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Chapter 9
Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 9 - 1
Formulation of National Trade Policies
Learning Objectives
• Review pros and cons of governmental
intervention in international trade
• Identify advantages and disadvantages
of adopting an industrial policy
• Analyze how domestic politics affect a
country’s international trade policies
Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 9 - 2
Learning Objectives
• Describe the major tools countries use to
restrict trade
• Specify the techniques countries use to
promote international trade
• Explain how countries defend against
unfair trade practices
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Rationale for Trade Intervention
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Trade Policy Debate
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Free Trade
Fair Trade
Industry Arguments
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National
DefenseInfant Industries
Strategic Trade
Theories
Maintenance
of Jobs
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National Defense
•Raw Materials
•Machinery
•Technology
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Government Protection
Comparative Advantage
Infant Industries
Maintenance of Jobs
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Existing Levels
of Employment
Relief from
Competition
Strategic Trade Theory
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Oligopolistic Industries
Government
Intervention
Requests for
Protection
Payoff Matrix: Profits from Developing a Nuclear Power Plant Design
(in billions of USD)
Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 9 - 11
Are
va
Develop
Do NotDevelop
Develop Do Not DevelopToshiba
-1
-1 10
0
10
0
0
0
Payoff Matrix: Profits Resulting from a $2 Billion Subsidy to Areva
(in billions of USD)
Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 9 - 12
Are
va
Develop
Do NotDevelop
Develop Do Not DevelopToshiba
-1
-1 + 2 = +1 10 + 2 = 12
0
10
0
0
0
Summary of Discussion
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Advantages and Disadvantages of Adopting
an Industrial Policy
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Economic Development
•Export Strategy
•Import Strategy
Industrial Policy
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Opportunities Challenges
Key Industries
Competitiveness
Politicians
Special Interests
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Public Choice Analysis
•Interest Groups
•Elected Officials
Summary of Discussion
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Barriers to International Trade
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Tariff Barriers
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•Export Tariffs
•Transit Tariffs
•Import Tariffs
Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 9 - 21
Three Import Tariffs
Heading/
Subheading
Stat.
Suffix Article Description
Units of
Quantity Rates of Duty
2006.00 Fruit, nuts, fruit peel, other plant parts,
preserved by sugar
2006.00.20 00 Cherries Kg 9.9¢/kg + 6.4%
2006.00.30 00 Ginger Root Kg 2.4%
2006.00.40 00 Pineapples Kg 2.1%
Other, including mixtures:
2006.00.50 00 Mixtures Kg 16%
2006.00.60 00 Citrus Fruit; Peel of citrus or other fruit kg 6¢/kg
2006.00.70 00 Other Fruit and Nuts Kg 8%
2006.00.90 00 Other kg 16%
Impact of an Import Tariff on Demand for U.S. Made SUVs
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Gainers: Producers, suppliers,
labor, dealers & communities
associated with U.S. SUVs
Losers: Domestic consumers,
workers, producers & dealers
associated with Foreign SUVs
Nontariff Barriers
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Numerical Quotas
Numerical Export Controls
Other Nontariff Barriers
Numerical Quotas
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Tari
ff r
ate
on
wid
gets
Number of widgets
100,000
Imports above thresholdQuota threshold
0
TL
TH
Numerical Export Controls
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Quantitative Trade Barriers
Voluntary Export
Restraint
Embargos
and Bans
• Product and Testing Standards
• Restricted Distribution-Network Access
• Public-Sector Procurement Policies
• Local-Purchase Requirements
• Regulatory and Currency Controls
• Investment Controls
Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 9 - 26
Other Nontariff Barriers
Summary of Discussion
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Promotion of International Trade
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Government Subsidies
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Opportunities Challenges
Export Markets
Foreign Imports
Trade Patterns
Efficient Producers
Foreign Trade Zones
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Preferential Tariff Treatment
Economic
Development
Customs
Duties
Export Financing Programs
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Government-Owned Agencies
Export-Import Bank of the U.S.
Overseas Private Investment Corp.
Summary of Discussion
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Controlling Unfair Trade Practices
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Unfair Trade Practices
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International
Trade
Administration
(ITA)
International
Trade
Commission
(ITC)
Countervailing Duty
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Foreign
Subsidy
Ad Valorem
Tariff
Antidumping Laws
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•Price Discrimination
•Predatory Pricing
Unfair Trade Laws
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Opposition to Enforcement
Protectionist
Trade Barriers
Harm to
Consumers
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Sudden Import Surges
Safeguards
Summary of Discussion
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Chapter 9
Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 9 - 40
Formulation of National Trade Policies
Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 9 - 41
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