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26 Cards in this Set

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What are the 7 main instruments of trade?
1. Tariffs
2. Subsidies
3. import quotas
4. voluntary export restraints
5. local content requirements
6. administrative policies
7. antidumping duties
A tax levied on imports. Put in place to protect domestic producers from foreign competition. They also raise revenue for the government.
Tariff
What are the two categories tariffs fall into?
1. Specific Tariffs
2. Ad valorem tariffs
Define Specific Tariffs
Levied as a fixed charge for each unit of a good imported. (Example $3 per barrel of oil)
Define Ad valorem Tariffs
Levied as a proportion of the value of the imported god. ex: % of price
List three reasons for tariffs
1. Governments impose tariffs for income.
2. To protect the domestic market
3. Results in higher prices for everyone
What is the largest industry in the world that is protected from tariffs?
Farming
What is a subsidy?
A government payment to a domestic producer.
ex:
-cash grants
-low-interest loans
-tax breaks
-government equity participation in domestic firms
In what ways are subsidies helpful?
1. They help producers compete against foreign imports
2. Help them gain export markets
True or False:
Subsidies must be paid for
True, they are paid for through the government taxing them
A direct restriction on the quantity of some good that may be imported into a country.
Import quota
A quota on trade imposed by the exporting country, typically at the request of the importing country's government.
Voluntary Export Restraint
Why do foreign producers agree to voluntary export restraints?
Because they fear far more damaging punitive tariffs or import quotas might follow if they do not
How do import quotas and Voluntary export restraints benefit domestic producers?
-They limit import competition
The extra profit that producers make when supply is artificially limited by an import quota is referred to as ____.
Quota rent.
What are some industries that operate with import quotas?
U.S. Sugar Industry
Textile Industry
A requirement that some specific fraction of a good be produced domestically.
Local content requirement
This Act specifies that government agencies must give preference to American products when putting contracts for equipment out to bid unless the foreign products have a significant price advantage.
the Buy America Act
Bureaucratic rules that are designed to make it difficult for imports to enter a country.
Administrative trade policies
What is a country that is considered the "master" of administrative trade policies and provide an example
Japan, because they must inspect every little thing. Holland will send them tulips but they cut them right down the middle and the tulips die, so Holland will not send Japan tulips
What is dumping?
selling goods in a foreign market at below their costs of production, or below their "fair" market value
What are the 2 paths of arguments for government intervention?
1. Political
2. Economic
Describe Political Arguments
Concerned with protecting the interests of certain groups within a nation (often producers) often at the expense of other groups (normally consumers).
Describe Economic Arguments
Typically concerned with boosting the overall wealth of a nation (to the benefit of all-producers and consumers)
List some of the issues of political arguments for government intervention
-Protecting Jobs and Industries
-National Security
-Retaliation
-Protecting Consumers
-Protecting Foreign Policy Objectives
-Protecting Human Rights
An attempt to have both countries benefit equally
Bi-lateral agreements