Copyright ©2002, South-Western College Publishing International Economics By Robert J. Carbaugh 8th Edition Chapter 6: Nontariff Trade Barriers

Carbaugh, Chap. 6 2 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 Types of non-tariff barriers

Carbaugh, Chap. 6 3 Import quota: trade & welfare effects Types of non-tariff barriers

Carbaugh, Chap. 6 4 Effects of a quota on sugar imports Types of non-tariff barriers

Carbaugh, Chap. 6 5 Comparing tariffs and quotas Types of non-tariff barriers

Carbaugh, Chap. 6 6 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 Types of non-tariff barriers

Carbaugh, Chap. 6 7 Tariff-rate quota: trade & welfare effects Types of non-tariff barriers

Carbaugh, Chap. 6 8 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 Types of non-tariff barriers

Carbaugh, Chap. 6 9 Effects of a voluntary export quota Types of non-tariff barriers

Carbaugh, Chap Domestic content requirements Rules that require a certain percentage of a products 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 Types of non-tariff barriers

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

Carbaugh, Chap 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 Types of non-tariff barriers

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

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

Carbaugh, Chap 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 Types of non-tariff barriers

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