Aspects of the Theory of Tariffs (Collected Works of Harry Johnson)

10.  An Economic Theory of Protectionism, Tariff Bargaining, and the Formation of Customs Unions*

I. INTRODUCTION

The traditional approach to the theory of tariffs, which is embodied in the recently elaborated analysis of the effects of customs unions pioneered by Viner, Meade, Lipsey, and others, is concerned with such matters as the possibility of increasing real income by using the tariff to exploit monopoly or monopsony power in world markets, the ‘welfare costs’ of the tariff in terms of foregone real income, and the effects on real income of changes in particular tariffs or in tariff structures, such as are entailed by the formation of customs unions and free-trade areas. Implicit in this approach is the assumption that ‘real income’ is ...