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KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 1 International Economics Part 4 Dr. Stefan Kooths BiTS Berlin (winter term 2013/2014)

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Presentation on theme: "KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 1 International Economics Part 4 Dr. Stefan Kooths BiTS Berlin (winter term 2013/2014)"— Presentation transcript:

1 KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 1 International Economics Part 4 Dr. Stefan Kooths BiTS Berlin (winter term 2013/2014)

2 KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 2 Outline 1.Introduction and Overview 2.Systemizing and Recording Cross-border Economic Activity 3.The Pure Theory of International Trade 4.Trade Policy: Free Trade vs. Protectionism Protectionism: Goals and instruments Tariffs Nontariff-barriers to trade Export subsidies (dumping) Economic integration and multilateral trade policy Free trade: Pros and cons 5.Foreign Exchange Markets and the Open Macroeconomy 6.Case Study: The Euro Area Crisis 7.Summary: The Key Lessons Learnt

3 KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 3 Goals of protectionism

4 KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 4 Mercantilism

5 KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 5 Tariffs vs. nontariff barriers to trade

6 KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 6 Outline 1.Introduction and Overview 2.Systemizing and Recording Cross-border Economic Activity 3.The Pure Theory of International Trade 4.Trade Policy: Free Trade vs. Protectionism Protectionism: Goals and instruments Tariffs Nontariff-barriers to trade Export subsidies (dumping) Economic integration and multilateral trade policy Free trade: Pros and cons 5.Foreign Exchange Markets and the Open Macroeconomy 6.Case Study: The Euro Area Crisis 7.Summary: The Key Lessons Learnt

7 KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 7 Tariff as a tax on imports

8 KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 8 Types of custom duties Specific tariff Ad valorem tariff

9 KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 9 Effect on domestic producers

10 KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 10 Effect on domestic consumers

11 KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 11 Government revenues

12 KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 12 Net national effect

13 KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 13 Terms-of-trade effect: Small vs. large countries

14 KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 14 Nationally optimal tariffs

15 KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 15 Outline 1.Introduction and Overview 2.Systemizing and Recording Cross-border Economic Activity 3.The Pure Theory of International Trade 4.Trade Policy: Free Trade vs. Protectionism Protectionism: Goals and instruments Tariffs Nontariff-barriers to trade Export subsidies (dumping) Economic integration and multilateral trade policy Free trade: Pros and cons 5.Foreign Exchange Markets and the Open Macroeconomy 6.Case Study: The Euro Area Crisis 7.Summary: The Key Lessons Learnt

16 KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 16 Types of nontariff barriers

17 KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 17 Import quotas: Small country analysis

18 KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 18 Allocating import licenses Fixed favoritism Auction Resource-using procedures

19 KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 19 Import quotas: Large country analysis

20 KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 20 Voluntary export restraints

21 KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 21 Other nontariff barriers Product standards Domestic content requirements Government procurement

22 KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 22 Outline 1.Introduction and Overview 2.Systemizing and Recording Cross-border Economic Activity 3.The Pure Theory of International Trade 4.Trade Policy: Free Trade vs. Protectionism Protectionism: Goals and instruments Tariffs Nontariff-barriers to trade Export subsidies (dumping) Economic integration and multilateral trade policy Free trade: Pros and cons 5.Foreign Exchange Markets and the Open Macroeconomy 6.Case Study: The Euro Area Crisis 7.Summary: The Key Lessons Learnt

23 KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 23 Dumping vs. fair market value Normal value »Comparative (prices charged in domestic market) »Cost-based (selling below average cost)

24 KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 24 Types of dumping Predatory Cyclical Seasonal Persistent (price discrimination)

25 KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 25 Small exporting country analysis

26 KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 26 Large exporting country analysis

27 KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 27 Retaliation

28 KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 28 Strategic trade policy: Boing vs. Airbus (1/2)

29 KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 29 Strategic trade policy: Boeing vs. Airbus (2/2)

30 KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 30 Outline 1.Introduction and Overview 2.Systemizing and Recording Cross-border Economic Activity 3.The Pure Theory of International Trade 4.Trade Policy: Free Trade vs. Protectionism Protectionism: Goals and instruments Tariffs Nontariff-barriers to trade Export subsidies (dumping) Economic integration and multilateral trade policy Free trade: Pros and cons 5.Foreign Exchange Markets and the Open Macroeconomy 6.Case Study: The Euro Area Crisis 7.Summary: The Key Lessons Learnt

31 KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 31 Stages of economic integration

32 KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 32 Regional economic integration Source:

33 KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 33 Trade creation and trade diversion

34 KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 34 Other effects of economic integration Increase in competition (reducing monopoly power) »Lower prices (static efficiency) »Higher productivity/lower cost of production (dynamic efficiency) Lower cost by expanding scales of production More opportunities for business investments (FDI)

35 KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 35 Case study: The European Union

36 KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 36 Trade embargoes

37 KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 37 International trade disputes

38 KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 38 GATT and WTO GATT (1947) »General Agreement on Tariffs and Trade WTO (1994) »World Trade Organization »www.wto.org

39 KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 39 Outline 1.Introduction and Overview 2.Systemizing and Recording Cross-border Economic Activity 3.The Pure Theory of International Trade 4.Trade Policy: Free Trade vs. Protectionism Protectionism: Goals and instruments Tariffs Nontariff-barriers to trade Export subsidies (dumping) Economic integration and multilateral trade policy Free trade: Pros and cons 5.Foreign Exchange Markets and the Open Macroeconomy 6.Case Study: The Euro Area Crisis 7.Summary: The Key Lessons Learnt

40 KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 40 First best vs. second best

41 KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 41 Costs of protection Loss of welfare (deadweight losses) Foreign retaliation Enforcement costs Renk-seeking costs Rents to foreign producers (VERs) Dynamic inefficiencies (loss of dynamic efficiency)

42 KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 42 Externalities

43 KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 43 Promoting domestic production or employment

44 KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 44 The infant industry/dying industry arguments

45 KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 45 Public revenues

46 KOOTHS | BiTS: International Economics (winter term 2013/2014), Part 4 46 Noneconomic objectives National pride National defense Domestic income redistribution


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