COMMERCE 4SA3 Lecture Notes - Lecture 6: Voluntary Export Restraints, Import Quota, Countervailing Duties
21 Feb 2017
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Document Summary
Trade policy uses 7 main instruments: tariffs, subsidies, import quotas, voluntary export restraints, local content requirements, administrative policies and antidumping duties. Tariffs are the oldest and simplest instruments of trade policy. Tariffs: tariffs: tax levied on imports, tariffs fall into 2 categories. Specific tariffs: tariff levied as a fixed charge for each unit of a good imported(/barrel of oil) Tariffs are generally pro-producer and anti-consumer while they protect producers from foreign competitors, this restriction of supply also raises domestic prices. Reduce exports from a sector, often for political reasons. Subsidies: subsidies: government financial assistance to a domestic producer, subsidies take many forms including cash grants, low-domestic loans, tax breaks and government equity participation in domestic firms, subsidies help domestic producers in 2 ways: Government typically pay for subsidised by taxing individuals: agricultural subsidies. Allow inefficient farmers to stay in business. Encourage countries to overproduce heavily subsidized agricultural products.
