An Introduction to Non-Tariff Barriers to Trade

Cleins C. Coughlin and Geoffrey E. Wood

Cletus C. Coughlin is a senior economist at the Federal Reserve Bank of St. Louis and Geoffrey E. Wood is a professor of economics at City UniVersity, London. Thomas A. Pollmann provided research assistance.

ESTRICTIONS on international trade, duction and consumption that risks retaliation primarily in the form of non-tariff barriers, by the affected country. have multiplied rapidly in the 1980s.’ The As a type of protectionist policy, non-tariff Japanese, for example, began restricting barriers produce the general consequences iden- automobile exports to the United States in 1981. tified above; however, there are numerous One year later, the U.S. government, as part of reasons, besides their proliferation, to focus at- its ongoing intervention in the sugar market, tention solely on non-tariff barriers!’ Non-tariff imposed quotas on sugar imports. barriers encompass a wide range of specific measures, many of whose effects are not easily The increasing use of protectionist trade measured. For example, the effects of a govern- policies raises national as well as international ment procurement process that is biased toward issues. As many observers have noted, interna- domestic producers are difficult to quantify. In tional trade restrictions generally have costly addition, many non-tariff barriers discriminate national consequences.5 The net benefits re- among a country’s trading partners. ceived by protected domestic producers (that is, benefits reduced by lobbying costs) tend to be This discrimination violates the most-favored- outweighed by the losses associated with ex- nation principle, a cornerstone of the General cessive production and restricted consumption Agreement on Tariffs and Trade (GATT), the of the protected goods. Protectionist trade multinational agreement governing international policies also cause foreign adjustments in pro- trade. Not only does the most-favored-nation

‘See Page (1987) for a general discussion indicating that Abstract of the United States (various editions) for the the proliferation of trade restrictions in recent years has figures for other years. 2 taken the form of non-tariff, as opposed to tariff, barriers. For example, see Coughlin et al. (1988). A recent Congressional Budget Office study (1987) notes tm that the average tariff rate for most developed countries is See chapter 1 in Laird and Yeats (forthcoming) for a less than 5 percent. There is no evidence of rising tariff discussion of the policy issues raised by non-tariff barriers. rates or coverage. For example, U.S. tariff revenue as a percentage of total imports has changed very little between 1975 (3.9%) and 1986 (3.6%), See the Statistical

FEDERAL RESERVE BANK OF ST. LOUIS 33

principle require that a country treat its trading countries generally. Two examples illustrate partners identically, but it also requires that these different characteristics. The United States trade barrier reductions negotiated on a imposes a general quota on dried milk imports; bilateral basis be extended to all GAT’I’ mem- licenses are granted to certain U.S. trading com- bers. By substituting bilateral, discriminatory panies, who are allowed to import a maximum agreements for multilateral approaches to trade quantity of dried milk based on their previous negotiations and dispute settlement, countries imports. In a different situation U.S. sugar im- raise doubts about the long-run viability of ports are limited by a quota that specifies the GATT. shares of individual countries; the right to sell sugar to the United States is given directly to This paper provides an introduction to non- the governments of these countries. tariff barriers. We begin by identifying numerous non-tariff barriers and document their pro- Voluntary Export Restraints and liferation. We then use supply and demand the Multjfiber Arrangement analysis to identify the general effects of two frequently used non-tariff barriers: quotas and Voluntary export restraints, which are nearly voluntary export restraints. Next, we consider identical to quotas, are agreements between an why non-tariff barriers are used instead of exporting and an importing country limiting the tariffs. A brief history of GATT’s attempts to maximum amount of exports in either value or counteract the expansion of non-tariff barriers quantity terms to be sold within a given period. completes the body of the paper. Characterizing these restraints as “voluntary” is somewhat misleading because they are fre- NON-TARIFF BARRIERS: quently designed to prevent official protective measures by the importing country. In the TYPES AND USE 1980s, for example, exports by the Japanese A tariff is a tax imposed on foreign goods as automobile industry to the United States and they enter a country; non-tariff barriers, on the the United Kingdom have been limited “volun- other hand, are non-tax measures imposed by tarily” to prevent the governments of these governments to favor domestic over foreign countries from directly limiting imports of suppliers. Non-tariff barriers encompass a wide Japanese autos. range of measures. Some have relatively unim- An example of a voluntary export restraint on portant trade effects. For example, packaging a much broader scale is the Multifiber Arrange- and labeling requirements can impede trade, ment. Originally signed in 1974 as a temporary but usually only marginally. Other non-tariff exception to CA’T’T and renewed three times measures such as quotas, voluntary export since, the Multifiber Arrangement allows for restraints, trade restraints under the Multifiber special rules to govern trade in textiles and ap- Arrangement, non-automatic import authoriza- parel. Under this agm’eement, quotas are set on tions and variable import levies have much most imports of textiles and apparel by more significant effects.~These “hard-core” non- developed countries from developing countries, tariff measures are designed to reduce imports while imports of textiles and apparel from other and, thereby, benefit domestic producers. The developed countm’ies except Japan are not sub- discussion below focuses on these hard-core ject to any restrictions. Multilateral voluntary barriers. export restraint agreements are frequently Quotas called “orderly marketing agreements.” A quota is simply a maximum limitation, Non-Automatic Import specified in either value or physical units, on Authorizations imports of a product for a given period. It is en- forced through licenses issued to either im- Non-automatic import authorizations are non- porters or exporters and may be applied to im- tariff barriers in which the approval to import ports from specific countries or from all foreign is not granted freely or automatically. There

~Thissubset of non-tariff barriers is taken from Laird and at customs, health and sanitary regulations, technical stan- Yeats (forthcoming). This subset excludes a number of dards, minimum import price regulations, tariff quotas and non-tariff barriers that can also have sizeable effects. monitoring measures. See appendix 4 in Laud and Yeats Among these are government procurement policies, delays for a glossary of terms associated with non-tariff barriers.

,A.wAnv,tcon, ~aa’,, 34

are two general categories of non-automatic domestic target price. ‘Fhe levies are variable so licensing. that as the world price of a product falls (rises), the levy rises (falls).’ The result is that price Discretionary licensing, often called liberal changes in the world market will not affect licensing, occurs when an importer’s govern- directly the domestic price. ‘I’hese measures are ment must approve a specific import; however, an integral aspect of the European Community’s precise conditions to ensure approval are not Common Agricultural Policy. For example, in specified. Frequently, this form of licensing is March 1987, the European Community’s price used to administer quantitative limits. Under the for wheat was $8.53 per bushel, while the current restraints on U.S. imports of steel, a world price was $1.95 per bushel. Prospective domestic user can request authorization to ex- importers were faced with a levy of $6.58 per ceed the maximum import limitation if the bushel!’ specific product is unavailable domestically at a The Use and Expansion i\T reasonable cost. Exactly how availability and of 00 cost considerations affect the probability of an Tariff Barriers approval are left to the discretion of the In a current study, Laird and Yeats (forthcom- authorities. ing) measure the share of a country’s imports The second category of non-automatic import subject to hard-core non-tariff barriers. Because licensing requires the importer to meet specific countries frequently impose non-tariff barriers on the imports of a specific good from a conditions, such as minimum export perfor- specific country, but not on imports of the mance, the use of the imported good for a same good from another country, they disag- specific purpose or required purchases of gregated each country’s imports by both pro- domestic products. In an export-import linkage duct and country of origin to permit calculation scheme, a firm’s value of imported components of the total value of a country’s imports subject is limited to a maximum percentage of the value to non-tariff barriers. Each country’s “coverage of its exports. ‘rhis measure is intended to im- ratio” is simply the value of imports subject to prove a country’s trade balance and protect 5 non-tariff barriers divided by the total value of domestic producers of components.- Export- imports.’ import linkage requirements are numerous. For example, in Yugoslavia during the early 1980s, Table 1 shows the trade coverage ratio for 10 authorized importers of automobiles were re- European Community and six other industrial quired to export goods totaling at least 30 per- 6 countries for 1981 and 1986. In computing this cent of the value of each imported automobile. ratio, the 1981 and 1986 non-tariff measures are Variable lEnport Levies apphed to a constant 1981 trade base. ‘rhus, the figures identify changes in the use, but not the Variable import levies are special charges set intensity, of specific non-tariff measures, while to equalize the import price of a pm’oduct with a holding constant the effects of trade changes.

‘See Herander and Thomas (1986) for a theoretical receive a lower weight in the construction of the coverage demonstration that an export-import linkage scheme might ratio than less-restrictive ones. For example, a non-tariff not improve a country’s trade balance. barrier that eliminated all imports of a good from a country 6 would have a smaller impact on the coverage ratio than a For details on the policies of Yugoslavia as well as less-restrictive measure. Assume that one country’s im- numerous other countries, see “Survey of Automotive ports are valued at $100, $15 of which comes from coun- Trade Restrictions Maintained by Selected Nations” try A, and there are no non-tariff barriers. In this case, the (1982). coverage ratio is zero. Suppose that a non-tariff barrier is ‘Variable import levies, which are actually variable tariffs, now imposed on imports of goods from country A. In the are considered non-tariff barriers in this study for two first case, assume that imports from country A decline reasons. First, the international trade literature generally from $15 to $10; alternatively, suppose that imports characterizes variable import levies as non-tariff barriers. decline from $15 to zero. The non-tariff barrier in the sec- See Nogues et al. (1986) for another list of non-tariff bar- ond case is more restrictive; however, the change in the riers that includes variable import levies. Second, Laird coverage ratio does not reflect this fact. The coverage and Yeats (forthcoming) provide the most up-to-date data ratio becomes 10.5 percent ($10/$95) in the first case and on non-tariff barriers and we have no way to remove zero percent ($01585) in the second. Thus, the “intensity” variable import levies from their data. of the protection provided by non-tariff barriers is not measured accurately by this coverage ratio. An alternative ‘The numerical example is from Coughlin and Carraro measure focusing on the share of trade “affected” by non- (1988). tariff barriers, which also highlights the proliferation of ‘One weakness of the coverage ratio as a measure of pro- non-tariff barriers, can be found in Laird and Yeats (1989). tectionism is that more-restrictive non-tariff barriers tend to

FEDERAL RESERVE BANK OF St LOWS 35

1986. Third, the United States had the largest percentage-point increase, as its coverage ratio bl~ increased from 11.4 percent in 1981 to 17.3

Non tariff trade Coverage Babes for percent in 1986. The 5.9 percentage-point in- Ettptmtnes crease was more than double the increase for rede Coverage l3atK$ all countries. lm)*rtet’ 198< 190% Dtfference Laird and Yeats provide evidence that exports from developing countries to industrial coun- I. eta 6% 4,3° 1 7% tries are affected to a larger extent than trade Dante 87 9 12 among industrial countries. For example, the Gefearty edflep 1 14 8 1981 trade coverage ratio was 18.8 percent for tie I 88 29 developing country exports to industrial coun- aS U 201 9 eet~ n 112< 18 18 tries and 14.3 percent for intra-industria~ coun- 6 37 ~ try trade. A similar pattern prevailed in 1986 1 10< with a coverage ratio of 20.6 percent for P$ftaclantfs 199 4 1 developing country exports to industrial coun- 4 6 tries and 17.5 percent for intra-industrial coun- dze4apd 60 try trade.b0 at 19 69 Cl Table 2 contains coverage ratio data on a pro- Japan 4 43 04 duct basis. As a result of the Multifiber Ar- r 1 12 P4ezeafetid 46 0 rangement, trade in textiles and clothing is sub- ted as’ 5 ject to non-tariff barriers. For example, slightly more than one-third of European Community 8 1 and U.S. imports of textiles are affected, while approximately two-thirds of European Com- eat trmCIU4 abté arport munity and three-quarters of U.S. imports of a mat tmfl$tt< mast an- diag empp artsmngvatwemea tta clothing are affected. Since these goods are eat mt mid estra among the most impot’tant manufactured ex- i*det ‘Mtber Art game ports from developing countries, coverage ratios to m ~pti tatof 0 COOpstatfon for imports from developing countries relative cc a me Auetr~a to industrial countries tend to be higher. Swede were xebded emit

‘°Whiiethis differential may reflect discrimination directed at example, show that the relatively higher tariff rates faced developing countries, another interpretation is that the dif- by developing countries can be explained by product ferential is product-based. Chow and Kellman (1988), for characteristics.

JANIIARVIFFRR1IARV 14P,ci Table 2 Coverage Ratios of Selected Non-tariff Measures on Selected Manufactured Goods: 1986 United

SITC Description 69 ~10~ Switzerland Finland Japan -- Norway New Zealand -- States

61 Leather products 7 7% 30 8 S/r, 0 0% 47 0 % 0.0% 59 9% 0.0% 62 Rubbor products 9.1 0.0 00 13.6 0.7 539 00 63 Wood and cork I 0 19 00 00 00 53.0 0.0 64 Faperandart~Ies 59 00 00 00 00 486 00 65 Textiles 347 00 1 6 555 6.1 27.4 345 66 Cement. clay and glass 2.9 0.0 0.0 24.1 0.0 54.5 0 1 67 Iron and steel 462 10 00 0.0 00 64.1 763 68 Non-ferrous metals 0.8 1.9 35 04 0.0 8.7 0.0 69 Metal manufactures. n e 5. 2 1 5.6 00 1.0 0.0 35.3 11.0 71 Non-electric machinery 3.1 4.7 0.0 4.4 0.0 359 0.0 72 Electric machinery il_I 0.0 00 03 00 64.0 1.4 73 Transport equipment 236 847 00 173 0.0 22.1 41.1 81 Plumbing & lighting f:xtures 00 0.0 00 00 0.0 682 0.0 82 Furniture 0.3 0.0 00 00 0.1 0.0 1.1 83 Travel goods 0.9 530 0.0 0.0 0.0 100.0 18.9 84 Clothing 65.7 18.6 12.1 Il 3 865 52.2 764 85 Footwear 11.3 74.6 00 6.9 0.3 82.9 0.1 86 Instruments 3.8 00 0.0 14.1 0.0 53 0.0

NOTE See table 1 for the list of hard-core non-lariff measures The coverage ratio is. for each given product and country, the imports subject to a hard-core non-tariff measure divided by total imports European Community intro-trade is excluded. SOURCE. Laird and Yeats (forthcoming)

Table 3 Coverage Ratios of Non4ariff Measures on Selected Agricultural Goods: 1986 United

SITC -- Description -. - EC ~1O~ Switzerland Finland Japan - Norway New Zealand States 00 Lmve animals 602% 100.0% 95.3% 1.2% 98.0% 00% 0.00/0 01 Meat 77 8 97.8 89.3 65.7 99 7 14.4 00 02 Dairy products 99.7 45.5 1000 732 82 1 12.7 87.8 03 Fish and seafood 46 583 97 100.0 80.4 36 0.0 04 Cereals and preparations 969 87.8 834 32.5 100.0 5 1 0.0 05 Fruits and vegetables 36.0 44.8 51.6 18.3 1000 392 0.9 06 Sugar and honey 85.8 0.0 89 1 84.6 1000 0.9 91.9 07 Colfee and cocoa 175 0.0 00 00 100.0 0.9 2.3 08 Animal feeds ii g 309 53 13.7 92.7 16.9 0.3 09 Food preparatons 10.2 13.4 0.0 173 1000 737 04 11 Beverages 249 764 88.0 70.7 100.0 5.6 00 12 Inbacco 0.0 0.0 0.0 843 00 5.1 00 21 H’des and skins 0.0 991 00 181 00 0.0 32 22 Oil seeds and nuts 24.8 560 1000 43 1000 00 74.0 23 Rubber 00 0.0 00 0.0 00 00 0.0 24 Wood and cork 06 396 0.0 0.0 00 24 00 25 Pulp and paper 00 0.0 00 0.0 00 00 00 26 Silk, wool, cotton. inc go 248 00 1 2 4.6 164 2.1 29 ~~ude animal & vegetable matter 19 07805.3 51.8 69 1 11 2 11.0

NOTE See table 1 br the t:si of hard-core ncr-la-itt measures. The coverage rato is. for each given product and country the imports sub~ecito a hard-core non tariff measure divided by tnmat imports Euiopear community nt,a-tiade ‘s excluoeo SOURCE Laird and Yeats tfodhcoming~ 37

Table 4 The Use of Selected Non-tariff Measures Change in the Share of Imports Share of Imports Facing NTMs. 19811 Facing NTMs, 1981~862 Importer QUOT VER MFA NAIA VIL QUOT VER MFA NAIA VIL Belgium Luxembourg 03% 5.1% 1 2% 5.7% 5.2% 11% 22% 0.0% 00% 0.0% Denmark 03 2.6 23 1.1 1.4 01 12 —01 0.0 00 Gennany. Fed. Rep. 05 3.0 4.9 3.0 20 0.4 20 —06 00 00 France 58 12 18 7.1 2.2 16 1.8 0.0 0.0 0.0 Greece 82 &8 12 3.9 38 0.4 4.4 00 00 00 Great Britain 22 2.0 29 5.1 4.4 —0.9 2.3 0.0 0.0 0.0 Ireland 0.1 4.6 1.3 2.2 22 0.1 1.5 0.0 0.0 0.0 Daly 7.5 0.8 18 70 66 0.6 1.2 -0.1 0.0 0.0 Netherlands 04 2.0 30 14.0 63 2.5 36 —02 0.0 0.0 EC (10~ 26 23 30 5.6 3.7 0.5 2.1 -02 0.0 0.0 Switzerland 25 0.0 0.4 28 05 00 00 0.0 00 0.0 Finland 09 0.0 02 6.7 18 00 0.0 0.1 0.0 0.0 Japan 142 0.0 0.0 7.7 1.8 01 0.0 0.0 0.0 0.0 Norway 52 0.0 0.0 2.2 0.0 -05 00 0.0 1.1 0.0 New Zealand 253 ao 0.0 256 00 16 00 0.0 —8.8 0.0 United Stales 05 69 32 ao 0.0 15 44 00 0.0 1.4 All above 4.0 3.1 2.3 42 2.0 07 22 —0.1 —01 0.4

Petroleum prooucts have been excluded trom the calculations The abbrevialions for the non-tariff measures are as follows: QUOT—quotas, VER —voluntary export restraints; MEA—restrictions under the Multifiber Arrangement: NAIA-—non-automatic import authorizations; and VIL—-variable import levies. 2 The change is tne 1986 share less the 1981 share. 3 European Community intra-trade is excluded. SOURCE: Laird and Yeats (forthcoming)

ratios are found for the European Community 11.3 percent of U.S. imports were affected by and Japan. voluntary export restraints; Greece, with 9.2 percent, had the next-highest share of its im- Another dimension of the use of non-tariff ports affected by these restraints. barriers concerns differences in the use of specific barriers across countries. Table 4 shows SUPPLY AND DEMAND ANALYSIS the share of imports (by country) that faced dif- USING QUOTAS AND VOLUNTARY ferent non-tariff measures in 1981 and how this share changed by 1986. A number of facts EXPORT RESTRAINTS emerge. In 1981, non-automatic import authori- Although the quantitative effects of non-tariff zations and quotas affected the largest share of barriers are not always easily identified and imports when all 16 countries are considered; measured, a theoretical identification of their by 1986, this was no longer the case. Voluntary major effects can be derived using supply and export restraints, whose use in the United demand analysis. We begin by examining the ef- States, Greece, the Netherlands and Great Bri- fects of a quota, then discuss how a voluntary tain rose substantially, affected the largest share expori restraint can be analyzed similarly. of imports (5.3 percent) by 1986. Meanwhile, In figure 1, lID represents the U.S. import the share of imports affected by quotas rose demand curve for some good produced by U.S. from 4 percent in 1981 to 4.7 percent by 1986. and foreign producers. The foreign supply Comparisons of the specific measures across curve (that is, the supply curve for imports into countries indicate that voluntary export re- the United States) for the good is SS. With free straints were used more extensively by the trade, the United States will import QF units of United States than by other countries. By 1986, the good and pay a price per unit of ~F-

JANUARY/FEBRUARY 1989 38

tary export restraint reduces the quantity of imports, which, in turn, causes the domestic price Figure 1 to rise and the foreign price to fall as shown in The Price and Quantity Effects of a Quota figure 1. Again, the higher domestic price and a Voluntary Export Restraint benefits U.S. producers of this good at the ex- Price pense of U.S. consumers. Finally, the difference between what domestic and foreign consumers pay, 8B~q~is a premium per unit of imports that can he captured by exporters, importers or government. While the supply and demand analysis isolates the major effects of two frequently used non- PQ tariff barriers, it conveys virtually no informa- tion about either the magnitude of the costs and benefits of non-tariff barriers or their dynamic consequences.’2 Various case studies, however, PB have provided estimates of these costs and benefits. A review of this literature can he found in Laird and Yeats. Two case studies are provided in the shaded inserts on pages and QQ OF Quantity of as examples of such analyses. The first exam- Imports pIe examines the impact of the U.S. quota on sugar imports; the second examines the effect Now, suppose that an import quota of Qq is of the U.S-Japanese agreement to limit Japanese imposed by the United States. This restriction automobile exports to the United States. causes the import supply curve to become ver- As a protectionist policy, non-tariff barriers tical at the restricted quantity. Thus, the import are a method for redistributing wealth from supply curve is the kinked curve SCS’. The consumers in general to selected firms and restriction reduces the quantity of imports from workers. This redistribution is abetted by con- °,F to Qq~the domestic price to rise from P8 to sumer ignorance and the costs of mobilizing an PQ and the foreign price to decline from P8 to effective force to counteract protectionist PJ3.” The higher domestic price reduces total demands. As Coughlin et al. (1988) have demon- U.S. consumption of the good, but increases strated recently, the benefits received by se- U.S. production; thus, U.S. producers of the lected groups of firms and workers are far out- good benefit at the expense of U.S. consumers weighed by the costs borne by the rest of the in general. The difference between what population. domestic and foreign consumers pay, 8B~Q~is a premium per unit of imports that can be appropriated by exporters, importers or government. The method used to allocate import WHY USE NON-TARIFF BARRIERS licenses determines the distribution of these INSTEAD OF TARIFFS? premiums among the potential claimants. Since non-tariff barriers have been used in- A voluntary export restraint has the same creasingly in recent years, an obvious question general effects as an equivalent quota. A volun- is why non-tariff harriers rather than tariff bar- 1 ‘ Figure I can also be used to illustrate a variable import text, two of which are mentioned below. Since many levy. While a quota limits the quantity ot imports, a markets for internationally traded goods are imperfectly variable import levy is used to fix the price. Assuming a competitive, a standard topic in introductory international target (domestic) price of PQ, when world prices fall below trade texts is to identify the effect of an import quota in this price, the levy will be altered automatically to maintain the presence of monopoly. See Krugman and Obstfeld the price of P . Thus, no matter how far world prices (1988) tor an elementary discussion. Since voluntary decline, the quantity0 of imports will not rise above O~. export restraints discriminate among trading partners, the Consequently, a variable import le’~yand a quota have the effects of this differential treatment have been explored. same effect, even though they are implemented differently. See Jones (1984) for such an analysis. 2 ‘ Theoretical research on the impact ot non-tariff barriers has explored various issues that we do not mention in the

FEDERAL RESERVE BANK OF ST. LOUtS 39

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tlu’ .tst—LlIlipIi)It ahotil the clistiiluiitic;ii ol tIn- pflHhticI’I—~ gained SI .25 hi]linn in 1984 and ptni’ j)ii(C cI l(’tl-4 II liii’ i~l)0it ifStiiIilIl% li-ti lin—i’ign jtixtnt-t’rs gainiii 5.5 billion. (II [lie to i~1 Ln\eiltnt IILJJi’ piit(’ t’ltttt,’ tin tli)iiii slit- Its i’J4i~[)Jt)(ItiiIi . ~$tin Japanese pr-iiclticti-s 1 aiicl hiipor[ed cais Limit F S. pi othicer~gain— ncr_nod 53.23 billion. Ii acrwaLe. Illis ligtii-i oct ~ billion in I 98-I and ltiii’ign 1)1 t.itltitt’i ~ iks an t)Iik (ILlS itiP’Ofl t\ It thi’ lalianesi gainotl Si.: billion. (It liii’ lorcign ~i—otlnci~ go~et-nnient cIliltinLiOd lit- resu-aints h’t-tiiicl g~tin..lapanew prnchirt’rs i o ei~edS I billion. earl_v U1f45 t\ 11(0 the Reagan ailininist -alion thi [lit titliei sincl it ilit’ e\1nJit I istiajilts deridi’cl nOt Ii) ri’qtit’st an i’’.teimiun ol thi- led to eqon ~iloni qtuiht~ etfrris, then I .5. agri’entont. 2 ifl early 1985. the Reagar- administration decided that level and ,n 1987 extended Inc restraints for another the domestic auto’nobj!e .ndustry had adjusted to year without a turther increase in the cci’inq. The foreign competition aid announced they wouid nct ask uni~ateratoec-sion to extend the reslra-nts is a c~earn- for an extension Nevertheless in early 1985. the dication mat the Japanese. especi&iy automobile po Japanese governnient exleneed the restraints through ducers. were henefituig from the restrants early 1987 at a level 24 percent above the previous riers have become so popular.’3 A review by Certainty of Domestic Benefits Deardorff (1987) concludes that there currently is no definitive answer to this question; how- Deardorff (1987) suggests that non-tariff bar- ever, numerous reasons have been suggested. riers are preferred to tariffs because policymakers and demanders of protection believe that the effects of tariffs are less certain. This perception could be due to various reasons, some real and some illusory. For example, it The Impact of GATT: An Institu- may be much easier to see that a quota of I tional Constraint on the Use of million limits automobile imports to 1 million Tarjffs than to demonstrate conclusively that a tariff of, say, $300 per car would result in imports of GATT is an institution whose original mission only I million automobiles. was to restrict the use of tariffs. Given this con- In part, doubts that tariffs will have the straint, policymakers willing to respond to pro- desired effect is based on the possibility of ac- tectionist demands were forced to use non-tariff tions that could be taken to offset the effects of devices. Thus, in this case, non-tariff barriers higher tariffs. For example, the imposition of a are simply a substitute for tariffs. In fact, re- tariff may induce the exporting country to sub- search by Ray (1981) indicates that non-tariff sidize the exporting firms in an attempt to barriers have been used to reverse the effects reduce the tariff’s effectiveness. The effects of of multilateral tariff reductions negotiated quotas, on the other hand, are not altered by under GATT.14 such subsidies.’~ 5 “Dating from Bhagwati’s seminal discussion in 1965, com- ‘ Deardorff’s (1987) review provides another perspective on parisons of the theoretical effects of tariffs and non-tariff the role of uncertainty. The optimatity of trade policy tools barriers have been a frequent topic in the international has been explored extensively using trade models with trade literature. Under various circumstances, a tariff and uncertainty. These models, which rely on risk aversion a specific non-tariff barrier, say, a quota, can cause dif- (that is, an individual requires a higher expected return as ferent final prices and production despite reducing trade compensation for an increase in risk) and uncertainty by equal amounts. These circumstances produce what is originating outside a country, conclude that quotas are termed nonequivalence. Tariffs and quotas are equivalent preferred to tariffs. The country is insulated from the when markets are pertectly competitive. In this case, there uncertainty stemming from randomness in world prices or is no reason to prefer one to the other. import supply curves by a quota that stabilizes the price Bhagwati (1965, 1968) has demonstrated that the and quantity of imports. One problem with this explana- equivalence of tariffs and quotas breaks down in imper- tion, however, is that the quota is instituted before the fectly competitive markets. Numerous situations can be uncertain state of the world is known, while in the real characterized as imperfectly competitive. To date, how- world protection is generally provided after a change in the ever, the literature has provided no compelling reasons for world market. preferring non-tariff over tariff barriers. For a recent example from this literature, see Krishna (1985). 4 ‘ A question remains, however, as to why the framers of GATT chose to focus primarily on tariffs rather than non- tarift barriers.

FEDERAL RESERVE BANK OF St LOUIS 41

-it, Si it, nv,r~nrnit,r,v ic,ao \lashtis Ii 987) ha, itlt-~ntific’cl 1 nLIIlIhtT at Flie JJit’lt’dStili4l\ t-t’stiictive inpoit harriers the tlvtiatiitt’ rohisctt]tlenie-, iiF thu I 5 sugar have J}lOdLict’d trnsioii’. t~ith nunu-rotia OX-

pt-ogi-aiii - pant sieninling li’cnii tlit’ lai’t thai porters at si gar. host of whom alt’ dtt elop— sugat- has stwerai rinse suhstituttm (:nt-n rig eountrit!s 10 t-onlorrn t~lilt the ( t’iieral 1 su c’rttttier~ nijti—t’fflorit ‘,tt t-uteners honu~ .-~grot’ment on I acilts antI fl-atlt’, tiiit import anti spt’cialtv 5tI~4iti’5at’i’ all t’lo~t’stihstitcit~i~. tliJOI is titusi hi- •tpplit’d lii ii 111)11- liglier sugar pt-it-es hate induced the produt-— disrrimijiaicir~ iashioti Ihi’ t niLed itatt’s tiori ol ,tlternatn t su eotetiet-s that t ontpt-Ie plied this pt-tn ision in basing its titlohi zilloca—

with anti, c’onstqtieritlt - threatt’ii I 5 sugar tion art iiupot-ts during Ihe i’tiliiiit cit li-ce— pi’oditt-t’r~ lllai’hei pc-reid ol 1 973—81 ~ttempls to main- - t~tillt’tnlstanl shares NW most t’titititiies, I he lact that sUgar is ttst!cI in titl brunt - lnnt et or. i_itt info nraritt-al piohients ( (lUll— good liii’, ,et iii illoliciri a ntinihec ol ad- --, ------tilt’-, c’\pertehlc-iytg rapid grou UI n sugar tx- Rlstnlettts. LXaiilpli’~abound of tiit’ iirstcu’ttctn’, .‘. - --- - ports [ci the I jutc’tl ~,tatc’’, huRt eon 1 Ih~ antI induced In tht’ at-til cia11., lirgli t S sugar------1981 urn-c subjected to Stihst,itltial nits bet- price.-,-101- e~atnple.the Lu-go prit.~’dillerc-n— -\t tu’ri the end cit tlit’ I-ree-market period- arid tial lmttvc’t’n L .s and I cii-tttgti sugar prot- ties ------liii’ hcLfrtltililg ot liii tiUlotas. I-tn’ t’xaiiiplu, U lust ath iiilta’e to loi-t’igu. espec talk ( ana- C’ -- -- sugar flXpIJI’Is I iiiiii lli)il(iUltit% were -c’tlttt-ecl dian. itiod-pitit’t~ssnigtunic. t tie ‘-algal’ pohiy him 93,500 (Ins in 1981 In 2,S 0011 tons in

r~iiiIll! ‘ n-u.ed as a tax on [.5 rc’tiilc’i’s anti 98 -- I o. ~ tIi~ttt%as not it., itti oti ttii’t’tgn ii till’, I lie otlet’t cit Ibis cut was tiiitigatt’d sortie- l’r-ath I lc,~ts i-t-s nnidetl Lu [lit-se ~ u hat in 19.53 ~t hen tlit’ I nitt-cl Stales flails- 1 rh~lilgt’S fl” a ntpiti e.\pansiwl ill unpork at I erred ‘2 jicc t!iit at \ic-at’atzttas titiota to sllgiti t ontaining gimcIs t’;istiecl. In l,tu,t tic Haritiurasanac butt that sinittltittteriu~lt tIillt’t-ential hr’tn-oi’n .S and u or’lti sttgai’ prirtislied he Sandinista t-.’czinie and eu arch-il pt-it-us hr-i-ann- so ar-ge at out’ time that a !lt’ighhlfl-irhg s[att- thotight to hi’ in ciangt-t sugai’—t-otiuonmg gootis it Ott’ imported sc.tlt’lv ti-nm tht- Nit-~ti’aau;~n—’uppoi-tetiitnii~Ilioii.

liii their’ 5ti~itI’content. lot trt:tntplt-, tlutuig this action ‘, olatt’d UVI I ittlOs and gent’— 1983, uor]cj sttnar ~ detlincd so shai pft i ated nun-h criticism of the nitc’ti Stales.

that in June I 185. till’ L .~. sugar iii itt’ \VC1” Such a qttrtta c~ ctim inl-rc’a’i’-, tilt- likohhood 77(i fit-rI-c ill oF the u odd pine. 1 his tiil— that I ‘ade potict i., used its’ ihiJtlet-Otlothiir

tere.iicn triulUlced sor~etic-ins n the I ntled ieasotin - Stiiit”’ to mpoi-t (.an~icIiaiiputt-aLt’ ink whit ii ii as nut sUIl)m’r-t to liii’ qtiotir, ~ - hit’ lesson’, Ii out [he L S. sugar pt’ogt lilt iC55 it ti OntiLict the sugar’. - - art’ straiglitlot u ar-cl. I it-st stgnttti’~ititt-tisI., -l lit’ iittluced chanw’s in pi’~tittcltoti and li,i~t’ h’’eti iiiiiost’tl on ( -.5 t’onstmit-rs Sc— I fl.tth’ hit i’ Ioi’ct’tI ~t illIJhttIt!d of acithtic~nal ronti. tltt’ resulting (listt;itioths iii t’i,utioiiiit’ itt— I .5. tifluits to niautttin titt sugar prices. t Or’ t’t:n!ltt’s bitt- h,trnir’d I .5. pi od ut-t’rs tlerx-tt— risc-al ti-al I 9-MS tltt’ I ~ sugar’ import (iota (Wilt on sugar I hut!, c’cortoiliic’ rt’spoitses to u as t-ctiitc-tti 17 pi’i-t tnt ibis Vt as toiluti Ott the legislation thu e tot eah-d a ntuniher of r edtuu-uions ol 21fl liii -utit iii t )SU anti loopholes llitt hat i’ tiut’c!ssitrtc’d atIchtitinal -15 T pout-out itt 987 I tacit- rectrirtiori’, nit i t’~[rictiun’-, anti tltstum’t:ons so that I.2i. SlJt4itI’ 5Lt~iut stiIisliILIi(’s also hit r’ resUllt’d. In a nI otiurt-r-s could continue Itt here-lit. I otui Lb

rltt-st’ ate II nih (‘11101 Urrlrt bait au itiilit)i’Is ot _‘~ ;tttutnpts It) insure tan nt’ss liat-t’ rilcl’ssi— curia it svitJps atici hbeti~~t’ti‘—tug’tt’s ill hulk in tateil -uhstaotial rt’soitrrc’~ ho ,t”rtrtWl pro—

_Iuttt- 1983; and 2l ttnittu-goruc-t quotas ciii a duction anti tt-ack’ hehnit 101 naIl., - tIn- ito— hr’oatl lange ol ingat —rnntaiuing articles ri giant has been tisiti Its’ pcihilic-ctI purpost!’ to both bulls and retail Ioi’ms in _lanimau’,t 1983 I ru at d anti punish foreign I tiUlmiti it_s. 43

Benefits to Other Parties voluntary export restraint.bO A simplification in this model, whose importance is discussed The supply and demand analysis of quotas below, is that rival political candidates place no and voluntary export restraints highlights the value on tariff revenue. Assume a voluntary ex- difference per unit of import between what port restraint and a tariff generate identical domestic and foreign consumers pay. This price domestic producer benefits. Politicians will sup- differential reflects the extent of the gains that port the voluntary export restraint over the are available for some group to appropriate. tariff because the voluntary export restraint With tariffs) the price differential is captured by generates benefits for foreign producers that, in the domestic government in the form of tariff turn, can be appropriated partially by the politi- revenue. With non-tariff barriers, the domestic cians in the form of campaign contributions. On government is not a direct beneficiary unless it the other hand, the tariff revenue is assumed to sells the rights to import to the highest bidders. have no value for politicians. Candidates for Otherwise, domestic importers) foreign ex- elective office are viewed as announcing trade porters and foreign governments capture these policy positions to maximize campaign contribu- gains. The potential distribution of these bene tions from domestic and foreign producer fits can influence the domestic government’s interests. choice between tariff and non-tariff barriers. In addition to increasing the probability that With voluntary export restraints, the price dif- protectionism will take the form of voluntary ferential identified above is typically captured export restraints rather than tariffs, the argu- by the exporting firms from the foreign coun- ment reveals a way that political candidates can try. This result may reduce the likelihood that personally capture revenues that, with tariffs, the foreign country will retaliate against such would have accrued to the domestic govern- restrictions. Given certain demand conditions in ment. Nonetheless, the assumption about the both the U.S. and foreign markets, voluntary ex- perceived value of tariff revenue to politicians port restraints can entail a substantial redistrib- and the fact that consumer interests are ig- ution from consumers in the importing country nored in the analysis suggests one should be to selected producers in the exporting country. cautious in generalizing this result. For example, Collyns and Dunaway (1987) estimate that the U.S-Japanese voluntary export The possible benefits to domestic politicians of restraint on automobiles yielded increased using non-tariff rather than tariff barriers are benefits to selected Japanese auto producers not restricted to campaign contributions. For ex- ranging from $1 billion to $5.25 billion in 1984. ample, a tariff is an explicit tax on consumers while a quota is an implicit tax on them. Policy- Hillman and Ursprung (1988) extend the makers might find it easier to support quotas preceding idea using a simple model of trade and other non-tariff barriers because they will policy formulation in which a democratic not be directly associated with a tax increase government is choosing between a tariff and a that consumers, as voters, might resist.”

l6Husted (1986) also connects foreign lobbying to the he also found some maior differences. Tariffs are biased domestic economy. He finds that the dollar value of toward low-skill rather than capital-intensive industries and foreign lobbying in the United States is small relative to are unrelated to product heterogeneity and the other traded service flows and that the returns to foreign geographical dispersion of domestic production facilities. lobbying generate large returns. For example, Husted On the other hand, non-tariff barriers are biased toward calculated that the expenditure in the United States of capital-intensive industries producing fairly homogeneous $1.4 million on foreign lobbying by the world automobile products. Production in these industries tends to be industry came primarily from Japan. Given the estimates distributed across regions consistent with the distribution by Collyns and Dunaway (1987) and others indicating of population. Japanese automobile rents exceeded $1 billion in 1984, U.S. politicians do not appear to be capturing much of these rents. “A neglected issue in the preceding comparison of non- tariff barriers with tariffs is the distribution of these restrictions across industries. While Ray (1981) found that non- tariff barriers and tariffs are biased toward industries in which the United States has a comparative disadvantage, 44

GATT AND NON~TARIFF unless the subsidized goods are shown to be BARRIERS causing (or threatening) “material” injury to a domestic producer. This code also allows a The history of multilateral trade negotiations country to seek redress for cases in which 3 dealing with non-tariff barriers is brief.’ another country’s subsidized exports displace its Multilateral trade negotiations are conducted exports in third-country markets. under the auspices of the General Agreement on Tariffs and Trade, which was created short- The code on government procurement states that, for qualifying nonmilitary purchases, ly after World War II. GATT, a term that en- compasses the multilateral agreement governing governments (including government-controlled international trade, the bodies administering the entities) must treat foreign and domestic pro- agreement, and all associated trade-related ac- ducers alike. In addition to resolving disputes, tivities, has focused on the reduction of tariff the code establishes procedures for opening and rather than non-tariff barriers, To date, seven awarding bids. rounds of GATT negotiations have been com- The code on technical standards attempts to pleted, with the first six concerned almost ex- ensure that technical regulations and product 19 clusively with tariffs. standards such as labeling, safety, pollution and quality requirements do not create unnecessary The Tokyo Round obstacles to trade. ‘the code does not specify standards; however, it establishes rules for set- The ‘Tokyo Round, the most recently com- ting standards and resolving disputes. pleted round lasting from 1973 to 1979, was a The code on import licensing procedures, comprehensive effort to reduce trade obstacles similar to the code on technical standards, is stemming from tariffs and non-tariff measures. not spelled out in detail. Generally speaking, New or reinforced agreements called “codes,” governments stated their commitment to sim- were reached on the following non-tariff mea- plify the procedures that importers must follow sures: 1) subsidies and countervailing duties; 2) to obtain licenses. Reducing delays in licensing government procurement; 3) technical stan- and paperwork are two areas of special dards; 4) import licensing procedures; 5) cus- interest. toms valuation; and 6) anti.dumping,20 The code on customs valuation established a The code on subsidies and countervailing uniform system of rules to determine the cus- duties prohibits direct export subsidies, except toms value for imported goods. This code uses under certain situations in agriculture. This transaction prices to determine value and is code is noteworthy in extending GATT’s prohibi- designed to preclude the use of arbitrary values tion of export subsidies to trade in raw matet- that increase the protective effect of a tariff ials. Because nearly all governments subsidize rate. domestic producers to some extent, the code established criteria to distinguish between a do- Finally, the anti-dumping code prescribes rules mestic and an export subsidy. Domestic subsi- for anti-dumping investigations, the imposition dies that treat domestic and export activities of anti-dumping duties and settling disputes. identically are generally allowed. Countervailing The standards for determining injury are clari- duties, which are tariffs to offset a subsidy fied. This code obligates developed countries to received by a foreign exporter, are prohibited treat developing countries preferentially.

8 ‘ For a brief history of multilateral trade negotiations, as well Prices, which applied a tariff rate for certain imports to an as details on the current negotiations, see The GATT artificially high dutiable value. The dutiable value was set Negotiations and U.S. Trade Policy, a 1987 study by the equal to the price of a competing good produced Congressional Budget Office For additional details on the domestically instead of to the import’s actual invoice price. current multilateral negotiations, see Aniaria (1986) and This system was applied to a small portion of total imports, the 1987 report by the United States International Trade primarily benzenoid chemicals and rubber footwear. Both Commission, Operation of fhe Trade Agreements Program. agreements were blocked by Congress, but were accepted 19 The sixth round, known as the Kennedy Round, marked in the next round of negotiations. the first time for a GATT agreement on non-tariff barriers. ‘°Non-tariffbarriers were also reduced in civil aircraft and Agreements were reached on an anti-dumping code and selected agricultural goods, primarily meat and cheese. the elimination the U.S. system of American Selling

ccfln~al cc 5I&KO( fl~rcy fltII~ 45

The Uruguay Round reform will be met with much resistance from these groups. The Tokyo Round codes have relied on good- faith compliance, which has tended to under- mine their effectiveness. Streamlining and CONCLUSION resolving disputes is a priority during the cur- Non-tariff barriers have effects similar to rent round of multilateral negotiations, the those Uruguay Round. The Tokyo Round codes will of tariffs: they increase domestic prices and impede trade to protect selected producers be reviewed and possibly modified during the at the expense of domestic consumers. As Uruguay Round. In particular, broadening the shown in the case studies of sugar and automo- government procurement code to include ser- biles, they also have other effects, generally vice contracts will be discussed. Concerning the adverse. technical standards code, agreements dealing with the mutual acceptance of test data gener- Despite the adverse national consequences, ated by other parties and the openness of the the use of non-tariff barriers has increased activities of standards bodies will be sought. A sharply in recent years. The chances for a re- major issue in the anti-dumping code is how to versal of this trend appear to be small. The handle input dumping (that is, export sales of variety of non-tariff measures, the difficulties of products that contain inputs purchased at identifying and measuring their effects and the dumped prices). benefits received by specific groups combine to The Uruguay Round, begun in September make a significant reduction of non-tariff barriers in the ongoing Uruguay Round negotia- 1986, has and will discuss a number of non- tions unlikely. tariff barrier issues, many of which extend beyond the codes of the Tokyo Round. Trade The original mission of GAn, which has been issues involving agriculture and services (bank- largely achieved, was to reduce tariffs. The ing, construction, insurance and transportation) question, however, of why policymakers have are of paramount importance. The United States preferred to use non-tariff barriers rather than has proposed the elimination of all trade- and tariffs in recent years remains. The more cer- production-distorting agricultural policies. While tain protective effects of non-tariff bat-riers is the major agricultural nations have agreed to one plausible explanation. A second explanation, the principle of liberalizing agriculture, the which focuses on the distribution of the bene- sweeping nature of the U.S. proposal has been fits, is that the benefits of non-tariff barriers resisted by some nations, especially the Euro- can be captured by foreign producers and pean Community. With respect to services, the domestic politicians. Such an allocation of bene- primary goal is to establish principles for exten- fits increases the probability that the political ding GATT coverage to this trade. process generates larger amounts of non-tariff barriers relative to tariffs. A final explanation is A recent study by the Congressional Budget that their adverse effects are generally less ob- Office (1987) predicts that the performance of vious to consumers than the effects of tariffs. the Uruguay Round will be judged largely on its handling of non-tariff barrier issues. GATT has not effectively combatted rising non-tariff barriers for many reasons. Two reasons are that REFERENCES the effects of non-tariff barriers are less trans- Anjaria, S.J. ‘A New Round of Global Trade Negotiations,’ parent than the effects of tariffs and, in many Finance and Development (June 1986), pp. 2-6. cases, non-tariff barriers are designed to satisfy Bhagwati, Jagdish N. “On the Equivalence of Tariffs and a domestic rather than an international objec- Quotas,” in RE. Caves et al., eds. Trade, Growth, and the tive. A major obstacle is determining at what Balance of Payments: Essays in Honor of Gotifried Haberler (Rand McNally, 1965), pp. 53-67. point a national economic policy, whose international effects are somewhat uncertain, becomes ______- ‘More on the Equivalence of Tariffs and Quotas,” American Economic Review (March 1968), an internationally unacceptable non-tariff bar- pp. 142-46. rier. ‘I’hese national economic policies have fre- Chow, Peter C. Y., and Mitchell Keiiman. Anti-LDC Bias in quently resulted from the lobbying efforts of the U.S. Tariff Structure: A Test of Source Versus Product strong domestic constituencies such as Characteristics,” Review of Economics and Statistics agricultural interests. ‘Thus, major trade policy (November 1988), pp. 648-53.

iSM~,aev,ccno, IAOV 1C~,t1 46

Collyns, Charles, and Steven Dunaway. “The Cost of Trade Laird, Sam, and Alexander Yeats. “Nontariff Barriers of Restraints: The Case of Japanese Automobile Exports to Developed Countries, 1966-86,” Finance & Development the United States,” International Monetary Fund Staff (March 1989), pp. 12-13. Papers (March 1987), pp. 150-75. Laird, Sam, and Alexander Yeats. Quantitative Methods for Coughlin, Cletus C., and Kenneth C. Carraro. “The Dubious Trade Barrier Analysis (Macmillan, forthcoming). Success of Export Subsidies for Wheat,” this Review Maskus, Keith E. “The International Political Economy of (November/December 1988), pp. 38-47. U.S. Sugar Policy in the 1980’s,” United States Depart- ment of State, Bureau of Economic and Business Affairs, Coughlin, Cletus C., K. Alec Chrystal, and Geoffrey E. Wood. Planning and Economic Analysis Staff, Working Paper #1 “Protectionist Trade Policies: A Survey of Theory, (September 1987). Evidence and Rationale,” this Review (January/February 1988), pp. 12-29. Nogu~s,Julio J., Andrzej Olechowski, and L. Alan Winters. “The Extent of Nontariff Barriers to Industrial Countries’ Deardorff, Alan V. “Why do Governments Prefer Nontariff Imports,” The World Bank Economic Review (1986), Barriers?” in Karl Brunner and Allan H. Meltzer, eds. pp. 181-99. Bubbles and Other Essays, Carnegie-Rochester Con- ference Series on Public Policy (North-Holland, 1987), Page, Sheila. “The Rise in Protection Since 1974,” Oxford pp. 191-216. Review of Economic Policy (Spring 1987), pp. 37-51 - Feenstra, Robert C. “Automobile Prices and Protection: The Ray, Edward John. “The Determinants of Tariff and Nontariff Trade Restrictions in the United States,” Journal of U.S-Japan Trade Restraint,” Journal of Policy Modeling Political Economy (February 1981), pp. 105-21. (Spring 1985), pp. 49-68. “Survey of Automotive Trade Restrictions Maintained by Herander, Mark G., and Christopher R. Thomas. “Export Selected Nations.” Office of International Sectoral Policy, Performance and Export-Import Linkage Requirements,” U.S. Department of Commerce, in hearings on Fair Quarterly Journal of Economics (August 1986), 591-607. Practices in Automotive Products Act before the Subcom- mittee on Commerce, Transportation and Tourism, March Hillman, Arye L., and Heinrich W. Ursprung. “Domestic 2, 1982, pp. 113-23. Politics, Foreign Interests, and International Trade Policy,” American Economic Review (September 1988), pp. 729-45. Tarr, David C., and Morris E. Morkre. Aggregate Costs to the United States of Tariffs and Quotas on Imports: General Husted, Steven. “Foreign Lobbying and the Formation of Tariff Cuts and Removal of Quotas on Automobiles, Steel, Domestic Trade Policy,” paper presented at Western Sugar, and Textiles, Bureau of Economics Staff Report to Economic Association Meeting, San Francisco, July 1986. the Federal Trade Commission (December 1984). Jones, Kent. “The Political Economy of Voluntary Export U.S. Congress, Congressional Budget Office. The GATT Restraint Agreements,” Kyklos (1984), pp. 82-101. Negotiations and U.S. Trade Policy (GPO, June 1987). U.S. Department of Commerce, Bureau of the Cen- Krishna, K. “Trade Restrictions as Facilitating Practices,” sus.Statistical Abstract of the United States: 1988 (GPO, National Bureau of Economic Research, Working Paper 1987). #1 546 (1985). U.S. International Trade Commission. Qperation of the Trade Krugman, Paul R., and Maurice Obstfeld. Internafiona/ Agreements Program—39th Report, 1987 (USITC, July Economics (Scott, Foresman, 1988). 1988).

FEDERAL RESERVE BANK OF St LOUiS