Resumen de Protection versus Free Trade: Lobbying Competition between Domestic and Foreign Firms

Dapeng Cai, Jie Li

• This article considers how political interaction between policymakers and domestic and foreign firms endogenously determines tariff rates. We show that because of lobbying competition between foreign and domestic firms, even a less competitive foreign firm can successfully elicit a tariff reduction under reasonable conditions. Moreover, lobbying competition may also increase the level of aggregate domestic welfare when the market powers of the competing firms are sufficiently alike.