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Types of non-tariff barriers
Import quotas Quota: how much of a good that may be imported in a year (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
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Import quota: trade & welfare effects
Types of non-tariff barriers Import quota: trade & welfare effects SUS SUS+Q Price ($) Quota a b c d SEU DUS Carbaugh, Chap. 6
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Comparing tariffs and quotas
Types of non-tariff barriers Comparing tariffs and quotas Tariff restriction Quota restriction Price ($) SUS0 Price ($) SUS0 SJ1 SJ0 SJ0 DUS0 DUS0 Carbaugh, Chap. 6
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Tariff-rate quota The tariff-rate quota is a two-tiered tariff
Types of non-tariff barriers Tariff-rate quota The tariff-rate quota is a two-tiered tariff A specified number of goods (up to the quota limit) may be imported at one (lower) tariff rate, while imports in excess of the quota face a higher tariff rate Carbaugh, Chap. 6
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Orderly marketing agreements
Types of non-tariff barriers Orderly marketing agreements Market sharing pact intended to protect less efficient domestic producers Usually involve voluntary export restraints, or export quotas Japanese auto exports Carbaugh, Chap. 6
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Domestic content requirements
Types of non-tariff barriers Domestic content requirements Rules that require a certain percentage of a product’s total value to be produced domestically Forces lower-priced imports to include high-cost domestic components or to be assembled by high-cost domestic producer Carbaugh, Chap. 6
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Subsidies Domestic subsidy Export subsidy
Types of non-tariff barriers Subsidies Domestic subsidy Payments made to import-competing producers to raise the price they receive above the market price Export subsidy Payments and incentives offered to export producers intended to raise the volume of exports Carbaugh, Chap. 6
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Subsidies: trade & welfare effects
Domestic subsidy: Payments made to import-competing producers to raise the price they receive above the market price SUS0 Price ($) Subsidy: shifts domestic supply down and out. Consumers not hurt. SUS1 a b SW DUS Carbaugh, Chap. 6
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Subsidies: trade & welfare effects
Export subsidy: Payments and incentives offered to exporter that raise the volume of exports SJ0 Price ($) G Japanese Subsidy of TV exports lowers their price to US buyers SJ1 E F DUS Carbaugh, Chap. 6
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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
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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
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