Lecture 2 Flashcards
Dumping
When a country/company sets prices lower internationally than domestically (for the purpose of driving international producers out of business
Quota
Limits imports by limiting the quantity
GATT
General Agreement on Tariffs and Trade. Goals is to promote international trade by reducing costs and reducing non-tariff measures
The Marrakesh agreement
The Marrakesh Agreement establishing the World Trade Organization was signed on 15 April 1994, leading to the birth of the WTO on 1 January 1995.
FTAs
Free Trade Areas. An agreement on the part of a set of countries to eliminate trade restrictions between themselves
CUs
Customs Unions. An agreement on the part of a set of countries to eliminate trade restrictions between themselves and to adopt a common external tariff
PTAs
Preterntial Trade Agreements (used to be called RTAs Regional Trade agreements
GATS
General Agreement on Trade in Services
Common market
An agreement on the part of a set of countries to eliminate trade restrictions between themselves, to adopt a common external tariff, and to allow the free movement of labor and physical capital between member countries
Monetary union
A common market that adopts a common currency and adopts a common monetary policy
Economic union
A monetary union that adopts a process of domestic policy harmonization in areas such as tax and spending policies and domestic regulation
Trade creation
- PTAs can reduce tariffs across the board, in which case you will trade with the lowest-cost country
- Or it can remove tariffs from the lowest cost trading partner
- This is called ‘trade creation’ because it enhances international trade (it’s not creating trade from nothing – there was already an import trade - so it’s a bit of a misnomer
Tradse diversion
Or, by reducing tariffs from a high cost country, while keeping them on products from a low cost country, you artificially shift trade from low to high cost source
Specific tariff
Fixed tax per physical unit of import
Ad valorem
Tax on value
Net welfare effect
The term primarily refers to the cumulative change in welfare within an economy, following alterations in certain economic variables. The Net Welfare Effect represents the total sum of consumer surplus and producer surplus, thus showing the aggregate welfare effect in an economy
Tariff
A tariff is a duty (tax) imposed by the government of a country or customs territory, or by a supranational union, on imports (or, exceptionally, exports)
GATT - nondiscrimination
- It puts trading partners in categories, with the idea that all in each category should be treated the same
- Eventually, everyone will be in the best category, which is MFN—most favored nation
- So products from ‘MFNs’ should be treated the same amongst all member nations
- Second principle: National treatment– means that all products within a country should be treated the same, with respect to taxation etc., whether imports or
domestically produced - GATT also prohibits quotas or any other quantitative restriction on trade
- Tariffs are preferred to quantity distortion
Tarification
Turning quotas and other NTMs into tariffs is a major goal
TRIPS
Trade in Intellectual Property Rights
ROOs
Rules of origin- the idea that it is not very easy to determine where goods come from given modern manufacturing methods
