"Predation -- extortion or theft -- imposes significant, sometimes prohibitive, costs on trade. Mutual causation of predation and trade can explain trade volume responses to liberalization that are otherwise puzzlingly 'too big' or 'too small'. Efficient commercial policy in this setting should subsidize (tax) trade when enforcement is weak (strong). The Mercantilist predilection for trade monopoly and for subsidy has a rationale. Tolerance (intolerance) of smuggling is rational when enforcement is weak (strong). The switch from weak to strong enforcement explains the switch from tolerance to intolerance by British policy toward its North American colonies after 1763."
""Predation -- extortion or theft -- imposes significant, sometimes prohibitive, costs on trade. Mutual causation of predation and trade can explain trade volume responses to liberalization that are otherwise puzzlingly 'too big' or 'too small'. Efficient commercial policy in this setting should subsidize (tax) trade when enforcement is weak (strong). The Mercantilist predilection for trade monopoly and for subsidy has a rationale. Tolerance (intolerance) of smuggling is rational when enforcement is weak (strong). The switch from weak to strong enforcement explains the switch from tolerance to intolerance by British policy toward its North American colonies after 1763"--National Bureau of Economic Research web site."@en

Commercial policy in a predatory world