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Can Bribes Buy Protection Against International Competition?
Unformatted Document Text:  Second, importing firms may have a similar incentive to lobby for less protection, which could to some extent counteract the lobby activity of import-competing sectors. However, this influence is likely to be much smaller than that of the domestic industry because the import-competing sector is likely to have smaller concentration and will not directly and visibly generate the same employment than the domestic industry and hence carry the same political weight. Importing firms, on the other hand, also clearly have a strong incentive to bypass costly barriers to trade that are the outcomes of trade policy making. The barriers to trade decided on in the political process thus create an incentive for corruption at the ‘local’ level, and this incentive is stronger the higher the barriers to trade are. In the light of the Rose-Ackerman quote in the introduction, an additional barrier to trade can also occur due to corruption in the customs offices where civil servants might decide to accept bribes in order for firms to circumvent the official and administrative barriers to trade. The demand for such circumvention will thus in general provide incentives for adopting a more cumbersome administration of trade regulations, which will increase the size and likelihood of bribes. 1 As the number of customs offices is necessarily limited in most countries, customs officers are likely to work as an oligopoly in selling circumvention. The local level of corruption is thus limited not only by the risk of being detected but also by the negative effect on the demand for imports, which may not influence the size of the individual bribe but only their frequency. To the extent that individual importing firms do not have market power – i.e. the extent to which they can be characterized as being atomistic – each firm may not take the demand effects of its corrupt activities into account, which will tend to 1 The Fraser Institute actually makes this point in their annual report, stating that administrative factors influencing trade are sometimes “the result of inefficiency while in other instances they reflect the actions of corrupt officials seeking to extract bribes (Gartzke et al., 2005, p. 8). 6

Authors: Bjørnskov, Christian.
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Second, importing firms may have a similar incentive to lobby for less protection,
which could to some extent counteract the lobby activity of import-competing sectors.
However, this influence is likely to be much smaller than that of the domestic industry
because the import-competing sector is likely to have smaller concentration and will not
directly and visibly generate the same employment than the domestic industry and
hence carry the same political weight. Importing firms, on the other hand, also clearly
have a strong incentive to bypass costly barriers to trade that are the outcomes of trade
policy making. The barriers to trade decided on in the political process thus create an
incentive for corruption at the ‘local’ level, and this incentive is stronger the higher the
barriers to trade are. In the light of the Rose-Ackerman quote in the introduction, an
additional barrier to trade can also occur due to corruption in the customs offices where
civil servants might decide to accept bribes in order for firms to circumvent the official
and administrative barriers to trade. The demand for such circumvention will thus in
general provide incentives for adopting a more cumbersome administration of trade
regulations, which will increase the size and likelihood of bribes.
As the number of
customs offices is necessarily limited in most countries, customs officers are likely to
work as an oligopoly in selling circumvention. The local level of corruption is thus
limited not only by the risk of being detected but also by the negative effect on the
demand for imports, which may not influence the size of the individual bribe but only
their frequency. To the extent that individual importing firms do not have market power
– i.e. the extent to which they can be characterized as being atomistic – each firm may
not take the demand effects of its corrupt activities into account, which will tend to
1
The Fraser Institute actually makes this point in their annual report, stating that administrative factors
influencing trade are sometimes “the result of inefficiency while in other instances they reflect the actions
of corrupt officials seeking to extract bribes (Gartzke et al., 2005, p. 8).
6


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