The Instruments of Trade Policy Flashcards
What is a specific tariffs?
A fixed charge for each unit of goods imported.
What is an ad valorem tariff?
A tax that is levied as a fraction of the value of the imported goods.
What are the two reasons countries implement tariffs?
- To increase tax revenue
2. To protect certain sectors
What is consumer surplus?
The difference between what the consumer paid for a good and what he had been willing to pay.
Who are the winners and losers in an importing country implementing a tariff?
Domestic producers: winners (higher prices)
Domestic consumers: losers (higher prices)
Domestic government: winner (tax revenue)
How is the net cost of a tariff calculated?
Consumer loss - producer gain - government revenue
What is an export subsidy?
A government payment to a firm that ships abroad
What is an import quota?
A direct restriction on the quantity of a specific good that is imported.
What is a voluntary export restraint (VER)?
A quota on trade imposed from the exporting country’s side instead of the the importer’s.
What is a local content requirement?
A regulation that requires some specified fraction of a final good to be produced domestically.
