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34 Cards in this Set
- Front
- Back
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Free Trade |
Absence of barriers to the free flow of goods and services A situation where government does not attempt to restrict what its citizens can buy or sell from another country Brings static and dynamic economic gains |
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GATT chapter 7 |
International treaty that committed signatories to lowering barriers to the free flow of goods across national borders and led to the WTO |
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Tariff |
A tax levied on imports Tariffs are place don imports to protect domestic producers from foreign competition Also provide a source of Revenue for the govt |
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Specific Tariff |
Tariff levied as fixed charged for each unit of good imported |
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Ad valorem tariffs |
Levied as a proportion of the value of the imported good |
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Losers and Winners of Tariffs |
Government and Producers win Consumers lose |
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Export tariffs |
Tariffs on exports to reduce export from that sector of the economy |
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Subsidies |
Government financial assistance to a domestic producer These lower production costs and help domestic producers 1. compete against foreign imports, 2. Gain access to export markets |
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Losers and Winners of Subsidies |
Main gains accrue to domestic producers, increasing international competitiveness Advocates of strategic trade favor subsidies to help domestic firms achieve a dominant position in those industries in which economies of scale are important an the world market is not large enough to profitably support more than a few firms Thus mostly in emerging markets help create first mover advantages Losers are tax payers |
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Import Quota |
A direct restriction on the quantity of a good that can be imported into a country |
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Tariff Rate Quota |
Lower tariff rates applied to imports within the quota than those over the quota Common in agriculture |
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VER (Voluntary export restraint |
A quota on trade imposed from the exporting country's side, instead of the importer's usually imposed at the request of the importing country's government (US on Japanese auto companies) Cave in to avoid higher tariffs |
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Quota Rent |
Extra profit producers make when supply is artificially limited by an import quota |
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Local Content Requirements |
A requirement that some specific fraction of a good be produced domestically Can be expressed in physical or value terms (e.g. us has Buy America Act- must be 51% produced in US) Also benefit producers by protecting against foreign producers |
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Non Tariff Barriers |
Specific Limitations Customs-Administrative Rules Government Participation Import Charges |
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Specific Limitations |
Quotas (including voluntary) Import-licenses Foreign-Domestic ratios Minimum import price limits embargoes Bilateral Agreements Orderly Marketing agreement |
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Administrative Trade Policies |
Typically adopted by government bureaucracies, that can be used to restrict uproots or boost exports |
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Antidumping policies |
Dumping is selling goods in a foreign market for less than their cost of production or below fair market value Fair includes the profit after production Anti-dumping laws deal with this |
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Countervailing Duties |
Antidumping duties may be a special tariff that is substantial and stay in place for long |
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Customs Administrative Rules |
Valuation System Antidumping rules Tariff classifications Documentation needed Fees Disparity in quality and testing standards Packaging, labelling, marketing standards |
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Government Participation |
procurement policies Export subsidies and incentives Countervailing duties Domestic assistance programs Trade-diverting aids |
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Import Charges |
Import deposits Supplementary duties Import credits Variable levies Border levies |
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The case for government intervention |
Two paths political and economic Protecting the interest of certain groups normally producers, at the expense of other groups normally consumers Economic arguments concerned with boosting the overall wealth of a nation |
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Political Arguments for intervention |
Protecting Jobs and Industries - leads to lower competitiveness and higher prices National Security - defense related industries Retaliation - threat of intervention to use as bargaining tool to help open foreign markets and force trading partners to play by the rules Protecting consumers - from unsafe products Furthering foreign policy objectives -build strong relationship, or to bring back rogue state in line Protecting Human rights - using tariffs to protect human rights of producer countries |
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Economic arguments for intervention |
Infant industry argument - Alexander Hamilton Strategic Trade policy |
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Infant Industry Argument for Intervention |
New industries in developing countries must be temporarily protected from international competition to help them reach a position where they can compete in World Markets with the firms of developed nations Usually protects inefficient markets Assumes that firms cannot make efficient long-term investments by borrowing money from domestic or international institutions |
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Strategic Trade Policy |
Two components - by appropriate actions govt can raise national income by ensuring that domestic companies gain first mover advantages Can help domestic firms enter market in which foreign firms have already reaped first mover advantages |
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Retaliation and Trade war due to STP |
Beggar thy neighbor effect - race to the bottom Krugman |
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Domestic Politics and the effect of STP |
Many time small national interest groups may usurp policy goals |
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GATT and WTO |
From repeal of Britain's Corn Laws (1846) to Smoot Hawley (1930) - which fueled the Great Depression GATT created in 1947 after WWII - Multilateralism and elimination of Barriers 1980's-1993 protectionist trends - Japanese growth strained econ system - Trade deficit in US - Ways around GATT, bilateral VER Used successive rounds to reduce barriers WTO and Mandate - arbitration, services, IPR Uses Panel to determine guilt |
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WTO different parts |
GATS - free-trade agreement to services TRIPS - Trade-Related Aspects of Intellectual Property Rights |
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WTO differed from GATT |
It had global police mechanism and enforcement mechanism |
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Uruguay Round |
Expanded global trading rules to include services WTO meant to increase reform in Financial Services and FDI and telecommunications markets |
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Doha Round |
Talks stalled on North/South differences Issues to be resolved - antidumping laws, high level of agricultural protectionism, the lack of strong protection for IPR, and continued high tariffs on nonagricultural gods and services in many nations |
