代写作业Trade Policy Instruments
References
Textbooks:
Appleyard, D. and Field, A. (2005) International Economics, McGraw-Hill Ch. 13 and 14
Husted, S. and Melvin, M. (2007), International Economics, Addison-Wesley Ch. 6 and 7
Krugman, P. and Obstfeld, M. (2006) International Economics Addison-Wesley Ch. 8
Articles:
Baldwin R E (1969) “The case against infant industry protection”, Journal of Political Economy, 77, pp.295-305
Feenstra, R. (1992), “How Costly is Protectionism”, Journal of Economic Perspectives, 6(3), pp.159-78
Krugman, P. (1987) “Is free trade passé?” Journal of Economic Perspectives, 1, pp.132-144
Winters L A (1989) “The ‘So-Called Non-Economic Objectives’ of Agricultural Policy”, OECD Economic Studies No. 13, Winter 1989-1990, pp.237-266
Outline
Free Trade or Trade Restrictions?
Methods of Protection
Tariff Barriers
Non-Tariff Measures
Free Trade or Trade Restrictions?
Economists argue for trade on the grounds of overall welfare maximisation but…
Most countries maintain some barriers to trade – why?
Stolper-Samuelson shows that free trade may not benefit everybody – shift to free trade is therefore not Pareto optimal
Comparative advantage theory and its extensions are based on static analysis – comparative advantage may change and can be influenced
Domestic producers may negotiate for protection
Workers’ organisations may want to protect wage levels
Methods of Protection
Tariff barriers
Fixed charges
Ad valorem charges
Non-tariff barriers
Export subsidies
Import quotas
Voluntary export restraints
Local content requirements
National procurement
Bureaucratic obstacles
Tariff Barriers
Simplest and oldest form of protection
Objectives
To protect vulnerable local industries from international competition
Source of government income – easy to collect revenue in countries where income tax is problematic
Note that success in protection (cutting import volume) reduces success in revenue generation
Decline in relative importance in many countries
Tariffs
Specific – fixed charge per unit of goods e.g. £5 per barrel of oil
Ad valorem – fraction of the value of imported goods e.g. 20% of the CIF (cost insurance and freight) value
Effect is to raise the price of the imported product (or reduce the price to the exporter)
Effects of a Tariff
Assume that the importing country is a price taker (i.e. cannot affect the world price)
Assume also domestic supply defined by supply curve S
Tariff increases the price from Pw to Pt
Domestic production increases fromQ1 to Q2
Imports are reduced from Q4 – Q1 to Q3 – Q2
Effects of a Tariff
Welfare changes are:
Consumer surplus falls by a + b + c + d
Producer surplus increases by a
Government (tariff) revenue increases by c
Areas b and d are referred to as deadweight losses
Area b is the deadweight production cost
Area d is the deadweight consumption loss
Effects of a Tariff
Note that if the small country assumption is relaxed an import reduction may reduce the world price
Terms of trade gain from reduced price partly compensates for efficiency loss
Note also the distinction between nominal protection and effective protection
Where the rate of protection for a finished good exceeds the rate of protection for the traded inputs the effective rate of protection is higher than the nominal rate
Many countries have low or zero tariff rates on raw materials and high tariff rates on finished goods
Non-tariff Barriers
Export subsidies
Tax relief and/or subsidised loans (export credits)/inputs to exporters
Raise prices to both producers and consumers in the producing country
Generally used to avoid WTO and EU restrictions on dumping
Export taxes
Usually imposed for revenue purposes
Reduces prices to local consumers and producers
Disincentive to exporters therefore generally low and mainly used in developing countries or to capture rents from mineral exports (e.g. oil)
Import Quotas
Direct restriction on the quantity of imports
Enforced through import licenses
Similar to tariffs they increase the domestic price of the imported good
Main difference is that the government only receives revenue, area c, if the licenses are sold
Rents may be transferred abroad if governments of exporting country assigned rights to sell
Therefore the cost to importing country may be higher than when a tariff is imposed
Local content requirements
Requirements that a fraction of the final good must be produced domestically
May be defined in terms of value or physical units
Used to try and increase local value added
National procurement
Purchases by the government or regulated firms may be restricted to domestically produced goods
Often used in tied aid agreements
Bureaucratic obstacles
Use of health and safety regulations and customs procedures to restrict trade
Summary
Tariff and non-tariff barriers are often used to protect domestic producers or wages.
Tariff barriers are declining – particularly in developed countries
The use of tariffs reduce consumer surplus, and raise producer surplus and government revenue
http://www.1daixie.com/daixiezuoye/ Tariffs and import quotas have a similar impact as long as the importing country government collects the quota rent.
There are a vast array of non-tariff barriers which are increasing attracting the attention of policy makers