Chapter 21 Competition Policy as a Substitute for Tariff Policy

In the real world, developed countries are permitted to impose tariffs only on a small range of imports (partial tariff). For this reason, tariff policies have been replaced in many countries by other policy devices such as a competition policy. This study compares a competition policy with a partial tariff policy. It demonstrates that if a country can impose a tariff on only a small part of the imports and at sufficiently low tariff rates, optimal partial tariff policy may not create as large a protective effect as optimal competition policy.