1. Tariffs, quota's, and other trade restrictions
International Trade & the World Economy;  Charles van Marrewijk
CHAPTER 8; TRADE POLICY
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

3. Tariffs, quota's, and other trade restrictions
International Trade & the World Economy;  Charles van Marrewijk
CHAPTER 8; TRADE POLICY
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

4. Introduction James Meade (1907-1995)
International Trade & the World Economy;  Charles van Marrewijk
Introduction
James Meade ( )

5. Tariffs, quota's, and other trade restrictions
International Trade & the World Economy;  Charles van Marrewijk
CHAPTER 8; TRADE POLICY
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

6. Tariffs, quota's, and other trade restrictions
International Trade & the World Economy;  Charles van Marrewijk
Tariffs, quota's, and other trade restrictions
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

7. Tariffs, quota's, and other trade restrictions
International Trade & the World Economy;  Charles van Marrewijk
CHAPTER 8; TRADE POLICY
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

8. Tariffs and partial equilibrium; small country
International Trade & the World Economy;  Charles van Marrewijk
Tariffs and partial equilibrium; small country

9. Tariffs and partial equilibrium; large country
International Trade & the World Economy;  Charles van Marrewijk
Tariffs and partial equilibrium; large country

10. Tariffs, quota's, and other trade restrictions
International Trade & the World Economy;  Charles van Marrewijk
CHAPTER 8; TRADE POLICY
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

11. Tariffs and general equilibrium
International Trade & the World Economy;  Charles van Marrewijk
Tariffs and general equilibrium
Tariff raises production of protected good, lowers production of other good
trade reduced

12. Tariffs and general equilibrium
International Trade & the World Economy;  Charles van Marrewijk
Tariffs and general equilibrium
Tariffs double distortion: for production and consumption

13. Tariffs, quota's, and other trade restrictions
International Trade & the World Economy;  Charles van Marrewijk
CHAPTER 8; TRADE POLICY
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

14. Chapter 8 tool: offer curves
International Trade & the World Economy;  Charles van Marrewijk
Chapter 8 tool: offer curves
Offer curve depicts all combinations of export supply in exchange for import demand

15. Tariffs, quota's, and other trade restrictions
International Trade & the World Economy;  Charles van Marrewijk
CHAPTER 8; TRADE POLICY
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

16. General equilibrium with offer curves
International Trade & the World Economy;  Charles van Marrewijk
General equilibrium with offer curves
Intersection offer curves gives trade equilibrium

17. Tariffs, quota's, and other trade restrictions
International Trade & the World Economy;  Charles van Marrewijk
CHAPTER 8; TRADE POLICY
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

18. Imposing tariff rotates offer curve, influences equilibrium
International Trade & the World Economy;  Charles van Marrewijk
The ‘optimal’ tariff?
Imposing tariff rotates offer curve, influences equilibrium

19. International Trade & the World Economy;  Charles van Marrewijk
The ‘optimal’ tariff?
Tangency of trade indifference curve with foreign offer curve determines ‘optimal’ tariff

20. Tariffs, quota's, and other trade restrictions
International Trade & the World Economy;  Charles van Marrewijk
CHAPTER 8; TRADE POLICY
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

21. Optimal tariffs and retaliation
International Trade & the World Economy;  Charles van Marrewijk
Optimal tariffs and retaliation
Tariff war leads to bad outcome for all

22. Tariffs, quota's, and other trade restrictions
International Trade & the World Economy;  Charles van Marrewijk
CHAPTER 8; TRADE POLICY
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

23. International Trade & the World Economy;  Charles van Marrewijk
Tariffs in the USA

24. Tariffs, quota's, and other trade restrictions
International Trade & the World Economy;  Charles van Marrewijk
CHAPTER 8; TRADE POLICY
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

25. There are many different types of trade restrictions
International Trade & the World Economy;  Charles van Marrewijk
Conclusions
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)

26. Human capital intensive man.; share of exports (%), 1998; Source: ITC
International Trade & the World Economy;  Charles van Marrewijk
Conclusions
Human capital intensive man.; share of exports (%), 1998; Source: ITC