Optimal Tariff Policy on Imports from Multinationals

Peter Svedberg

The Economic Record, 1979, vol. 55, issue 1, 64-67

Abstract: Using partial equilibrium analysis, it is shown that for small countries there is an optimal tariff on imports from a monopolistic multinational. There is also (under specified circumstances) a tariff at which the multinational finds subsidiary production more profitable than exports: the switchover tariff. The interaction between the optimal and switchover tariffs is analyzed from the small country's welfare standpoint. The conclusion is that there is not one, but a variety of possible optimal policies for the country: trade at the optimal tariff, with or without prohibition of subsidiary production, or tariff‐protected subsidiary production.

Date: 1979
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