Government Policy & International Trade (Chapter 7) Flashcards
Types of Subsidies
Cash grants, low-interest loans, tax breaks, government equity participation
Specific Tariff vs. Ad Valorem Tariff
Specific tariffs are assessed as a money charge per unit of the imported good. Ad valorem tariffs are assessed as a percentage of the value of the imported good
Instruments of Trade Policy
Tariffs, subsidies, import quotas, voluntary export restraints, local content requirements, administrative policies, anti dumping duties
Import Quotas
usually enforced by issuing licenses
Voluntary Export Restraints (VER)
a quota on exports imposed by the exporting country, typically at the request of the importing country’s government
Local Content Requirements (LCR)
a requirement that some specific fraction of a good be produced domestically
Infant Industry Argument (A. Ham)
governments should temporarily support new industries until they are strong enough to meet international competition
Strategic Trade Policy
governments should use subsidies to support promising firms in new industries
What does Krugman think about strategic trade policy?
it will lead to a pointless trade war; it will prioritize special-interest groups over consumers
Embargo
ban
What was established in the Uruguay round of GATT?
extended GATT rules to services; increased protection for intellectual property; reduced agricultural subsidies; enhanced monitoring and enforcement systems
How do countries today feel towards new trade policies associated with the WTO?
negatively
Bound Tariff Rate
the maximum tariff rate for a given product that a country has committed not to exceed. WTO members have the flexibility to apply tariffs at any level up to their bound level.
Multilateral/Bilateral Trade Agreements
reciprocal trade agreements between two or more partners
TRIPS Agreement
Trade-Related Aspects of Intellectual Property Rights; resulted in more protection of property rights;
