The Political Economy of Effective Tariff Protection in Canada's Manufacturing Sector

This study investigates the effects of market structure on the ability of Canadian manufacturing industries to lobby successfully for high effective tariff protection. Several of the factors that explain the inter-industry variation in effective tariff protection are treated not as exogenous influences but as endogenous features of a structural model of Canadian manufacturing, which is estimated, using two-stage least-squares, on a sample of eighty-four 3-digit industries. The statistical results indicate that effective tariff protection is negatively associated with foreign ownership, export share, and unit transportation costs. In addition, industries which have relatively low labour productivity compared to their us counterparts receive a high degree of effective tariff protection. Finally, there is some evidence that industries with high seller concentration are able successfully to lobby for high tariffs, provided that foreign ownership in these industries is relatively low.