Week 7 Flashcards
What are tariffs
Oldest form of trade policy and it is a tax that the government impose on imported/exported goods
What are the two categories of tariffs?
- Specified tarries
- Ad valorem
What are specified tariffs?
Levied as a fixed charge for each unit
What is ad valorem?
Levied as a proportion of the value of the imported good
What are the components that government pays to the domestic producer?
- Cash Grants
- Low interest loans
- Tax breaks
- Government equity participation in the company
Where do subsidy revenues generated from?
Taxes
What do subsidies encourage?
Over production, inefficiency and reduced trade
What are the different types of quota?
Import quotas and voluntary export restraint
What are import quotas?
Restriction on the quantity of some good imported into a country
What are voluntary export restraint?
Quotas on trade imposed by exporting country, typically at the request of the importing country
What are local content?
Requires a fraction of a good to be produced domestically, there’s a percent of component parts and value of good
Who uses the local content initially?
Developing countries but developed countries are starting to implement
Who benefits from the local content?
Producers
What are administrative policies?
These bureaucratic rules that make it difficult for imports to enter a country
What did the Japanese impose?
Impose strict administrative policies
What are antidumping policies?
When you sell a goods in a foreign market below production goods and below market value
Why was antidumping policies created?
Because of unloading excess production and predatory behavior
What remedies are there?
Seeks imposition of tariffs
What are the political arguments of intervention?
- Protect jobs and industries
- National security
- Relatliation (Punitive sanctions)
- Furthering foreign policy objectives
- Protect human rights
- Protect consumer rights
What are examples of the economic arguments for intervention?
Infant industry
Who made the oldest economic argument for intervention?
Alexander Hamilton
How does strategic trade policies play in economic intervention?
subsidies protect firms in new emerging industries with substantial scale economies bc governments benefit if they support domestic firms to overcome barriers to enter created by existing foreign firms
What is GATT and when was it established?\
GATT is a multilateral agreement established in 1948 under the US leadership and its objective is to liberalize trade by eliminating tariffs, subsidies and import quotas. They used round of talks to reduce trade barriers
What did Uruguay Round GATT 1986-93 negotiate?
They negotiated Mutual tariff reduction and to dispute resolutions if complaints are were received
Why was there a greater protectionism for the greater protectionism
Because of Japan’s increase of power due to the economic machine which closed Japanese markets, US trade benefits and GATT circumvented by many countries
Why was the WTO created?
Created during the Uruaguay Round of GATT to police and enforce GATT rules
What did the WTO have an impact on?
Agriculture subsidies, intellectual property (TRIPS), monitoring and enforcement
What were the achievements of WTO?
- Telecommunications 90% of worlds telecommunication revenues and pledged to open their market to fair competition
- Financial Services 95% of financial services market
What happened in WTO in Seattle?
- Millennium round was aimed at further reduction of trade barriers in agriculture and services
- Meeting was disrupted by human rights groups, trade unions, environmentalists, anti globalization groups and no agreement was reached
What did the Doha Agenda do for the WTO?
Cut tariffs on industrial goods and services, phasing out subsidies, reduce antidumping laws, WTO regulation on intellectual property should not prevent members from protecting public health. (TRIPS agreement)
