6'2 Tariffrate quota: A TwoTier Tariff - PowerPoint PPT Presentation
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6'2 Tariffrate quota: A TwoTier Tariff
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This device allows a specified number of goods to be imported at one tariff rate ... Smoot-Hawley Act ???--????. Strategic trade policy ???????. Tokyo Round ???? ... – PowerPoint PPT presentation
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Title: 6'2 Tariffrate quota: A TwoTier Tariff
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6.2 Tariff-rate quotaA Two-Tier Tariff
- Tariff-rate quota It displays both tariff-like
and quota-like characteristics. This device
allows a specified number of goods to be imported
at one tariff rate ( the within-quota rate),
whereas any imports above this level face a
higher tariff rate (the over-quota rate).
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6.3 Orderly Marketing Agreements
- Orderly Marketing Agreements(OMAs)
- It is a market-sharing pact negotiated by
trading partners.Its main purpose is to moderate
the intensity of international competition,
allowing less efficient domestic producers to
participate in markets that would otherwise have
been lost to foreign producers that sell a
superior product at a lower price. OMAs involve
trade negotiations between importing and
exporting nations, generally for a variety of
labor-intensive manufactured goods.
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6.3.1 Export quota effects
- Under an export quota, it is the foreign exporter
who is able to capture the large share of the
quota revenue. In our example of the auto export
quota, the Japanese exporters, in compliance with
their government, self-regulate shipments to the
United States. This supply-side restriction,
resulting from Jananese firms behaving like a
monopoly, leads to a scarcity of autos in the
United States. Japanese automakers then are able
to raise the price of their exports, capturing
the quota revenue. For this reason, it is not
surprising that exporters might prefer to
negotiate a voluntary restraint pact in lieu of
facing other protectionist measures levied by the
importing country. As for the export quotas
impact on the U.S. economy, the expropriation of
revenue by the Japanese represents a welfare loss
in addition to the deadweight losses of
production and consumption.
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- When increases in the nonrestrained supply offset
part of the cutback in shipments that occurs
under an export quota, the overall inefficiency
loss for the importing nation (deadweight losses
plus revenue expropriated by foreign producers)
is less than that which would have occurred in
the absence of nonrestrained exports.
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6.4 Domestic content requirements
- Domestic content requirements stipulate the
minimum percentage of a products total value
that must be produced domestically. The effect of
content requirements is to force both deomestic
and foreign firms who sell products in the home
country to use domestic inputs ( workers )in the
production of these products.
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6.5 Subsidies
- Domestic subsidy is sometimes granted to
producers of import-competing goods. - Export subsidy goes to producers of goods that
are to be sold overseas.
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6.5.1 Domestic subsidy
- To encourage production by its import-competing
manufacturers, a government might levy tariffs or
quotas on imports. But tariffs and quotas involve
larger sacrifices in national welfare than would
occur under an equivalent subsidy. Unlike
subsidies, tariffs and quotas distort choices for
domestic consumers ( resulting in a decrease in
the domestic demand for imports), in addition to
permitting less efficient home production to
occur.The result is the familiar consumption
effect of protection, whereby a deadweight loss
of consumer surplus is borne by the home nation.
This welfare loss is absent in the subsidy case.
Thus, a subsidy tends to yield the same result
for domestic producers as does an equivalent
tariff or quota, but at a lower cost in terms of
national welfare.
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- The tariffs and quotas involve larger sacrifices
in national welfare than would occur under an
equivalent subsidy. - The subsidy yields the same result for domestic
producers as does an equivalent tariff or quota,
but at a lower cost in terms of national welfare.
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6.5.2 Export subsidy
- The granting of an export subsidy yields two
direct effects for the home economy a
terms-of-trade effect and an export-revenue
effect. Because subsidies tend to reduce the
foreign price of home-nation exports, the home
nations terms of trade is worsened. But lower
foreigh prices generally stimulate export volume.
Should the foreign demand for exports be
relatively elastic, so that a given percentage
drop in foreign price is more than offset by the
rise in export volume, the home nations export
revenues will increase.
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6.6 Dumping
- Dumping is recognized as a form of international
price discrimination. It occurs when foreign
buyers are charged lower prices than domestic
buyers for an identical product, after allowing
for transportation costs and tariff duties.
Selling in foreign markets at a price below the
cost of production is also considered dumping.
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Antidumping Regulations
- Antidumping Regulations
- Under U.S. law, an antidumping duty is levied
when the U.S. Department of Commerce determines
a calss or kind of foreign merchandise is being
sold at less than fair value ( LTFV ) and the
U.S.International Trade Commission (ITC)
determines that LTFV imports are causing or
threatening material injury ( such as
unemployment and lost sales and profits) to a
U.S.industry. Such antidumping duties are imposed
in addition to the normal tariff in order to
neutralize the effects of price discrimination or
below-cost sales.
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- The margin of dumping is calculated as the amount
by which the foreign market value exceeds the
U.S. price. Foreign market value defined in one
of two ways. According to the price-based
definition, dumping occurs whenever a foreign
company sells a product in the U.S.market at a
price below that for which the same products
sells in the home market.
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- In case where the price-based definition can not
be applied, a cost-based definition of foreign
market value is permitted. Under this approach,
the Commerce Department constructs a foreign
market value equal to the sum of - (1) the cost of manufacturing the merchandise,
- (2) general expenses,
- (3) profit on home-market sales,
- (4) the cost of packaging the merchandise for
shipment to the United States. - The amount for general expenses must equal at
least 10 percent of the cost of manufacturing,
and the amount for profit must equal at least 8
percent of the manufacturing cost plus general
expenses.
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Chapter 7Trade Regulations and Industrila
Policies
- Key concepts and terms
- commodity Credit Corporation ??????
- countervailing duty ????
- economic sanctions ????
- export-import bank ?????
- fast-track authority ??????
- General Agreement on Tariffs and Trade ( GATT )
???????? - Intellectual property rights ( IPRs) ????
- Kennedy Round ?????
- Knowledge-based growth policy ?????????
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- Ministry of International Trade and Industry (
MITI) - ????????
- Most-favored-nation (MFN) clause ?????
- Normal trade relations ??????
- Reciprocal Trade Agreements Act ????????
- Section 301 301??
- Smoot-Hawley Act ???--????
- Strategic trade policy ???????
- Tokyo Round ????
- Trade adjustment assistance ??????
- Urguguay Round ?????
- World Trade Organization ( WTO ) ??????
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