Trade Policies - International Trade - Lecture Slides, Slides of Foreign Trade

Download Trade Policies - International Trade - Lecture Slides and more Slides Foreign Trade in PDF only on Docsity! Trade Policies Tariffs and Quotas Docsity.com Tariffs Tariff: A tax on import • Specific tariff: a per unit tax on imports • Ad valolrem tariff: a value based tax on imports • Why impose tariff? • To discourage consumption • To raise revenue • To discourage imports • To protect domestic industries Docsity.com The Small Country Case D S Q P Pw Pw+ T Pa o Q1 Q3 Qo Q4 Q2 b c d e f g h i k Tariff Docsity.com The Large Country Case D Sd +w Sd+w +t Sd Q P o q1 q3 q2 qo m r s P1 P0 P2 Docsity.com Tariffs and Offer Curves Case of a small country TT A A` Good X Good Y X2 X1 Y2 Y1 Docsity.com The Effective Rate of Protection • The protective effect of tariff based on the value added tf - a.ti • ETR = ------------ 1 - a a = value of import as % of the value of final good Docsity.com f h g i Dw Dw -t Q 0 q2 q1 q4 q3 P Export Tax P1 P0 Docsity.com Non-tariff Barriers to Trade • Quotas Quantitative restrictions on imports • Voluntary export restrictions • Export subsidies • Dumping • Regulatory and technical standards • Government purchasing policies • How to measure non-tariff barriers Docsity.com o o Q Q q1 q3 qo q2 q1 q2 q3 q4 D D’ D D’ Sd Sd +t Sd P P Docsity.com Export Policies • Export taxes: » Small counties » Large countries • Export subsidies • Voluntary export restraints • Countervailing Duties (Against subsidies) Docsity.com Dw-S2 Dw Dw +S1 Dd Sd P Qx o q3 q1 qo q1 po Po-s Po+s a b c d e f Docsity.com Export Subsidies • An export subsidy lowers the cost of production for the produces in the exporting country. • The cost of a subsidy is borne by the taxpayers in the exporting country. • An export subsidy lowers the price to the importing country, resulting in an increase in the exports for exporting county; that is an increase in imports for the importing country. Docsity.com An Export Subsidy from the Perspective of the Importing Country: A Small Country D Sd Pw Pw -s 0 s = Pw-s+c Q f e g h P1 P2 Docsity.com Non-Tariff Barriers • Technical standards • Regulatory standards • Administrative standards • Domestic-content requirements • Rules of origin • Government-procurement policies Docsity.com The Optimal Tariff Dd Q Sd+w Sd+w +t Sd 0 P0 P2 P2 s Docsity.com International Trade and a Monopoly • Under autarky a monopoly under-produces • Free trade forces a monopoly to behave like a competitive firm. • A tariff protection for a monopoly is less restrictive than a quota protection. Docsity.com Monopolies and Tariffs MC D Q 0 MR Sw Q1 Q2 Q3 Sw +t Docsity.com Positive Externalities S D Sw Sw +t Q Q o o CE EB Docsity.com Negative Consumption Externalities S D Sw Sw +t Q Q o o CE Docsity.com