Protection for the Neediest? Comparative Advantage, Tariffs, and Political Economy Dynamics under NAFTA

Abstract

ABSTRACT In theory, a country will impose tariff barriers to protect the domestic industries and firms that are less competitive relative to foreign imports. This study investigates whether revealed comparative advantage (RCA) is related to tariff protection in the three large North American economies. I find little evidence for the hypothesis that higher RCA values always correspond to lower tariff levels. The effects of RCA on tariffs are heterogeneous across sectors; consumer goods are likelier to see higher tariffs as RCA increases than agricultural or other goods. These results challenge the theory that export-competitive goods will necessarily receive less tariff protection.