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International EconomicsBy Robert J. Carbaugh
8th Edition
Chapter 6:
Nontariff Trade 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
Types of non-tariff barriers
Import quota: trade & welfare effects
Types of non-tariff barriers
Effects of a quota on sugar importsTypes of non-tariff barriers
Comparing tariffs and quotas
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
Types of non-tariff barriers
Tariff-rate quota: trade & welfare effects
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
Types of non-tariff barriers
Effects of a voluntary export quota
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
Types of non-tariff barriers
Domestic content: trade & welfare effects
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
Types of non-tariff barriers
Subsidies: trade & welfare effectsTypes of non-tariff barriers
Subsidies: trade & welfare effectsTypes 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
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
Types of non-tariff barriers