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Chapter 9 Nontariff Trade Barriers and New Protectionism

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  • pg 1
									                   Chapter 9
       Nontariff Trade Barriers and New
                 Protectionism
9.1 Introduction
  There are many other types of trade barriers, such as
  import quotas, voluntary export restraints, and
  antidumping actions.
  Section 9.2 examines the effect of an import quota and
  compares them to those of an import tariff.
  Section 9.3 deals with other nontariff trade barriers and
  includes a discussion of voluntary export restraints and
  other regulations, as well as trade barriers resulting
  from international cartels, dumping, and export
  subsidies.
9.2 Import Quotas
  A quota is the most important nontariff trade
  barrier. It is a direct quantitative restrictions on
  the amount of a commodity allowed to be
  imported or exported.
9.2 A Effects of an Import Quota
The given import quota is 30X
Px ($)
                                                  Sx

  5       R

  4
                              E
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  2.5
          G          J                  H              K
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  1            C     M                   N                 B
                                                                     Dx’
          A
                                                                    Dx

      0        10   20 25 30      40   50 55 60 65 70          80
9.2 B Comparison of an Import Quota to an Import
  Tariff
  With a given import quota, an increase in
  demand will result in a higher domestic price and
  greater domestic production than with an
  equivalent import tariff.
   A given import tariff, an increase in demand will
  leave the domestic price and domestic production
  unchanged but will result in higher consumption.
  The quota involves the distribution of imports
  licenses.
   An import quota limits imports to the specified
  level with certainty while the trade effect of an
  import tariff may be uncertain.
9.3 Other Nontariff Barriers and New
  Protectionism
9.3 A Voluntary Export Restraints
  These refer to the case where an importing
  country induces another nation to reduce its
  export of commodity “ voluntarily”, under the
  threat of higher all-round trade restrictions,
  when these exports threaten an entire domestic
  industry.
  “Orderly marketing arrangements”
  Purpose to make use of VERs.
  Economic effects of VERs.
  VERs were less effective in limiting imports than
  import quotas.
9.3 B Technical Administrative, and other
  Regulations
  Safety regulations fro automobile and electrical
  equipment.
  Health regulations for the hygienic production
  and packaging of imported food products.
  Labeling requirements showing origin and
  contents.
  Government procurement policy
  Border taxes
9.3 C International Cartels
  An international cartel is an organization of
  suppliers of a commodity located in different
  nations( or a group of governments) that agrees
  to restrict output and exports of the commodity
  with the aim of maximizing or increasing the
  total profit of the organization.
  OPEC
  International Air Transport Association
  An international cartel is more likely to be
  successful if there are only a few international
  suppliers of an essential commodity for which
  there are no close substitutes.
9.3 D Dumping
  Dumping is the export of a commodity at below cost
  or at least the sale of a commodity at lower price
  abroad than domestically.
  Persistent dumping (international price
  discrimination), is the continuous tendency of a
  domestic monopolist to maximize total profits by
  selling the commodity at higher price in the domestic
  market than internationally.
  Predatory dumping is the temporary sale of a
  commodity at below cost or at a lower price abroad
  in order to drive foreign producers out business,
  after which prices are raised to take advantage of
  the newly acquired monopoly power abroad.
 Sporadic dumping is the occasional sale of a
  commodity at below cost or at a lower price
  abroad than domestically in order to unload an
  unforeseen and temporary surplus of the
  commodity without having to reduce domestic
  prices.
  Trigger-price mechanism
9.3 E Export Subsidies
 Export subsidies are direct payment or granting
  of tax relief and subsidized loans to the nation’s
  exporters or potential exporters and or low-
  interest loans to foreign buyers so as to stimulate
  the nation’s exports.
Export-import bank
Foreign Sales Corporation provisions of the U.S.
 tax code.
Particularly troublesome are the very high
 support prices provided by the European Union
 to maintain its farmers income under its common
 agriculture policy. (CAP)
Countervailing duties (反补贴税)
Px ($)
                                                          Sx

  5        R

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  4
               a’    b’        c’         d’
  3.5
          A’         N’                 C’ M’
  3                        B’
                                    E

  2

  1

                                                                         Dx

      0             10    20        30 35 40    50   60        70   80
Reading Task: case study 9-2, 9-3, 9-4 and 9-5.
Homework:
Page 310
Questions for review:
1. What is an import quota?
2. What is meant by voluntary export restraints?
3. What are international cartels?
4. What is meant by dumping? What are the
   different types of dumping?
5. Why do nations subsidize exports?
    9.4 The Political Economy of
             Protection
• Fallacious and Questionable Arguments for
  Protection;
• The Infant-Industry and Other Qualified
  Arguments for Protection;
• Who Gets Protected?
      Fallacious and Questionable
       Arguments for Protection
• Trade protections are needed to protect domestic
  labor against cheap foreign labor (fallacious);
• The scientific tariff would make the price of
  imports equal to domestic prices and allow
  domestic producers to meet foreign competition
  (fallacious);
• Protection is needed to (1) reduce domestic
  unemployment and (2) cure a deficit in the
  nation’s balance of payment (questionable)
      The Infant-Industry and Other
          Qualified Arguments

•   General comment: may be correct;
•   The standards for infant-industry and
•   What should be regarded as infant-industry;
•   The protection costs vs the future return;
•   Empirical experiences: negative
     The Strategic Trade Policy
• View point: a nation can create a comparative
  advantage in high-tech fields and other industries
  that are deemed crucial to future growth and the
  nation can reap the large external economies;
• Examples: steel industry in 1950’s and
  semiconductors in 1970’s ~80’s in Japan;
• Concorde and airbus in 1970’s in Europe
• It may cause retaliation.
        Who Gets Protected?
• Producers;
• Labor-intensive industries in developed
  countries;
• Natural resource- intensive, capital-
  intensive and technology-intensive
  industries in developing countries.
 History of U.S. Trade Policy (from
          1934 to present)
• 1930’s: high tariff rates up to 59% by U.S. and followed
  by retaliation of others resulting in a collapse in world
  trade later on (trade war);
• The establishment of GATT resulted in a sharp decrease in
  tariff in U.S. and other countries (by 35%) ;
• Kenney and Tokyo Rounds: resulting in a tariff reduction
  by 27%~28%;
• Uruguay Round (1986~1993):trade dispute between U.S.
  & EU in the field of agricultural Products;
• Doha Round (going on): the conflicts between U.S. &
  developing countries

								
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