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Import quotas

Types of non-tariff barriers. Import quotas. Quota: how much of a good that may be imported in a year (usually below free-trade levels) Global quotas restrict the total quantity of an import, regardless of origin

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Import quotas

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  1. Types of non-tariff barriers Import quotas • Quota: how much of a good that may be imported in a year (usually below free-trade levels) • Global quotas restrict the total quantity of an import, regardless of origin • Selective quotas restrict the quantity of a good coming from a particular country Carbaugh, Chap. 6

  2. Types of non-tariff barriers Import quota: trade & welfare effects SUS SUS+Q Price ($) Quota a b c d SEU DUS Carbaugh, Chap. 6

  3. Types of non-tariff barriers Comparing tariffs and quotas Tariff restriction Quota restriction Price ($) Price ($) SUS0 SUS0 SJ1 SJ0 SJ0 DUS0 DUS0 Carbaugh, Chap. 6

  4. Types of non-tariff barriers Tariff-rate quota • The tariff-rate quota is a two-tiered tariff • A specified number of goods (up to the quota limit) may be imported at one (lower) tariff rate, while imports in excess of the quota face a higher tariff rate Carbaugh, Chap. 6

  5. Types of non-tariff barriers Orderly marketing agreements • Market sharing pact intended to protect less efficient domestic producers • Usually involve voluntary export restraints, or export quotas • Japanese auto exports Carbaugh, Chap. 6

  6. Types of non-tariff barriers Domestic content requirements • Rules that require a certain percentage of a product’s total value to be produced domestically • Forces lower-priced imports to include high-cost domestic components or to be assembled by high-cost domestic producer Carbaugh, Chap. 6

  7. Types of non-tariff barriers Subsidies • Domestic subsidy • Payments made to import-competing producers to raise the price they receive above the market price • Export subsidy • Payments and incentives offered to export producers intended to raise the volume of exports Carbaugh, Chap. 6

  8. Domestic subsidy: Payments made to import-competing producers to raise the price they receive above the market price Subsidies: trade & welfare effects SUS0 Price ($) Subsidy: shifts domestic supply down and out. Consumers not hurt. SUS1 a b SW DUS Carbaugh, Chap. 6

  9. Subsidies: trade & welfare effects Export subsidy: Payments and incentives offered to exporter that raise the volume of exports SJ0 Price ($) G Japanese Subsidy of TV exports lowers their price to US buyers SJ1 E F DUS Carbaugh, Chap. 6

  10. Types of non-tariff barriers Dumping • The practice of selling a product at a lower price in export markets than at home (or exporting at prices below production cost) • Sporadic dumping - to clear unwanted inventories or cope with excess capacity • Predatory dumping - to undermine foreign competitors • Persistent dumping - reaping greater profits by engaging in price discrimination Carbaugh, Chap. 6

  11. Types of non-tariff barriers Other NTBs • Government procurement policies • Social regulations (health, environmental and safety rules can also restrict trade) • Sea transport and freight restrictions Carbaugh, Chap. 6

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