Non Tariff Barriers and New Protectionism Introduction •Since the birth of GATT, in 1947, tariffs have been negotiated downwards •New measures of protection such as import quotas, voluntary export restraints and anti- dumping actions have come in. Import Quotas • Quota- quantitative restriction on the amount of a commodity to be imported/exported. • Effects of a Quota.-used usually to protect, domestic industry or for BOP reasons Partial Equilibrium effects -Quota Quota • Before Quota -Nation consumes 70X(AB), 10X(AC) produced domestically and 60X imported(CB) is imported Quota -Imposition of an import quota of 30X(JH) raises, the price to $2 so that Demand can match 20X domestically produced plus30X(JH), allowed by the imposition of a quota -Consumption is reduced by 20X and domestic pdn is increased by 10X. Tariff & Qouta • With a given import quota, increase in dd will result in higher domestic prices than an equivalent tariff • Also with a given import tariff an increase in dd will not change domestic price and pdn, but results in higher consumption and imports than quota • Involves distribution of import licenses, which may result in rent seeking and monopoly profits • Quota-limits imports to specific levels, while trade effect of a tariff is uncertain. Other Non-Tariff Barriers • 1.Voluntary export restraint (VER)- Negotiated settlement, e.g in clothing, steel • 2.Technical, Administrative and other Regulations • Safety regulations-automobile and electrical • Health regulations-food • Labeling regulations-showing origin and contents • Procurement policies • Border taxes-rebates of internal taxes given to exporters of a commodity • International commodity agreements and multiple exchange rates. International Cartel • International agreement in the restriction of output and exports among countries. E.g OPEC. Dumping • It is the sale of a commodity at below cost or at least the sale of a commodity at a lower price abroad than domestically • Examples • Persistent Dumping-continuous tendency of monopolist selling a product more expensive in a domestic market than international(face competition) • Predatory-selling cheaply abroad to drive out local producers and raise prices after death of local industry. • Sporadic-once off to off load unexpected production Export Subsidies • Direct payments to nation exporters/ low interest loans to boost nation exports. • Form of dumping If a subsidy is imposed, domestic consumers suffer as domestic prices rise from 3.5 to 4 after imposition of a export subsidy GATT • General Agreement on Tariffs and Trade • Created to promote free trade • Principles included, non discrimination,elimination of non tariff trade barriers,consultation among nations to resolve trade disputes, • Many other meetings followed including Tokyo Round,Uruguay Round , Marrakech Agreement Uruguay Round-1993 • Focused on Tariffs • 1-Qouta • 2-Anti-dumping • Subsidies • Safeguards • Intellectual property • Services • Other Industry Provisions • Trade related investment measures • WTO.
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