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Chapter 7: Government policy and International Trade - Coggle Diagram
Chapter 7: Government policy and International Trade
Free trade: when the gov. don´t attempt to restrict what citizens can buy from another country or what they can sell.
Import quotas
Enforced by issuing import licenses to a group of individuals or firms
Trading system is based on:
General Agreement on Tariffs and Trade (GATT)
Tariffs: specific tariffs, ad valorem tariffs.
Impact: increase governent revenue, force to pay more for certain imports, reduce the overall efficiency of the world economy.
Tariff rate quotas
Hybrid of a quota and a tariff where a lower tariff is applied to imports within the quota than those over the quota.
Voluntary export restraint (VER)
Can appease protectionist measures in a country.
Antidumping policies: Objective is to protect domestic producers from unfair foreign competition.
Infant Industry Argument: suppport comes through tariffs, import quotas, subsidies.
1947-1979: Trade liberalization, economic growth
Strategic trade policy
A government may intervene in an industry by helping domestic firms overcome the barriers to entry created by foreign firms.
Both of these support government intervention in international trade.
Government can help raise national income when a domestic firm gains first-mover advantages.
Future of WTO
The rise of anti-dumping policies, the high level of protectionism in agriculture, lack of strong protection, continued high tariffs on nonagricultural goods and services.
World Trade Organization (WTO)
Countries involved have mostly adopted WTO´s recommendations, expanded trade agreements.
Protectionism in Agriculture
Tariff rates generally much higher on agricultural products, reflects desire to protect domestic agriculture, raises consumer prices.
Multilateral and bilateral Trade Agreements
Designed to capture gain from trade beyond WTO treaties.