COMMERCE 4SA3 Chapter Notes - Chapter 6: Final Good, Countervailing Duties, General Agreement On Tariffs And Trade
3 Dec 2016
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Document Summary
Chapter six: the political economy of international trade. Trade policy uses seven main instruments: tariffs, subsidies, import quotas, voluntary export restraints, local content requirements, administrative policies, and antidumping policies. Tariff- a tax levied on imports (oldest and simplest instrument of trade policy) Generally pro-producers and anti-consumer: while they protect producers from foreign competitors this restriction of supply also raises domestic prices, import tariffs reduce the overall efficiency of the world economy. They reduce efficiency because a protective tariff encourages domestic firms to produce products at home that, in theory, could be produce more efficiently abroad. Specific tariff- as a fixed charge for each unit of good imported. Ad valorem tariff- levied as a proportion of the value of an imported good. Subsidy- government financial assistance to a domestic producer. By lowering production costs, subsidies help domestic producers in two ways: competing against foreign imports and, gaining export markets.
