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1、Chen Qingping Anhui University of Finance and Economy,6 - 1,An Introduction to International Economics,Chapter 6: Nontariff Barriers and the Political Economy of Protectionism Dominick Salvatore John Wiley & Sons, Inc.,6 - 2,Nontariff barriers to trade,The previous chapter explored the effect of tar
2、iffs as barriers to international trade. This chapter extends this discussion by considering the effects of barriers to trade other than the tariff such as: Quotas Voluntary export restraints (VERs) Regulations Export subsidies Dumping,6 - 3,Nontariff barriers to trade,The previous chapter explored
3、the effect of tariffs as barriers to international trade. This chapter extends this discussion by considering the effects of barriers to trade other than the tariff such as: The growth of these nontariff barriers is important as they have grown in use in recent years and their effects are typically
4、not as transparent as with a tariff. This increases the opportunity for hidden protectionism.,6 - 4,Quotas,A quota is a numerical limit on the number of allowed imports. Using the example from tariffs, a quota that reduces imports to the same numerical amount as an equivalent tariff changes the mark
5、et in a similar way to the tariff.,Quota,6 - 5,Quotas,Initial effects of a quota The equilibrium price under a quota (the quota price) will be the same as the price with an equivalent tariff.,Quota,6 - 6,Quotas,Initial effects of a quota The equilibrium price under a quota (the quota price) will be
6、the same as the price with an equivalent tariff. The level of production will be the same as with a tariff.,Quota,Production,6 - 7,Quotas,Initial effects of a quota The equilibrium price under a quota (the quota price) will be the same as the price with an equivalent tariff. The level of production
7、will be the same as with a tariff. The level of domestic consumption will be the same as with a tariff.,Quota,Consumption,6 - 8,Quotas,Initial effects of a quota The level of production will be the same as with a tariff. The level of domestic consumption will be the same as with a tariff. The alloca
8、tion of the quota rents depends on how the government allocates the licenses to import the product.,Quota,Quota rent,6 - 9,Quotas,Initial effects of a quota The level of domestic consumption will be the same as with a tariff. The allocation of the quota rents depends on how the government allocates
9、the licenses to import the product. The same regions of deadweight loss exist.,Quota,Deadweight loss,6 - 10,Concerns about quotas,The initial effects of a tariff and a quota are similar. The effect of market changes Changes in domestic supply or demand alter imports with a tariff. Since imports are
10、fixed with a quota, the quantity of imports does not change with market changes.,6 - 11,Concerns about quotas,The initial effects of a tariff and a quota are similar. The effect of market changes The effect of imperfect competition By introducing a numerical limit on imports, quotas limit the compet
11、ition faced by domestic producers. This better allows domestic producers to exploit their monopoly power.,6 - 12,Concerns about quotas,The initial effects of a tariff and a quota are similar. The effect of market changes The effect of imperfect competition The allocation of the quota rents is ambigu
12、ous If the government auctions off the licenses, it should capture the quota rent. If the allocation of the quota rent is arbitrary, it is possible that a portion of the quota rent will be lost to the society.,6 - 13,Voluntary export restraints,A voluntary export restraint exists when the exporting
13、nation voluntarily restricts its exports to a numerical limit. Generally, this action is taken to reduce the likelihood of the importing country imposing some other form of barrier to trade. The welfare effects are similar to quotas but with the quota rent going to the foreign producer. In 1981, Jap
14、an and the US agreed to a VER of 1.68 million automobiles to be imported annually by the US from Japan.,6 - 14,Regulations,Health and safety regulations may serve as barriers to international trade by raising the costs of imported products Government purchasing restrictions may be biased against for
15、eign goods The Buy American Act of 1933,6 - 15,International cartels,An international cartel may form to limit sales For example, OPEC (the Organization of Petroleum Exporting Countries) acts to limit exports of petroleum. The Energy Information Administration provides a good summary of current acti
16、vities of OPEC WWW link,6 - 16,Dumping,Dumping exists when (1) the sales price in the importing country is lower than the sales price in the exporting country or (2) the sales price in the importing country is below the costs of production. Types of dumping Persistent Sporadic Predatory,6 - 17,Dumping,Dumping exists when (1) the sales price in the importing country is lower than the sales price in the exporting country or (2) the sales price in the importing country is
