. This
strengthened the existing law which required that no
action be taken which would endanger domestic production
needed for projected national defense requirements.
Thus the 1958 extension, while authorizing further
tariff liberalization, still incorporated the protec-
tionist philosophy found in previous extensions of the

Act.

11

In light of this new authority, it clearly remained
to be seen whether the United States, armed with the
bargining weapons provided by the new extension of the
Trade Agreements Act, could secure for itself a larger

share of the European Market.

The "Dillon" Round

 

On September 1, 1960, the United States commenced
trade negotiations with the European Economic Community
(EEC) and 17 other countries7 with the purpose of further
liberalization of foreign commerce between the contracting
parties. The concessions granted by the United States
were in return for reciprocal concessions obtained from
the members of the General Agreement on Tariffs and
Trade (GATT). Under GATT, all concessions are initially
negotiated bilaterally directly with individual countries,
normally the principal supplier, or with a customs union
acting as a unit on behalf of its member governments,
but the concessions are extended multilaterally to the
other contracting parties. The U.S. also adheres to the
most-favored nation's principal, whereby it accords to
other governments, not contracting parties to the GATT,

those concessions granted to the principal suppliers.

 

7The contracting parties were: Israel, Portugal,
Pakistan, Austria, Canada, Denmark, Finland, New Zealand,
Norway, Peru, Sweden, Switzerland, the United Kingdom,
Haiti, India, Japan and Cambodia.

12

Because of the scope and complexity of the nego-
tiations, the conference, the fifth held for the purpose
of reducing tariffs on a multilateral basis, was
organized in two phases. The first phase, which com-
menced on September 1, 1960, was concerned principally
with negotiations held under the provisions of Article
XXIV:6 of the GATT with the six EEC countries negotiating
During the second, or reciprocal phase,
which began on May 29, 1961, the United States completed
an exchange of new tariff concessions among interested
countries.

Concessions granted by the United States at the
1960-61 Tariff Conference were made on products selected
from 89 of the 99 commodity subgroups of imports

(Schedule A nos. 010—990).9 Imports of products within

the subgroups receiving concessions totalled $1,827.1

million in 1960. Almost half of this trade ($876.5

 

8The rules of the General Agreement relating to
customs unions and free-trade areas are contained in
Article XXIV. It sets out a series of rules designed
to ensure that a customs union shall in effect lead
to the reduction and elimination of barriers within the
area without raising new barriers to trade with the out-
side world. It also contains the conditions under which
a customs union is accepted as an exception to the most—
favored-nation clause.

9The ten commodity subgroups in which no concessions
were granted were edible animals; animal oil and fats
edible; cocoa, coffee and tea; unmanufactured cotton;
cotton semi-manufactures; coal and related fuels; petro-
leum and products; lead and manufactures; tin, zinc and
manufactures.

13

million) consisted of machinery and vehicles. About 11
per cent ($194.4 million) was in vegetable foods and
beverages, and about 9 per cent ($170.9 million) was in
metals and manufactures other than machinery and
vehicles. Tariff reductions were also granted on
products from the following commodity groups: Textile
fibers and products, $97.4 million; non-metallic
minerals, $97.1 million; chemicals and related products,
$61.8 million; inedible vegetable products other than
fiber and wood, $50.5 million; wood and paper products,
$48.8 million; edible animals and edible animal products,
$44.4 million; inedible animals and inedible animal
products, $43.5 million; and miscellaneous products,
$141.7 million. Thus about 20 per cent of the total
dutiable imports of the United States in 1960 were the
subject of tariff concessions.

These concessions involved almost 1,200 statistical
classes of products (Schedule A groups 0-9). The duty
reductions were primarily in the magnitude of 20 per
cent. However, for those products for which existing
duties were equal to 10 per cent ad valorem, or less,
or greater than 62.5 per cent ad valorem, reductions of
more than 20 per cent were realized. The larger reduc-
tions resulted from the exercise of the authority to

lower duties by 2 percentage points, or, in the case of

14

duties in excess of 62.5 per cent ad valorem, down to
50 per cent.
Of the concessions granted by the U.S., (See Table
I), imports from the country of direct negotiation
accounted for $1,224.8 million of the total from all
sources. As a consequence of the United States'
adherence to the most favored-nation's principal,
another $490.6 million in concessions were granted.
Nearly two-thirds of the items were negotiated
directly with the EEC. The direct concessions granted
to the EEC covered imports totaling $794.8 million in
1960, a volume of trade which was almost four times
that involved in any other bilateral negotiations
concluded at the conference. Concessions granted to
the U.K. and Canada ranked second and third, respectively.
In return for concessions granted, the U.S. was the
recipient of tariff reductions on a wide range of com-
modities, totaling $2,764.5 million of exports. Thus,
about 25 per cent of total U.S. exports to the GATT
nations in 1960 were subject to a downward revision in
tariff rates.

The Dillon Round and the European
Economic Communiay

 

 

The Treaty of Rome, which established the Common

Market, provides that the tariffs of the EEC Member

TABLE 1.--U.S. imports in 1960 from countries negotiating with U.S.

15

reciprocal phase 1960-61 Tariff Conference.

Imports of Products on Which Concessions Were

Granted and Imports of All Products

(Millions of dollars)

3': .= z = 3... ' ‘4 T. ‘1 7". 1': :31 .= =1: :———— :2: Z: =—

in the

 

 

 

 

Imports from country named in column 1
Products on which
Negotiating concessions were granted All products
Country In negoti- In negoti-

ation with ation with In “11 ,

countrv in other negotia— Dutiable Free Total

column 1 countries tions

Total 1,224.8 400.6 1,715 4 5,801 3 2,697.0 8,588.3
EEC 794.8 30.4 825.2 2,003 1 255.4 258.5
Austria 10.2 4.4 14 f 48 7 9 49.6
Cambodia -- -- -- a 6.6 6.6
Canada 64.5 71.0 135.9 1,204 2 1,708.0 2,912.2
Denmark 1.3 10.8 12 l 79 3 19.1 98.4
Finland 2.8 1.3 4 1 19 8 32.3 52.1
Haiti .6 .3 9 6.5 11.1 17.6
India 51.3 2.8 54.1 161.6 68.4 230.0
Israel 17.5 1.3 18.8 24 . 3.3 27.3
Japan 18.5 54.1 72.6 1,046 7 79.8 1,126.5
New Zealand 11.6 b 11.6 59.4 57.6 117.0
Norway 5.u 3.0 8.4 66.3 ' 21.u 87.7
Pakistan 0 d e 9. 26.7 36.0
Peru 6.0 f 6.0 67.2 101.7 168.9
Portugalg 9.2 1.6 10.8 28.9 8.6 37.5
Sweden 12.6 43.2 55.8 120.4 50 0 170.4
Switzerland 17.1 23.2 40.3 166.3 29.7 196.0
United Kingdom 201.4 242.8 444.2 779.6 216.4 996.0
as 2,000. b$34,000. c$141,000.
d$24,000. e$65,000. f$29,000.

gIncludes Azores and Madeira Islands.

* U.S.

Source:

import figures are valued f.o.b.

Volume III, p.

 

Department of State, General Agreement on Tariffs and Trade,

Analysis of United States Negotiations, 152.

16

States shall be gradually replaced by a common external
tariff by January 1, 1970, and in any event not later
than January 1, 1973. On January 1, 1961, the Member
States took the first in a series of scheduled moves to
align their individual tariffs with that of the common
tariff. This first alignment entailed the abandonment
of the individual schedules of tariff concessions
previously contracted in GATT with the contracting
parties, including the United States.

The GATT permits contracting parties to establish
a customs union provided that the new external tariff
is, on the whole, not higher than the general incidence
of the duties applied by the constituent members prior
to the formation of the union. The common external
tariff which the EEC published in 1960 was based largely
on the arithmetic average of the national rates of the
Member States, although some rates were negotiated
internally among the Six.

The GATT recognizes that a customs union neces—
sarily involves an alignment of existing individual
national tariffs with a new common tariff; hence some
duties may go up, others down, while some may remain
the same. If rates are increased on those products for
which Member States had previously undertaken commitments
against increases, the GATT requires the customs union

to compensate those contracting parties having rights

17

either as initial negotiators of the commitment, or as
principal suppliers of the commodities involved. The
GATT requires that the calculation of compensation take
account of duties which are being reduced from previous
levels as well as the bound duties being increased.

The criteria and procedures for these negotiations are
set forth in Article XXIV:6.

The U.S. objective in the Article XXIV:6 nego-
tiations was to obtain a set of concessions in the CXT
which, in terms of trade coverage and duty level, would
satisfactorily replace all of the concessions which the
U.S. had had with the six separate countries prior to
the formation of the EEC customs union. Of the 2,900
tariff positions in the new common tariff, the U.S.
identified 1,100 where it potentially had claims for
compensation under Article XXIV:6 either as initial
negotiator or major supplier. As a result of these
negotiations, nearly three—fourths of the direct con—
cessions obtained by the United States were at rates
equivalent to or below duty rates which the individual
Member states had previously applied. Table 2 summarizes
the concessions obtained by the U.S. as a result of the
1960-61 Conference.

The amount of trade dealt with in both phases of
the 1960-61 Conference was sizeable, cumulatively

amounting to more than $4.6 billion of U.S. exports

TABLE 2.--Trade with the U.S.

18

of countries from which

direct concessions were obtained in
the 1960-61 Tariff Conference.

(U.S. $1 million-1960)

Imports from the U.S.

of Products on which U.S. Total Imports

 

Country Obtained Direct from U.S.
Concessions
Total 2,764.5 12,037.6
EEC (XXIV:6
Negotiationsc) 1,200.0 --
EEC (Reciprocal
Negotiations) 1,000.0 3,400.0
Austria 7.6 80.0
Cambodia 1.1 8.9
Canada 75.1 3,632.7
Denmark 17.2 108.7
Finland 4.6 56.3
Haiti a 25.1
India 43.6 608.6
Israel 21.8 118.4
Japan 23.4 1,554.2
New Zealand 4.5 74.6
Norway 20.8 89.1
Pakistan b 168.8
Peru 6.7 142.1
Portugal 8.9 38.4
Sweden 9.6 298.8
Switzerland 19.6 246.5
United Kingdom 300.0 1,386.4

 

rights in Member States'

a$46,000.

b$79,000.

CThe Commission of the EEC negotiated with the United
States and other contracting parties having contractual

tariff concessions that had to be

modified as the Six started moving toward the Common Exter-

nal Tariff.

Volume I, p.

*Imports from the U.S. are reported c.i.f.

Source:

Department of State, General Agreement on
Tariffs and Trade, Analysis of United States Neggtiations,

106.

l9

and imports in 1960. Thus, the negotiations affected
almost 14 per cent of total U.S. trade in 1960 and more
than 20 per cent of the total trade conducted with the

participating members of GATT.1O

 

loTotal U.S. trade (imports and exports) of
merchandise for consumption amounted to $34.9 billion
in 1960. Trade with the contracting parties in the
1960-61 negotiations amounted to approximately $20.6
billion in 1960. U.S. Department of Commerce.

 

CHAPTER III

RECENT STUDIES OF PAST NEGOTIATIONS

Before analyzing the economic consequences of the
tariff reductions negotiated in the Dillon Round, a
discussion of previous investigations pertaining to
recent tariff conferences will provide a basis for
comparing our results to those obtained by other inves-
tigators.

A comparison between volume changes of dutiable
and duty-free imports has frequently been taken as an
index of the effectiveness of tariff changes. In a
study prepared for the House Ways and Means Committee,11
Piquet found that in four out of five economic classes,
imports of dutiable commodities exhibited larger per-
centage growth rates between 1947 and 1956 than did
duty-free items (See Table 3). This period saw trade
agreement activity at the Geneva, Annecy, and Torquay
Conferences. These results lead him to the conclusion
that "reduction of tariffs by trade agreement have been

moderately effective." His technique implicitly assumes

 

llSee Foreign Trade Policy, Compendium of Papers,
Subcommittee, on Foreign Trade Policy of the House
Committee on Ways and Means, 85th Congress, 2nd Session,
Washington, 1958.

20

21

 

.wmma “commCHnmmz .COfimmom cam .mmmhwcoo cpmw .mmmmdm no ezficcoQEoo “moflaom

 

 

 

mpmpe cwfiopom =.mps0QEH .m.D can mCOHpospmm Manama: .posvflm .m ”meadow
H.0m + omm.e omm.m ems.m m.mma+ Ham.e mmm.s mam.m Hmpoe

H.mmfi+ ssfi.fi was 0mm o.omm+ smo.m sfim.a mm: masseuse
Iaeaz eoenacaa
m.ss I mms.H eos.H mmm s.msm+ sem.a mam.a om: monaaomeaeszHEom

a.sa I mm meg am m.sm + mmH.H mam nae nacapneoos
bondhowmscmz

m.eos+ mam.fi sam.fi mam m.sm + mam mom wma nameHe< new
mmmsumpoom bongo
e.ms + mms.fi ea:.a H@H.H m.mmfi+ Hmm.H sHH.H mam namanosmz tease

331;? mm? mm? 33 3.3132 mm? mmmfi 32
mwmwmmmwom mugoQEH oosm owmwmmmmom mpLOQEH oanmfiusa mmmao oHEocoom

 

.emaH .mmma .asaa

Annmaaoo mo mcofiHHHE cw mpLOQEHv

.mmmmmflo OHEOCOOm an .omsm ocm mapmfiuso

.npsoasHsu.m mamas

22

that in the absence of tariff reductions, for each of
the five classes studied, the two lists (dutiable and
free) would exhibit parallel trends in growth.
Furthermore, for his method to be valid, each list
must contain the same commodities in 1956 as in 1947.
In this connection, he must account for the possibility
of the transfer of a free item to the dutiable list
during this period, since such a shift would imply
growth in dutiable imports even in the absence of tariff
reductions. Indeed, such a shift would reflect an
increase in protection. As a further complication,
domestic price changes during this period may not have
affected both groups equally. Thus, the differential
impact of inflation on the two groups may distort his
findings. He makes no attempt to isolate the effect
of the tariff reductions on import prices, nor does he
investigate the effectiveness of multilateral tariff
negotiations in stimulating United States exports.
Lawrence B. Krause examined the relationship
between tariff concessions negotiated at Torquay in
1951 and the subsequent increase in the volume of U.S.
imports.l2 Since the method he employed is similar to
the one used in this thesis, a detailed decription of

the procedure is reserved for a later chapter. Basically,

 

12Lawrence B. Krause, "United States Imports and
the Tariff," American Economic Review, Proceedings, May,
1959, pp. 542-51.

 

23

his work is an analysis of the behavior of two groups
of commodities. One group contains many of the manu-
factured products on which the U.S. import tariff was
reduced at the Torquay negotiation, while the other is
comprised of similar manufactured products on which
tariffs were 222 changed during these negotiations.
These groups were made comparable by selecting the
non-reduced group in such a way as to equate it with
respect to commodity composition and the average value
of imports of the reduced group. The analysis concerns
the dollar volume of U.S. imports of the two groups in
the years 1952 to 1956, while the years 1949—51 were
used as a base. In the absence of tariff reductions,
and except for possible strong substitution effects
between the two groups, these two groups would be
expected to exhibit parallel changes in growth. Thus,
a priori, an index reflecting the volume of imports
for the reduced group should exceed that of the non-
reduced group for all years subsequent to the tariff
reductions. His results are presented in Table 4.

A student's "T" test reveals that although the volume
of imports of both groups rose sharply in this period,
the difference between them was statistically insig-
nificant. He then divided the reduced items according
to the amount of the 1951 tariff reduction and to the

tariff levels after the reduction. It is particularly

24

TABLE 4.--Index of volume of imports into the United States
of products whose tariffs were reduced by the Torquay
Agreement, of similar products with no tariff
reductions, and of all finished
manufactured imports.

 

(1949-51 Average = 100)

 

Reduced Non-reduced All Finished

Manufactures
1949-51 100.0 100.0 100.0
1952 124.3 129.2 124.8
1953 182.7 165.5 133.1
1954 162.5 157.1 133.8
1955 197.0 206.1 160.9
1956 241.2 230.7 194.7

 

Source: L. B. Krause, "United States Imports and
the Tariff,‘' American Economic Review, Proceedings, May,

1959; p. 543.

25

interesting to note that volume increases were greatest
for those commodities where tariff rates had been
reduced by 30 per cent or more. The general conclusion
of the statistical analysis is that the tariff reductions
negotiated at Torquay in 1951 cannot be regarded as a
significant factor in the import increases that followed.
In explaining his findings, Krause suggests that
political as well as economic considerations may explain
why the Torquay negotiations had no significant effect
in increasing imports. Among the economic considerations
he lists the effect of price increases in reducing the
protectiveness of tariffs levied in the form of specific
rather than ad valorem duties, the nature of import
demand, (i.e., the response of imports to changes in
tariff rates) and the incentives for foreign producers
to supply increased U.S. import demand. When import
prices increase, the ad valorem equivalent of specific
duties declines, as does the restrictive effect of the
tariff. Since this will tend to stimulate imports of
both the reduced and control groups, the impact of tariff
reduction becomes more difficult to ascertain. With
regard to import demand, Krause postulates that import
demand is more than proportionately responsive to large
tariff changes. He finds that increases in trade were
much greater for items whose tariffs were reduced by

more than 30 per cent, than for items receiving reductions

26

of less than 30 per cent. Since more than 90 per cent
of the base value of concessions were in the latter
category, he concludes that no significant increase in
trade could be demonstrated in part because tariff
reductions on major commodities were insufficient to
induce substantial increases in imports.

Among the political considerations, he discusses
the "no injury" concept as it applied to permitted
tariff reductions, as well as the tariff structure as
it existed in 1951. With regard to the latter, he
points out that tariff reduction may not have been
adequate to remove the "excess" protection enjoyed by
the commodities in the reduced group.13 Thus, he con-
cludes, tariff levels, rather than changes are of prime
importance. However, Kreininlu suggests that, since
1951, cumulative tariff reductions have lowered U.S.
tariffs to a level where further reduction may induce

significant changes in U.S. imports.

 

l3For empirical evidence of the restrictive nature
of the U.S. tariff see M. E. Kreinin, "On the Restrictive
Effect of the Tariff--A Note on the Use of the Balassa
Index", The Manchester School, January, 1966, pp. 75-80.

lL‘Mordechai E. Kreinin, "Effect of Tariff Changes on
the Prices and Volume of Imports," The American Economic
Review, June, 1961, p. 320. The realized average duty on
dutiable imports was 47 per cent in 1934 and 14 per cent
in 1949. As a result of further tariff reductions, the
average duty declined to 12 per cent in 1952. Kreinin's
results suggest that the average duty may have been reduced
by as much as 15 per cent (down to 11.2 per cent ad valorem)
as a result of the 1956 negotiations.

 

27

Krause does not take into consideration the effect
of priCe Changes which may have occurred in the two
groups of commodities, but rather assumes that import
prices reflected fully the tariff changes in the reduced
group. If imports are a relatively small part of total
consumption, it is possible for a large increase in
imports to occur with little decline in import price.
The benefit of the tariff reduction would accrue to the
foreign suppliers in the form of higher export prices.
The subsequent increase in import volume would occur as
foreign suppliers, having absorbed the tariff concessions,
become capable of more vigorous price competition with
import-competing products.

Although Krause finds no significant difference
between the means of his two samples, this may be due
in large part to the degree of aggregation of the two
groups. The tariff elasticity of demand will vary
directly with the degree of substitutability. While
total imports are a small part of total consumption it
is a relatively large share when compared to the shares
of the individual commodity groups which comprise the
total. Thus, it may be expected that the tariff
elasticity of demand of separate commodity categories
is larger than that for all commodities taken together.
It may be, therefore, to our advantage to apply a test

of statistical significance to each of these subgroups

28

as well as to the aggregates in order to more accurately
evaluate the effectiveness of any reduction in duty
level.

Mordechai E. Kreinin, who recognized Krause's
failure to take into account possible changes in prices,
investigated data from the 1955 and 1956 GATT negotia-

15 The effects of a tariff reduction are shown as

tions.
taking place in four stages. The tariff reduction leads
to a decrease in import prices and improved terms of
trade for supplying nations. This price decline leads
to an increase in the volume of U.S. imports and
subsequently to a reduction in U.S. employment.

The empirical technique is essentially the same
as that used by Krause but differs in so far as Kreinin
takes into account the changes in prices that attented
the tariff cuts. His results are summarized in Tables
5 (A) and 5 (B).

For the 1955 negotiations it was found that one-
third of the benefit of the duty reductions was passed
on to domestic consumers while two-thirds accrued to
foreign suppliers in the form of higher export prices.

The 1956 negotiations were much larger and extended
over a longer period of time. Greater weight is given

to these results since the reduced group was 14 times

larger than that for 1955. The reduced group underwent

 

151818.

29

 

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pcm meowna m5» :0 mmwcmso umflpme no pomumm

:

.cflcflmsx .m Hmcooppoz "mopsom

 

 

 

 

mw+ m.m+ adopo boosponcoz
mam ms m.a om+ s.m+ aaoso oooaoem
monzuomuscmz oozmficflm
2m+ :.m+ Qsopo nooznoccoz
mum ms m.m ww+ o.m+ nacho pmozpom
mmwpflpoeeoo HH<
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LOpw QSOL C membflfiqwu
esp Lo muLOQEH .n
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esp mo mpLOQEH
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eoaeoaemm cusses

 

umma ocm :mm

H Cmmzumm

.mmfipfipoEEOU pcuLOQEH Mo mbmcmso zpfipcmso ocm oofipmll.m mqm<e

 

30

a 15 per cent reduction in tariffs. Foreign suppliers
and domestic consumers shared about equally the benefit
of the tariff concessions, while the volume of the
reduced group experienced a 12 per cent increase over
the control group.

Using the results from the 1956 GATT conference a
measure of the gain in welfare and loss in employment
is made. Although these estimates are "relatively
inconsequential," Kreinin indicates that in order to
get a more accurate result the concessions obtained by
the U.S. should also be considered.

Kreinin suggests that Krause's pessimism concerning
the effectiveness of tariff reductions in stimulating
imports is unwarranted. Although Kreinin's reduced
group did show a 12 per cent increase over the non—
reduced group, no test of significance was made. In
fact, Krause has a differential of almost 11 percentage
points which he finds could have occurred by chance.

Finally, Kreinin finds that the increase in
economic efficiency as a result of 1956 negotiations
approached $31.5 million as an upper limit. The loss
of employment associated with the tariff reduction was
estimated at most to be 20,000 workers. When concessions
both received and granted are considered, the former

estimates could be expected to be larger and the latter

31

16 presents a general equilibrium model

smaller. Basevi
that allows measurement of the welfare effect of trade
restriction in money terms, when the terms of trade are
affected by restriction. The effect is measured on the
basis of consumer surplus. Applying this measurement

to 1960 data for tariffs and trade of the United States,
he shows that because of the improvement in the terms of
trade, the U.S. enjoys a positive net welfare effect,
but a relatively small one. According to the estimates
of elasticities and an assumed average tariff level of
15 per cent, the net gain lies between $258 million and
$558 million (at almost 0.11 per cent of national
income). Alternatively, these estimates are made under
the assumption of a uniform tariff rate of 13 and 17

per cent. His results suggest that a reduction in the
tariff level from 15 to 13 per cent would result in a
gain of $269 million as imports increased. However, the
corresponding reduction in the terms of trade reduce the
welfare impact by $287 million. Thus, on balance, it
would appear that the impact of unilateral tariff
reduction from 15 to 13 per cent ad valorem would be a
net welfare loss to the United States of a mere $18

million. However, multilateral tariff reduction would

be expected to mitigate some of the loss due to a decline

 

l6G. Basevi, "The Restrictive Effect of the U.S.
Tariff," American Economic Review, Vol. LVIII, September,
1968; pp. 840-852.

 

32

in the terms of trade. While not directly comparable
with Kreinin's results, both seem to support the con-
clusion that the impact of multilateral tariff reduction
on U.S. welfare (i.e., economic efficiency) would be
slight.

In a more recent study, Krause examined the
product pattern of competitive U.S. imports of manu-
factured goods for the period 1947-1958.17 Two models
are postulated. The first is static in nature and
relates the dependent variable, the ratio of imports
to domestic shipments ME/XE, to a multiplicative function
of the variables (PEi/Pgi E
E1 and P31 are the foreign price

(FOB) of good i in year t and the price of the domestically

produced good in year t, respectively. T: is the U.S.

), (l + TE), and (XE), where X

is an income proxy and P

ad valorem tariff rate for good i in year t. The

equation has the form:

t _ t t t a t a t a

M /M _ K (Pfi/Pdi) l (1 + T1) 2 (xi) 3V

when Kt is a constant in year t for all commodities, and
v is a random error term. This form of equation was
selected since it yields parameters in the form of
elasticities. Through a double logarithmic transfor—

mation the equation was made linear yielding;

 

17Lawrence B. Krause, "U.S. Imports, 1947-1958,"
Econometrica, April, 1962, pp. 221-38.

 

33

t t _ t t t
log (Mi/Xi) - log K + 01 log (Pfi/Pdi)
+ a log (1 + Tt) + a log (Xt) + log vt [1]
2 i 3 i '

A second model was necessary to illustrate the
changes that occurred in the structure of U.S. imports
over a period of time. Using a first difference trans-

formation of [1] the following logarithmic equation is

derived:
t t t-n t-n _ t-n
[log (Mi/Xi) - log (Mi /Xi )] — log Ci
t t t-n t-n
+ Bl[log (Pti/Pdi) - log Pf1 /Pdi ]

+ 82[log (l + TE) - log (1 + Tt-n)]

1
+ B3[log (XE) - log (Xg'n)1
+ log vt - log vt-n. [21
where: Ct_r1 is a constant for all products but changes

t

depending on the years involved, n is the period over
which the difference is taken, and the expected value
of log vt - log Vt-n = 0. The regressions were run on
two categories of goods which were grouped according to
their physical characteristics. The critical consider-
ation here was the elasticity of the short-run supply
curve of the major raw materials incorporated into the

product. The more price-inelastic the supply curve of

the raw material, the more price-inelastic the supply

34

curve of the commodity. Thus, variations in quantities
imported of the goods will reflect mainly changes in
total demand. Those goods greatly affected by the con-
ditions of the raw materials (i.e., highly income
elastic) were classified in group B, while all others
were classified in group A.

The results of the first model conformed to
a priori expectations. The parameter al and 03 are
shown to be significant, however 02, the tariff
elasticity coefficient, is not significantly different
from zero. Thus, it is implied that in the short-run
the tariff level is not an important variable in
determining the pattern of U.S. imports. At this
point, Krause does give some attention to differences
between product groups. By stratifying his sample of
group A products in one year (1958) and estimating
equation [1] for each group separately, he was able to
make inter-industry comparisons. Only four of eight
industrial groups tested turned out to be significant.
They were wood and paper products, leather and leather
products, non-metallic minerals, and metal and metal
products.

The analysis using Model II indicated that as the
time period under investigation was lengthened, the
responsiveness of imports to changes to relative prices

increased. It is also apparent that if the time period

\I:

is sufficiently long the change in the tariff level
becomes a significant factor in explaining increases

in import volume. This indicates hat in any study of
tariff reductions it is necessary to allow a time period
of sufficient duration in order to allow the economy to
adjust to the new tariff liberalizations.

Krause concludes that since 1947, Changes in U.S.
tariff rates have not led to substantial increases in
imports. He attributes this to the fact that tariffs
are reduced only n commodities where there is some
assurance that imports will not increase, and that the
tar'ff reductions since 1947 themselves have been small.

riff rates it is

{1)

However, for larger reductions in t

expected that the volume of imports would respond

Hi

icantly. These results are consistent with his

0)

igni
Torquay investigation.

O;A

9

M1 4,. - l ' .:
more recently, Albert Small investigated the

effect of the tariff reduction negotiated at Geneva in

 

18

For more comprehensive analysis of long run tariff

e1 sticities of demand, see B. A. DeVries, "Price

a
asticities of Demand for Individual Commodities Import
t “ n St

E1
in o the United States," International Mone ary rund

 

Papers, (April, 1951), pp, 397-419; R. J. Ball and K.
Marwah, ”The U.S. Demand for Imports, 1948-1958," The
Review of Economics and Statistics, Vol. (LIV, No..4:
November, 1962, pp. 395-401, and H. B. Junz and R. R.
Rhomberg, "Prices and Exports Performance of Industrial
Countries, 1953-1963," IMF Staff Papers, July, 1965,
pp. 244-71.

 

 

l n .
9A1bert s. Small "The Effect of U.S. Tariff
Reduction on U.S. Import Volume," MSU Business Topics,
Graduate School of Business Administration, Spring, 1967.

 

36

1960—61. Following a procedure similar to Krause and
Kreinin he constructed indices of trade growth between
1961 and 1964 for those items which received tariff
reductions, and similar commodities which did not. A
comparison of the growth rates of the two groups
revealed that in 54 of the 97 "pairs" studied, the rate
of growth of the reduced group exceeded that of the
control group. This is taken as "persuasive" evidence
that tariff reductions were instrumental in significantly
increasing trade.

His analysis implicitly assumes that the tariff
reduction is fully reflected in import prices. Thus his
analysis is subject to the same weakness as Krause's
1959 study (see footnote 12). In light of the fact that
almost 1,200 statistical classes of products were subject
to tariff reduction, the sample of 97 paired commodities
seems highly inadequate as a representative sample. No
attempt is made to explore the effect of the reduction
on individual commodity groups, nor does he analyze the
consequences of the Dillon Round with regard to U.S.
exports.

20

Balassa and Kreinin considered the possible

effects of the Kennedy Round of tariff negotiations

 

2OB. Balassa and M. E. Kreinin, "Trade Liberaliza-
tion Under the 'Kennedy Round': The Static Effects,"
The Review of Economics and Statistics, Vol. XLIX, No. 2,

May. 1967; pp. 125-37.

 

37

(1965-67) on U.S. trade and welfare. They provide
estimates on the impact of a 50 per cent across-the-
board tariff reduction on industrial materials and
Inanufactured goods under the static assumptions of given
tastes and unchanged technology. Their results suggest
that while both U.S. exports and imports will increase
as a result of the Kennedy Round, these increases will
be in the order of only 5.6 per cent and 7.0 per cent

of the 1960 trade figures, respectively. These per-
centages imply a slight increase in the trade balance,
but this could be easily reversed by limited relative
price changes. Furthermore, the gain in welfare is also
expected to be quite small when compared to gross
domestic product. The latter result is consistent with
the findings of Basevi and Kreinin. Their results,
however, are heavily dependent upon their assumptions
and must await empirical verification.

The Dillon Round dealt with a substantial range of
products (1,200 statistical categories of imports were
affected) and the reductions in duty were in the
magnitude of about 20 per cent. It would therefore seem
likely that the import concessions granted in the 1960-61
negotiations would fulfill Krause's requirement for an
effective tariff policy. However, Balassa and Kreinin
suggest that even a 50 per cent across-the-board reduction

in industrial tariffs may not be sufficient to induce

38

significant increases in trade. In sum, it appears that
no a priori judgement can be made on the effectiveness
of the 1960-61 Geneva Conference in stimulating U.S.
trade.

Except for the Balassa-Kreinin study, the foregoing
analysis concentrated on the effectiveness of tariff
liberalization in inducing changes in the volume of U.S.
imports. In analyzing the consequences of tariff con—
cessions for the U.S. economy it is just as important to
focus attention to those concessions received, as it is
to consider the tariff reductions granted by the United
States. This thesis will therefore examine the effec-
tiveness of the Dillon Round in stimulating both the
imports and exports of the United States. Following
Kreinin's lead, I will obtain a measure of the change
in the U.S. terms of trade as well as the gain in welfare
and the net effect on employment of the 1960-61 Geneva

negotiations.

CHAPTER IV

METHODOLOGY AND EMPIRICAL PROCEDURE

United States Imports

 

In order to estimate the effect of tariff concessions
granted by the United States, I shall compare changes in
prices and volume of imports between products on which
tariff concessions were granted (reduced group), and im-
mediate substitutes which were not subject to tariff
reductions (non-reduced group).

The tariff concessions granted in 1960-61 were made
effective by three different methods, at three different
dates: (1) where the reduction in the tariff existing on
July 1, 1958 is a maximum of two percentage points, the
tariff concession was made effective in July, 1962; (2)
wherever the concession reduces the tariff existing on
July 1, 1958 by not more than 20 per cent, the reduction
was made effective in two stages of ten per cent each,
with the second stage terminating on July 1, 1963; (3) for
duties reduced down to fifty per cent ad valorem, the con-
cessions were made effective in three stages ending in
July, 1964. As a consequence, the concessions will be

studied by comparing the years 1960 and 1965. The time

40

period is sufficiently long to allow the economy to
adjust to the effects of the tariff liberalizations.
Since in the absence of tariff concessions the
reduced group and the non—reduced group (i.e., the
control group) would be expected, in the aggregate, to
exhibit similar price and quantity movements, a comparison
between them should reveal the effect of the tariff con-
cessions. An implicit assumption is made here that the
prices and volume of the non-reduced group will not be
affected by the tariff concessions. However, since the
two groups are substitutes, the non-reduced category will
move in a predictable fashion which depends upon the
cross-elasticity of demand. Specifically, the prices of
the non-reduced group may be checked by the lower prices
of its close substitutes subject to tariff concessions.
Thus, the estimated changes in foreign export prices
obtained through a comparison between the two groups may
be regarded as an upper limit, while the reductions in
U.S. import prices represents a lower limit to the gain
by the domestic consumer. Similarly, the rate of growth
in volume of the non-reduced group may be retarded by the
increased demand for substitutes in the reduced group.
The estimate of the change in volume attributed to the
tariff concessions must therefore be regarded as an upper
bound. Furthermore, since the commodities considered are

substitutes in consumption it can be assumed that income

41

elasticities are similar. Thus, any changes in income
affecting one group of commodities will also affect the
other group by the same magnitude. Therefore, deviations
in trend between the two groups will be attributed to
tariff reductions. Concessions granted by the United
States are subject to a Most-Favored-Nations clause, and
therefore total imports21 of a commodity (i.e., imports
of a given classification regardless of origin) of the
reduced and non-reduced classifications may be used.

In considering imports, in addition to aggregative
figures for price and quantity changes, the results will
be broken down to several commodity groups, which will
permit us to observe differential effects of tariff
changes between groups which are presumably subject to
different elasticities. Foodstuffs and raw materials
will be omitted since many of these commodities are subject
to quotas which inhibit the functioning of the price
mechanism.

The groups to be considered are Textile Fibers

and Manufactures,22 Wood, Paper and Printed Matter,

21

 

U.S. statistics report import value f.o.b.

22The first short-term international cotton textile
agreements were effective for the 12-month period ending
on October 1, 1962. These were followed by the Long-Term
Cotton Textile Agreement. In considering textiles, we
will select an equal number of reduced and non-reduced
commodities subject to the same controls of the inter-
national cotton textile agreements. Accordingly, any
effect of these restrictions would presumably be compen-
sated for in both samples.

42

Hon—Metallic Minerals, Metals and Manufactures including
Machines and Vehicles, Chemicals and Related Products,
and Miscellaneous Products.

Principally, the following steps will be taken.
For each commodity on which the tariff was reduced, the
tariff change as a per cent of the 1960 tariff as well
as of the 1960-65 unit value will be computed. As a
second step, computations will be made for the percentage
change in unit value and volume between the two periods.
These percentages will then be aggregated first for each
of the six commodity categories, and then for all imports,
in each case using average 1960-65 import values as
weights. The same computations, with the exception of
those relating to tariff changes will be performed for
the immediate substitutes of those commodities (i.e., the
non-reduced group).

The selection of substitutes will be made from the
listings in the United States Tariff Commission publica-

tion, Tariff Schedules of the United States Annotated

 

(1965) and Report No. FT 110, United States Imports of

Merchandise for Consumption published by the United

 

States Commerce Department. The latter lists all dutiable
commodities reported according to the classification
established in Schedule A, Statistical Classification of
Commodities Imported into the United States, and is

presented in the order of the numbered classifications

43

in that Schedule. Within each category a further disag-
gregation classifies articles according to industry
affiliation. Each item is assigned a commodity number.23
For each commodity which received a concession during the
Dillon Round a closely related article in consumption can
be found by pairing similar commodity numbers. For
example, Schedule A, item 9470120, Rifles, Breech Loading,
valued at over $10 each not over $25 each, can be paired
with item 947130, Rifles, Breech Loading, valued at over
$25 each not over $50 each. In some cases, items in one
category are effective substitutes for commodities in
another category. For instance, silk gloves compete

with woolen gloves even though they are listed under
separate subheadings. Where matchings of this sort
provide better substitutes than the former method, they
will be utilized. Of course, to obtain a precise measure
of the degree of substitutability of one product for
another, cross-elasticity estimates should be used. In
the absence of such information, however, our procedure
assures only closely related products. The degree of

substitutability between commodities is unknown. The

implication of this qualification for our results will

 

23In 1960 the commodity code numbers were based on
the Schedule A classification. In 1963 a revision
regrouped items according to the TSUSA schedule. This
revision will have no effect on the selection of sub-
stitute commodities.

44

be made clear in the discussion of the results.
Furthermore, care will be taken to equate the average
value of each commodity to that of its substitute.
This procedure is necessary to assure a meaningful
measure of the statistical significance of our results.
The measure of the foreign export price of each
commodity will be calculated by dividing its value in
a given year by the corresponding quantity. In a report.
issued by the National Bureau of Economic Research214 the
shortcomings of using unit value indexes as a measure of
foreign prices were explicitly stated. Unit values are
values per unit of quantity within detailed export or
import classifications. However, since the classifica-
tions must in total cover every item of trade, they
cannot be narrowly specified unless their number is
increased far beyond any practical limit. As a result
of the lack of close specification, there is never any
certainty that a change in unit value adequately
represents a change in price; the unit value of a trade
Classification can change, even though all prices are

constant, if there is a shift from one quality or type

of item to another.

 

2”Irving B. Kravis, Robert E. Lipsey, Philip J.
Bourque, Measuring International Price Competitiveness,
National Bureau of Economic Research, A Preliminary
Report, Occasional Paper 94, 1965.

45

Unit value indexes also suffer from the fact that
for many manufactured products quantitites are not
reported at all and unit values are simply unavailable.
This shortcoming is particularly noticeable when dealing
with imports of machinery and vehicles. For this reason
it will be necessary to include the relatively few items
for which quantity statistics are available in the Metals
and Metal products category.

Unit values may not be good indicators of price
competitiveness in international trade. One disadvantage
is that the weights differ from one country to another,
due to the differing composition of export trade.
Therefore, it is not possible to say whether an apparent
change in price relations results from differences in
price movements or from the difference in the weighting
of identical price changes. Secondly, exports which
encounter severe foreign competition may tend to dis-
appear from a country's exports thus undergoing a
lowering of its weight in any index. Even if constant
weights are used in the index of export unit values,
the worse the competitive position of a country in a
commodity, the lower the weight of that commodity in
that country's index. These criticisms, while common
to all price indexes, cannot be ignored when using unit

values as a measure of foreign prices. Since no other

46

source of foreign export prices is available, these
deficiencies have to be overlooked.

A comparison between the changes in the prices and
quantities of the reduced and non-reduced groups, along
with the data on the tariff reductions as a per cent of
price, will make it possible to divide the tariff cut
between a rise in the foreign export price and a decline
in the U.S. import price.

The tariff rates referred to in this thesis are the
nominal or apparent ad valorem rates. Where specific or
compound duties prevailed they were converted to their
ad valorem equivalent. However, we must be aware that

it is the effective protective rate and not the nominal

 

duty that determines the level of protection. This is
the rate of protection provided for an economic activity,
as distinct from the rate of protection provided for a
product. It indicates the percentage rise in the value
added of the marginal unit which is made possible by the
tariff system.

In the simple case of an imported commodity, i,
which has only one input, also an importable, j, let
the tariffs applicable to commodity i and input j,
be t

and t respectively. Then the value added per

i J
unit of i in the absence of tariffs is:

V = P. (1 - A

i 1 ji) [l]

47

and the value added per unit of i due to the imposition

of a tariff is:

0
Vi = P1 [(1 + ti) - A51 (1 + tj)] [2]
where Pi is the unit price of i in the absence of tariffs
and A. is the proportion of j in the cost of i in the

ji

absence of tariffs. The effective protective rate is:

 

 

V — V.
l l
G =
1
V1
01"
Pi [(1 + ti) - A31 (1 + t3) - <1 - Aji)]
G1 =
P1 (1 - A31)
t1 - Ajitj
= [31
1 - Aji

For example, if under free trade the duty-free
price of commodity i is $100 and is subject to a duty of
20 per cent, while the duty levied on imported input j
which constitutes half its value is 10 per cent, the
effective rate of protection is equal to 30 per cent.
Clearly, the higher the apparent tariff on the finished
good and the lower the level of duty imposed on the raw
materials used in its production, the higher will be the

effective protection.

48

In our example, suppose that through negotiations
the tariff on the finished product i is lowered by 25
per cent to 15 per cent ad valorem while the tariff on
input j remains the same. The effective level of
protection would be lowered from 30 to 20 per cent or a
decline of 33-1/3 per cent. Had the reduction in duty
also applied to the raw material the decline in effective
protection would have been the same as the nominal
decline, namely 25 per cent.

In general, the change in the effective tariff on
the finished good will be greater than or less than the
change in its nominal rate depending on whether the
change in the nominal rate exceeds or falls short of
the change in duty on the imported inputs.25

Bela Balassa26 has provided us with estimates of
the nominal and effective rates of protection for the

five major trading areas of the world. His results are

summarized in Table 6.

 

25For a full discussion of the effective protective
tariff see W. M. Corden, "The Structure of a Tariff
System and the Effective Protective Rate," The Journal of
Political Economy, June, 1966, pp. 221-237. See also
Giorgio Basevi, "United States Tariff Structure: Estimates
of Effective Rates of Protection of United States Indus-
tries and Industrial Labor," The Review of Economics and
Statistics, May, 1966, pp. 147-160.

26Bela Balassa, "Tariff Protection in Industrial
Countries: An Evaluation," Journal of Political Economy,
December, 1965, p. 588.

 

 

 

49

 

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pcoaw>flsom ommso>< popcwfioz mmmso>< oouzwfioz
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.meaa .sbceaoo sb .ncems ceases bsabccccb och Hecasoznn.e mamas

50

His figures suggest that among these five areas
Japan has the highest rate with respect to both nominal
and effective duties, while the United Kingdom ranks
second. The United States and the EEC are about even
with the United States having a higher effective level
and the EEC slightly higher in its level of nominal
tariffs. At the opposite end of the scale is Sweden
which has the lowest level of nominal as well as effective
rates.

One purpose of calculating effective protective
rates is to obtain indications of the direction in which
resources are pulled by the tariff structure. Effective
rates determine, along with production substitution
elasticities, the production effect of a tariff. On the
other hand, nominal rates determine, together with
expenditure substitution elasticities, the expenditure
or consumption effect. It may therefore be both neces-
sary and desireable to take into account the effective
protective level of a tariff when considering the con-
sequences of its reduction. However, this study will
not employ effective tariff rates for several reasons.
First of all, the effective level of protection has not
been computed for Canada and several other countries
which account for an important share of United States

trade. Secondly, those estimates which are available

51

are not sufficiently disaggregated for our purposes.
Many of the industrial products studied in this thesis
enter as inputs in the production of other products.
Thus a decrease in nominal tariff rates would lower
effective protection by more than the change in nominal
duties. In order to estimate the change in the effec-
tive tariff structure it would be necessary to know

the share of dutiable inputs used in the production of
each commodity studied. Since this information is not
available it is impossible to measure the change in the
effective rates of protection. This problem is com-
pounded when we realize the possibility of more than
one input in the production process.

27 has suggested that in the course of

Kreinin
successive GATT negotiations manufactured goods (i.e.,
categories 5-8 SITC) were probably subject to larger
tariff cuts than those on semi-finished or primary
commodities. If his hypothesis is correct, changes in
effective rates have exceeded changes in nominal rates.
Therefore, it would seem that for the United States

the use of nominal rates would impart an upward bias

to the effect of tariff negotiations on trade flows.

 

27M. E. Kreinin, "'Price' vs. 'Tariff' Elasticities
in International Trade--A Suggested Reconciliation,"
American Economic Review, Vol. LVII, September, 1967,
pp. 891-894.

52

United States Exports

 

Since tariff concessions granted to the United
States differed from one trading partner to another, it
will be necessary to evaluate their effect on the volume
of exports on a country by country basis. Of the 23
members of the GATT participating in the 1960-61
Conference, the European Economic Community, Canada,
and the United Kingdom accounted for approximately 93
per cent of the value of all concessions received by
the United States.28 Thus, we will confine ourselves
to investigating the effectiveness of tariff reductions

in stimulating U.S. exports to these areas.

Demand‘Factors

 

The relationship between movements of domestic
demand and imports accounts for the largest part of the
variation in import volume. Imports may be seen as
consisting of materials and semi-manufactures going into
current production, imports of finished goods going into
final demand for current use, and imports for inventory
replenishment. Therefore, as the level of economic

activity within an area increases, ceteris paribus, we

 

would expect a rise in the volume of goods imported.

 

281h 1960, these areas accounted for 70 per cent
of all U.S. exports of manufactured commodities.

53

Thus, if we are to explain variation in U.S. exports to
a given area, it will be necessary to account for the
influence of demand pressures within the country of
destination.

Because of the cyclical diversity of the demand
for various products, complex relationships appear to
govern the movements of total imports (U.S. exports)
over the business cycle. The movement of various U.S.
export categories is likely to diverge over the
business cycle, with some categories, like exports
of machinery and other manufactures, being far more
cyclically sensitive than materials or foodstuffs.
These phenomena may be caught empirically by estimating
export functions separately for various product

categories.

Supply factors

 

Relative price relationships may play a significant
role in determining the flow of U.S. exports to a par-
ticular area. a priori, one would expect movements in
U.S. prices relative to the prices of domestically
produced import-competing goods to be of prime impor-
tance in the choice between these substitutes.

Of equal importance is price competition from
third country suppliers. Changes in U.S. prices vis

a vis foreign sources of supply may also be expected to

54

be an important factor in determining the share of U.S.
exports to a given market.

Another factor which can be expected to influence
trade flows, and the one to which we will direct our
attention, is the level of tariffs. The imposition of
a tariff creates a divergence between the price paid
by the importer and that received by the exporter. Thus,
a price decline resulting from a tariff reduction has a
different supply effect as compared to one resulting
from a lowering of the U.S. offer price. In the former
case, the U.S. supplier will receive the same return
per unit (or even higher if the entire tariff change is
not passed on to the consumer), while in the latter one,
he will receive less. This would lead one to expect
that the quantity of goods exported would react differ-
ently to an equal percentage change in the two elements.

dpecification of the Export
Function

 

Our analysis will be conducted at the commodity
group level (Schedule B commodity categories 3-9).
The volume of U.S. exports of commodity group i

to area j was taken from the following identity

3. J J J
xi - 111(13i + Xi - E1) [1]

55

where Xi is the quantity of U.S. exports of commodities

of the 1&8 commodity group, which were subject to tariff
29

reductions, to area j.

u is the portion of domestic consumption of the

i
1:2 commodity group provided by U.S. exports.

Pi is the quantity of domestic production of
category i in area j.
E; is exports of category 1 commodities from
area j. Solving for Xi we get

ui

J _ J J
Xi - (Pi - Bi) [2]
1 - u
1
Practical considerations forced an alteration of
the equation. It was felt that adjusting domestic
production for exports would not greatly affect the var-
iable Pg since area j exports of commodities imported
from the United States in considerable amounts could
be expected to be quite small in relation to total
domestic production. Furthermore, since data for
domestic production of various commodity groups by
area was not readily obtainable, an index of overall

industrial production (P3) (1960=100) for each area

will be used. This index has performed well as a

 

29When referring to commodity group i we will only
consider commodities within group i which have received
tariff concessions. This procedure will minimize the
risk of the dependent variable reflecting random varia-
tions unrelated to tariff concessions.

56

proxy for economic activity and will be used in this

investigation as an activity-demand variable.30
The ratio of the share of the 122 commodity group

provided by U.S. exports to the share provided by domes-

tic production (ui/l-ui), will be considered to be a

function of the ratio of the U.S. export price in area

j to the domestic wholesale price prevailing in area j,

the ratio of U.S. wholesale prices of commodity group i

to the wholesale price of commodity group i quoted by

 

foreign suppliers,31 and the level of domestic production.
_ Pxi Pusi
ui/l-ui - f (Pdi 3 P01 ) Pj) [3]

where Pxi is the U.S. export price index of group i to
area j. (l960=100)
Pu.s.i is the domestic wholesale price index of
commodity group i in the United States. (l960=100)
P01 is the wholesale price index of commodity

group i of foreign suppliers, (l960=100) and,

 

3OSee "An Econometric Analysis of International
Trade, an Interrelated Explanation of Imports and Exports
of OECD Countries," by F. G. Adams, H. Eguchi, and F.
Meyer-zu-Schlochtern. OECD Economic Studies Series,
January, 1969.

 

31Since tariff reductions received by the United
States were extended to all other supplying nations as
a result of the Most-Favored-Nation clause, the import
prices of the U.S. and foreign suppliers in area j would
decline by the same percentage. Thus any relative price
shift can be attributed to changes in wholesale prices
which are unrelated to duty levels.

57

Pdi is the wholesale price of domestically produced
group i commodities in area j. (l960=100)

The U.S. price of group i in area j is taken from

the following identity:
Pxi = Pu.s.i (l + Ti) [4]

where Ti is the average nominal ad valorem tariff rate
levied on goods within commodity category i by area j.
Combining equations [2], [3] and [4] yields:

Pu.s.i Pu.s.i

xg=rt<r,,——————,————. <i+ii>1 [51
Pdi Pci
The dependent variable Xi will be taken as a linear
32 Pu.s.i Pu.s.i
combination of the four variables P .______

Jam: )
Pdi Pci
and (1 + Ti)

j Pu.s.i Pu.s.i
. = + _ + ___._.__.
Xl do qlPJ + a2 ( Pdi ) a3( Pci )
+ a4 (1 + Ti) + e1 [61

where do is a constant for all product classes, and ei is
a random disturbance term. The equations will be run on
quarterly data for the period 1955-I--1965-IV.

With the exception of the EEC, the reductions made

by Canada and the United Kingdom were put into effect in

32While non-linear (logarithmic) demand functions
estimated by least-squares procedures have the desired
property of yielding parameters in the form of elastic-
ities, preliminary work suggested the linear form produced
a better statistical fit to the data.

 

58

one stage beginning in 1962. In the EEC case, the
concessions granted were in terms of the ultimate Common
External Tariff to which the national tariff of the
Member States were to move during the transitional
period which was to be completed by the end of 1963.
It is reasonable to expect that the responsiveness of
U.S. exports to changes in the tariff level will increase
as the time period under investigation is lengthened.
Furthermore, U.S. exports may not respond immediately to
once-and-for-all changes in the tariff structure, but
rather only after some lag. A lagged response to changes
in the relative price structure also seems a reasonable
assumption since it may take time for the export sector
of the U.S. economy to adjust to the new level of
foreign demand. Unfortunately, we have no reason to
suspect any particular lag structure which would best
describe the responsiveness of U.S. exports to tariff
liberalizations or relative price changes. However, a
useful technique to deal with the problem of multiple
lags has been developed by Shirley Almon.33
The "Almon" technique has the virtue of permitting

the data to determine the shape of the weight distribu-

tion of the lag structure rather than imposing a

 

33For a completely detailed account of the math-
ematical underpinning and actual procedures of this
technique see, Shirley Almon, "The Distributed Lag
between Capital Appropriations and Expenditures,"
Econometrica, Vol. 33, No.1, January, 1965, pp. 178-195.

 

59

completely pre-determined shape. The idea is that if
we can find the "true" weights for a few periods in

the time interval, this will be sufficient to define
the mathematical function which best describes the
distribution of the weights3u for all periods. If,

for example, the weight distribution turns out to be

a straight line, finding two points on this line is

all that is necessary to develop a formula which will
give the values for all points on this line. In general,
however, this technique is best suited for establishing
the values of weights whose configuration is more
complicated than that of a straight line. This tech-
nique will be employed in our analysis in order to
determine the responsiveness of U.S. exports to changes
in relative prices and tariff levels over time.

In estimating equations for U.S. exports as
basically determined by foreign demand, prices in the
importer's country, prices in the United States, prices
of competitive supply countries, and the level of tariffs,

35

we will use the weighted average of the foreign whole-

sale prices listed in column (2) to represent the

 

3“In this connection, the weights appear in the
equation as the best—linear-unbiased-estimates of the
coefficients of the lagged independent variable.

th 35The weights will be total U.S. exports of the
i-— commodity group to area j in year t.

 

6O

competitive supply price in the equations for U.S.

exports to the areas listed in column (1).

(1)
European Economic Community
United Kingdom FT?

Canada

(2)

Canada, United Kingdom

 

Canada, European Economic Community

United Kingdom, European Economic Community

Once the coefficients are determined, implicit
tariff elasticities of foreign demand for U.S. exports
of category 1 may be calculated by assuming a given
percentage change in the tariff level, and calculating
the absolute increase in exports resulting from it.
The ratio of this change to the mean value of the
dependent variable will then represent the tariff
elasticity. Mathematically, if X = a + tT and AX =
t AT, then a 1 percentage point decline in T would
cause an absolute increase in exports of AX = t. 01.
Thus, the ratio of AX to X, AX/X, where X is the mean
of the dependent variable represents the percentage

increase in U.S. exports in response to a 1 percentage

61

point decline in the tariff level. The latter constant
will be taken as the tariff elasticity of import demand
implied by the equation coefficients. In this connec-
tion, to find the total effect of the tariff reduction
on export performance over time, we will algebraically
sum the coefficients of the lagged tariff variable.
This sum is designated by t, above. A similar technique
may be used to estimate the papal relative price elas-
ticity of the demand for U.S. exports of category 1.
In this case however, the algebraic sum of the price
coefficients may be used as an indication of the total
price multiplier. Both terms, pr and pc, have the U.S.
wholesale price index in the numerator.

Once the tariff elasticity is determined it is
a simple matter, given the actual reduction in the
tariff rate, to estimate the percentage increase in
U.S. exports which occurred as a result of tariff
liberalization. Applying the percentages to the value
exported in the base year 1960 will yield the absolute
increase in U.S. exports of each commodity group in
response to tariff reductions. The sum over all groups
will be taken as the effect of the Dillon Round
negotiations on all U.S. export trade.

Perhaps the major shortcoming of this technique
lies in the necessity of implicitly assuming an infinite

elasticity of export supply. In other words, our model

62

assumes that any increase in foreign demand resulting
from tariff reductions can be supplied at constant costs.
The implication of this assumption with regard to the
measurement of the total terms of trade effect is
discussed in Chapter VII. Exports occupy a relatively
small share of total production in the United States,
in contrast to many European nations, making the U.S.
export supply elasticity much higher than elsewhere.
Furthermore, during the early 1960's the U.S. economy
was characterized by high levels of unemployment. This
excess capacity coupled with high resource mobility
suggestS‘Uun:export expansion could be brought about
without significant increases in the cost of production.
The only direct estimation of supply functions
appears in the IMF's world trade model.36 This model
includes three equations, one each for the United
States, Western Europe, and the rest of the world,
relating export prices of the region to an internal
price level (except in the case of the rest of the
world), the volume of exports and time (presumably to
allow for technological change shifting the demand
schedule over time). The estimated price elasticities

of export supply are: plus 15.0 for the United States,

 

36R. R. Rhomberg, R. Randall, and L. Boissoneault,
"Effects of Income and Price Changes on the U.S. Balance
of Payments," IMF Staff Papers, 11:1 (March, 1964)
pp. 58-124.

63

plus 2.5 for Western Europe, and plus 1.2 for the rest

of the world. If these elasticities are reasonably
indicative of the order of magnitude of the supply
elasticities involved in international trade, they

imply that the tacit assumption of an infinite elasticity
of supply (in the case of the United States) used in
ordinary least-squares estimation of demand curves from

time series data may be warranted.

Data

 

A thorough-going revision in United States tariff
nomenclature took effect on August 31, 1963, under the
Tariff Classification Act. It thus becomes necessary
to use two statistical sources from which to obtain
data on United States imports. For 1960, data are

available from Report No. Ft. 110, U.S. Imports of

 

Merchandise for Consumption, while Ft. 246, U.S. Imports

 

for Consumption and General Imports will be used to
obtain 1965 import data. The latter is presented in
terms of the classifications contained in the Tariff
Schedules of the United States Annotated (TSUSA). Only
those classifications unaffected by the nomenclature
changes can be directly compared between the years 1960
and 1965. For those classifications which were revised,
comparisons will be made by matching commodity descrip-

tions and tariff levels existing after the negotiations.

64

The information provided by the commodity description
will enable the Schedule A commodities to be uniquely
matched to their TSUSA counterparts. The Unites States

Department of State reports, Analysis of U.S. Negotia-

 

padaa, Vols. I-IV, contain the relevant information
concerning the tariff concessions both granted and
received by the United States.

Commodity groups will be made comparable by using
the Schedule A commodity classifications. In some
instances where a commodity appearing in one group in
1960 was re—classified to another in 1965, it will be
considered as belonging to the original Schedule A
classification. This will be done in order to maintain
uniformity as well as make the results comparable with
those studies done prior to the revision. A commodity
will be eliminated from the study if there is inadequate
quantity information or if a suitable substitute is
unavailable.

With regard to exports, value data are available
for the years 1955-1965 in the Department of Commerce

publication Report No. Ft. 420, United States Exports

 

of Domestic and Foreigp Merchandise Country of Destination

 

by Subgroup. In 1964, there was a revision of the 5-digit

 

Schedule B numbers to a new Schedule B numbers to which

they were assigned. This list will be used when

65

necessary for maintaining consistency within subgroups
before and after the conversion.

While quantity statistics are called for in the
model, constant dollar amounts (l960=100) will be used
in order to make cross-product calculations possible.
The U.S. domestic wholesale price indices by subgroup
which will be used are available for the years 1955-1965
from the U.S. Department of Commerce publication,
Statistical Abstract of the United States, while
quarterly wholesale price indices of the United Kingdom
and Canada may be obtained from various issues of Eda

Board of Trade Journal, published by Her Majesty's

 

Stationary Office, and the Bank of Canada's Statistical

 

Summary respectively.

An aggreagte index of the wholesale price indices

of the EEC will be constructed by aggregating the various

country indices, weighting each country series by its
share of U.S. exports in year t. References to the
sources of these price series and all raw statistical

data are presented in the statistical appendix.

| If mmfli‘.H-_ n— a- n”
' u

23"? y

, vi.._- '

.t

A

CHAPTER V

THE EFFECT OF THE DILLON ROUND

ON UNITED STATES IMPORTS

Table 7 summarizes the results of this investiga—
tion with regard to American imports. The reduced
group, (i.e., those commodities which underwent tariff
revision) included two hundred and twenty-three
commodities amounting to $745.9 million in 1960, or 52.3
per cent of the total value of U.S. import concessions.37
The non-reduced group, or control group, was comprised of
an equal number of close substitutes in consumption,
valued at $735.2 million in 1960. The two groups were
made comparable by selecting the non-reduced group in
such a way as to roughly equate it to the reduced group
with respect to commodity composition and the average value
of imports in the two years under consideration. The
latter constraint on our sample was necessary to assure
that any differences observed in the behavior of the

two groups were due to the tariff changes and not merely

reflecting differences in the weights.

 

37The United States negotiated tariff reductions
on industrial imports valued at $1,494 million in 1960.

66

 

67

 

 

 

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68

For all commodities, the reduced group experienced
a 23.68 per cent reduction in the average tariff rate
existing in 1960, which constituted 2.30 per cent of
1960 prices. These results suggest that the average
ad valorem rate for the reduced group declined from 9.7
per cent to 7.4 per cent of 1960 prices.38 Between 1960
and 1965, the average foreign export price of the
reduced group increased by 11.01 per cent, while that
of the non-reduced group increased by 10.69 per cent,
a difference of 0.32 percentage points. Thus foreign
export prices rose by a total of 0.32 per cent over the
five year period, while the import price fell by 1.98
per cent, (i.e., 2.30-0.32). These results suggest
that more than 85 per cent of the tariff concessions
granted by the United States was passed on to the
domestic consumer, while less than 15 per cent accrued
to foreign exporters in the form of higher export
prices. Our estimates seem to support Kreinin's
expectation that a larger share of subsequent tariff

o
reductions would be passed on to domestic consumers.3’

 

38The average nominal ad valorem rate for all
manufactured commodities has been estimated to have been
11.6 per cent in 1962. Therefore, it seems that the
reduced group was subject to a below average level of
protection. See B. Balassa, "Tariff Protection in
Industrial Countries: An Evaluation," op.cit.

39M. E. Kreinin, "Effect of Tariff Changes on the
Prices and Volume of Imports," American Economic Review,
June, 1961, p. 317, Footnote 17.

 

 

69

These price changes were accompanied by a 22.81 per—
centage point differential between the rates of growth
of the two groups.

The tariff reduction of 23.68 per cent is in
excess of the 20 per cent authority permitted by the
1958 extension of the Trade Agreements Act. One possible
explanation of this result lies in the fact that a major
portion of United States imports which underwent
revision in tariffs during the negotiations were sub-
Jected to compound rates of duty, consisting of ad valorem
rates coupled with specific duties. When reduced to
their ad valorem equivalents, in many cases, effective
reductions in duty of more than 20 per cent were
realized. Another factor which may account for the
size of the overall reduction in the tariff is the
authority to reduce tariffs down to 50 per cent
ad valorem, or by 2 percentage points. If the duty
is above 62.5 per cent, or below 10 per cent ad valorem,
this authority constitutes more than a 20 per cent
reduction.

Since the products comprising the non-reduced
group were selected on the basis of their substitutability
for commodities of the reduced group, and thus by
virtue of experimental design, competitive, it becomes

necessary to consider the effect of the tariff concessions

 

70

upon the non-reduced category. The price of the non-
reduced group may have risen by more than 10.69 per cent
had they not been affected by the reduced prices of
their close substitutes which were the subject of tariff
reductions. Thus, our estimate of the 1.98 percentage
point differential accruing to the consumer must then be
viewed as a minimum. The growth of import volume must
also be considered in light of its effect upon the
growth of the non—reduced group. The increase in
imports of commodities of the non-reduced category may
have been retarded by the increased demand for its close
substitutes. Our figure, therefore, tends to overstate
the effect of tariff concessions on the volume of
American imports.

With these qualifications in mind, it is possible
to obtain an approximate measure of the "nominal tariff
elasticity" of import demand and export supply. This
concept can best be defined as the response of a change
in import volume to a change in prices of manufactures
associated with a change in their tariff. No allowance
has been made for changes in input prices. In response
to a decline in the import price of 1.98 per cent,
import volume increased by 22.81 per cent suggesting an
elasticity of import demand of -ll.5. Since price

changes may be understated while quantity changes may

71

be overstated, our estimates are probably upper-bound
elasticities. Kreinin,“O using a cross-sectional
approach subject to the same limitations as our

method, analyzed data pertaining to the negotiations

in 1955 and 1956. The elasticities implicit in his
results are -7.1 for all commodities excluding textile
between 1954 and 1956 and -9.2 for finished manufactures
in the period 1955-1959.

Since we allowed a longer period of adjustment
than did Kreinin, it is not surprising that our overall
elasticity estimate appears to be somewhat larger.
Similarly, an increase in the average foreign export
price of 0.32 per cent induced an increase in export
volume to the United States of 22.81 per cent yielding
an export supply elasticity of +7l.3. This figure
suggests that, in the long-run, the assumption of an
infinite elasticity of export supply fairly approxi-
mates existing conditions. For short-run analysis,
however, this assumption may be unwarranted.

Before any further conclusions can be drawn, the
statistical significance of the observed difference
between the calculated means of the two groups must be

determined. Our "null" hypothesis is that there is no

 

Ibid.

72

statistical difference between the weighted means of
the reduced and nonreduced groups. This test was
conducted for the average foreign export prices of
the two groups as well as for the changes in volume
during the period. The results are shown in Table 8.”1

The probability of the observed difference in
the means occurring by chance is so large that we must
accept the "null" hypothesis and conclude that no
significant difference has been demonstrated between
the behavior of the tariff-reduced group and that of
the non—reduced group. However, although the results
pertaining to the overall effect of the tariff conces—
sions on the prices and volume of imports are enlight-
ening, much information is lost due to the high degree
of aggregation. Therefore, we have constructed
various commodity groups by combining the individual
products into the major Schedule A commodity categories.
(Schedule A Nos. 3-9).

0f the six commodity categories studied, Metal
and Metal Products (including machinery and vehicles)
clearly dominated the total. Inadequate quantity
information for the variety of products in the Machinery
and Vehicles subgroup made it necessary to include the

remaining commodities with items in the Metals and

 

ulSee Appendix A for a detailed description of the
test used.

' 11.; ,r'
v

73

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m m m m

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mo mcmoE ozp coozuoo cocoaomgflo Uo>pomoo mo cosmofimficwfim mo ummBII.m mqm¢e

74

Metal Products category. The few products which were
available for analysis, however, accounted for the
major portion of the value of commodities in the
Machinery and Vehicles subgroup receiving concessions.
Concessions were granted on 159 classes of metals

and manufactures other than machinery and vehicles

 

involving 1960 imports of $170.0 million, or 12 per '3“
cent of dutiable imports in this commodity group. All
Of the concessions were reductions in duty except in ,
four instances where existing duties covering $809,000 i

were bound at existing rates. About 60 per cent
($105.8 million) of total imports of the concession
products were in the steel mill products subgroup.
Concessions in other subgroups involved imports of
$17 .2 million of brass and bronze manufactures, $18.3
million of iron and steel making raw materials, $8.7
mi llion of advanced manufactures of iron and steel,
$7 - 2 million of jewelry and plated ware, and miscel-
lal’ieous amounted to approximately $12.1 million.

By far the largest concessions granted during
the. 1960-61 negotiations pertained to machinery and
Vehicles, accounting for 48 per cent of total imports
or all commodities on which agreement was reached at
the Conference. These concessions included more than
1’40 classes of imports in which trade totaled $876.5

m1 llion. Duty reduction on automobiles and parts

75

covered $626.2 million, or 71 per cent of this trade.
The remaining concessions affected imports on various
types of machinery and apparatus amounting to $250.3
million in 1960. While these concessions were extended
to all contracting parties they primarily benefited the
European Economic Community which was a principal
supplier of these commodities in 1960.

Our sample consisted of 45 commodities which
underwent downward revisions in their tariff rates and
45 substitutes in consumption not receiving concessions.
This sample accounted for more than 51 per cent of the
combined total of concessions in both commodity categories.
Tariff rates experienced a decline of 24.21 per cent.
Since the duty level was already quite low when negoti-
ations began,”2 this reduction constituted only a 1.94
per cent decrease in the tariff as a per cent of the
foreign price. Prices of the reduced group rose on the
average by 11.99 per cent, in contrast to an increase of
11.75 per cent for their immediate substitutes. Thus,
tariff reductions were responsible for an increase in
the average foreign export price of (11.99-11.75)=0.24

per cent, and consumers benefited from an import price

 

uzThe average ad valorem equivalent duty of our
sample was 8 per cent in 1960. This level conforms to
the estimates made by Balassa for 2-digit SITC groups
in the Metal and Metal Products category (op.cit.,
Table l).

76

decline of (1.94-0.24)=1.70 per cent. These price
changes were accompanied by an import volume increase
of (32.81-16.79)=l6.02 per cent.

Our results imply an import demand elasticity of
—9.4, and an export supply elasticity of +66.7. Of the
six categories, chemicals and related products underwent
the largest decline in import prices reflecting a low
import demand elasticity relative to export supply. 0n
the other hand, import prices of non-metallic minerals
declined by a modest 0.29 per cent as a result of a
highly elastic import demand schedule. As expected,
the quantity demanded of most of the commodity groups
exhibited a higher degree of responsiveness to price
changes than did "total imports."

A "T" test was performed on these groups in order
to ascertain whether the observed differences between
the sample groups for each commodity class were
significant. The results are presented in Table 9.

The reduced groups of the Wood and Paper, Non-
Metallic minerals, and Metal and Metal Products
categories each experienced significant differences
in their rate of growth from that of their control
groups with respect to volume and prices. Chemicals
and related products, while undergoing a significant
change in price structure demonstrated that the esti-

mated increase in the volume of the reduced group of

77

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mhowopmo mpflpoEEoo

78

11.49 per cent over that of the non-reduced group could
have occurred by chance. For Textiles and Miscellaneous
products we must accept the "null" hypothesis of no
significant difference between the measured changes in
volume and prices. It is interesting to note that

43

Krause also found a significant relationship between
tariff changes and the volume of imports for Metal
products, Paper, and Non-Metallic Minerals. However,
for these relationships to be significant his time
period had to span at least eight years (i.e., 1947—1954).
On the other hand, we have only allowed five years to
elapse. This suggests that over the course of several
negotiations (1954, 1955 and 1960-61) "excess" tariff
protection of these groups has gradually been eroded to
the point where further reductions will allow sub-
stantial increases in import volume to occur. Further-
more, our results show that while "total" imports have
not reacted significantly to the tariff reductions
negotiated at the Dillon Round, certain categories of
commodities have become "tariff-sensitive" as a result
of continued downward revisions in tariff levels.

Added up over all commodity groups, United States

44

imports increased by $340 million between 1960 and

 

u3Lawrence B. Krause, "U.S. Imports, 1947-1958,"
Econometrica, April, 1962, Table IV, p. 232.

44
f.o.b.

 

United States statistics report import values

79

1965 as a result of tariff negotiations. The groups

in Table 10, each of which experienced an increase in
imports of $20 million or more, accounted for more than
90 per cent of the total increase.

Since it is often assumed that transport and
distribution costs are roughly equal to the foreign
price of imported commodities,l45 total United States
imports subject to concessions amounted to approximately
'$3.0 billion domestic port value. Thus tariff reduc-
tions were responsible for an increase in U.S. imports
of $680 million (c.i.f.) during the five year period.

Kreinin found an annual increase of $200 million
(c.i.f.) as a result of the 1955 negotiations. The
difference in our results is not surprising when the
scope of the Dillon Round with regard to trade coverage
is compared to prior negotiations. The 1960-61
Conference dealt with approximately $3.0 billion in
imports (domestic port value) as contrasted with the
$1.7 billion in 1955.

Secondly, by 1960 a significant amount of excess
protection was eliminated by successive rounds of
tariff concessions. With this excess protection removed
one would expect the reductions granted in 1960-61 to be
somewhat more effective in increasing the volume of

imports.

 

”SSee: D. Humphrey, American Imports, op.cit.

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CHAPTER VI

THE EFFECT OF THE DILLON ROUND

ON UNITED STATES EXPORTS

The results for United States exports on a
commodity basis are presented in Table 11 for each of
the three main trading areas granting concessions to
the United States during the 1960-61 negotiations.

For each area, the commodity groups were selected on
the basis of the trade coverage of the concessions
granted. 0n the whole, the U.S. was the recipient of
tariff concessions on $2,764.5 million worth of exports

46

in 1960. We have chosen to study only those indus-
trial exports receiving tariff reductions totaling
$l,29l.1 million, of which $1,040.0 million were
selected for our sample. Furthermore, care was taken
to assure that our sample proportions (i.e., the pro-
portion of U.S. exports to a destination to the sample
total) closely approximated those of the population.
Looking through the country equations we note that

the fit, as measured by R2, is generally good. The

 

6This figure includes concessions on agricultural
products.

81

82

TABLE 11.--Cumm1ry of equations for U.?. exports by cowmaditv and leftination.
(1)»:-1--:103-13)

 

 

 

 

 

Destination U.K. REC Canada

Industry Chem. Text. Rich. Wool Chem. Zach. Met. Misc. let. Wood
Constant 34.7% 33.68 73.77 ~4€.¥4 54.17 25.03 97.67 23.41 33.23 17.11
IPIA 8.04 “ q? 1.?“ 6.17 3.48 4.14 9.85 10.15 93.62 34.12

(1.58) (8.15) ().*V) (1.1)) (1.9?) (1.96) (4.7?) (1.97) (21.84) (14.22)

Distributed
lag weights
(a) pr
t -D.41 —7.1) -;.’% -1.1* -%.08 -6.88 -5.37 -3.27 -2.97 -2.2
(4.79) (1.30) (1.1 ) (1.17) (5.74) (3.70) (;.59) (1.09) (0.47) (1.04)
t-l J- - ”. — - — “ -‘.34 -. 91 -1.65 3 . 3.93
(1 43) () -J‘ ’1 j) 0 V“) (1 61) (1.6?) (0 74) (1.0“) (1 23) (2.07)
(b) PC
t -l.50 -1.81 1.77 -2.0? -8.33 -’.8? -3.00 -12.80 -l.18 -2.63
(0.53) (0.57) (0 7') (1.0”) (3.41) (1.73) (7.39) (3.91) (0.9?) (1.03)
t—l -1 00 -2.V) ‘.7) 1 0T -‘ ”8 -1.55 -2.00 —14.76 -1.54 -3.74
(0.38) (0.83) (“.10) (0.21) (1 77) 3 70) (7.75) (4.97) (0.71) (1.51)

Price elas-
ticity —0.69 -0.33 -0.1) -0.38 ~0.79 -0.73 -0.17 -0.93 -0.23 -0.36

(0) Tariff

t -31.02 -1.46 —85.7? -6.03 —36.06 -39.31 —:7.54 —16.14 -4.93 —5.77
(16.89) (3.87)(20.47) (2.54) (9.60)(14.03)(40.61) (7.87) (4.12) (4.45)

t-l -16.40 -2.16 -57.70 -9.94 -15.99 -9.81 -?6.55 -38.25 -2.81 -4.35
(6.44) (3.98)(22.21) (3.84) (3.29) (3.33)(12.13)(4o.14) (1.84) (3.89)

t-2 ~5.99 -2.14 -35.19 -7.93 -7.3

. - -8.87 -23.31 -32.87 -8.17 -3.65
(2.01)(—4.90)(12.10) (2

.0
48) (4.58) (5.27)(10.29)(22.14) (7.89) (2.98)

Tariff elas-
ticity -2.34 -0.21 -3.10 -1.38 -1.79 -2.90 -1.41 -2.48 -0.39 -O.39

R2 .9256 .8410 .8539 .8015 .9301 .8445 .9023 .8291 .8020 .8862

Durbin-Watson
Statistic 2.32 1.50 1.61 1.88 1.98 1.63 1.74 1.43 1.91 1.70

No. of obser-
vations 44 44 44 44 44 44 44 44 44 44

 

83

Durbin-Watson coefficients suggest no auto-correlation
(at the five per cent level of significance) in our
static equations.”7 The quarterly observations used
extended over the period 1955—1965. The regression
coefficients for industrial production (our income
proxy) are invariably significant. For all commodity
groups, except U.S. exports of textiles to the U.K.,
the "tariff" elasticity of demand is sizeable compared
to the total relative price elasticity, suggesting
that relative price changes and tariff changes of the
same magnitude lead to unequal changes in U.S. exports.
This may be due to the fact that foreign importers
regard tariff changes as permanent, while changes in
relative prices are often considered transitory.

In every instance the relative price elasticity
of demand is below unity, while except for textile
exports to Britain and wood and paper and metal exports
to Canada, (which are statistically insignificant at
the 5 per cent level) all tariff elasticities are
greater than unity. Thus, it appears that while U.S.
exports were tariff sensitive during the 1960-65 period,

they were significantly less responsive to relative

 

u7If we apply simple least squares to obtain
estimates of the parameters in a regression relation-
ship when the random component is serially dependent,
we shall still obtain unbiased estimates, but these
estimates will not be "best" estimates, i.e., they will
not be of minimum variance.

84

price changes. These results are consistent with those
of Branson who found that, in the aggregate, the demand
for U.S. exports is price—inelastic.“8 It should also
be noted that the same concessions were granted to the
main competitors of the United States in each market
under the most—favored-nation clause of GATT. Thus,
any volume or competitive gain was against domestic
producers in the granting country and not third-country
exporters.

A second degree polynominal was fitted to the data
for relative prices and tariff rates. Zero weights were
assigned before time t=o and after time t=(n-l), where
n is the length of the distributed lag. The optimal
value of n for each variable was determined by trying
alternative values. Accordingly, that value of n which
maximized R2 was chosen as the optimal length of lag.
The use of the Almon lag distribution technique revealed
that U.S. exports are affected by relative prices in
the current period and with a one-period lag, while the
effects of tariff changes were distributed over three
quarters. This may possibly reflect the effect of the
"staging" of the tariff reductions. Since foreign

importers may have adjusted their expectations to the

 

“8William H. Branson, "A Disaggregated Model of the

U.S. Balance of Trade," Staff Economic Studies, Board of
Governors of the Federal Reserve System, February, 1968.

85

lxsng—run import price, which presumably reflected the

.lell reduction in the tariff level, the complete

rmesponse of U.S. exports to duty reductions may have

tween spread over a period long enough for the full
rueduction to become effective.

Tariff reductions averaged 15.5 per cent in the
[Irated Kingdom while 21.7 and 17.6 per cent reductions
tvrere realized for the European Economic Community and
(Seanada respectively. Thus our results suggest that
‘tlae United States was able to eliminate approximately
‘twno-thirds of the expected discriminatory effect of
‘blde common external tariff of the EEC.149
Our empirical technique assumes that, in the long—
I?L1n, the export supply curves of the United States for
tsrie several groups studied are perfectly elastic (i.e.,
:irurzreased demand can be satisfied at constant costs).
Iic>tithaker and MageeSO assert that their experimentation
ESngggested that supply elasticities in the long-run are
1FEifirrly high. While for many industrial nations the
Share of exports to total production may be high, U.S.
e‘J'CIDQrts occupy a relatively small share of domestic

IDIFCDCiuction, making high elasticities of export supply

\

t; uglnternal Tariffs were lowered by 30 per cent during
P153 1960-65 period.

E3 50H.S. Houthaker and S.P. Magee, "Income and Price
JLEisticities in World Trade," Review of Economics and

§§liéijzistics, May, 1969, footnote 1.

 

86

quite likely. Furthermore, the degree of elasticity
of foreign demand will vary inversely with the share
of imports from the U.S. to total consumption. Since
the latter proportion can be expected to be high in
the areas studied, a priori we can expect a high import
demand elasticity relative to the elasticity of export 1‘
supply. Thus, the tariff reduction would accrue to the ’
aomestic consumer in the form of lower import prices,

rather than as higher per unit prices received by the

 

U-S. exporter. _

0f the five commodity categories studied,
machinery and vehicles exports to the U.K. and the
IEIEC were the most responsive to tariff changes, while
the demand for U.S. textile exports to the United
Kingdom exhibited a high degree of insensitivity to
tariff reduction (the coefficient was found not to be
Significantly different from zero at the 5 per cent
level of significance). Similarly, exports of metals
and wood products to Canada do not seem to have been
effected significantly by the reduction in duty level.
United States exports subject to tariff reduction
Llrlderwent an average reduction in duty level of 20.6 per
cent, constituting a 4.7 per cent decline in the tariff
as a per cent of the American export price. These
DI‘Zl-cze reductions were followed by a 44.4 per cent

11“Grease in the volume of U.S. exports during 1960-1965.

87

Applying this percentage to the total value of
industrial goods receiving concession (i.e., $1,29l.l
million) suggests that as a direct result of duty
reductions, U.S. exports increased by $573.2 million

during the 1960-1965 period. (See Table 12.)

SUMMARY

The Effect of the Dillon Round on
United States Trade

 

 

The Dillon Round of negotiations effected the
unit values and volume of United States trade as shown
in Table 13.

While a determination of the benefit accruing to
tfine U.S. exporter and foreign consumer was not possible,
we have determined that foreign export prices rose on
the average of 0.32 per cent, while a 1.98 per cent
reductiOn in import prices was passed on to the American
consumer. United States exports of merchandise amounted
to $19.4 billion in 1960. Thus, the increase in exports
due to the Dillon Round was 2.9 per cent of total
exports. Similarly, merchandise imports in the same
year were $15.0 billion indicating an increase of 2.3
per cent of the total as a consequence of tariff
negotiations. Therefore, it is estimated that the

Dillon Round had a net favorable effect on the U.S.

88

 

 

 

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balance of trade of some $233.2 million. However,
this net increase constituted little more than a five
per cent increase in the trade balance in 1960 and is
completely insignificant when compared to the 1960

gross national product.

CHAPTER VII

THE EFFECTS OF THE DILLON ROUND

ON THE DOMESTIC ECONOMY

Static Welfare51 Effects

 

In Chapter V, it was pointed out that the increase
in United States trade as a result of the negotiations
was relatively insignificant when compared to overall
production of the American economy. The gain in economic
welfare brought about by this increase depends upon the
way in which resources are reallocated as a consequence
of tariff reductions.

The imposition of a tariff upon a commodity
involves a misallocation of productive resources.
Production of the protected commodity increases as
factors of production are diverted to it from more
efficient uses. The degree of this misallocation depends
upon the effective tariff rate (although these rates were
not used in estimating trade flows).

As the domestic price of the product increases,

consumption decreases as consumers switch to cheaper,

 

51The word welfare as used throughout this thesis
denotes economic efficiency.

91

92

less desirable substitutes. The extent of this substitu-
tion depends upon the nominal tariff rate. The gains to

the economy come in the form of higher government revenues,
and an increase in the terms of trade. The latter is deter-
mined by the relative elasticities of import-demand and
export-supply. The total cost of protection can be obtained
by netting these three factors against each other. For the
country imposing the tariff, this cost may be positive or
negative depending on whether the gain in the terms of

trade offsets the loss in the volume of trade. For the
world as a whole, it involves a net loss, since the gain in
the terms of trade is offset by a comparable decline in the
terms of trade of the rest of the world. The loss in the
total volume of trade is not offset by any gain. In this
section we will focus upon the gain in welfare of the United
States, as well as the contribution to world welfare made

by the United States.

When measuring the gain the welfare from trade liber-
alization these factors operate in reverse. Our analysis
refers to a multi-product world which requires us to make
some simplifying assumptions. First, production of domes-
tically produced import-competing goods may disappear sub-
sequent to tariff reductions, while other products, made
more attractive as prices are lowered, will begin to be im-
ported. Second, complementarity and substitutability present

problems in estimating effective costs of protection. For the

93

sake of simplicity we will assume that all imported
commodities, or their close domestic substitutes,
continue to be produced after tariff reduction, and
that on the average, the margin between the price of
domestically produced goods and cost is no greater

52

than for the imports which replace them Further,
we will assume two-trading economies of equal size,
namely the United States and all other GATT members
combined.

From the point of view of economic welfare, the
reduction in the cost of protection, and changes in
the terms of trade resulting from trade liberalization,
are relevant. Let us consider the case of a single
homogeneous imported product, produced under constant
costs abroad and increasing costs in the United States.
It will also be assumed that domestic production does
not cease as the tariff is reduced. Graphically, the
situation can be depicted as in Figure 1.53

As a result of the tariff, the amounts produced

and consumed domestically are OL and OM, respectively.

 

52See H. G. Johnson, "The Cost of Protection and
the Scientific Tariff," Journal of Political Economy,
August, 1960, pp. 327-3A5.

 

53A similar procedure has been used by Balassa
and Kreinin, "Trade Liberalization Under the 'Kennedy
Round': The Static Affects," op.cit. p. 135.

94

 

  

 

 

 

 

  

 

Figure l
P 1
Supply

P0

P1

P llililflllllll

A
Demand

0

 

 

 

After the tariff is reduced there is an increase in
domestic consumption to ON and a decline in production
to OK. Imports increase from IF to HE. Employing
Marshallian concepts of consumer and producer surplus,
the reduction in duty has resulted in an increase of
consumer surplus equal to PoPlFE' Producer surplus and
government revenue decline by PoPlIH and IGFJ, respec-
tively. At the same time tariff revenue would increase

by the sum of ABGH and CDEJ, since the increase in

95

import volume will be subject to the new tariff. On
balance, and assuming compensation between the three
groups, the net increase in welfare can be represented
by the sum of the two areas, AHIB and CFED.

In terms of the changes in the amount consumed
(dCi) and produced (dPi), the welfare effect of the
reduction in duty level on commodity i can be expressed

f‘. w
ab

1
(IB + HA)dPi + 5 (FC + ED)dCi

MID-4

*
-%- (IB + HA)dMi [13

Under the assumptions made earlier, this formula
can be made to apply to a multi-product world, so that
the welfare gain due to trade liberalization can be

approximated by

l
5 (IB + HA)dMi [2]

"MS

18 represents the decline in the domestic price had the
tariff been reduced to zero. If the full effect of the
reduction had been realized in a fall in the import

price this decline would be equal to to/(l + to).514

 

5
IB = FC, and HA = ED by construction.

51‘The ad valorem rate was reduced from 9.7 per cent
down to 7.4 per cent between 1960 and 1965.

96

This assumes an infinite elasticity of export supply.
We have seen, however, that part of the tariff
reduction was reflected in an increase in the export
prices received by foreign exporters. With reference
to Figure l, the domestic price including the duty
prior to negotiations is equal to P0 = PX (l + to),
where PX is the foreign export price. If this duty
is reduced to zero, the free trade price P is equal

to the price received by the exporters. The percentage
P - P
0

change in domestic prices can be expressed as

1 PO
P (1 + t ) - P
x o x l
= , where P is the new higher free
qu + to) X

 

trade price of the commodity. Alternatively, this
PO - P zAPx + tO
change can be written as —————— = . Import

PO (1 + to)

 

prices declined by 1.98 per cent, while export prices
increased by 0.32 per cent. Assuming linearity, it

can be expected that if tariffs were reduced to zero,
export prices would rise by one-sixth the decline in

import prices. Therefore, our formula becomes

 

 

 

P - P
l O
-3 +130
P - P P t
O L___O_____‘ O
P (1 + t ) 7
O O 6+t0

97

Had tariffs been reduced to zero, the resulting per—
centage change in domestic prices would have been equal
to 7.68 per cent. Therefore, the gain in welfare as a
result of expanded import trade amounted to % (7.68 +
5.70) x 3A0 = $22.75 million.

These calculations must be modified to account
for the change in the terms of trade aS'a result of
increasing export prices in foreign countries. The
change in the revenue paid by foreign exporters will
depend upon existing elasticity conditions.

Prior to negotiations, the United States received
an amount equal to the area ABCD in payment from foreign

exporters (See Figure 2).

 

 

 

 

 

 

Figure 2
Foreign Sector
P.
P \ E C D F
Y I 2
Pl. r
Poi X
A
Supply Demand

 

 

Q

98

When the tariff is lowered, the new revenue obtained by
the United States is equal to EFHG. The loss in revenue,
area X, must be balanced against the gain (area Y +
area Z).

Had tariffs been completely eliminated, the

t
0

average foreign price would have risen by % (——————), or

7+1;

8 o
1.28 per cent. Since prices actually increased by only
0.32 per cent, the loss in revenue is equal to 0.32
(1A94.0)=$A.78 million. This must be considered in
light of a gain in revenue of O.96(3AO)55 =$3.26, which
yields a net loss of $1.52 million. The net welfare
effect as a result of the reduction in the tariff level
of the United States is equal to a gain of $21.23
million.

Since we have assumed constant costs in the United
States export sector, the tariff reductions granted by
the GATT nations to the U.S. accrued totally to foreign
consumers. Therefore there is no additional welfare
benefit to the United States as a result of the lowering
of foreign tariff reductions.

An estimate may also be made of the total contri-

bution to world welfare made possible by the Dillon

 

55The tariff is levied on the foreign price
exclusive of shipping costs.

99

Figure 3 represents the international market

 

 

 

Round.
place.

P Figure 3

Po 7—0 Es

P1

P

D
/B
ID

 

 

{The intersection of the export supply and import demand
:functions determine the free trade equilibrium price.
CPhe imposition of a tariff causes a divergence between
tflue value of the marginal unit to the foreign producer
Eirud its value to the domestic consumer. Increasing
Tzlrade by one unit will increase welfare by the amount
<C>1f the duty.56 AB represents the original tariff to,
Wlulle'CD‘is the level existing after negotiations t1.
UDlde total contribution of the United States to the
<3luange in world’welfare can be represented-by the area
IXIBCD. The import price declined by 1.98 per cent, while

‘tlue foreign export price increased by‘O.32 per cent.

56J. E. Meade, The Theory of International Economic
Policy, Vol. II, Trade and Welfare, p. 2014.

100

These price changes were brought about by a reduction
in the ad valorem rate from 9.7 to 7.4 per cent. The
change in welfare is equal to % (9.7 x 7.4) x $68057
= $58.1“ million.
In any comparison of the United States tariff

levels with those of the European Common Market and
of most other countries of the Free World, one factor
should be kept in mind: the United States ad valorem
duties are based on f.o.b. valuation of the imported
goods rather than on a c.i.f. basis. The United States
valuation is made on the foreign or export value,
whichever is the higher, and excludes such non-dutiable
charges as marine insurance, ocean freight and customs
fees, before being subject to duty at ad valorem rates.

V On the other hand, the major industrial countries
value their imports on c.i.f. cost, that is, the
valuation includes cost, ocean freight and insurance.
Since the inclusion of these costs has the effect of
making the valuation higher, the ad valorem duty
applied on c.i.f. valuation as opposed to f.o.b.

58

valuation. We will, therefore, consider the nominal

rate of duty to which American exports were subjected

 

57Domestic port value exclusive of duty.

58Committee for Economic Development, "Comparative
Tariffs and Trade, the United States and the European
Economic Community," Supplementary Paper No. I“, Vol. I,
March, 1963, p. XIII.

 

lOl

prior to negotiations to be 11 per cent higher to adjust
for the difference in valuation procedure. Following
the same procedure as for the United States, the contri-
bution of the rest of the world to the change in world
welfare is equal to % (25.30 + 20.60)$573.2 = $131.55
million. The increase in total world welfare is then
$189.69 million.

M. E. Kreinin59 estimated the contribution to
world welfare by the United States to be $31.5 million
as a result of the 1955 negotiations. His result is
smaller than ours since the increase in imports as a
result of the Dillon Round was over three times that
of the 1955 negotiations. This difference apparently
more than offset the effects of differences in the
average tariff levels during the two periods.

In a more recent article M. E. Kreinin and
Bela Balassa6O estimated the welfare effects anticipated
from the Kennedy Round of negotiations concluded in 1967.
These estimates were made under varying assumptions as

to the effects of tariff reductions on import and export

prices. Variant II estimates reflect welfare changes

 

59M. E. Kreinin, "Effect of Tariff Changes on the
Prices and Volume of Imports," American Economic Review,
June, 1961, Vol. II, p. 321.

60M. E. Kreinin and B. Balassa, "Trade Liberaliza-
tion Under the 'Kennedy Round': The Static Effects,"
The Review of Economics and Statistics, May, 1967, Vol.
XLIX, pp. 125-137.

 

102

which do not entail changes in the terms of trade,
while Variant I estimates take into account the pos-
sibility of rising export prices. For the United
States the total gain in welfare is estimated to be
$56 million under Variant I assumptions and $1A9
million under Variant II. For all industrial nations,
these gains are $251 million and $326 million,
respectively. One would expect larger gains from the
Kennedy Round in light of the large across—the—board
reductions (50 per cent in most cases), as opposed to
only an average reduction of 23 per cent negotiatied

at the 1960-61 Conference.

The Terms of Trade

 

The static argument in favor of tariffs at the
national level is that under the appropriate circumstances
a tariff will enable the country to obtain its imports
cheaper. A country's terms of trade are improved, and
its share in the gain from trade therefore increased, if
import prices are lowered relative to its export prices.

In the partial-equilibrium case, Figure A shows the
effect of a tariff in widening the spread between prices

in the exporting and importing countries.

103

Figure A

   

Importer

E porter S

 

 

P is the price with trade, before the imposition of a
tariff, assuming no transportation costs. P1 is the
jprice in the importing country, while P2 is the price
:in the exporting country after the tariff is imposed.
iIn this case, where the elasticities of demand and
supply are roughly the same in both countries, the
‘tariff will partly raise the price in the importing
country and partly lower the price in the exporting'
Ination. If the price in the exporting country is lowered
eat all, however, the country imposing the tariff gets
'the product cheaper. The extent to WhiCh a tariff can
fimprove the terms of trade depends upon existing

eslasticity conditions. In the extreme case where the

104

p>roduction of a commodity takes place at constant costs
zabroad and increasing costs in the home country, the
ianosition of a tariff will not lower the price
:received by the exporters. On the other hand, if the
demand for the product is relatively elastic when
compared to the export supply curve, the effect on the
foreign export price of a tariff may be quite severe.
This means that the gain realized by the country imposing
the tariff is at the expense of other countries; that is,
the distribution of world income is altered in favor of
the tariff—levying country.

When tariffs are lowered unilaterally the opposite
effect occurs. In the absence of perfectly elastic
supply curves, a reduction in the level of protection
‘will be associated with a deterioration in the terms of
trade of that nation vis a vis the rest of the world.
'The extent of this deterioration depends, for the most
‘part, on the underlying elasticities of demand and
supply in the country, or countries, receiving the
concessions.

When multilateral tariff negotiations take place,
the effect upon a country's terms of trade will depend
Lumnu (a) the amount of protection it gives up in the

:form of concessions to other countries; (b) how

ssuccessful it is in inducing other countries to lower

tzheir tariff barriers, and (c) the existing elasticities

105

c>f import demand and export supply. We will be concerned
vvith the net barter terms of trade, more commonly called

izhe commodity terms of trade, Tc’ It affords a measure

c>f how much imports a country will receive for its exports.

IIt is the ratio of the price received for its exports to
‘the price paid for imported goods. If OPX and OPm61 are
the prices existing in the base period for exports and
imports, respectively, and lPx and le are the export
and import prices in period 1, the terms of trade can

be expressed as

1Px/0Px

T = —————-— [l]
C P P
l m/o m

It therefore measures the trend over time in the amount
of foreign goods received in exchange for one physical

unit of export goods.

Mathematically, we can find the percentage change
in the terms of trade by differentiating the function

'Tc = f(Px,Pm), where TC is the commodity terms of trade,

and Px and Pm are the prices of United States exports
and imports, respectively. If TC = Px/Pm’ then dTC
dP dePm dPX Tchm

, which equals ———--

P P 2 Pm Pm
m m

 

 

, therefore,

 

61The relevant price for imports is the foreign

jprice excluding tariffs.

,—‘

106

dTC dPX de

—-——-—-——--———. [2]

T P P

In words, the percentage change in the terms of
trade of the United States is equal to the difference
between the percentage change in the price received for
its exports and the percentage change in the price paid
for its imports.

The price paid for imported goods excluding tariffs
can also be viewed as being the price received by foreign
exporters for their exportables. Thus, the percentage

change in terms of trade can be expressed as

 

__.=__.. , [3]

where le is the average export price received by foreign
exporters.

Our results suggest that as a direct consequence of
the Dillon Round the United States terms of trade deteri-
orated by a modest 0.32 per cent. This estimate must be
considered as setting an upper limit to the loss in the
U.S. terms of trade since we have assumed no change in
the prices received by U.S. exporters.

The relatively insignificant change in the terms

of trade reflects in part our assumptions of an

107

infinitely elastic export supply curve for the United
States. Exports occupy a very small share of total
production in most American industries, which has the
effect of making the U.S. export supply curve more
elastic than for countries which are heavily engaged
in production for export. Secondly, the high level

of mobility of resources in the United States can also
explain why an expansion in production can take place
without a significant increase in costs.

The terms of trade of a nation must obviously
take account of all the prices of all commodities
which enter into international trade. We have only
focused upon the industrial sector and as such have
measured only a part of the whole effect of the
negotiations on the overall terms of trade. It would,
therefore, be more correct to say that our estimate
shows the effect of the changes in the relative
prices of industrial products upon the terms of trade.
When the prices of agricultural products are taken into
consideration, it is quite possible for changes in
agricultural prices to offset any loss sustained as a
result of negotiations on industrial goods. On
balance, it appears that the Dillon Round had a
neutral effect on the terms of trade of the United

States.

108

The Employment Effect

 

We have already seen that the reduction of tariff
barriers causes a reallocation of productive resources
to more efficient uses. As tariffs are reduced multi-
laterally, there will be a shift in employment away
from import-competing industries towards those
industries producing for export. Our analysis now
turns to the relationship between the expansion of
foreign trade and its impact upon domestic employment.

In two related studies, the Bureau of Labor
Statistics investigated the relationship between exports
and imports and domestic employment.62 In Employment in
Relation to U.S. Imports, all 1960 imports ($17.6
billion c.i.f.) were divided into two categories:
supporting imports and competitive imports. Of the
competitive imports ($6.8 billion), all manufactured
imports (divisions 19-39) account for a major portion,
specifically ($6.3 billion).

For our purposes only the estimate pertaining to
the second category is relevant. It shows the number

of workers that would have been required to produce

 

62U.S. Department of Labor, Bureau of Labor
Statistics (BLS) Domestic Employment Attributable to U.S.
Exports, 1960 and Employment in Relation to U.S. Imports,
1960, Washington, 1962 (mimeographed). See also U.S.
Department of Labor, BLS, The Relationship Between
Imports and Employment (An analysis of 27 import com-
pleting industries, and 2 industry case studies,
Washington, April, 1962 (mimeographed)).

109

these imports in the United States. It consists of:
(a) direct employment, (b) indirect employment, and
(c) employment required to replace plant and equipment.
The BLS estimated that to produce all the competitive
imports would require 916.2 thousand workers both
directly and indirectly. At the same time 73.7
thousand would be necessary to replace plant and
equipment, and 83 thousand workers would be necessary
to handle transportation and distribution to the next
stage of production. The total is 1,072.9 thousand
1,072,900
$6,808.6

 

workers yielding an arithmetic average of (

= 157.6 workers per million dollars worth of com-
petitive imports.

0n the other hand, the BLS study relating to
domestic employment and exports, shows that 3,081,700
workers were required to produce $22,055.3 million
worth of exports. These figures suggest an average
of 138.7 workers per $1 million of exports.

The above data refer to all trade, including
trade in agricultural products and thus cannot be
directly applied to the estimation of the effect of
the Dillon Round on employment. The two studies
present the direct and indirect effect on each industry,
but they do not show the effect on employment due to

output changes within each industry. Thus even though

110

for the direct impact the two figures are identical,
the indirect effect in each industry is not given.

M. E. Kreinin,63 in a study of the effects of
an Atlantic Free Trade Association was able to overcome
this deficiency in the data. For each of some 200
industries, a 1960 employment matrix which shows the
number of jobs required directly and indirectly, to
produce $1 million of output in 1960, was used to
ascertain the indirect requirements of each of the six
major sectors (agriculture, mining, manufacturing,
transport, trade, and all others). By the use of
arithmetic averages, the BLS employment estimates
were aggregated into two-digit SIC divisions. In
Appendix IV-A for each two-digit SIC division, he
presents the job requirements per $1 million of final
demand in 1960. Since our results pertain to the major
Schedule A commodity groups, it was necessary to
aggregate his results into these major classifications.
Table 14 presents estimates of the employment changes
in each major commodity group (last two columns),
obtained by applying the BLS coefficients (first column)
to the estimated changes in trade as a consequence of

the Dillon Round.

 

63M. E. Kreinin, Alternative Commercial Policies-q
Their Effect on the American Economy, MSU International
Business and Economic Studies, Institute for International
Business and Economic Development Studies, Division of
Research, 1967.

111

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112

The net gain in employment, approximately 59
thousand jobs over a five year period, is insignificant
when compared to a total labor force of over 70 million
or even to the 17 million employed in the manufacturing
sector of the economy. Thus, it appears that the
multilateral reductions in tariff levels negotiated

at Geneva had a relatively insignificant effect upon

dome s tic employment .

fl

 

, "="l._

CHAPTER VIII

SUMMARY AND CONCLUSIONS

A review of the results of this investigation - é

suggests that the Dillon Round had a very limited

affect upon the American economy. Over a period of t

 

fiver years the concessions negotiated at Geneva were ;3
able; to stimulate the foreign trade of the United
Statues by only $913.2 million (imports plus exports)

or txy about two per cent of the total volume of trade
in 15960. On balance the increase in industrial exports
exceeaded imports for a net favorable effect upon the
balaaice of trade of $233.2 million, which is roughly
eqtu11_ to five per cent of the 1960 surplus on merchan-
dise' trade. From the point of View of economic welfare
the IJrrited States benefited by a mere $21.23 million,
vflfifile' the total contribution to world welfare was
EStinuited to have increased by $189.69 million. Again
We ffiirui the size of these changes to be insignificant
when c0mpared to a gross national product in 1960 of
over ($6500 billion. Large export supply elasticities
pPeVented any Significant change in the terms of trade

as a. rwesult of negotiations. Over the period the United

113

114

States commodity terms of trade deteriorated at most

by less than one—half of one per cent. On the
employment side, 130 thousand jobs were created due

to the expansion of export industries, as compared to

an estimated net loss of 71 thousand jobs in import-
competing industries. Assuming perfect mobility between
the two sectors, roughly 59 thousand jobs were created
as a result of the Conference, a very small increment

in a total labor force of over 70 million.

Perhaps the single most important factor to which
this relatively minor impact can be attributed, is the
very philosophy under which the United States operated
its trade agreements program. From the day of its
inception in 1930, through 1962, trade agreements
legislation had incorporated two inconsistent goals,
namely the liberalizing of trade and the avoidance of
injury to domestic industry. A vivid example of how
these dual philosophies hampered meaningful negotiations
can best be presented with reference to the negotiations
with the European Economic Community and the United
Kingdom.

As a result of the normal process followed under
the existing trade agreements legislation of determining
offers on a highly selective basis, and an unprecedented
number of determinations under the "peril point"

provision of the legislation, the United States entered

115

the negotiations with offers that met only about 18

per cent of the requests made by the countries with
which it was negotiating.614 Despite the fact that
negotiations with the EEC were of great importance,

the United States was able at the beginning of the
Conference to make offers on only 20 per cent of the
products on which the EEC had requested concessions.
The EEC offers, on the other hand, were for a reduction
across-the-board for industrial products with a limited
number of specific exclusions. The EEC had made it
clear that, although it would not require that its
offers be met dollar for dollar by the United States,
it did expect a reasonable Showing of reciprocity.
Early in the negotiations it became apparent that U.S.
offers were inadequate to obtain the kind of agreement
the United States wanted with the EEC. In order,
therefore, to improve the negotiating position of the
United States, the President authorized the making of
supplemental offers on some products initially excluded
from the negotiations by Tariff Commission "peril
point" determinations. Products were chosen which
appeared to have bargaining potential and on which

reductions appeared to have minimal risk for U.S.

 

6“Department of State, General Agreement on

Tariffs and Trade, Analysis of United States Negotiations,

Volume I, p. viii.

”in

“us-er

116

industry. The concessions ultimately made from this
specially selected list added $76 million in tariff
reductions to the list of direct concessions to the

EEC, and $7 million in direct concessions to the United
Kingdom. Although the improved offers brought the
United States response to EEC requests to only 32 per
cent, and did not achieve an exact balance in the

trade coverage of the concessions, they made it possible
to reach an agreement in which the EEC maintained most
of the reductions of interest to the United States.

The very nature of the commodities selected to undergo
revisions in their tariff schedules ensured a minimal
effect upon the domestic economy. The expanded authority
of the Trade Expansion Act of 1958 was neutralized to a
great extent by the strengthening of such protectionist
provisions as the escape clause, peril point investiga-
tions, and the national security amendment.

To an economist interested in maximizing efficiency
through the increased specialization and subsequent
lower costs of production due to the reductions in
tariff barriers, the Dillon Round must surely be viewed
with disappointment. Peril—point investigations
precluded many items from collective bargaining. Only
when the inadequacy of United States' offers became
apparent did the President concede to make concessions

on commodities previously excluded by peril-point

117

determinations. These commodities, however, were
carefully selected to minimize injury to domestic
industries. On the other hand, legislators saw no
inconsistancy in these actions Since they sought to
maximize not economic efficiency, but rather the
strength of the Western Alliance. This objective
was to be sought with as little harm as possible to
domestic industries engaged in international trade.

A major economic objective of the United States
during the 1960-61 Geneva Conference was the avoidance
of the discrimination against American products as a
result of the imposition of a Common External Tariff
by the six members of the Common Market. Since over
seventy-five per cent of the concessions received by
the United States were at rates equal to or below those
applicable before negotiations, it appears that the
United States was successful in limiting the discrim-
inatory effects resulting from the EEC bargaining as
a unit.65 It is also apparent that had the United

States not adhered to a "no injury" policy, further

reductions in EEC discrimination may have been realized.

Over the past decade the United States has con-

sistantly run a deficit in its balance of payments,

 

65Our results suggest that these reductions
constituted a decline in the CXT of approximately 21
per cent.

.‘ JV

.. iv." a....' l

118

relying heavily on its strong current account to
minimize this imbalance. However, in recent years
concern has been growing over the trend in the rate
of growth of the surplus on merchandise trade. Since
this rate has declined in the face of an ever-growing
deficit in the capital account, the position of the
dollar as a key world currency has been threatened.
Our findings suggest that the Dillon Round was
unsuccessful in slowing the pace of the decline in
the balance on goods and services. United States
reliance upon multilateral tariff reduction as a
meaningful measure for restoring a balance in its
external trade position would be a serious misin-
terpretation of the usefulness of such negotiations.
Tariff reductions have been advocated as a means
of combatting inflation of the cost-push variety.66
The increase in imported goods would break bottlenecks
and check excessive price increases, so that prices of
particular goods in short supply would be Slower to
rise when the economy as a whole was not operating at
capacity. The data suggest the inability of tariff
concessions of the magnitude negotiated at Geneva in

1960-61 to curb general cost-push inflation. First,

 

66A. Rees, "Price Level Stability and Economic
Policy," The Relationship of Prices to Economic Stability
and Growth, Compendium prepared for the Joint Economic
Committee, Washington, 1958, pp. 651-69.

119

the concessions were very small in relation to price,
and secondly a portion of these reductions accrue to
foreign exporters rather than to domestic consumers.

A major reversal in U.S. tariff policy came with
the passage of the Trade Expansion Act of 1962. Here,
for the first time, Congress recognized the role of
tariff reduction as a means of improving economic
efficiency. Tariff relief ceased to be the only avenue
of relief to an industry claiming injury as a result
of lowered rates of protection. The government was
empowered to extend to the industry trade adjustment
assistance in the form of grants, low interest loans
and technological information to aid in the shift to
other lines of production. Further, readjustment
allowances providing as much as 65 per cent of an
individual's average weekly wage for up to 52 weeks,
were made available to workers displaced as a result
of increased import trade. These workers could also
be provided with financial aid to relocate to a
different place in the United States. Thus U.S.
legislative policy became consistent with the
philosophy of multilateral tariff reduction.

Under the five-year act the President was permitted
to cut duties by up to 50 per cent of their July, 1962
level, to remove duties that did not exceed 5 per cent

on that date, and to eliminate duties on commodities

120

for which the United States and the EEC together account
for at least 80 per cent of total world exports.

Tariffs on temperate and tropical zone commodities were
also subject to removal. Tariff negotiations were to

be conducted on broad categories rather than on a

commodity by commodity basis.

v ' f
“.m' 1 r

A major departure from previous legislation was .
that the Tariff Commission was no longer required to
make individual peril point decisions. A broad ‘1
definition of the industry was encouraged in order to
make it more difficult for an industry to claim injury.
Whenever the Tariff Commission would find, upon
investigation, that an industry had been injured it
could recommend direct assistance.

Under the auspices of the Trade Expansion Act of
1962 the United States negotiated concessions with
interested GATT members in the "Kennedy Round." This
round of negotiations could serve as an excellent
control group for our study in determining if these
broader powers and the new philosophy enabled trade
negotiations to become a significant factor operating
upon the American economy. Unfortunately, adequate
data is not yet available for such a determination.
However, Bela Balassa and Mordechai E. Kreinin,
operating under strict assumptions, have attempted to

estimate the effects of the Kennedy Round upon the

121

United States as well as the other main trading blocks
of the Free World.67
Under the assumption that as a result of a 50

per cent reduction across-the-board in manufactured
goods export prices in Western Europe would rise by
one-third of the tariff reduction (Variant I), and

the alternate assumption of unchanged European prices
(Variant II), estimates were made of the impact of

the Kennedy Round upon U.S. trade. Using 1960 as a
base, as a direct consequence of the negotiations

they find an expansion in the export trade of the
United States to be $833 million. With the removal

of one-half of the discrimination of the EEC and EFTA
U.S. trade would benefit from a further increase of
$195 million. The indirect effects contributed $118
million to this estimate bringing the total increase
in U.S. exports to $1,146 million for both Variant I
and Variant II. On the import side the direct effects
are estimated to be $1,008 million and $1,130 million
for Variant I and Variant II respectively. A comparison
of these estimates with our results indicates that the
Kennedy Round may be as much as three times as

effective an increasing the imports and exports of

 

67B. Balassa and M. E. Kreinin, "Trade Liberalization
Under the 'Kennedy Round': The Static Effects," op.cit.

,, .m «5’

122

the United States as was the Dillon Round. An exam-
ination of the expected effect of the Kennedy Round

upon the U.S. trade balance Shows a net increase in

the trade surplus of $138 million under Variant I as
compared to a $16 million increase under Variant II

assumptions.

Using a technique similar to ours, an estimate
was made of the potential gain in welfare attributable
to the reductions in 1962 tariff levels. When European
prices remained unchanged the net increase in U.S.
welfare was estimated to be $149 million as compared
to only $56 million when these prices were assumed to
rise by one-third of the tariff reduction.

We have found that on the average foreign prices
rose by little more than 12 per cent of the tariff
reductions negotiated during the 1960-61 Conference.
These results imply larger export supply elasticities
than those anticipated in the Kennedy Round study. Thus
the actual magnitude of the effects of the Kennedy Round
may lie nearer to the estimates found under the Variant
II assumption of unchanged foreign prices. Although
the impact of the 1965-67 negotiations is expected to
be significantly greater than the 1960-61 Conference,
the results are still insignificant when compared to
the size of the U.S. economy. For instance, the

expansion of exports and imports as percentages of

123

gross domestic product is estimated to be only 0.3 per
cent, as compared to our estimate of less than 0.2 per
cent. At most the increase in the surplus on merchan-
dise trade represents only a change of about 5 per cent
of the surplus existing in 1960.

It must be emphasized that the estimates arrived
at by Kreinin and Balassa set an upper limit to the
effectiveness of the Kennedy Round. The actual cut on
industrial tariffs may very well lie below the hoped-
for 50 per cent across-the-board reduction. In this
case their estimates would have to be revised downward,
bringing them closer to the results obtained in our
investigation.

It appears that future negotiations may be
significantly more effective in stimulating the trade
of the United States. For the most part industrial
tariff rates are already at low levels, so that further
reductions may substantially effect industrial imports.
The Dillon Round, as we have seen, was successful in
reducing the discrimination of the common external
tariff of the EEC. The Kennedy Round is expected to
reduce the level of this common tariff wall still
further, which will enhance the position of U.S. exports
to Western Europe.

We have dealt exclusively with the reduction of

tariff rates as a stimulus to trade between nations.

12M

Non-tariff barriers in the form of quotas and valuation
procedures such as the American Selling price method,68
are very severe impediments to international trade.
These and other protectionist policies should also be
included in future negotiations in keeping with the

new philosophy of the Trade Expansion Act of 1962.

Even complete removal of tariff barriers by all
the major GATT members may have an insignificant effect
upon the United States, since the foreign trade sector
occupies such a small fraction of the total economy.
However, for those countries heavily dependent upon
international trade, the further liberalization of
trade through meaningful negotiations will be a strong

stimulus for increased efficiency as well as a binding

agent for the Western Alliance.

 

68For purposes of valuation, the ad valorem duty is
applied to the price of a domestically produced import-
competing product. This procedure is currently being
used for imports of coal—tar products, canned clams,
rubber-soles, fabric upper footwear, and wool-knit gloves
and mittens.

APPENDIX A

125

APPENDIX A

Our empirical procedure poses a difficult problem
when attempting to test for the significance of the
differences between our sample means. In all cases our
"null" hypothesis is that there exists no statistical
difference between the means of the reduced group and
its non-reduced counterpart. However, we are dealing
with two samples which, by the nature of our statistical
design, are inherently paired. That is, changes in one
group may systematically effect changes in the other.
For example, as pointed out in Chapter IV, as a result
of the reduced prices of the tariff-reduced group,
prices in the non-reduced category may not have risen
by as much as they would have in the absence of tariff
reduction. Furthermore, volume growth of non-reduced
imports may have been retarded as a result of the
increased demand for its close substitutes. Thus, we
are dealing with non-independent samples.*

In order to test the significance of the difference

between the means of our two samples, we obtained the

 

iiA technique developed to deal with the problem of
dependence, is described in F. E. Croxton and D. J.
Cowden, Applied General Statistics Prentice-Hall Second
Edition, pp. 65A-657.

 

126

127

difference D between each pair of values, determined the

value of the average of these differences YD differed

Significantly from zero. The "null" hypothesis was that
ED is the mean of a random sample from a population of
differences having a mean of zero. The standard error of

the difference between the two sample means is given by

 

Jdlz(xl - X2)2 - [( 2(Xl - x2)]2.

8E1 - I2 _ OED _
(N-l) (N-l)
XD - 0
Then, t = —E:7——- where XD is assumed to be a normally
x
D

and independently distributed random variable. Further-
more we will assume that there are no systematic
influences on the X's.

The possible consequences of employing a method
which assumes independence of the two samples when they

are not, in fact, independent may be clarified by

 

writing OED in its alternative form, 0x1 _ i2
= o2 , + 02 -2r 0 . o where r is the correlation
x1 x2 x1 x2

between the two samples. If the shorter form, Oil i2

 

= ‘joii + G§22 , which assumes independence, is used,

the value of Oil _ E2 will be too large when there is a

positive correlation between the two sets and too small

when negative correlation is present. Ignoring the lack

128

of independence may cause us to fail to declare a
significant difference when r is positive, and to
erroneously declare a difference to be significant when
r is negative. We have reason to expect that, since
our sample groups have been selected on the basis of
their substitutability, the correlation between the
quantitites of the reduced and non-reduced group as
well as the correlation between the prices of these
groups is negative. Therefore, had we failed to
recognize the dependence between our sample group we
may have concluded that certain of our reduced groups
experienced significantly different rates of growth
than their counterparts, even though the observed

difference could have occurred by chance.

APPENDIX B

STATISTICAL

IMPORTS, EXPORTS AND

RELATED SERIES

129

APPENDIX B

SOURCES OF DATA

The following sources were used for the series

indicated:

Industrial Production Index: Series of industrial

 

production for all countries can be obtained from various

issues of Main Economic Indicators, OECD.

 

United States' Export Trade Data: Value data is

 

presented by commodity and destination in various issues

of United States Exports of Domestic and Foreign

 

Merchandise, U.S. Department of Commerce, Report No.

 

RT. “20.

Price Data: For Canada, wholesale price indices

 

by commodity group were obtained from the Statistical

 

Summary, Bank of Canada, and the Statistical Review,

 

Minister of Trade and Commerce. The Board of Trade

 

Journal, Her Majesty's Stationery office, contains
wholesale price indices of manufactures, by commodity
group, for the United Kingdom. United States' wholesale
price indices are presented on a commodity group basis
in various issues of the Statistical Abstract of the

United States, U.S. Department of Commerce. Price

 

130

131

indices for the European Economic Community were con—
structed by aggregating country indices weighted by
total U.S. exports. Wholesale price indices by com—

modity groupings for Germany were taken from Wirtschaft

 

und Statistik, Weisbaden, Statistisches Bundesamts. The

 

Bollettino Mensile di Statica, Instituto Centrale di

 

Statistica reports Italian wholesale price indices on a
commodity group basis. French wholesale price indices
were obtained from the Bulletin Mensuel de Statistique,
Paris, Institut National de la Statistique et des

Etudes Economiques. Wholesale prices of Belgium com-

modities were obtained from the Bulletin d' information

 

et de Documentation Department des Etudes, Banque
National de Belgiuque.

Tariff Rates: The tariff rates which prevailed

 

before and after the negotiations for the United States
as well as for the other contracting parties are
presented in Analysis of United States Negotiations,
Department of State, Vol. I, March 1962.

United States Imports: For 1960 and 1965, value

 

data are available from Report No. FT. 110, U.S. Imports
of Merchandise for Consumption, and FT. 246, U.S. Imports
for Consumption and General Imports, U.S. Department of

Commerce, Bureau of the Census.

1332

TABLE B.l.--Wool and paper: printed matter (reduced group).

V3110 Tariff

Schedule A 30. (thounindn of dollurnl Wuantity (per cent of foreign price)

 

 

 

1300 1165

5 _J
x.)
x
1...
-o
I\
Y"

1960 1965

 

A075000 1,035.1 ?,€‘A-7 190-? 133-6 “~0 9-0

0200650 16,656.6 2H,*51.0 063,637.? 817,u01.0 10.0 8.0
0221300 ,22u.1 3,17U.1 11,15‘.7 9,030.5 28.0 20.0
0701150 :3 .3 “Us ( u, 36.1 3,238 A 6.0 u.0
A791L33 .1 1 1:: { F".1 137.7 1: 5 10.0
u728300 31,0 205.; 2n.0 307.0 12.6 10.2
u720300 105.1 3». 1 3 . 21 A 8.2 6.8
“721911 30 1 11¢ 0 105.5 1,739 A 16 13.0
17175t3 he a 37.3 1 1.7 "u 7 17. 15.0

9521100 126.“ 196.9 19.6 118.0 1..

\A’ '
03 m CU U1

H

V—‘

O

“799“70 26.3 06.6 67,0 90.0 7. 6.2
0530830 103.1 7i.: 71.1 100.1 13.5 10.8
'y7o'1 3 1‘1 ‘1 j .1” 1,110» r.7 u 5
U7 1' 0 “1.- 1 7 . 313.7 11 0 17.0
A7“:-00 “ ‘ u. ‘ ‘0 ..1.u A 7 6 E
A790000 17.0 M.§ 9;._ 1M.7 15.0 12.0
#731903 1b2.0 132.0 3,705.. 3,39u.2 7.; 5.5
“790613 0H0.b 711.€ =»".7 371.2 12.5 10.0
0309001 15.u 32b.0' 3.5 303.0 17.8 lb 2

0321100 87.

U1
F)
LA)
k l
(w
|._.a
Aw
C‘
.1:
1.4
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C)
l’\)
O
O

U717HOO 10.

U.)
W
\J
V

O )
O\
O'\
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1..»
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H
1...;
N

4726100 575.

(.0
w
w
\I‘

L—
w

F4

C»

O

H
w
\J

1:-
1...;
C
b
1,..1
U"
I
k
H

M

J:-

u72uu20 3.9 1.1 7.2 1.7 11.6 9.3

0752200 1,173.0 1,160.0 3,12U.6 2,937.9 19.0 15.0

Viv-arr: $5!

 

133

TABLE B.2.--Textile fibers and manufactlres (reduced group).

 

 

 

 

Value Tariff
Schedule A No. (thousands of dollars) Quantity (per cent of foreign price)
1960 1965 1960 1965

1960 1965

 

3030000 90.7 3‘3 8 36.0 115.0 20.0 16.0
3971210 50.0 1,9,0 5 00.1 ?,350.3 12.5 11.0
3081010 68.3 9..0 115.0 01.2 30.0 25.0
3081020 6.3 17.3 3.6 23.7 30.0 20.0
3220200 212.1 0.8 126.8 6.9 20.0 16.0
3220300 1,007.: 1, 10.3 779.7 668.1 9.1 7.0
3220500 21.0 14.: 18.1 730.0 17.5 10.0
3086300 111.1 3.5 6w » 160.1 28.7 20.9
3261010 9.3 1.0 :9 1 2.0 2.8 1.3
3262000 317.6 r90.0 1,267.8 1,808.3 3.3 1.1
336 500 95.8 18.6 108 6 225.6 3.8 3.1
339010 03.0 2 #131; 0 1,200.2 2,617.7 10.0 8.0
3270>00 1,066.0 2,175.5 1,1 3.7 2,330.7 25.0 20.0
3270600 200.6 1,272.7 :06 6 681.0 15.0 12.0
3286000 138.6 026.2 160 3 080.9 12.5 .10.0
3275000 1,966.9 1,375 1 1 013.9 929.0 8.5 6.5
3352130 29.8 5.7 107 1 11.5 30.0 27.5
3250700 663.1 902.3 3,702.0 0,083.6 35.0 28.0
3291000 775.0 206.0 0,335.1 270.6 8.5 6.0
3291500 1,331.3 866.1 5,060.2 3,007.2 33.6 27.6
3291600 375.6 ,60.8 0,767.7 003.0 23.0 18.0
3535050 2,939.1 5,090.8 2,220.6 3,288.0 6.0 0.0
3535000 2.0 3.0 7.2 0.6 1.2 1.0
3373000 887.2 1,818.1 137.1 335.2 19.2 16.7
3661000 30.: 611.7 37.6 570.0 25.5 20.0
3615900 613.0 ,181.0 181.2 298.9 28.2 20.7
3705010 13.8 152.0 3.2 68.3 21.0 17.0
3705390 53.0 13.3 75.1 0.2 21.0 17.0
3706290 1 7.: 131.7 01.6 10.9 25.5 20.0
3727000 21r.7 230.8 38.6 0a.8 21.0 17.0
3729000 31.9 8.9 1.9 0.9 21.0 17.0
3737000 13.0 30.0 11.0 36.8 30.0 20.0
3737200 3.5 37.9 13.7 06.8 30.0 20.0
3703100 6.7 7,093.9 23.0 5,017.2 50.0 00.0
3703000 15.7 32.7 8.5 56.0 25.0 20.0
3800090 1,078.0 1,387.0 601.5 901.0 50.0 00.0
3880000 139.8 261.5 32.6 77.8 31.5 26.5
3902550 1,030.3 1,088.3 :23,725.0 182,108.2 6.0 0.0
3912100 1,278.3 1,385.6 300.1 339.1 18.8 15.1
3912700 388.8 551.0 393.2 303.1 15.0 12.0
3913100 860.8 215.1 132.6 28.6 13.5 10.6
3925000 10.5 03.0 2.1 3.5 03.1 30.7
3925000 000.2 153.6 57.2 20.5 50.8 00.6
3166300 16.7 5.3 78.3 26.8 50.0 00.0
3750310 369.1 505.3 22.0 20.1 30.0 20.0
3850510 77.3 151.7 15.7 52.3 30.0 20.0
3295000 2.1 0.7 0.0 0.2 05.0 36.0
3750390 1.1 1.3 0.2 0.1 38.0 30.0
3168100 1,32 .6 1,366.9 153.3 110.3 35.0 28.0
3851000 250.8 625.0 1,522.8 2,161.2 28.7 23.1
3690000 193.0 3,315.2 05.6 283.9 10.0 8.0
3698700 36.6 382.9 02.9 397.3 10.0 8.0

max 1‘7
r

 

1330

TABLE B.3.-—Hun-metulllc mineral? (redu*e1 vrrun).

271111e TV1F11‘Y

Schedule A 30. (thoaauud; of dallgrr) Oguntitv (Der cent of fareign price)

 

 

 

;0 1:65 1960 1965 1960 1965

\~J
‘
\

 

5390050 671.1 317.0 ,179.0 3,537.0 5.0 3.0

R. .J

‘0570 9.1 576.3 10.3 2,537.2 30.0 20.0

W
(.0)
L1“

5110300 f'9.7 977.3 1T1,“'fi.i h 2.1 13.9 11.1

\J)
a:
LA)
*4
1,)
C.)
I
11
_11
l
‘1
7;
J
A)

i 41-,0 (‘1 I]. 7',l-j‘;4-l: 110:) 800

‘“”“‘O3 1‘” fl 1'7-3 Y."“-“ ;,w'3.“ 21.3 17.5
“33??“3 . ’1.” 1,7*7.~ 11“.? 31.9 0.0 3.1
“ ”‘73 ' - 1‘.* -.~ :1. 21.0 17.0
77" 1“ 7’- 07 '.7 1.3 ,7: . ‘".1 12.5

0.1.

j730€00 36.6 19.

V J
r 1
L

N
\J

)_:
“q
11‘
Ch
NJ
5‘
U1
\n

5260270 370.1 239.3

‘ J7

,262.5 3,231.0 7.1 5.7

5109300 519.0 730.? 133.9 3 166.2 1.6 0.]

5110060 9.1 5.7

L:
0
J}
2’
o
O\

0.9 1.3

\

5951000 78,036.9 171,827.9 301.9 1,258.7 10.0 8.0

 

 

135

TABLE B.U.--Metals and metal products (ro1uced grown).

WALK? T112”): ff

 

 

 

 

Schedule A No. (thousands of da111r0) Quantity (per cent of foreign price)
1350 1968 1361 1965 1960 1965
6301500 2,172.3 7, 15.“ 111.5 216.0 U.u 2.
600320 3,ian.8 3%,.7“.3 $6.9 787.5 1. 0.
0212100 123.0 373.0 930.2 1,769.9 Q. 6.
6210080 21.6 126.: 29.2 67.3 19. 15.
6215200 332.3 ?C0.fi ‘,17E.6 3,670.6 12. 10.
6219100 5,637.6 11,331 3 “2,171.9 66,879.u 10. 8
6250360 “1.5 11 C 106.1 33.9 12. 10
6250500 15.3 “7.6 13.6 28.2 17 15
6210600 63.0 02.0 3.1 9.7 12 10
6230610 20.9 1.3 2.0 0.1 12 10
6250655 23.0 23.1 1.; 1.6 12 10
6087200 932. 296.: 16,031.] 6,037.2 10 8.
6081300 300. 2,?42.1 16,~12 3 72,696.? 3
6111800 107. 1,6$2 1 ‘,“ 7 ? 3?,231 7 10
6110500 3,156 1,9f2 T :,1~ 3 r’,77" ~
6030100 257. 2a,'1« 7 n, 1 0 na9,011 6
6036300 9. 51 ” ”27 2

6113500
6150500
6113200 2,
6113u00
6092600
6092700
6112u00

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65uu31o 299.
6158700 36.
6790970 1,386.
7900500 513,659.

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6119600 3’ 3' 1 7‘ .0 65.1: I; 6,013
6200930 7 3. 1 1"F.P 1 197.1 2,803 19 12
6190000 3:7. :‘r 7 :51.7 162 10 8
6790350 2u.6 16 6 31.1 80 20 16
6120000 3.8 0.2 127.1 25 87 50
6120020 0.2 0 6 5.3 13 75 50
6120030 31.1 37.8 323.7 019 88 50
6118200 329.0 391.3 789.9 570 35. 18
6118600 21.3 0.9 309.0 3.0 50 no
6150310 119.6 M1.3 05 9 10.3 5 3
62007u0 128.u 232.2 121.1 291.3 23 20
6200790 76.7 328.2 91.9 93.u 20 17.
6200780 25.2 105.9 0.7 2 .3 2M 19
6200790 2.6 5.7 0.0 0.2 17 1a.
6200800 151.u 51.0 12.0 16.1 22. 18
6790500 u67.9 821.0 557.7 799.9 12. 10
65uu300 18.u 219.0 0.8 98.3 12 10

1 1 1 0.2 .5

7 7 6 .9

8 0 6 .3

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136

TABLE B.5.—-Chemicals and related products (reduced group).

 

 

 

 

Value Tariff
Schedule A No. (thousands of dollars) Quantity (per cent of Foreign price)
1960 1965 1960 1965 1960 1965
8231230 9,362.2 9,012.6 20,200.9 12,125.1 26.8 21.9
1250780 1,669.3 999.1 1,965.5 670.8 20.0 16.0
82115900 130.7 165.11 329.6 582.5 10.5 8.5
8297500 282.7 17 .3 11,567.3 6,010.1 10.5 9.5
8312900 99.3 133.9 6,071.8 7,198.9 10.5 8.5
8380110 8.9 10.7 307.5 311.9 12.6 10.0
8380170 593.9 765.3 6,170.3 6,699.9 10.5 8.5
8380210 99.5 219.6 925.5 279.8 27.3 21.8
8380937 285.3 305.0 835.6 1,862.8 39.1 31.0
8310200 109.9 82.9 2,279.2 1,888.9 6.0 5.0
8380300 57.6 169.9 1,959.2 9,501.5 8.5 6.5
8380982 265.0 188.9 1.7 39.7 12.5 10.0
8050100 70.0 93 0 89.0 22.1 50.1 90.1
2220970 1,985.9 399.2 651.3 555.5 5.0 3.0
2220030 81.6 303.1 299.9 609.7 9.8 3.3
2395000 1,389.1 2,681.7 17,990.6 30,059.9 6.0 9.0
2395800 229.7 55.2 6,395.1 1,519.9 7.5 5.5
0097000 1,071.5 657.5 3,969.7 2,099.7 16.5 13.2
9850900 70.0 170.3 72.9 153.7 7.5 5.5
8050200 10,523.0 3,723.9 3,593.2 1,065.9 110.0 32.0
8070830 128.5 670.8 9.0 96.5 21.0 17.0
8070900 11,758.1 1,509.7 2,995.9 969.7 26.0 21.0
8261000 1,520.2 1,010.6 1,959.2 996.9 3.8 1.9
2278000 790.5 1,195 9 59.9 82.2 10.0 8.0
2290360 27.3 199.2 20.9 88.8 6.3 9.0
2290910 706.6 1 289 7 55.5 177.7 5.0 3.0
8722350 139.3 17“ ; 20.6 ,1.5 20.0 16.0
2200990 2,095.6 1,562.11 2,15 .1 6.3 11.0
2206000 2,863.5 ' 897.1 111.5 629.2 157.0 125.9
8722000 18.5 19..1 0.5 1.1 10.8 8.0
8722150 67.8 103.0 3? 2 68.6 95.0 36.0
8725700 162.9 30.8 35.3 19.9 18.8 15.0
8731100 327.8 3129 31.0.6 92.3 22.3 17.8
8931100 952.9 559.9 121.9 273.3 11.5 9.5
890.2200 19.2 29.9 239.7 5112.9 21.0 17.0
8920270 380.8 88.0 86.9 23.2 11.0 9.0
8931900 229.9 230.9 588.7 1,082.1 10.5 8.5
8920130 192.1 716.9 603.3 2,986.9 12.5 10.0
8325000 136.7 193 6 1,331.9 1,993.3 5.0 2.0
8330900 202.9 905.3 671.9 1,799.6 9.7 7.9
8712500 623.8 1,639.1 899.6 2,52 .9 8.5 6.5
8336000 61.9 292.6 2.7 11.1 5.7 2.2
8390000 107.9 190.6 975.9 1,978.1 6.7 5.0
8391000 0.1 1.9 1.0 22.0 56.3 95.0
8350120 17.3 27.0 210.0 309.0 11.1 8.9
8350390 36.3 22 .3 862.7 3,893.1 7.5 6.0
8380620 5.9 93.2 39.9 359.2 36.6 30.0
8380872 38.7 15.5 9.1 11.0 21.0 17.0
8380570 1.0 2 2.0 2.9 505.7 93.0 39.2
8130870 62.5 228.9 29.6 119.2 15.0 12.0
8380915 7.8 39.7 29.9 183.9 35.0 28.0
8020200 3,325.1 2,992.8 2,925.9 2 995.3 28.5 22.8
8090150 19.9 51.2 7.0 183.2 22.9 18.3
8090760 922.5 789.7 519.1 1,593.0 25.3 20.2
8380350 82.9 30.1 209.6 78.0 6.3 3.8
8090755 969.1 19.5 3,863.9 123.6 97.5 38.0

 

1337

TABLE B.6.--Miscellaneous (Reduced Group).

 

 

 

 

 

Value Tariff
Schedule A. No. (thousands of dollars) Quantity (per cent of foreign price)
1960 1965 1960 1965 1960 1965
9160560 291.9 198.2 17,952.9 7,582.5 50.0 32.0
9160580 206.8 165.5 11,299.1 6,237.1 50.0 32.0
9970120 925.5 733.3 17.7 33-7 35.5 28.5
9970960 502.6 639.1 11.9 16.0 18.7 15.0
9970982 5,810 1 6,730.0 88.9 91 9 20.0 16.0
9u70985 1,229.9 9,615.6 15.7 91.9 20.0 16.0
9970590 317.9 977.5 19.1 15.3 15.7 12.7
9970550 25.9 27.3 1.7 17.8 99.2 39.9
9970560 95.6 33 0 8.1 5.9 31.9 25.2
9970570 12.8 99.1 0.7 6.3 u1.7 33.3
9970020 839.2 9,018 9 72 3 281.6 91.1 32.9
9590220 29.5 29.0 0.8 0.8 39.2 31.9
9590260 110.1 55.6 0.9 1.0 18.2 15.5
9730090 997 8 165 6 350.1 291.6 22.5 18.0
)730800 529.9 2,1 .7 69.1 3,9‘).9 25.0 20.0
9910860 838.9 1,318.2 35.3 637.1 25.0 20.0
9850500 73.0 “2“ 2 7.1 212.8 39.0 27.0
9260200 79.6 89.3 7.9 7.5 19.0 15.2
9260750 1,830 8 :,567.6 99.5 18.1 20.0 17.0
9212050 696 8 1,09“ 8 38.5 96.7 20.6 16.5
9262200 3,719 3 3,836.8 9,699.2 5,291.9 12.5 10.0
9780270 929.9 695.7 190.1 177.8 0.9 0.3
9780280 8.3 15.3 19.5 35.9 11.6 9.3
9780290 37.1 273.1 21.3 192 20.0 16.0
9001000 3,751.3 3,790 2 189.2 33.9 15.0 12.0
9025600 1,896.5 2,170 9 29,771.8 22,232.3 11.1 8.9
9800010 6.8 39.9 1.9 2. 11.3 9.0
9800200 28.9 233.2 139.1 178.7 93.3 39.7
9800790 28.1 36.9 55.7 59.9 12.5 10.0
9820110 92.1 71.9 7.6 3.5 25.0 20.0

 

 

TABLE

B.7.-—Hood

and paper:

1Q38

 

brintod matter (nan-roducod grown).

 

 

14729910
11726270

31.9

1,927.8

108.

.131101101 0 A ‘12 ( 13u711‘f1571 ri“=1‘ 1' 011ur1ti_t37
“760 1361 1960 196
u030030 .1 5: 2 618.0 780.9
1219723 4,370.1 11,300 7 113,53U.7 628,082.5
U23103F 4,191.0 3,377 6 7,937.u 8.813.6
u710130 3: : 1,351 3 5,273.7 6,325.0
u7u0270 _5.6 62.1 172.8 52 .3
u728310 P , 3-9 31-9 1'9
u729810 7“ .7 035.“ 4,557 3 5,785.6
M739930 E 1 10 u 110.5 31.2
“717900 237 752,? 3,811.1 7,855-u
9521700 2.1 5.5 1.5 2.2
u709u60 6? 1 0 8 167.5 2.3
5530510 .5 25.5 0.3 1.9
M72582) *1. "2 39.9 33.9
#723720 1 7.2 139.0 012.7 805.9
M720950 61.8 0.8 155.2 2 .O
u775000 673.1 132 2 8 550 6 1,860.8
u7u0192 1, g 2 135 1 27,173 2 2,u95 9
u799590 73.8 2 1 6u.6 1.2
u303000 1,937.3 1,229.3 2 ,208.8 1u,103 u
u303100 1.5 0.6 3.5 1.7
u716020 2,682.u 1,99u.0 35,183 6 25,652 9
u726290 7,135.9 1,601.7 6,136.9 1,382 2

 

Schedule A

(LhOUfl

“11111;?

139

and n1un1fncture:

(11011-110-101:e:l

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nrnah).

Quantity

 

 

3639300
3639500
3166690
3750900
3855900
3296000
3750b00
3855100
3168500
3160800
3696280
3698800

19v 1965 1960 1965

3709300 25.;' 9.6 5.2 1.5
3070010 101.1 375.7 570.9 591.3
3081350 37.3 15.u 27.5 31.1
3181360 1.8 5 7 3.1 2.3
3250600 33.1 6 5 25.7 u.5
3221150 10.8 2 7 00.2 38.u
322M000 711.9 101 5 068.9 u3.9
3086100 211.9 Ml .u 323.0 672.7
3909000 90.3 17H.9 0.6 8.2
3u03000 2,986.9 3,178.0 9.5 23.9
3291500 9,115.1 3,u17.9 5n.6 22.6
3u09700 A36 0 ”11.0 2.6 1.1
3280000 251.9 09.8 1,732.5 900.u
3270700 17.9 0.8 32.0 22.3
3078020 3fii.8 119.0 171.9 76.u
3283?OO 3?%.S 959.3 ““5.“ 3U2.3
3352110 140.1 281.: 837.1 1,912.2
3230270 90L.8 U92.8 579.1 5n6.9
315u100 90: 3 061.3 062.3 1,051.1
319N100 1,910.5 288.9 1,529.0 16u.1
37u3900 1,988.9 2,093.5 2 100.2 5,017.2
3530050 35.6 1.8 28.6 1.6
3538900 ..9 3.8 0.6 2.9
3011000 3,88 .7 1, 05.6 8.916.3 3,08u.u
3670010 931.5 39.8 1,832.0 no.9
3615650 97.0 91.2 58.8 26.6
3706010 3,06‘.0 1,956.1 M86.0 39u.1
3801100 505.1 1,032 9 961.9 1,276.7
3021000 509.5 218 3 365.7 292.6
3622000 00.1 3 1 26.9 27.9
3830100 3:9.0 18 5 108.5 101.6
3635100 2,676.0 2,70 1 U20.1 u03.1
36u1150 615.8 9 190.1 1.8
3160920 1,095. 15 u 12,207.9 1,786.8
3160800 3,595. 2,38 1 32,205.3 1,101.9
3800100 95 33 3 5u,5 232.7
3830200 1,369. 1,76 6 250.9 28u.7
3900u00 636 53 9 78,988.0 52,BU2.7
3913000 59 1,79 6 1,309.1 3,023.9
3912600 59 U9 3 1,133.7 6M3.6
3913u00 3 15 5 139 0 111.7

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5300590 050.7 3,7a3.7 797.0 16,766.5

5120150 34.5 32.1 1.6 1.u
5063100 11.? +9.7 12,561.u 16,72u.3
5u57300 13 .5 348.7 2,225.7 7,678.0

5301090 13,0fl7.6 13,561.? 393.0 . QUE.“

5);;3‘ [‘1 ‘.‘j H '1 u6gl’] 8606
5561110 1.C 11.9 ”.2 330.9
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330190; 95“.? 137.“ 7,1 :.1 2,913.3

5109500 379.3 1,365.1 98.6 101.2
51100%O 779.0 39.7 35.3 1.0

5950000 88,060.0 96.056.8 1:355”3 1’900'9

 

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6311100 75,111.« 111,181.” 9,731.3 12,701.6
‘ ' I ".‘_.i I-‘- 7 (I.
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6013??) -.},f ‘47.? 1")".I’ 1’7’iil'j.3 370.11.379.11
'S(‘ 12‘7" "“a ‘ P. o Unof' 5109
9117‘» 1 1) 44 W 1, . 19','/}’:J).3 5,??ri05
6219111 C,r‘ .: : :.~ 96,137.8 7,092.3
637,3)21/3’0 \ 7. | 11139,. 1 1717.0 395.5
6217910 1,v» .4 1, ‘.0 1,8 1.8 2,020.8
CH'“’7‘ .3 . 3.1 0.1
'7.'-' ‘r’ 3 v I :1 l. o ;' T‘ 0 )1 36 o 9
rl»5b 3 ".7 .“ 37.7 25.7
6086330 1,01‘.1 1,107.1 1,705.3 u,377.9
[73:7103 ‘ "a ‘ 1,1.‘7107’ 1r,);)y:i).8 39,701.08
“111803 .‘ 71.‘ 35U.9 192.“
{11‘03'Mj H, . ' 3 €1,9"3 3 T),96f3 9
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6036210 H.,~x .— 7,1 ‘. 7f1,196.6 767,709.7
6036100 “’7.~ *,2'~.r 7,539.8 ”5,230.9
6113003 1 .' “7.) £“1.3 377.2
6151550 1.1 2.6 13.9 5.0
6111191 1: .2 £3. 1,136.6 u65.1
(1:11—77 , ‘Ar’o‘j .‘,:I1’--'" 0” 1r ,13'3'57‘06 7,387.1
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6002709 ‘ 8.1 ',1“«.8 1,916.7 1 ,6uo.8
6112810 I. 8.1 12.1 10.8
6112900 : .' ~2.1 599.1 181.5
6303580 f7.7 ‘i.: 77.5 U3?.S
6153193 417.7 133.5 11,519.? 1“ 973.3
6710330 639.0 8‘7.1 939.9 1,221.1

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L)l~?k_l\le‘3 J\.—) i“ ‘01 1,317.5 3,073.5
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6139753 .6“.1 . i7.r gfh. 090.3
61?7363 773.? 675.1 556. 569.5

’ ‘ . I :1" K (’1

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611897? 97.3 73.3 112. 8 .
5150751 35.3 5U.7 5“. 5 .
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6790960 32 .8 1,927. 53 . 2,u3 .
7900700 ,60,66 .8 966,003. 2 . .

 

1142

'TABLE 13211.--Chendmx110 :umj relrmxyd nrwmiucts (vaM—rwniucecitirouo).

17“] .
J '1. U‘.‘

 

 

 

Schedule A No. (thousands of dollars) Quantity
1060 1065 1960 1965
8331850 01.0 81.1 600.2 52.1
8380880 180.0 78.7 321.5 721.1
8205000 ‘06 8 83.8 1,073.0 1,136.1
8207103 001.5 728.0 ,870.8 20,917.9
8312000 83.7 220.0 602.0 2,099.5
8380121 5,666.8 2,013.0 175,528.5 “8,603.5
8381130 3.» 7.3 75.8 37.2
8380180 172.3 1,717.6 0,735 6 0,305.3
8380938 130.1 2,507.0 005.0 7,977.9
8310100 30.0 106.6 575.0 1,030.9
8205000 100.7 V8.5 2,812.7 1,651.9
3380921 1,012.7 170.0 12,258.0 211.9
3050150 11.0 800.6 7.5 306-0
2220020 0,935.3 160.8 200.6 120.0
2210070 17.1 00.0 117.1 92.1
2301000 321.8 101.0 6,200.0 2,019.2
2305 00 1,128.3 500.1 17,071.0 15,570.9
0137600 ,205.8 2,831.3 0,020.0 0,095.7
3851 00 08.5 663.6 93.5 801.1
8000720 ‘"6.5 838.0 251.5 211.3
8100100 1,~10.7 1.6 1,856.1 1.0
80708r0 87.0 01.0 10.2 0.3
8380285 3.0 8.0 2.2 5.3
2270000 -,0“5 5 0,032.7 <98.2 677.9
2280300 7 3 8.0 0.6 3.1
2280180 021.0 868.6 00.8 85.0
8722200 11.3 7.5 10.2 0.3
2275000 1,121.2 0,972.1 780.0 958.3
2210070 17.1 00.0 117.1 93.1
8721200 1,026.0 3,602.0 6.0 101.7
87220100 3,580.0 6,362.2 200.3 067.2
8725 600 5,311.3 9,763.5 055.0 2,250.0
8730100 32.0 55.0 77.9 173.7
8031200 8.5 6.2 7.3 0.6
8002300 86.5 00.9 2.7 3.0
8020390 87.0 609.7 203.7 556.7
8001300 105.6 101.0 07.1 51.8
8020010 133.8 3 .9 719.2 211.1
8330700 308.7 150.7 0,865.2 2,713.9
8330500 251.5 065.5 1,293.0 2,305.2
8719900 108.5 155.5 607.2 612.8
8335000 3,011.1 0,521.3 106.2 233.5
8330000 2,330.6 2,625.2 17,152.1 21,531.5
8302000 119.1 115.1 601.8 719.0
8303000 186.5 276.7 9,175.6 10,789.0
8350000 219.2 026.3 5,560.1 9,590.7
8380615 1,856.2 265.9 09.8 5.3
8300000 1,020.8 2,075.7 1,800.0 2,807.1
8380560 1,065.7 1,855 0 607.3 006.6
8130800 2.7 2.0 0.8 0.6
8380305 25.0 01.0 03.2 73.7
8010360 603.0 111.9 11,210.1 2,832.9
8000680 23.5 5.0 153.2 3.0
8000770 1,186.7 2,169.3 092.3 1,172.0
8380360 21.0 132.5 25.2 67.3
8000700 216.2 810.2 120.1 017.3

 

 

1143

 

 

 

9800750

9820100

O\O\CD\J

632.

155.

317.
1M7.

TAP; '< l." 1 2:011111131311? ( 1 1—1 ,_ 11:73-71 “1391113)
”11w
Jchedulc A No. (t‘ 1 mu] 3? dollar ) Quantity
13a3 1965 1360 1935
9163110 ‘.1 18 2 312.1 650.6
9163330 17 7 13.6 53 2 50.7
9070130 18 3 ”5 8 0.5 5.1
9970100 ~3 * E 5 7 9.9
9970130 8 13 1 0.1 0.1
9970920 3. 13 3 2.6 10.7
9070530 7 3 31 8 5.0 20.1
1973113 7 1 5.7 7.3
1373113 3 3 3 3.3 0.2
9970373 1,- 3 3 57' 3 31a 9 157.5
3170010 ' .3 f” 59.8 69.5
9590‘00 13.? l? 9 1.7 2.0
9590250 A E H 3.1 0.2
3730030 -,1:‘ 167 2 1,51".7 66.5
0735303 1, 7 6 0 3,296.9 623.6
901951: ? 3 332 3 33,170.6 20,5U7.9
5853113 1,‘71 0 3,355 7 U,313 6 6,651.5
9260050 1,11 .1 :,8~3 7 9.9 10.0
9260900 611 7 1,666.9 0.1 2.1
921M500 '32.1 120.8 28.1 8.3
7100230 6L2.9 1,890.3 103 7 27u.8
9780510 6.8 2 9 5.3 2.0
9790000 1.3 1.0 0.1 0.1
9790800 9.3 17.8 0.2 1.1
9001100 855.3 699.3 87u.7 1,6u3.9
9010000 1,850.3 1,605.2 12,006.3 11,081.3
9800160 519.6 529. 3,358.6 2,885.2
9800190 1,552 0 ,889 1,650.7 3,897.9
5
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._1;

11111

TAiLE B.lB.——Cdn3da (metals).

 

Relative Price Variables
(U.S. price relative to)

 

Industrial

'71‘ O f
n Production Domestic .nirj m
v3lume n . Country lariff
Index uUDDllGFS a .
" nunoliers

(1969=100)

 

1

 

1955....1 35.11 83.03 96.;8 92.90 1.20
11 01.76 8 .00 37.09 92.70 1.20
111 35.01 87.00 36.67 93.10 1.20
IV 36 97 89.03 35.70 99.00 1.20
1356....1 39 03 91.30 130.02 90.20 1.20
11 30.10 91.33 39.89 95.20 1.20
111 38.70 70.30 93.36 96.00 1.20
17 93.71 36.00 97.83 97.20 1.20
1957 1 95.00 96.03 131.11 98.60 1.20
T ”7.93 9u.30 00.63 100.00 1.2
111 33.98 93.03 39.00 100.70 1.20
17 33.35 93.03 39.50 100.20 1.20
1958 1 39.68 90.00 93.10 100.00 1.90
II 38.33 9:.30 33.33 100.10 1.20
111 31.91 92.03 99.00 103.10 1.20
17 3A.73 90.33 99.19 99.90 1.20
1959. 1 39.09 96.33 101.16 99.60 1.20
11 95.83 99.30 131.18 99.u0 1.20
111 37.37 99.03 131.18 99.00 1.20
17 33.81 133.03 101.61 99.60 1.20
1963....1 93.80 132 00 101.30 100.00 1.20
11 93.28 130.00 130.80 100 50 1.20
111 31.30 33 03 101 00 100 33 1 20
17 35.08 10 .03 102.01 39.30 1 2«
1961 .1 37.82 99 00 132 25 98 20 1.20
11 37.56 102.00 103.71 97.10 1.20
111 29.92 136.00 103 90 96 90 1.20
17 35.95 108.00 102. 6 97 80 1.20
1562 .1 37.13 139.00 131.52 98 50 1.17
11 05.07 112.00 100.91 99.10 1.17
111 33.50 110.00 100.70 99 30 1.17
IV 00.27 115.00 100.81 99 20 1.17
1963 1 03.08 117.00 101.00 99.10 1.17
11 95.59 119.00 101.10 99 00 1.17
111 37.31 121.00 100.91 99.20 1.17
IV 07.11 125.00 100.60 99.50 1.17
1960....1 53.07 129.00 103.01 99.80 1.17
11 53.66 131.00 102.70 100 10 1.17
111 u5.7u 133.00 102.09 100.30 1.17
1v 51.28 130.00 102.u9 100 30 1.17
1965....1 53.75 138.00 105.10 100.00 1.17
11 60.53 101.00 105.52 99.60 1.17
111 55.99 199.00 10u.89 100.20 1.17
1v 70.27 108.00 103.1u 101.90 1.17
Corresponding Variable in estimating equation:
Symbol XiJ PJ Pu.s.i Pu.s.i (1 + T)

Pdi PC

105

 

 

TABLE b.lU.-—Canad3 (wood and nwrer).
Relative Price Variables
(U.S. orice relative to)
l1.) 1.1t’l7 l .
aflhnrt g, iu ;. W m1 “in Third
. n H.) '3 4L1‘Z‘A V I”) 1.»:;' [.1 V
Volume . ’ f . Country Tariff
. . . Index uUDDllePS n
(miilionS) (13 q_ 33) Hubbliers
). -A"- ‘J

 

 

1955....1 36.20 82.33 38.06 92.36 1.08
11 30.71 a: 33 98.27 93.10 1.08
111 33.07 87.33 38.85 93.77 1.08
17 33 33 89.33 96.91 90.57 1.08
1956....1 27.87 91.03 98.23 95.56 1.08
11 35.78 3; 33 97.68 96.70 1.08
111 35.60 95.33 96.8 96.98 1.08
17 35.11 06.00 95.67 96.19 1.08
1957. .1 33.55 96.30 130.00 95.33 1.08
11 31.81 90.03 98.90 90.51 1.08
111 33.63 93 03 98.31 90.60 1.08
7 33.32 93.30 89.83 ,5.81 1.08
195 ..... 1 31.79 91.33 133.13 96.90 1.08
11 31.68 93.33 133.33 7.83 1.08
111 3?.Li 12.30 133.33 98.23 1.08
17 33.53 90 1 133. 0 98.33 1.08
1059....1 30.70 36 33 131.01 98.09 1.08
11 35.19 39.00 101.6 98.69 1.08
111 01.55 13.00 131.61 98.99 1.08
17 38.08 130.00 131.01 99.33 1.08
1960. 1 37.10 132.6t 101.83 99.20 1.08
11 35.33 133.03 131.29 98.81 1.08
111 32.03 39 13 131.50 99.70 1.08
17 3: 33 113 03 132.52 102.12 1.08
1961....1 3 .70 99.03 100.61 100.38 1.08
11 35.05 132 00 101.75 106.09 1.08
111 35 15 106 03 101.96 107.95 1.08
17 30.90 108.00 101.02 108.69 1.08
1962 .1 38.63 109.00 131.52 109.75 1.05
11 35.00 112.00 100.91 111.20 1.05
111 32.87 110.00 130.70 111.78 1.05
17 31.09 115.00 130.81 111.09 1.05
1963 .1 30.02 117.00 100.10 111.50 1.05
11 30.55 119 00 100.20 111.72 1.05
111 32.00 121.00 100.00 111.79 1.05
17 33.90 125.00 99.70 111.86 1.05
1960....1 00.20 129.00 99.20 111.82 1.05
11 35.60 131.03 98.90 111.89 1.05
111 35.80 133.00 98.70 111.96 1.05
1v 00.39 130.00 ' 98.70 112.26 1.05
1965....1 00.67 138.00 98.10 112.90 1.05
11 01.03 101.00 98.09 113.66 1.05
111 02.08 100.00 97.90 113.17 1.05
1v 00.00 108.00 96.27 111.08 1.05
Corresponding Variable in estimating equation:
Symbol x13 PJ Pu.s.i Pu.s.i (1 + T)

Pdi PC

1“6

 

 

 

 

 

TABLE B.15.--Un1ted Kingdom (chemicals).
Relative Price Variables
(U.S. price relative to)
Irnhistriil
Exnort . 3 . Third
Volume Production Eomebtic Country Tariff
(million“) Index ' oupoliers Quonlier"
” (1960=100) “ - °
1955....1 15.29 86.00 111.56 82.36 1.10
II 15.18 86.00 112.82 82.32 1.10
III 13.1“ 87.00 111.“9 83.22 1.10
IV 12.87 89.00 109.2 8“.10 1.10
1956....1 10.79 87.00 109.28 86.10 1.10
II 12.33 86.00 107.26 88.05 1.10
III 11.10 86.00 105.9“ 90.01 1.10
IV 10.33 86.00 105.26 92.00 1.10
1957....1 12.0“ 87.0 105 12 93 00 1.10
II 10.96 88.00 10“ 0“ 95 01 1.10
III 12.00 90.00 103 22 96 01 1.10
IV 12.“2 88.00 102 6“ 96 01 1.10
1958....1 13.58 88.00 102.70 95 00 1.10
II 15.58 87.00 101.73 95.00 1.10
III 12.95 87.00 101 35 95 00 1.10
IV 15.83 88.00 101 '2 95 01 1.10
1959....I 13.20 88.00 101 20 9“ 09 1.10
11 17.73 91.00 101 17 95 0“ 1.10
III 17.9“ 93 00 101 00 95 0“ 1.10
IV 19.09 98.00 100 66 98.01 1.10
1960....I 2“.80 100.00 100.71 100.00 1.10
II 2 .“0 100.00 100.72 100.00 1.10
III 2 .00 100.00 100.21 100.00 1.10
IV 26.“0 100.00 99.18 100.00 1.10
1961....I 2“.36 101.00 97.12 101.00 1.10
II 21.09 101.00 96.19 103.0“ 1.10
III 20.10 101.00 95.67 103.0“ 1.10
IV 20.10 99.00 95.5“ 103 01 1.10
1962....1 20.69 100.00 93 75 103.01 1.08
II 2 .30 101.00 93.39 101.01 1.08
III 21.39 102.00 93 12 102.01 1.08
IV 2“.26 100.00 92.95 102.01 1.08
1963....1 25.10 100.00 91.7“ 103.01 1.08
II 39.70 103.00 91.79 102.01 1.08
III 29.00 107.00 91.31 101.01 1.08
IV 30.70 109.00 90.29 102.0“ 1.08
196“....I 3“.“6 111.00 89.8“ 103.0“ 1.08
II 33.56 112.00 89.22 10“.09 1.08
III 36.93 113.00 88.“1 105.16 1.08
IV “2.23 115.00 87.“1 107.16 1.08
1965....I 29.67 116.00 87.31 109.16 1.08
II “0.95 116.00 86.50 110.25 1.08
III “2.95 117.00 85.59 110.25 1.08
IV “2.00 118.00 8“.59 110.25 1.08
Corresponding Variable in estimating equation:
Symbol X J P Pu.s.i Pu.s.i (1 + T)

1 J
Pdi Pc

1“7

TABLE B.16.--United Kingdom (machinery).

_,___.." '.__ ._~

Relative Price Variables
(U.S. price relative to)

 

Industrial

 

 

Export 7 _ Third
Volume Production Domestic Country Tariff
(millions) Index Suppliers Suppliers
° (1960:100)
1955....I 28.00 86.00 10“.82 9“.98 1.30
II 37.18 86.00 10“.79 95.09 1.30
III 26.51 87.00 103.56 95.89 1.30
IV 33.56 89.00 101.“2 96.18 1.30
1956....I 2“.“9 87.00 105.08 97.97 1.30
II 28.00 86.00 103.1“ 98.67 1.30
III 25.93 86.00 101.87 99.03 1.30
IV “2.72 86.00 101.22 99.0“ 1.30
1957....I 37.“2 87.00 105.23 98.99 1.30
II 31.28 88.00 10“.l“ 99.22 1.30
III 26.32 90.00 103.32 99.“5 1.30
IV 29.79 88.00 102.75 98.61 1.30
1958....1 26.8“ 88.00 101.37 97.52 1.30
II 26.“2 87.00 100.“1 96.36 1.30
III 26.7“ 87.00 100.0“ 95.98 1.30
IV 26.25 88.00 100.21 97.“0 1.30
1959....I 27.73 88.00 102.“2 98.72 1.30
II 3“.7“ 91.00 102.39 99.02 1.30
III 26.39 93.00 102.21 98.8“ 1.30
IV 28.28 98.00 101.87 100.19 1.30
1960....1 36.20 100.00 101.82 100.68 1.30
II 81.70 100.00 101.83 100.31 1.30
III 70.50 100.00 101.31 99.83 1.30
IV 81.90 100.00 100.27 99.2“ 1.30
1961....I 57.“3 101.00 98.69 99.63 1.30
II 63.07 101.00 97.7“ 99.07 1.30
III 52.67 101.00 97.25 98.57 1.30
IV 56.37 99.00 97.08 99.09 1.30
1962....I 58.33 100.00 96.15 98.78 1.22
II 59.“0 101.00 95.79 96.59 1.22
III 56.3“ 102.00 95.51 96.89 1.22
IV 60.20 100.00 95.33 95.83 1.22
1963....I 66.67 100.00 95.36 95.82 1.22
II 65.25 103.00 95.“2 9“.05 1.22
III 58.30 107.00 9“.9l 92.28 1.22
IV 7“.90 109.00 93.85 91.“l 1.22
l96“....I 88.22 111.00 95.51 91.77 1.22
II 96.2“ 112.00 9“.85 90.91 1.22
III 89.80 113.00 93.98 90.1“ 1.22
IV 106.50 115.00 - 92.92 91.22 1.22
1965....I 98.19 116.00 9“.02 92.21 1.22
II 120.10 116.00 9“.02 91.“9 1.22
III 101.71 117.00 92.17 90.7“ 1.22
IV 132.38 118.00 91.09 89.98 1.22
Corresponding Variable in estimating equation:
Symbol X J P Pu.s.i Pu.s.i (1 + T)

i J

 

 

Pdi Pc

l“8

TABLE B.l7.—-United Kingdom (textiles).

Relative Price Variables
(U.S. price relative to)

 

Industrial

Export Third
Volume Production Domestic Country Tariff

. 3 Index Suppliers
(millions) (l960=100) Suppliers

.'._ . 11""

 

1955....1 30.82 86.00 117.56 116.7u 1.u2
11 15.06 86.00 117.2u 116.“3 1.u2
111 8.02 87.00 115.87 115.06 1.u2
IV 9.02 89 00 113.“8 112.69 1.55
1956....1 10.3u 87.00 108.39 110.50 1.92
II 1u.33 86.00 106.39 1o8.u6 1.u2
III 25.71 86.00 105.08 107.12 1.u2
1v 5u.02 86.00 10“.“1 106.uu 1.u2
1957....1 6“.19 87.00 101.96 105.55 1.u2
II “3.51 88.00 100.90 103.92 1.u2
III 30.8“ 90.00 100.11 100.53 1.u2
1v 37.37 88.00 99.55 96.88 1.u2
1958....1 32.00 88.00 103.82 95.13 1.u2
11 26.21 87.00 102.8“ 9u.23 1.u2
III 13.79 87 00 102.u6 9“.89 1.92
1v 15.83 88.00 102.63 97.08 1.u2
1959....1 12.16 88.00 101.61 96.1“ 1.u2
11 13.90 91.00 101.58 98.1u 1.u2
111 13.09 93.00 101.u0 97.97 1.u2
IV 27.78 98.00 101.07 99.66 1.u2
1960....I “3.90 100.00 102.02 100.51 1.u2
II 26.30 100.00 102.03 100.52 1.u2
III 22.90 100.00 101.51 101.01 1.u2
1v 32.60 100.00 100.u7 98.98 1.u2
1961....1 36.““ 101.00 97.71 98.03 1.u2
II 19.90 101.00 96.77 97.50 1.u2
111 21 39 101 00 96 2“ 97 37 1.u2
IV 20 78 99.00 96.11 95 19 1.u2
1962....1 18.“3 100.00 96.73 9u.83 1.33
11 16 70 100 00 96 36 96 “7 1.33
111 I“ 71 100 00 96 08 96 28 1.33
IV 1u.75 100.00 95.50 96.22 1.33
1963....1 20.78 100.00 95.7“ 96.27 1.33
II 23 17 103 00 95 80 95 76 1.33
III 26 80 107 00 95 29 95 63 1.33
IV 29.50 109.00 9“ 22 95 70 1.33
196“....I 28.“2 111.00 99.03 95.96 1.33
II 29 u1 112 00 93 38 96 91 1.33
III 29 90 113 00 92 52 97 62 1.33
IV 30.39 115.00 - 91 “8 96.62 1.33
1965....1 35.05 116.00 90.62 95.72 1.33
II 38 00 116.00 89 96 95.59 1.33
III 38.38 117.00 89.01 95.3u 1.33
IV “2.10 118.00 89.97 95.30 1.33

 

Corresponding Variable in estimating equation:

Symbol xiJ PJ Pu.s.i Pu.s.i (1 + T)

 

 

Pdi Pc

l“9

TABLE B.18.--United Kingdom (wood and paper).

 

1
J
1
i
1

Relative Price Variables
(U.S. price relative to)

 

Industrial

 

 

Ex ort . 2 Third
Vogume Production Egme”FiC" Country Tariff
(millions) Index ouppllern Suppliers
(1900=100) .
1955....1 16.35 86.00 100.16 103.21 1.10
II 1“.“7 86.00 99.90 103.25 1.10
III 16.63 87.00 98.72 103.3“ 1.10
IV 16.2 89.00 96.60 103.“5 1.10
1956....I 1“.2 87.00 102.76 103.37 1.10
II 12.00 86.00 100.86 102.22 1.10
III 11.98 86.00 99.62 101.10 1.10
IV 11.63 8 .00 102.00 100.00 1.10
1956....I 1“.“1 87.00 106.39 100.00 1.10
II 13.“0 38.00 105.29 98.9“ 1.10
III 13.“? 90.00 10“.“6 98.95 1.10
IV 12.95 88.00 103.88 98.95 1.10
1958....1 11.“7 88.00 101.16 100.00 1.10
II 1“.00 87.00 100.21 100.00 1.10
III 13.05 8 .00 99.83 100.00 1.10
IV 12.81 88.00 100.01 101.0“ 1.10
1959....I 11.13 8-.00 103.“3 103.09 1.10
II 1“.“3 91.00 103.“0 102.06 1.10
III 21.65 93.00 103.22 102.06 1.10
IV 15.35 98.00 102.88 101.01 1.10
1960....1 18.50 100.00 102. 2 100.00 1.10
II 21.10 100.00 102.9“ 100.00 1.10
III 20.60 100.00 102.“1 100.00 1.10
IV 20.2 100.00 101.36 100.00 1.10
1961....I 21.39 101.01 100.2 100.00 1.10
II 20.59 101.00 99.29 98.02 1.10
III 19.31 101.00 99.75 98.02 1.10
IV 17.65 99.00 98.62 99.02 1.10
1962....1 13.82 100.00 98.37 99.02 1.08
II 19.“O 101.00 97.99 99.00 1.08
III l7.“3 102.00 97.71 99.01 1.08
IV l7.“3 100.00 97. 2 99.01 1.08
1963....1 15.“9 100.00 97.36 99.02 1.08
II 17.23 103.00 97.“2 99.01 1.08
III 19.30 107.00 96.90 99.00 1.08
IV 19.70 109.00 95.82 98.00 1.08
196“....I 23.37 111.00 95.61 98.02 1.08
II 22.“8 112.00 9“.23 97.03 1.08
III 21.88 113.00 9“.O8 96.0“ 1.08
IV 21.55 115.00 - 93.01 96.12 1.08
1965....1 22.38 116.00 92.68 96.19 1.08
II 23.“2 116.00 91.82 95.2“ 1.08
III 25.52 117.00 90.85 95.2“ 1.08
IV 28.76 118.00 89.79 95.2“ 1.08
Corresponding Variable in estimating equation:
Symbol X1J PJ Pu.s.i Pu.s.i (1 + T)

Pdi PC

IfSO

TABLE B.19.--European Economic Community (Chemicals).

 

 

 

Relative Price Variables

 

 

 

(U.S. price relative to)
Industrial
Export - Third
Volume PPOduqtion EomeSLiC Country Tariff
(millions Inoex “Uppliers Suppliers
” (l960=100) “
1955....1 1“.71 67.97 108 28 89.00 1.20
II 15.81 70.08 108 8“ 89.00 1.20
III 10.12 72.53 108 O“ 90.00 1.20
IV 13.68 7“.08 107 20 90.00 1.20
1956....I 12.02 72.86 108 87 92.00 1.20
II 1“.56 77.08 108 “3 92.00 1.20
III 13.63 78.59 107 62 92.00 1.20
IV 1“.35 79.20 106 “7 92.00 1.20
1957....1 13.98 80.57 106 01 93.00 1.20
II 16.38 81.08 105 12 93.00 1.20
III 13.37 82.19 10“ 26 9“.00 1.20
IV 17.58 82.09 103 38 9“.00 1.20
1958....I 17.89 83.00 103 05 95.00 1.20
11 19.26 82.2“ 101 83 95.00 1.20
III 16.63 83.28 100 “2 95.00 1.20
IV 22.08 8“.17 101 86 97.00 1.20
1959....1 20.21 85.12 101 77 100.00 1.20
II 17.53 88.31 102 08 99.00 1.20
III 17.01 90.66 101 90 99.00 1.20
IV 17.37 9“.“0 101 20 100.00 1.20
1960....I 2“.00 96.80 100 89 100.00 1.20
II 26.00 99.39 100 51 100.00 1.20
III 2“.70 101.“? 100.03 100.00 1.20
IV 2“.00 103.01 99.“3 100.00 1.20
1961....I 29.01 105.“6 97.75 101.00 1.20
II 26.53 105.95 97.20 99.00 1.20
III 30.59 107.56 96.71 99.00 1.20
IV 28.1“ 109.63 96.27 101.00 1.20
1962....I 27.06 111.95 9“.“2 101.00 1.18
II 26.u0 113.00 9u.18 99.00 1.18
III 25.9“ 115.33 93.53 100.00 1.18
IV 2“.65 115.80 92.51 100.00 1.18
1963....1 29.12 115.37 90.“6 101.00 1.15
II 26.93 120.53 89.67 100.00 1.15
III 3“.80 122.“9 88.86 99.00 1.15
IV 27.30 125.18 88.03 98.00 1.15
l96“....I 32.57 127.85 87.86 99.00 1.15
II 36.53 127.7“ 87.0“ 98.00 1.15
III “5.9“ 127.00 86.30 97.00 1.15
IV “8.06 130.00 85.6“ 99.00 1.15
1965....I 59.62 131.“8 85.71 101.00 1.15
II 55.62 133.“1 85.0“ 100.00 1.15
III 58.“8 133.0“ 8“.35 100.00 1.15
IV 51.81 136.8“ 83.6“ 100.00 1.15
Corresponding Variable in estimating equation:
Symbol XiJ PJ Pu.s.i Pu.s.i (l + T)

 

Pdi

 

“If: r ‘VZ—‘T'Tfin‘a—s .... fin

1W

v
..a~..-

15].

TABLE B.20.--European Economic Community (machinery).

 

Relative Price Variables
(U.S. price relative to)

 

Industrial

 

 

Export 6 Third
Volume Production Domestic Country Tariff
(millions) Index Suppliers Oup 11ers
” (l960=100) ° -p
1955....I 111.76 67.97 95.88 95.88 1.25
II 110.9“ 70.08 95.98 9“.“1 1.25
III 90.81 72.53 95.66 9“.01 1.25
IV 108.97 7“.08 9“.85 9“.00 1.25
1956....I 129.32 72.86 100 17 93.05 1.25
II 113.67 77.08 99.76 92.“6 1.25
III 9“.73 78.59 99.03 91.“2 1.25
IV 123.“8 79 20 97.96 89.96 1.25
1957....I 128.“9 80.57 103 99 88.89 1.25
II 133.19 81.08 103 12 88.21 1.25
III 127.37 82.19 102 27 90.13 1.25
IV 117.37 82.09 101 “1 95.61 1.25
1958....I 119.26 83.00 102 75 93.02 1.25
II 122.00 82.2“ 101 53 90.65 1.25
III 9“.95 83.28 100 12 88.98 1.25
IV 105.95 8“.l7 101 56 90.15 1.25
1959....1 93.“0 85.12 10“ 01 99.31 1.25
II 10“.02 88.31 10“ 33 100.67 1.25
III 97.“2 90.66 10“ l“ 9“.55 1.25
IV 135.35 9“.“0 103 “3 97.3“ 1.25
1960....I 171.50 96.80 103 10 96.91 1.25
II 206.90 99.39 102 72 98.32 1.25
III 216.“0 101.“7 102 23 10“.68 1.25
IV 189.“0 103.01 101 62 100.03 1.25
1961....I 19“.06 105.“6 100 91 95.“7 1.25
II 257.52 105 95 100 3“ 93.93 1.25
III 191.“9 107 56 99 83 90.38 1.25
IV 219.31 109 63 99 38 88.72 1.25
1962....I 267.9“ 111 95 99.07 90.05 1.23
II 268.30 113 00 98.81 88.61 1.23
III 202.38 115 33 98.1“ 87.83 1.23
IV 227.“3 115 80 97.07 88.65 1.23
1963....1 236.57 115 37 96.01 88.5“ 1.20
II 263.96 120 53 95 17 85.70 1.20
III 228.80 122 “9 9“ 31 8“.97 1.20
IV 262.20 125 18 93 “2 9“.50 1.20
196“....I 298.12 127 85 93 “9 85.65 1.20
II 288.32 127 7“ 92 62 83.09 1.20
III 23“.36 127 00 91 83 8“.“8 1.20
IV 263.30 130 20 91 13 85.“9 1 20
1965....I 301.1“ 131 “8 90 98 88.18 1.20
II 382.10 133 “1 90.27 87.52 1.20
III 285.90 133.0“ 89.53 86.95 1.20
IV 371.71 136.8“ 88.78 88.22 1.20
Corresponding Variable in estimating equation:
Symbol xiJ PJ Pu.s.i Pu.s.i (1 + T)
Pdi Pc

 

 

”‘3

. A
«$-

7 7'" 1' 'H “Is——

‘EITT

_, . :v ”.25.

2152

TABLE B.2l.-—European Economic Community (metals).

 

 

' _‘ .‘.'..'_ 2. u—. —.- ‘

Relative Price Variables
(U.S. price relative to)

 

Industrial

 

 

Export a Third
Volume Production Pomestic Country Tariff
(millions) Index Suppliers Suppliers
” (l960=100) -
1955....I 78.“7 67.97 9“.98 102.50 1.1“
II 95.06 70.08 95.09 102.78 1.1“
III 62.56 72.53 95.89 10“.2“ 1.1“
IV 83.22 7“.08 96.18 106.90 1.1“
1956....1 90.56 72.86 97.97 109.58 1.1“
II 79.““ 77.08 98.67 112.28 1.1“
III 63. 2 78.59 99.02 113.7“ 1.1“
IV 72.07 79.20 99.0“ 113.90 1.1“
1957....1 81.08 80.57 98.99 115.62 1.1“
II 79.79 81.08 99.22 118.88 1.1“
III 78.11 82.19 99.“5 117.21 1.1“
IV 62.00 82.00 98.61 110.72 1.1“
1958....I 5“.95 83.00 97.52 10“.58 1.1“
II 55.37 82.2“ 96.36 98.82 1.1“
III “6.92 83.28 95.98 96.86 1.1“
IV 61.67 8“.17 97.“0 98.61 1.1“
1959....1 33.“0 85.12 98.72 99.38 1.1“
II 32.16 88.31 99.02 99.13 1.1“
III 29.07 90.66 98.8“ 99.17 1.1“
IV 15.86 9“.“0 100.19 99.“9 1.1“
1960....1 “0.50 96.80 100.68 99.9“ 1.1“
II 85.30 99.39 100.31 100.50 1.1“
III 87.“0 101.“7 99.83 100.29 1.1“
IV 80.10 103 01 99.2“ 99.31 1.1“
1961....1 80.50 105.“6 99.63 98.37 1.1“
II 66.63 105.95 99.07 97.52 1.1“
III 51.88 107.56 98.57 97.22 1.1“
IV 50.39 109.63 99.09 97.“8 1.1“
1962....1 “2.“5 111.95 98.78 98.1“ 1.11
II “8.“0 113.00 96.59 99.19 1.11
III “7.92 115.33 96.89 98.10 1.11
IV “0.59 115.80 95.83 9“.98 1.11
1963....I 30.78 115.37 95.82 92.03 1.11
II “3.27 120.53 9“.05 89.21 1.11
III 39.50 122.“9 92.28 88.37 1.11
IV “1.50 125.18 91.“1 89.“2 1.11
196“....I “3.17 127 85 81.77 90.08 1.11
II “5.“5 127.7“ 90.91 90.35 1.11
III “8.12 127.00 90.1“ 90.27 1.11
IV “6.12 130.20 91.22 89.85 1.11
1965....I “6.80 131.“8 . 92.21 89.35 1.11
II “6.95 133.“1 91.“9 88.3“ 1.11
III “7.71 133.0“ 90.7“ 86.68 1.11
IV “9.81 136.8“ 89.98 85.0“ 1.11
Corresponding Variable in estimating equation:
Symbol xiJ PJ Pu.s.i Pu.s.i (1 + T)

 

 

Pdi PC

 

 

 

1553

TABLE B.22.-—European Economic Community (miscellaneous).

Relative Price Variables
(U.S. price relative to)

 

Industrial

 

 

Export . a Third
Volume Produgilon Eogiiticg Country Tariff
(millions) (1968:180) “” 198‘ Suppliers
1955....1 3“.00 67.97 110.7“ 111.58 1.16
II 29.“1 70.08 110.86 111.68 1.16
III 19.53 72.53 110.“9 110.33 1.16
IV 28.39 7“.08 109.55 106.“7 1.16
1956....1 “0.56 72.86 107.9“ 110.16 1.16
II 32.22 77.08 107.55 107.57 1.16
III 18.79 78.59 106.75 108.18 1.16
IV 23.0“ 79.20 105.60 102.5“ 1.16
1957....I 30. 2 80.57 102.82 106.36 1.16
II 3“.0“ 81.08 101.96 103.95 1.16
III 30.53 82.19 101.12 10“.50 1.16
IV 27.89 82.09 100.26 103.86 1.16
1958....1 25.37 83.00 103.16 102.83 1.16
II 29.05 82.2“ 101.93 100.82 1.16
III 18.2 83.28 100.52 99.01 1.16
IV 23.““ 8“.17 101.96 99.“0 1.16
1959....I 22.“7 85.12 103.70 99.“3 1.16
II 21.13 88.31 10“.02 99.50 1.16
III 22.2 90.66 103.83 97.81 1.16
IV 21.62 9“.“0 103.13 97.79 1.16
1960....I 22.80 96.80 99.98 100.98 1.16
II 2“.30 99.39 99.61 100.77 1.16
III 2“.00 101.“7 99.13 99.92 1.16
Iv 27.00 103.01 98.5“ 98.“3 1.16
1961....I 30.50 105.“6 102.“9 97.“0 1.16
II 30.20 105.95 101.91 9“.13 1.16
III 28.“2 107.56 101.“0 91.95 1.16
IV 33.“3 109.63 100.93 91.67 1.16
1962....1 31.18 111.95 103.91 90.23 1.13
II 36.50 113.00 103.6“ 87.78 1.13
III 30.20 115.33 102.9“ 86.05 1.13
IV 32.57 115.80 101.81 87.96 1.13
1963....1 ' 36.“7 115.37 103.71 85.80 1.13
II “8.12 120.53 102.80 86.38 1.13
III 39.50 122.“9 101.87 8“.80 1.13
IV “2.80 125.18 100.91 8“.00 1.13
196“....I “5.7“ 127.85 99.22 85.96 1.13
II 52.“8 127.7“ 98.29 85.9“ 1.13
III “3.76 127.00 97.“6 8“.33 1.13
IV 50.39 130.20 96.71 82.21 1.13
1965....1 52.89 131.“8 96.86 83.32 1.13
II 73.90 133.“1 ' 96.11 82.00 1.13
III 6“.76 133.0“ 95.32 81.“3 1.13
IV 70.76 136.8“ 9“.52 81.“8 1.13
Corresponding Variable in estimating equation:
Symbol x 3 P Pu.s.i Pu.s.i (1 + T)

i J

 

 

Pdi Pc

BIBLIOGRAPHY

l5“

BIBLIOGRAPHY

1'

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155

Cowden, D. J., and Croxton, F. E. Applied General
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Kravis, I.; Lipsey, R. E.; and Bourque, P. J. Measuring
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157

Kreinin, M. E. "Price U.S. Tariff Elasticities in
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Rhombery, R. R.; Randall, R.; and Boissoneault, L.
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Small, A. S. "The Effect of U.S. Tariff Reduction on
U.S. Import Volume." MSU Business Topics, Graduate
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pp. “3—53.

 

              
  

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