Quotas

Trade blocs This is a group of countries that engage in international trade, who agree to make trade between themselves easier and to maintain barriers to trade with countries outside of the bloc

Trade groupings – remember these? ASEAN MERCOSUR NAFTA EU CIS WTO

Trade Groups… Free trade areas – group of countries that agree to trade without barriers between themselves, but maintain their own individual barriers with countries outside the area. E.g. NAFTA Customs unions - group of countries that agree to trade without barriers between themselves, AND gave a common trade barrier against the rest of the world eg. EU

Quotas Aka Voluntary exports constraints To limit the volume of imports into a country

International trade without a quota Price Output (Q) Domestic Demand Domestic Supply World Price QdQs Pw

Introduction of a Quota Price Output (Q) Domestic Demand Domestic Supply World Price Qd Qs Pw S total quota What effect will the quota have?

Introduction of a Quota Price Output (Q) Domestic Demand Domestic Supply World Price Qd Qs Pw S total Qd1 P1 quota Qs1 imports How has the domestic producer been effected? How has the domestic consumers been effected? How has the international producer been effected?

Impact of a Quota on domestic producers Price Output (Q) Domestic Demand Domestic Supply World Price Qd Qs Pw S total Qd1 P1 quota Qs1 imports How has the domestic producer been effected? Domestic producer gains from selling more at a higher price than without protection of the quota

Impact of a Quota on domestic producers Price Output (Q) Domestic Demand Domestic Supply World Price Qd Qs Pw S total Qd1 P1 quota Qs1 imports Exporters can make a gain! … as they can now sell at a higher price (but less units) Green box How has the international producer been effected? Windfall gain

Impact of a Quota on domestic producers Price Output (Q) Domestic Demand Domestic Supply World Price Qd Qs Pw S total Qd1 P1 quota Qs1 imports Net Loss How has the domestic consumers been effected?

Quota impact (2005!)

Non-Tariff Barriers Non-Tariff Barriers (NTBs) proliferate even when standard tariff barriers have been reduced / eliminatedNon-Tariff Barriers Examples: –Different legal and technical standards –Export Subsidies –Government procurement policies favouring home firms –Research and development subsidies –Different labour market regulations –Language barriers

Remember these from WTO lesson? Both are issues of Quota’s. Sugar = reduction of quota limits to allow more to be traded in EU Avatar = China reinforcing it’s quota of foreign films and restricting sales of imports domestically!

More recent examples Sugar rush…. USA protectionism for its own farmers… Banana trade wars….

Bra wars?

Your task…. Quotas are often criticised as encouraging domestic producers to be inefficient with resource allocation and dynamic inefficiencies. The syllabus states “Students should examine cases of protectionism currently in the news.” So over to you & internet! Possible sources of research… I want you to look at USA v China Clothing Car manufacturing Agricultural

an/03/china-brics-global-economy- america-europehttp:// an/03/china-brics-global-economy- america-europe

Hom ewor k