Government Intervention in International Trade

Unit 7 Part 2A

Basic Methods to Limit Trade

• Tariffs– Tax on imported goods

• Quotas– Limit on quantity of imported goods– VER

• Regulations– FDA

How Trade Works

Support Limits on Trade

• National defense• Infant industry• Dumping • Preserve domestic jobs• Maintain a diverse and stable economy

Results of Barriers

• Higher prices for consumers• Inefficiency• Less choice• Less profit for suppliers

History of Tariffs

• Smoot Hawley Act 1933– Raised 20%

• NAFTA– Reduce tariffs

• WTO– Reduce tariffs

WTO

• History of WTO