After studying this chapter, you should be able to: (1)Know what is an import quota( 进口配 额 ) (2)Illustrate the effects of import quota on domestic economy under competitive and monopolistic market (3)Identify other nontariff trade barriers (4)Describe the impacts of TBT( 技术性贸 易壁垒 ) on China’s economy
Although tariffs have historically been the most important form of trade restriction, there are many other types of trade barriers, such as import quotas, voluntary export restraints( 自愿出口限制 ), and antidumping actions. As tariffs were negotiated down during the postwar period, the importance of non-tariff trade barriers has greatly increased. CASE STUDY 6-4
§1 Direct Restrictions on the Imports 1.1 Import Quotas System A quota is the most important non-tariff trade barrier. It is a direct quantitative restriction on the amount of a commodity allowed to be imported or exported in a nation. In this section, we examine import quotas. Import quotas can be used to protect a domestic industry or agriculture, and for balance-of-payments reasons. They were very common in Western Europe immediately after World War II.
Effects of An Import Quota in Competitive Market S 1 S 2 C 2 C 1 Q 60 70 110 120 d c b a D 总需求曲线 S d 国内供给曲线 Q ＝ 40 D d 对国内钢铁的需求 P 1.0 1.5
Distribution of Quotas Results in the Change in Welfare First, if the government issues quotas to importers directly, the profits obtained by importers equals the tariffs c; Second, if the government issues quotas according to importers’ application, potential importers are likely to devote a great deal of effort to lobbying( 游说 ) and even bribing( 贿赂 ) government officials to obtain them (in so-called rent-seeking 寻租 activities). The welfare will be lower than c; Third, if the government auctions( 拍卖 ) off these quotas in a competitive market, the government revenue will equal the tariffs c; Last, if the quotas will be distributed by the exporters, the net welfare loss will be b+d+c.
Effects of An Import Quota under Monopolistic Condition 60 65 70 105 110 120 Q Q=40 b d 1.5 MC Cost/price 1.8 1.0 MR DdDd D e
1.2 Import License System( 进 口许可证制 ) Governments stipulate that enterprises must obtain license before importing. The quotas involves the distribution of import licenses. (as stated before)
1.3 Voluntary Export Restraints These refer to the case where an importing country induces( 迫使 ) another nation to reduce its exports of a commodity "voluntarily," under the threat of higher all- round trade restrictions, when these exports threaten an entire domestic industry. CASE STUEY 6-1 VERs have been negotiated since the 1950s among industrial nations to curtail exports of textiles, steel, electronic products, automobiles, and other products from Japan, Korea, and other nations. These are the mature industries that faced sharp declines in employment in the industrial countries during the past three decades.
Effects of VERs They have all the economic effects of equivalent import quotas, except that they are administered by the exporting country, and so the revenue effect or rents are captured by foreign exporters. Voluntary export restraints are less effective in limiting imports than import quotas because the exporting nations agree only reluctantly to curb their exports. Foreign exporters are also likely to fill their quota with higher-quality and higher- priced units of the product over time. Furthermore, only major supplier countries are involved, leaving the door open for other nations to replace part of the exports of the major suppliers and also from transshipments through third countries.
§2 Indirect Restrictions on the Imports 2.1 Exchange Rate Undervalued( 汇率 低估 ) It refers to undervaluing its own money to depreciate consciously its money to foreign money.
2.2 State Monopoly( 国家垄断 ) It means that governments handle the imports and exports of some commodities directly, or grant monopolistic power to some organizations. Some types of commodities: (1) cigarette and liquor; (2) agricultural products; (3) weapons; (4) petroleum.
2.3 Discriminatory Government Procurement Policy( 歧视性政府采购 )Discriminatory Government Procurement Policy Governments stipulate laws requiring the government’s agencies to buy from domestic suppliers. For example, under the “Buy American Act” passed in 1933, U.S. government agencies gave a price advantage of up to 12% (50% for defense contracts) to domestic suppliers. As part of the Tokyo Round, U.S. and other nations agreed on a government procurement code to bring these practices and regulations into the open and give foreign suppliers a fair chance.
2.5 Minimum Price( 最低限价 ) A minimum price is a price floor set by the government where the price is not allowed to fall below this set level (although it is allowed to rise above it). For example: the minimum price of steel is $320/T. If the import price is $300/T, the importing nation will impose surtaxes of $20 on the imports of steel.
In 1978, U.S. introduced a trigger-price mechanism( 启动价格制 ) under which a charge that steel was being imported into U.S. at prices below those of the lowest-cost foreign producer (Korea in the late 1980s) was subject to a speedy antidumping investigation. If dumping was proved, the U.S. government would provide quick relief to the domestic steel industry in the form of a duty that would bring the price of the imported steel to equal that of the lowest-cost country.
2.6 Technical Barriers to Trade, TBT It refers to the use of the domestic regulatory process as a means of protecting domestic producers. TBT is the most comprehensive applied non-tariff barrier in the world.
Scope of the TBT Agreement 1. Technical regulation 技术法规 Example 1: A law stating that only refrigerators that are one meter high can be sold in State X is a technical regulation. Example 2: A law stating that all product packaging must be recyclable is an example of a technical regulation.
2. Standard 技术标准 Example 1: A government guideline saying that all eggs weighing 62 grams or more are entitled to be labeled “Grade A” is a standard (provided that eggs weighing less may still be sold). Example 2: A guideline defining what products can display a “recyclable symbol” is a standard (provided that products that do not bear the symbol may still be sold).
3. Conformity Assessment Procedure 合格评 定程序 Example: Assume a country requires as a condition for the sale of spirits that the correct alcoholic content be displayed on the bottle. An official test of the beverage to determine that the correct alcoholic content is displayed would be a conformity assessment procedure implemented to verify compliance with a technical regulation.
The principle difference between a technical regulation and a standard is that compliance with a technical regulation is mandatory, while compliance with a standard is voluntary. Conformity assessment procedures are used to determine whether a technical regulation or standard has been complied with.
2.7 Social Accountability( 社会责任 )Social Accountability 社会责任 Measure of an organization’s state of being mindful of the emerging social concerns and priorities of internal and external stakeholders (community, employees, governmental and nongovernmental organizations, management, and owners). It is reflected in: (1) willing compliance with employment, health and hygiene, safety, and environment laws, (2) respect for basic civil and human rights, and (3) betterment of community and surrounding.