Introduction Tariffs, quota's, and other trade restrictions Tariffs and partial equilibrium
description
Transcript of Introduction Tariffs, quota's, and other trade restrictions Tariffs and partial equilibrium
Introduction
Tariffs, quota's, and other trade restrictions
Tariffs and partial equilibrium
Tariffs and general equilibrium
Chapter 8 tool: offer curves
General equilibrium with offer curves
The "optimal" tariff?
Optimal tariffs and retaliation
Tariffs in the USA
Conclusions
CHAPTER 8; TRADE POLICYInternational Trade & the World Economy; Charles van Marrewijk
Explanations for trade
Classical 2. Opportunity costs 3. Comparative advantage
Neo-classical 4. Production structure 5. Factor prices 6. Production volume 7. Factor abundance
1. The world economy
New trade 9. Imperfect competition 10. Intra-industry trade
Policy
8. Trade policy
11. Strategic trade policy
12. Int. trade organizations 13. Economic integration
17. Applied trade policy modeling
Economicgeography
New interactions 14. Geographical economics 15. Multinationals 16. New goods, growth, and development
Industrialorganization
InternationalbusinessGrowth theory
Part
IPa
rt II
Part
III
Part
IV
18. Concluding remarks
Introduction
Tariffs, quota's, and other trade restrictions
Tariffs and partial equilibrium
Tariffs and general equilibrium
Chapter 8 tool: offer curves
General equilibrium with offer curves
The "optimal" tariff?
Optimal tariffs and retaliation
Tariffs in the USA
Conclusions
CHAPTER 8; TRADE POLICYInternational Trade & the World Economy; Charles van Marrewijk
IntroductionInternational Trade & the World Economy; Charles van Marrewijk
Objectives / key terms
Tariff / effective tariff Quota
Voluntary export restraints (VER) Harberger triangle
Double distortion Offer curve
Trade indifference curves 'Optimal' tariff and retaliation
James Meade (1907-1995)
Introduction
Tariffs, quota's, and other trade restrictions
Tariffs and partial equilibrium
Tariffs and general equilibrium
Chapter 8 tool: offer curves
General equilibrium with offer curves
The "optimal" tariff?
Optimal tariffs and retaliation
Tariffs in the USA
Conclusions
CHAPTER 8; TRADE POLICYInternational Trade & the World Economy; Charles van Marrewijk
Tariffs, quota's, and other trade restrictions International Trade & the World Economy; Charles van Marrewijk
Remaining tariff as % of 1930 tariff
0
10
20
30
40
50
60
1945 1955 1965 1975 1985 1995
There are many types of trade restrictions, e.g. specific tariffs, ad valorem tariffs, quota, subsidies, prohibitions, minimum content, etc.
Multilateral rounds by GATT/WTO have reduced the tariff levels considerably
Introduction
Tariffs, quota's, and other trade restrictions
Tariffs and partial equilibrium
Tariffs and general equilibrium
Chapter 8 tool: offer curves
General equilibrium with offer curves
The "optimal" tariff?
Optimal tariffs and retaliation
Tariffs in the USA
Conclusions
CHAPTER 8; TRADE POLICYInternational Trade & the World Economy; Charles van Marrewijk
Tariffs and partial equilibrium; small country International Trade & the World Economy; Charles van Marrewijk
quantity
demand
supply
price
q0 q1 q4q3q2
p0
p0(1+t)
p2
imports without tariff
imports with tariff
tariff
increase producer surplusnet loss; Harberger trianglesdecrease consumer surplusgovernment revenue
Tariffs and partial equilibrium; large country International Trade & the World Economy; Charles van Marrewijk
quantity
demand
supply
price
q0 q1 q4q3q2
p0
p1(1+t)
p2
imports without tariff
imports with tariff
tariff
p1
increase producer surplus= net loss; possible gain
decrease consumer surplusgovernment revenue
-/-
Introduction
Tariffs, quota's, and other trade restrictions
Tariffs and partial equilibrium
Tariffs and general equilibrium
Chapter 8 tool: offer curves
General equilibrium with offer curves
The "optimal" tariff?
Optimal tariffs and retaliation
Tariffs in the USA
Conclusions
CHAPTER 8; TRADE POLICYInternational Trade & the World Economy; Charles van Marrewijk
International Trade & the World Economy; Charles van Marrewijk
0
2
4
6
0 1 2 3 4 5
Manufactures
Food
export Food with tariff
export Food without tariff
import Manufactures with tariff
import Manufactures without tariff
Tariffs and general equilibrium
Tariff raises production of protected good, lowers production of other good
trade reduced
International Trade & the World Economy; Charles van Marrewijk
Tariffs and general equilibrium
ppf
U1U2
U3
Tariffs double distortion: for production and consumption
Introduction
Tariffs, quota's, and other trade restrictions
Tariffs and partial equilibrium
Tariffs and general equilibrium
Chapter 8 tool: offer curves
General equilibrium with offer curves
The "optimal" tariff?
Optimal tariffs and retaliation
Tariffs in the USA
Conclusions
CHAPTER 8; TRADE POLICYInternational Trade & the World Economy; Charles van Marrewijk
Chapter 8 tool: offer curves International Trade & the World Economy; Charles van Marrewijk
-2
0
2
4
6
-4 -2 0 2 4
export Manufactures
impo
rt Fo
odA
B
Offer curve depicts all combinations of export supply in exchange for import demand
Introduction
Tariffs, quota's, and other trade restrictions
Tariffs and partial equilibrium
Tariffs and general equilibrium
Chapter 8 tool: offer curves
General equilibrium with offer curves
The "optimal" tariff?
Optimal tariffs and retaliation
Tariffs in the USA
Conclusions
CHAPTER 8; TRADE POLICYInternational Trade & the World Economy; Charles van Marrewijk
General equilibrium with offer curves International Trade & the World Economy; Charles van Marrewijk
0
1
2
3
0 1 2 3
export ManufacturesA ; import ManufacturesB
impo
rt Fo
odA ;
expo
rt Fo
odB
offerB
offerA
trade equilibrium
Intersection offer curves gives trade equilibrium
Introduction
Tariffs, quota's, and other trade restrictions
Tariffs and partial equilibrium
Tariffs and general equilibrium
Chapter 8 tool: offer curves
General equilibrium with offer curves
The "optimal" tariff?
Optimal tariffs and retaliation
Tariffs in the USA
Conclusions
CHAPTER 8; TRADE POLICYInternational Trade & the World Economy; Charles van Marrewijk
International Trade & the World Economy; Charles van Marrewijk
0
1
2
3
0 1 2 3
export ManufacturesA ; import ManufacturesB
impo
rt Fo
odA ;
expo
rt Fo
odB
offerA no tariff
offerB
offerA tariff
C
D
The ‘optimal’ tariff?Imposing tariff rotates offer curve, influences equilibrium
International Trade & the World Economy; Charles van Marrewijk
0
1
2
3
0 1 2 3export ManufacturesA ; import ManufacturesB
impo
rt Fo
odA ;
expo
rt Fo
odB
offerA no tariff
offerBofferA tariff
trade indifference curves
C
D
The ‘optimal’ tariff?Tangency of trade indifference curve with foreign offer curve determines ‘optimal’ tariff
Introduction
Tariffs, quota's, and other trade restrictions
Tariffs and partial equilibrium
Tariffs and general equilibrium
Chapter 8 tool: offer curves
General equilibrium with offer curves
The "optimal" tariff?
Optimal tariffs and retaliation
Tariffs in the USA
Conclusions
CHAPTER 8; TRADE POLICYInternational Trade & the World Economy; Charles van Marrewijk
International Trade & the World Economy; Charles van Marrewijk
0
1
2
3
0 1 2 3
export ManufacturesA ; import ManufacturesB
impo
rt Fo
odA ;
expo
rt Fo
odB
offerA no tariff
offerB no tariff
offerA tariff
offerB tariff
C
D
E
F
Optimal tariffs and retaliation Tariff war leads to bad outcome for all
Introduction
Tariffs, quota's, and other trade restrictions
Tariffs and partial equilibrium
Tariffs and general equilibrium
Chapter 8 tool: offer curves
General equilibrium with offer curves
The "optimal" tariff?
Optimal tariffs and retaliation
Tariffs in the USA
Conclusions
CHAPTER 8; TRADE POLICYInternational Trade & the World Economy; Charles van Marrewijk
Tariffs in the USA International Trade & the World Economy; Charles van Marrewijk
0
10
20
30
40
50
60
1820 1870 1920 1970
tarif
f rev
enue
/ im
port
valu
e
tarif f of Abominations Morrill and
War tarif fs Haw ley-Smoot
Fordney-McCumby
Kennedy
Introduction
Tariffs, quota's, and other trade restrictions
Tariffs and partial equilibrium
Tariffs and general equilibrium
Chapter 8 tool: offer curves
General equilibrium with offer curves
The "optimal" tariff?
Optimal tariffs and retaliation
Tariffs in the USA
Conclusions
CHAPTER 8; TRADE POLICYInternational Trade & the World Economy; Charles van Marrewijk
ConclusionsInternational Trade & the World Economy; Charles van Marrewijk
• There are many different types of trade restrictions
• Imposing tariffs leads to winners (some producers and the government) and losers (other producers, consumers, and abroad)
• Net welfare is negative if the country is ‘small’ (efficiency loss, Harberger triangles)
• Net welfare effect is potentially positive if the country is ‘large’ (= can influence the world relative price level; ‘optimal’ tariff)
• Net welfare effect also negative for large country with retaliation
• quota equivalent to tariff, except for distribution tariff revenue
• human capital intensive manufactures exports mainly in OECD countries, Central Europe, and Latin America (next slide)
ConclusionsInternational Trade & the World Economy; Charles van Marrewijk
Human capital intensive man.; share of exports (%), 1998; Source: ITC
human cap. int. man.share of exports (%)
16.9 to 43.6 (31)7.8 to 16.9 (30)2.6 to 7.8 (26)0.5 to 2.6 (30)0 to 0.5 (34)