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ECO100Y1 (431)
Jack Carr (32)

Trade Policies and Tariffs

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University of Toronto St. George
Jack Carr

February 11, 2009 International sector is most important sector Foreign Exchange Rates-Todaro Chart If a country has a higher labor productivity in producing two products, one country will gain, one country will lose International trade theory-If both countries specialize, each country will achieve gains from trade. Crewman says this is wrong. Argument for protectionism-free trade improves resource allocation, protectionist policy, infant industry argument can be justified as it improves resource allocation Infant industry tariff-a country wants to industrialize, specialize in 1 industry Look at an industry to be developed. Have a small industry, want to protect it. Impose strong protectionist measures, 100% tariffs. Block imports from coming in. Domestic producer has whole market to work with. As industry grows, need more products, expand for more production units. Initially, it was a high cost producers (high AVC). More plants will be produced, more efficient plants, larger, obtains better technologies. Achieves strong increasing returns to scale. Domestic market growing, lower unit price. Efficient low cost industry that can stand on its own, tariffs can be taken away. Lea
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