Week 2: Government Policy and International Trade, Sept 21 Flashcards
Trade theory to policy
economists have made policies that make trade freer that benefit economy in aggregate
-since ww2 many policies have reflected this
–significant declines intariffs
–more important regional trade agreements (EU, NAFTA/USMCA, ASEAN, TPP)
–multiple rounds of GATT/WTO liberalization
-also significant increases in trade volumes
-aggregate economic gains, yes
-but distributional concerns much larger than predicted
reasons for govt policy/intervention
-free(er) int. trade offers net economic benefits
-most, (or all) govt interventions to restrict int trade target other objectives
–political
–normative, social, distributional
–enviro
national security
there is a belief that some industries should be self sufficient
-the pandemic has amplified this
belief that some tech should be protected
-dual use controls
some of foreign policy objectives
-sanctions to encourage the countries to disarm in order to protect home from nuclear threats
foreign, enviro policy
trade for political aims
-embargos or sanctions
-“positive” methods
human rights
-trade policy to influencer the domestic policy of a foreign govt
enviro protection
-domestically (imports pollute the domestic enviro)
-or in response to the enviro costs of foreign production
domestic production policy
maintain existing jobs/industries
-strong lobby groups
-political costs, human costs
protecting consumers
-restricting imports of dangerous products
–lead paint
–weapons
–drugs
instruments of trade policy: tariffs, what do they do
calculation
application
- act as a trade barrier
- raise national revenue
usually calculated in one of two ways
-ad valorem tariff - assessed as a percentage of market value
-specific tariff - monetary amount per unit
usually applied in one of three ways
-import tariff - applies to good entering a country
-export tariff - applies to goods leaving the country
-transit tariff - applies to good passing through a country
quantitative restrictions: quotas
quantity limits on imports
quantitative restrictions: tariff rate quota
low tariff on limited amount then higher tariff after a certain level
quantitative restrictions: voluntary export restraint
promise to limit exports to a certain amount
non tariff barriers
-product testing standards
-restricted access to distribution networks
-public sector procurement
-local content procurement
-local content requirements
-regulatory controls
-investment controls
why is trade policy difficult
many different interest groups in dif countries influence policy decisions
-trade policy responds to both economic and political concerns
-even if might be economically beneficial govt often unwilling to unilaterally lower trade barriers; fearing others may not follow
GATT
Generalized Agreement on Tariffs and Trade (1947 - 1944)
-8 rounds focused on developing a free and competitive international trading environment
-most favoured nation (MFN) - preferential treatment given to one nation must be extended to all members
WTO
World Trade Organization; the successor of GATT
created in 1995 w the aim to build a trading system:
-w/o discrimination
-freer
-predictable
-more competitive
-beneficial for less developed countries
basic rules of WTO
do not:
-raise tariffs above ‘bindings’ (MFN)
–except for antidumping, countervailing duties, safeguards
-use quantitative restrictions (quotas, bans, boycotts)
–except for health protection, conservation
-treat imported goods worse than domestic “like products”
–except for health protection, conservation
-discriminate between WTO members
–except for regional free trade agreements
WTO recently
-164 members, ~98% of world trade
-limited progress since late 90s
–doha round is stalled
-the 1008 financial crisis
–trade volume collapse (and subsequent recovery)
–uptick in preotectionism
-pandemic trade collapse, trade disputes
–nationalism
-leadership (lack there of)
-agriculture
-intellectual property
