ADM 3318 Lecture Notes - Lecture 15: Voluntary Export Restraints, Free Trade
16 Jun 2018
School
Department
Course
Professor
Political Economy
Free trade refers to a situation where a government does not…
Attempt to restrict what its citizens can buy from another country
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What they can sell to another country
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The political and economic reasons that governments have for intervening in
international trade
When governments intervene, they often do so by restricting imports of
goods and services into their nations, while adopting policies that promote
exports
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Normally their motives are to protect domestic producers and jobs form
foreign competition while increasing the foreign market for products of
domestic producers
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When government intervene they use what we call "Instruments of Trade Policy"
Tariffs
Ad valorem tariffs
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Specific tariffs
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Subsidies
A government payment to a domestic producer
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Can take many forms
Cash grants
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Low-interest loans
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Tax breaks
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Government equity participation
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By lowering production costs, subsidies help domestic products in two
ways
They help them compete against foreign imports
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Import quotas and voluntary export restraints
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Local content requirements
Demands that some specific fraction of a good be produced
domestically
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The requirement can be expressed either in physical terms, or in value
75% of component parts for this product must be produced
locally
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75% of the value of this product must be produced locally □
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Administrative policies
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Antidumping policies
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The case for government intervention
Political arguments for intervention
Protecting jobs and industry
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National security
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Retaliation
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Protecting consumers
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Furthering foreign policy objectives
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Class 15 -Mar. 5th
Monday, March 5, 2018
10:23
