Abstract:

The purpose of this paper is the extension of the traditional analysis of optimal tariffs to a situation in which a country 'dominates' only a subset of international markets whereas it behaves as a price taker (small economy) for the remaining tradeable commodities. After presenting the general case of n traded sectors we present some reflections on the Argentine case, a country not small in every sector connected with foreign trade. We show that for a medium sized country which exports industrial commodities it is not valid to apply the usual optimal tariff argument. The main conclusion among several others is that if tariffs are to be set on imports, optimality requires that necessarily industrial exports be subsidized in the same proportion so as to keep the domestic relative price of these commodities equal to the international prices. © 1986.