International duopoly, tariff policy and the superiority of free trade

This paper addresses the effectiveness of tariff policy in the long-run pro duction framework in which decisions must be made about plant size and the level of output to be produced by foreign duopolists competing with each ot her in the importing country's market. We consider two types of tariff regi me, discriminatory and uniform, and show that the importing country's welfa re is unambiguously higher in the uniform tariff case. We consider free tra de in the same production framework and show that, as the longrun capacity decision becomes increasingly relevant relative to the short-run quantity d ecision, free trade dominates tariffs in welfare rankings.