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Protection for Free? The Political Economy of U.S. Tari Suspensions Rodney Ludema, Georgetown University† Anna Maria Mayda, Georgetown University and CEPR‡ Prachi Mishra, International Monetary Fund§ June 2010 Abstract This paper studies the political influence of individual firms on Con- gressional decisions to suspend taris on U.S. imports of intermediate goods. We develop a model in which firms influence the government by transmitting information about the value of protection, via costless messages (cheap-talk) and costly messages (lobbying). We estimate our model using firm-level data on tari suspension bills and lobbying expen- ditures from 1999-2006, and find that indeed verbal opposition by import- competing firms, with no lobbying, significantly reduces the probability of a suspension being granted. In addition, lobbying expenditures by pro- ponent and opponent firms sway this probability in opposite directions. 1 Introduction With the success of the WTO in binding and reducing taris over the recent decades, it is tempting to believe that the tari schedules of WTO members are largely static between negotiating rounds. In fact, tari schedules are constantly being modified. In the United States, Congress regularly passes Miscellaneous We are grateful for the excellent research assistance of Anastasiya Denisova, Manzoor Gill, Melina Papadopoulos, Jose Romero, Natalie Tiernan, and especially Kendall Dollive, whose undergraduate thesis on tari suspensions proved invaluable. We thank Andy Berg, Mitali Das, Luca Flabbi, Gene Grossman, Giovanni Maggi, David Romer, Francesco Trebbi, and Frank Vella for i