International Economics By Robert J. Carbaugh 9th Edition Chapter 5: Nontariff Trade Barriers

Types of non-tariff barriers Import quotas Quotas are a restriction on the quantity of a good that may be imported in any one period (usually below free-trade levels) Global quotas restrict the total quantity of an import, regardless of origin Selective quotas restrict the quantity of a good coming from a particular country Carbaugh, Chap. 6

Import quota: trade & welfare effects Types of non-tariff barriers Import quota: trade & welfare effects Carbaugh, Chap. 6

Effects of a quota on sugar imports Types of non-tariff barriers Effects of a quota on sugar imports Carbaugh, Chap. 6

Comparing tariffs and quotas Types of non-tariff barriers Comparing tariffs and quotas Carbaugh, Chap. 6

Tariff-rate quota The tariff-rate quota is a two-tiered tariff Types of non-tariff barriers Tariff-rate quota The tariff-rate quota is a two-tiered tariff A specified number of goods (up to the quota limit) may be imported at one (lower) tariff rate, while imports in excess of the quota face a higher tariff rate Carbaugh, Chap. 6

Tariff-rate quota: trade & welfare effects Types of non-tariff barriers Tariff-rate quota: trade & welfare effects Carbaugh, Chap. 6

Orderly marketing agreements Types of non-tariff barriers Orderly marketing agreements Market sharing pact signed by trading partners Intended to protect less efficient domestic producers Usually involve voluntary export restraints, or export quotas Recent trade negotiations have restricted the use of these agreements Carbaugh, Chap. 6

Effects of a voluntary export quota Types of non-tariff barriers Effects of a voluntary export quota Carbaugh, Chap. 6

Domestic content requirements Types of non-tariff barriers Domestic content requirements Rules that require a certain percentage of a product’s total value to be produced domestically Often has the effect of forcing lower-priced imports to include higher-cost domestic components or be assembled in a higher-cost domestic market Carbaugh, Chap. 6

Domestic content: trade & welfare effects Types of non-tariff barriers Domestic content: trade & welfare effects Carbaugh, Chap. 6

Subsidies Domestic subsidy Export subsidy Types of non-tariff barriers Subsidies Domestic subsidy Payments made to import-competing producers to raise the price they receive above the market price Export subsidy Payments and incentives offered to export producers intended to raise the volume of exports Carbaugh, Chap. 6

Subsidies: trade & welfare effects Types of non-tariff barriers Subsidies: trade & welfare effects Carbaugh, Chap. 6

Subsidies: trade & welfare effects Types of non-tariff barriers Subsidies: trade & welfare effects Carbaugh, Chap. 6

Types of non-tariff barriers Dumping The practice of selling a product at a lower price in export markets than at home (or exporting at prices below production cost) Sporadic dumping - to clear unwanted inventories or cope with excess capacity Predatory dumping - to undermine foreign competitors Persistent dumping - reaping greater profits by engaging in price discrimination Carbaugh, Chap. 6

Other NTBs Government procurement policies Types of non-tariff barriers Other NTBs Government procurement policies Social regulations (health, environmental and safety rules can also restrict trade) Sea transport and freight restrictions Carbaugh, Chap. 6