Non-tariff trade barriers (NTBs) Have been on the rise since the 1960s. They include import quotas, export restraints, subsidies and domestic content requirements. Trade and welfare effects of NTBs are similar to those of tariffs.
Non-tariff trade barriers (NTBs) Have been on the rise since the 1960s. They include import quotas, export restraints, subsidies and domestic content requirements. Trade and welfare effects of NTBs are similar to those of tariffs.
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Non-tariff trade barriers (NTBs) Have been on the rise since the 1960s. They include import quotas, export restraints, subsidies and domestic content requirements. Trade and welfare effects of NTBs are similar to those of tariffs.
Direitos autorais:
Attribution Non-Commercial (BY-NC)
Formatos disponíveis
Baixe no formato PDF, TXT ou leia online no Scribd
Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy
1 Other Barriers To Trade
Non-tariff Barriers
Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy
2 Introduction Nontariff trade barriers (NTBs) Have been on the rise since the 1960s Encompass a variety of measures such as: Import quotas Voluntary export restraints Subsidies Domestic content requirements Intended to reduce imports and thus benefit domestic producers
Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy
3 Non-Tariff Barriers 1996
Sawyer, 3rd ed, Pearson
Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy
4 Existing Quotas
Sawyer, 3rd ed, Pearson
Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy
5 Import Quota Physical restriction on the quantity of imports during a specific time period (Table 5.1) Import licenses Quotas on manufactured goods outlawed by W.T.O Global quotas Permit a specified number of goods to be imported each year Selective quotas Import quotas allocated to specific countries May lead to domestic monopoly of production Accusations of favoritism
Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy
6 Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy 7 Trade and Welfare Effects Like a tariff, an import quota affects an economy’s welfare The case of cheese, involving the U.S. in trade with the E.U. (Fig 5.1) Redistributive effect, area a ($5) Protective effect, area b ($2.50) Consumption effect, area d ($2.50) • Deadweight loss: Protective effect plus consumption effect Revenue effect, area c ($7.50)
Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy
8 Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy 9 Allocating Quota Licenses
Limited imports; allocation by governments
Issue of import licenses on the basis of historical share of the import market Discriminates against first-time importers Issue of import quotas on a pro rata basis Auctioning process Few nations use auctions, as competition transfers revenue effect to the government
Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy
10 Sugar Import Quotas
U.S. sugar industry
Earlier: Subsidies in the form of price supports 1982 sugar price crash Response Raise import tariffs to the legal maximum Nation-by-nation import allocations based on average sugar exports to the United States Transferred the cost of sugar support from the taxpayer to the consumer
Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy
11 Quotas Versus Tariffs During periods of growing demand, an import quota is a more restrictive trade barrier (Fig 5.2) Tariff increases the domestic price, but does not limit the number of goods that can be imported Tariffs allow for some degree of competition Degree of protection is determined by the market mechanism Quota is more restrictive and suppresses competition Quota forecloses the market mechanism W.T.O and tariffication
Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy
12 Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy 13 Tariff-Rate Quota: A Two-Tier Tariff
Tariff-like and quota-like characteristics
A specified number of imports at one tariff rate Any higher imports face a higher tariff rate Has three components: (Table 5.2) Import-quota threshold A within-quota tariff An over-quota tariff Many over-quota tariffs are prohibitively high
Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy
14 Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy 15 Tariff-Rate Quota …….
Techniques for the administering tariff-rate quotas:
Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy
16 Voluntary Export Quotas Used to restrain trade Voluntary export restraint agreement (orderly marketing agreement) Moderate the intensity of international competition Allow less efficient domestic producers to participate in world markets Identical economic effects to equivalent import quotas, except for being implemented by the exporting nation Conclusion from the viewpoint of the U.S. economy: Voluntary export restraints tend to be more costly than tariffs
Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy
17 Japanese Auto Restraints Put Brakes on U.S. Motorists Fall in domestic auto sales (1981) Voluntary restraint pact with the Japan Unpopular with smaller Japanese automakers Record profits for Japanese auto majors U.S. consumer paid higher prices 44,000 jobs saved in the U.S.; consumer cost per job saved being $100,000 By 1985: Japanese companies open plants in the U.S.; decline in imports coupled with decline in market share for U.S. firms Japan exported bigger, higher value cars to US
Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy
18 Domestic Content Requirements
Stipulate the minimum percentage of a product’s total
value to qualify for zero tariff rates Purpose: Limit outsourcing Pressurizes firms that sell products in the country to use domestic inputs in production Often used by developing countries to foster domestic automobile production (Table 5.3) Welfare effects of an Australian content requirement on automobiles (Fig 5.3)
Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy
19 Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy 20 Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy 21 Subsidies
Granted to producers to help improve trade positions
Governmental subsidies assume a variety of forms (Table 5.4) Outright cash disbursements Tax concessions Insurance arrangements Loans at below-market interest rates
Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy
22 Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy 23 Subsidies…….
Domestic subsidy: Granted to producers of import-
competing goods (Figure 5.4) Unlike tariffs and quotas, subsidies do not distort choices for domestic consumers Burden financed out of tax revenues Often in return for accepting government conditions on key matters May not be as superior to other commercial policies
Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy
24 Subsidies……. Export subsidy: Granted to producers of goods that are to be sold overseas (Fig 5.4) Encourage exports by reducing price paid by foreigners Yields direct effects for the home economy: Terms-of-trade effect Export-revenue effect Consumers in the exporting nation suffer as the international terms of trade move against them Domestic consumers pay higher prices Tax burden
Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy
25 Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy 26 Dumping
A form of international price discrimination
Charging foreign buyers lower prices than domestic buyers; selling below cost Forms of Dumping Sporadic dumping: Disposal of excess inventories Predatory: Temporary price cuts to eliminate competition Persistent: Indefinite dumping to maximize profits
Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy
27 International Price Discrimination
A profit-maximizing firm would benefit from
international price discrimination Charge a higher price at home, where competition is weak and demand is less elastic Charge a lower price for the same product in foreign markets to meet competition Demand and cost conditions example
Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy
28 Antidumping Regulations
Under U.S. law, antidumping duty is levied when
Commerce Department determines foreign merchandise is sold at less than fair value (LTFV) ITC determines that LTFV imports are causing or threatening material injury to a U.S. industry Margin of dumping: Amount by which the foreign market value exceeds the U.S. price Priced-based definition Cost-based definition
Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy
29 Antidumping Regulations…… Process Complaint from an import-competing industry Evidence of dumping; supporting data Commerce Department conducts preliminary determination, estimate of margin Special tariff imposed immediately, if evidence is found Final determination, estimate of margin Rebate, if ruling is against dumping ITC determines material injury Rebate, if ruling is against dumping Imposition of permanent tariff if both bodies rule in favor of the dumping petition
Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy
30 Antidumping Regulations….. Smith Corona - Hollow victories 1980: Japanese typewriters Product evolution by Brother Industries (Japan) to circumvent ruling 1990: Assembling of typewriters in U.S. itself 1991: Japanese word processors Ruling ineffective as these were assembled in U.S. Components not sourced from Japan Washington apple producers Canadian government impose duties (Table 5.5)
Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy
31 Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy 32 Is Antidumping Law Unfair? Supporters: Ensures level playing field by offsetting artificial sources of competitive advantage Critics: Consumers of the protected good and the wider economy typically lose more Average variable cost as yardstick for dumping? (Table 5.6) Economists: Fair value should be based on average variable cost rather than average total cost Antidumping law is unfair as it uses average total cost
Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy
33 Anti-Dumping a. WTO allows trade restrictions to counteract predatory dumping b. Difficult to determine dumping c. Trigger-price mechanism to activate trade restrictions d. Used as protectionist weapon: threats of anti- dumping measures e. Examples: 1981-1994 US 618 EU 490 Canada 537 Australia 690
Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy
34 Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy 35 Is Antidumping Law Unfair?…..
Antidumping law and currency fluctuations
Antidumping law does not account for fluctuations Does the antidumping law redress unfairness or create it? Are antidumping duties overused? Disturbing trend of backdoor protectionism For U.S. producers, it is easier to obtain relief in the form of antidumping duties
Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy
36 Other Non-tariff Trade Barriers
Government procurement policies
Buy-national policies: Barrier to free trade Social regulations To correct undesirable side effects that relate to health, safety, and environment Corporate average fuel economy standards (CAFE) - U.S. energy conservation policy Hormones in beef production - European Union’s ban on hormone-treated meat
Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy
37 Other Non-tariff Trade Barriers…..
Sea transport and freight restrictions
Restrictive practices at Japanese ports Delays and costs of loading/unloading U.S. decision to bar Japanese ships from U.S. ports Agreement to liberalize port services in Japan
Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy
38 Other Non-Tariff Barriers International Cartels a. Organization of suppliers located in different nations [or a group of governments] that agrees to restrict output and export of a commodity b. Aim: to increase price, maximize profits c. Outside individual country’s control/jurisdiction d. E.g. OPEC, IATA e. Free riders: non-member suppliers f. Success: if good substitutes not freely available
Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy
39 Other Non-tariff Trade Barriers…..
Sawyer, 3rd ed, Pearson
Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy
40 Industrial Policies…..
Session 3-09 Prof Augustine
H H Tan Econ MBA Global Economy
41 Other Non-tariff Trade Barriers…..
Sawyer, 3rd ed, Pearson
Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy
42 Government Procurement…..
Sawyer, 3rd ed, Pearson
Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy
43 Corruption & International Trade
Sawyer, 3rd ed, Pearson
Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy
44 Corruption Index 2006
Sawyer, 3rd ed, Pearson
Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy
45 Economic Sanctions
Sawyer, 3rd ed, Pearson
Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy
46 Economic Sanctions…..
Sawyer, 3rd ed, Pearson
Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy
47 Economic Sanctions…..
Sawyer, 3rd ed, Pearson
Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy
48 Labor & Environmental Standards
Sawyer, 3rd ed, Pearson
Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy
49 Labor & Environmental Standards
Sawyer, 3rd ed, Pearson
Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy
50 Labor & Environmental Standards
Sawyer, 3rd ed, Pearson
Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy
51 Labor & Environmental Standards
Sawyer, 3rd ed, Pearson
Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy
52 Labor & Environmental Standards
Sawyer, 3rd ed, Pearson
Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy
53 Labor & Environmental Standards
Sawyer, 3rd ed, Pearson
Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy
54 Labor & Environmental Standards…..
Sawyer, 3rd ed, Pearson
Session 3-09 Prof Augustine H H Tan Econ MBA Global Economy