PO102 Lecture Notes - Lecture 1: Voluntary Export Restraints, Government Procurement, Protectionism
F.List: “Infant Industry Argument”
● Trade rules should vary
● Each country should be treated differently based on: special needs, circumstances, and
level of development
Some of today’s mercantilists argue:
● Comparative advantage is a way of rationalizing (even locking-in) the existing
international division of labour (at disadvantage if primary products are worth less eg
bananas vs cars)
Why govts protect their producers and restrict trade
● Protect domestic jobs and industries
● Levels the playing field when other country has unfair advantage
● Tariffs on imports generate revenue
● National industry argument → national interest
● Infant industries (protect at beginning)
According to 2015 Report by Global Trade Alert
● 2015 increase in protectionism
○ Governments imposed 539 trade distortions in the first ten months of 2015 - G20
responsible for 443
○ G20 tariff increases were down 21% but NTBs (like subsidies) were up 47%
○ Trade distortions by the G20 are up 40% compared to 2014
Tools of Protectionism
● Tariffs: a tax on goods that are imported, making them more expensive than what is
produced domestically
● Non-tariff barriers: anything that isn’t a tariff but limits or constrains trade (eg quotas,
VERs)
Non-tariff Barriers
● Quotas and voluntary export restraints (VER)
● Government procurement (buying) policies → favours canadian good or service
● Subsidies to domestic industries
● Subsidies to exporters
● Health regulations and hygienic regulations
○ Beef - are hormones safe? EU says not sure, Canada and US say yes
○ Non tariff barrier?
Global Governance Related to Trade - From the GATT to the WTO
● History - cooperation on trade
○ After WWII countries attempt to regulate and liberalize trade
○ Industrialized countries have interest in open trading order
find more resources at oneclass.com
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Document Summary
Each country should be treated differently based on: special needs, circumstances, and level of development. Comparative advantage is a way of rationalizing (even locking-in) the existing international division of labour (at disadvantage if primary products are worth less eg bananas vs cars) Why govts protect their producers and restrict trade. Levels the playing field when other country has unfair advantage. According to 2015 report by global trade alert. Governments imposed 539 trade distortions in the first ten months of 2015 - g20 responsible for 443. G20 tariff increases were down 21% but ntbs (like subsidies) were up 47% Trade distortions by the g20 are up 40% compared to 2014. Tariffs: a tax on goods that are imported, making them more expensive than what is produced domestically. Non-tariff barriers: anything that isn"t a tariff but limits or constrains trade (eg quotas, Government procurement (buying) policies favours canadian good or service. Eu says not sure, canada and us say yes.
