Please enable JavaScript.
Coggle requires JavaScript to display documents.
Chap 7: Gov Policies & International Trade (How Gov Intervene (Tariffs…
Chap 7: Gov Policies & International Trade
How Gov Intervene
Tariffs
: taxes levied on imports that effectively raise the cost of imported products relative to domestic products
Specific tariffs - levied as a fixed charge for each unit of a good imported
Ad valorem tariffs - levied as a proportion of the value of the imported good
Subsidies
: Gov payments to domestic producers
helps domestic producers compete against low-cost imports & gain export market
consumers typically absorb the costs of subsidies
Import Qoutas
: restrict the quantity of some good that may be imported into a country
Tariff rate quotas - a hybrid of a quota and a tariff where a lower tariff is applied to imports within the quota than to those over the quota
A quota rent - the extra profit that producers make when supply is artificially limited by an import quota
Voluntary Export Restraints
: quotas on trade imposed by the exporting country, typically at the request of the importing country’s government
Import quotas and voluntary export restraints
Benefit domestic producers
raise the prices of imported goods
Local Content Requirements
: demand that some specific fraction of a good be produced domestically
benefit domestic producers
consumers face higher prices
Administrative Policies
: bureaucratic rules designed to make it difficult for imports to enter a country
Antidumping Policies
: punish foreign firms that engage in dumping and protect domestic producers from “unfair” foreign competition
How intervention work
Tariffs
increase government revenues
force consumers to pay more for certain imports
reduce the overall efficiency of the world economy
are pro-producer and anti-consumer
Subsidies
Revenue generated from taxes
encourage over-production, inefficiency & reduced trade
Administrative Policies
policies hurt consumers by limiting choices
Anti Dumping Policies
dumping - selling goods in a foreign market below their costs of production, or selling goods in a foreign market below their “fair” market value
enables firms to unload excess production in foreign markets
may be predatory behavior - producers use profits from their home markets to subsidize prices in a foreign market to drive competitors out of that market, and then later raise prices
2 types of Arguments
Political
concerned with protecting the intrests of certain groups within a nation, often at the expense of other group
Economic
concerned with boosting the overall weath of the nation, benefts both producers & consumers
Protecting Jobs
Protecting industries deemed important for national security
retaliation for unfair foreign competition
protecting consumers from "dangerous products"
furthering the goals of foreign policy
protecting human rights of individuals in exporting
Protecting the environment