International Trade - Theory and Policy, 2010a

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0806.10.20 $1.13/m 3 (Feb. 15–Mar. 31) Free (A+,AU,BH,CA,CL,D,E,IL,J,JO,MA,MX,OM,P,PE,SG) Grapes, fresh 0806.10.40 Free (Apr. 1– June 30) 0806.10.60 $1.80/m 3 (any other time) Free (A+,AU,BH,CA,CL,D,E,IL,J,JO,MA,MX,OM,P,PE,SG) Ceramic tableware; cups valued over $5.25 per dozen; saucers valued over $3 per dozen; soups, oatmeals, and cereals valued over $6 per dozen; plates not over 22.9 cm in maximum diameter and valued over $6 per dozen; plates over 22.9 but not over 27.9 cm in maximum diameter and valued over $8.50 per dozen; platters or chop dishes valued over $35 per dozen; sugars valued over $21 per dozen; creamers valued over $15 per dozen; and beverage servers valued over $42 per dozen Motor cars principally designed for the transport of persons, of all cylinder capacities 6912.00.45 4.5% 8703.2x.00 2.5% Free (A+,AU,CA,CL,D,E,IL,J, JO,MX,P,PE,SG) 2.7% (BH) 2.4% (MA) 4% (OM) Free (A+,AU,B,BH,CA,CL,D,E,IL,J,JO,MA,MX,OM,P,PE,SG) Motor vehicles for the transport of goods (i.e., trucks), gross vehicle weight exceeding 5 metric tons but less than 20 metric tons 8704.22.50 25% Free (A+,AU,B,BH,CA,CL,D,E,IL,J,MA,MX,OM,P,PE) 2.5% (JO) 10% (SG) Bicycles having both wheels not exceeding 63.5 cm in diameter 8712.00.15 11% Free (A+,AU,BH,CA,CL,D,E,IL,J,JO,MA,MX,OM,P,PE) 1.3% (SG) Saylor URL: http://www.saylor.org/books Saylor.org 55
Cane sugar 1701.11.05 1.4606¢/kg less 0.020668¢/kg for each degree under 100 degrees but not less than 0.943854¢/kg Free (A∗,AU,BH,CA,CL,E∗,IL,J,JO,MA,MX,OM,P,PE,SG) Sports footwear: tennis shoes, basketball shoes, gym shoes, training shoes and the like: having uppers of which over 50% of the external surface area is leather 6404.11.20 10.5% Free (AU,BH,CA,CL,D,E,IL,J+,JO,MA,MX,OM,P,PE,R) 1.3% (SG) Golf clubs 9506.31.00 4.4% Free (A,AU,BH,CA,CL,E,IL,J,JO,MA,MX,OM,P,PE,SG) Wristwatches 9101.11.40 51¢ each + 6.25% on case and strap + 5.3% on battery Free (AU,BH,CA,CL,D,E,IL,J,J+,JO,MA,MX,OM,P,PE,R,SG) Fax machines 8517.21.00 Free Coffee, caffeinated 0901.21.00 Free Tea, green tea, flavored 0902.10.10 6.4% Free (A,AU,BH,CA,CL,E,IL,J,JO,MA,MX,OM,P,PE,SG) The products presented in Table 1.3 "Selected Tariffs in the United States, 2009" were selected to demonstrate several noteworthy features of U.S. trade policy. The WTO reports in the 2006 U.S. trade policy review that most goods enter the United States either duty free or with very low tariffs. Coffee and fax machines are two goods, shown above, representative of the many goods that enter duty free. The average MFN tariff in the United States in 2002 was about 5 percent, although for agricultural goods the rate was almost twice as high. About 7 percent of U.S. tariffs exceed 15 percent; these are mostly sensitive products such as peanuts, dairy, footwear, textiles, and clothing. The trade-weighted average tariff in the United States was only about 1.5 percent in 2003. One interesting feature of the tariff schedule is the degree of specificity of the products in the HTS schedule. Besides product type, categories are divided according to weight, size, or the time of year. Note especially the description of ceramic tableware and bicycles. Saylor URL: http://www.saylor.org/books Saylor.org 56
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This text was adapted by The Saylor
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Chapter 1 Introductory Trade Issues
Page 6 and 7: However, rapid growth in the value
Page 8 and 9: As of 2009, 153 countries were memb
Page 10 and 11: International trade is a field in e
Page 12 and 13: imported, the U.S. government colle
Page 14 and 15: Kenya 12.7 Ghana 13.1 Generally spe
Page 16 and 17: Average tariffs can be measured as
Page 18 and 19: When the bubble bursts, the demand
Page 20 and 21: missed deadlines are commonplace in
Page 22 and 23: a well-known “bicycle theory” a
Page 24 and 25: But at the same time that many deve
Page 26 and 27: Recent opposition to trade liberali
Page 28 and 29: ought back to the United States and
Page 30 and 31: conference attended by the main all
Page 32 and 33: One of the key principles of the GA
Page 34 and 35: arriers. [1] The trade remedy laws
Page 36 and 37: ound tariff rate the country reache
Page 38 and 39: instead, they are put into place ov
Page 40 and 41: 5. The WTO principle to treat an im
Page 42 and 43: subsidies. Recall that export subsi
Page 44 and 45: As a result of Uruguay Round negoti
Page 46 and 47: Agreement, or TRIPS. The TRIPS inte
Page 48 and 49: 1.7 The World Trade Organization LE
Page 50 and 51: 1. Consultations. The DSB first dem
Page 52 and 53: countries from choosing more destru
Page 54 and 55: P, P+ CAFTA-DR FTA PE MA OM R SG U.
Page 58 and 59: Tariffs vary according to time of e
Page 60 and 61: 1.9 Appendix B: Bound versus Applie
Page 62 and 63: EXERCISE 1. Jeopardy Questions. As
Page 64 and 65: 2.1 The Reasons for Trade LEARNING
Page 66 and 67: For example, the Ricardian model of
Page 68 and 69: 2. Learn the major historical figur
Page 70 and 71: could end up with more of both good
Page 72 and 73: The primary issue in the analysis o
Page 74 and 75: Real wages (and incomes) of individ
Page 76 and 77: he begins planting seeds in the sec
Page 78 and 79: In this way, we might raise the wel
Page 80 and 81: 2.3 Ricardian Model Assumptions LEA
Page 82 and 83: Utility Maximization and Demand In
Page 84 and 85: United States L C + L W = L France
Page 86 and 87: 2. Suppose that the unit labor requ
Page 88 and 89: KEY TAKEAWAYS The equation aLC QC
Page 90 and 91: comparative advantage in newspaper
Page 92 and 93: −aLCaLW⎡⎣⎢hrslbhrsgal=gallb
Page 94 and 95: KEY TAKEAWAYS Labor productivity i
Page 96 and 97: 2.6 A Ricardian Numerical Example L
Page 98 and 99: With full employment of labor, prod
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Thus a good way to think about how
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Similarly, by rearranging the above
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production. But where will they fin
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The focus on real wages allows us t
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Real Wages in Autarky To calculate
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exchange. Thus the real wage of che
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2.11 The Welfare Effects of Free Tr
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Free trade will raise aggregate wel
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Chapter 3 The Pure Exchange Model o
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A Simple Example of Trade Suppose t
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3.2 Determinants of the Terms of Tr
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Persuasion The art of persuasion ca
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KEY TAKEAWAY The terms of trade is
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two individuals make a voluntary ex
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3.4 Three Traders and Redistributio
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is not motivated by profit but inst
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The changes described above assume
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3.6 The Nondiscrimination Argument
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clothing worker. The same applies i
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the page, scroll down to the “Bou
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4.1 Factor Mobility Overview LEARNI
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argument that free trade can only b
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them, but only if the prices are ve
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4.3 Time and Factor Mobility LEARNI
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EXERCISE 1. Jeopardy Questions. As
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factor to be moved and become produ
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KEY TAKEAWAY The immobile factor m
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wine workers and cheese workers. Th
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In autarky, the quantity demanded o
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4.7 Depicting a Free Trade Equilibr
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0 the variable does not change A th
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Thus cheese workers are most likely
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Real Wage of Wheat Workers in Terms
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wages. However, these extra profits
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French production and consumption i
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5.1 Chapter Overview LEARNING OBJEC
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less-developed countries have much
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would rise, while the wage rate wou
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Ricardian model, then factor prices
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4. This is by which industries diff
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where KC and KS are the quantities
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Let aLC[labor−hrsrack] represent
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The capital-labor ratio in an indus
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that would employ all the capital i
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The Relationship between Endowments
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Suppose the exogenous variables of
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Adding these two equations vertical
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3. Write the magnification effect f
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tariffs or other government regulat
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If the price of clothing had risen,
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Table 5.6 Numerical Values for Exog
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w∧>PC∧>PS∧>r∧. The effect i
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2. Suppose the price of cheese fall
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this requires a fair amount of adva
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workers per unit of capital in the
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of quantities CS″/CC″. Since CS
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In Figure 5.8 "Free Trade Equilibri
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5.11 National Welfare Effects of Fr
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calculating changes in real income
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who has deposits in a pension plan
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export industry in order to benefit
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Income is redistributed among indiv
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Thus it is always possible to find
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affects the capital-labor ratios in
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1. Describe the pattern of factor f
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assumed to be freely and costlessly
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expansion of output in the export s
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[1] See R. W. Jones, “A Three-Fac
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product line for a representative t
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The total amount of revenue earned
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The horizontal length of Figure 5.1
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Our prime concern, however, is the
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An alternative version of the magni
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8. The magnification effect for pri
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can be used to transport tomatoes o
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esponds to the excess supply of wor
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The effect on workers is, in genera
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Factor Rewards over Time Now let’
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Figure 5.20 Dynamic Import-Capital
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In summary, the models suggest that
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[1] See J. P. Neary, “Short-Run C
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6.2 Economies of Scale and Returns
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produced and if the costs of this e
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6.3 Gains from Trade with Economies
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United States aLC = 1 L = 100 Franc
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thirty racks of clothing, then each
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model best describes markets in whi
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2. Each firm produces a product tha
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2. The demand assumption in which e
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Keep in mind that this is the equil
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KEY TAKEAWAYS A market equilibrium
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1. If the product is such that an i
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varieties may increase aggregate we
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7.1 Basic Assumptions of the Partia
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2. The term used to describe a coun
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where XSUS(.) is the export supply
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This implies also that world supply
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1. The price that equalizes one cou
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The price that ultimately prevails
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Surplus", some firm would be willin
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Changes in Producer Surplus Suppose
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2. The term used to describe a meas
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the same price for their product re
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to purchase the Mexican wheat at $1
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The effect on the foreign price is
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The quantity of imports and exports
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the sum of the gains exceeds the su
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indicate the effect of each policy
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7.6 The Optimal Tariff LEARNING OBJ
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zero. Somewhere between a zero tari
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3. The tariff rate that corresponds
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KEY TAKEAWAYS An import tariff wil
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7.8 Import Tariffs: Small Country W
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3. The tariff causes a redistributi
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1. Where on the graph is the level
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We examine the effects of optimal t
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3. Given player one’s optimal pol
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The goal of a cooperative equilibri
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1. Use the information provided in
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7.10 Import Quotas: Large Country P
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An import quota will reduce the qua
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KEY TAKEAWAYS To administer a quot
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demand is equal to the quota level.
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market decreases producer surplus i
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Foreign National Welfare 2. Suppose
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This implies that, in the case of a
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Quota Rents National Welfare + C
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Import Quota (Administered by Givin
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to as tariffication. In this way, f
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Next, consider the effects in this
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In situations where market changes
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where S is the specific export subs
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7.17 Export Subsidies: Large Countr
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the subsidy payments are made, then
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An export subsidy of any size will
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2. Identify the effects of a counte
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Table 7.12 "Welfare Effects of the
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Consumer Surplus − (G + H + I + J
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KEY TAKEAWAYS An antisubsidy law,
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9. What is the change in government
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Notice that a unique set of prices
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in the import country and in the ca
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Figure 7.36 Welfare Effects of a VE
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the quota rents will benefit, but p
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A the variable change is ambiguous
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Mexico, and all wheat sold in Mexic
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7.23 Export Taxes: Large Country We
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Because there are both positive and
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− the variable decreases 0 the va
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If a domestic consumption tax is im
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Equivalency between Domestic and Tr
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An import tariff applied on an impo
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KEY TAKEAWAYS Domestic production
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a Domestic Production Subsidy", whi
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Domestic policies can affect trade
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+ the variable increases − the va
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Domestic consumption taxes are ofte
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Figure 8.3 Inducing Exports with a
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8.7 Consumption Tax Effects in a Sm
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Since the cost to consumers exceeds
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When a specific consumption tax “
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time of the founding of the nation,
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Chapter 9 Trade Policies with Marke
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Market imperfections or market dist
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firm’s welfare) by restricting su
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are neatly kept and homes are well
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Policy-Imposed Distortions Another
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In this section, we will provide an
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Welfare-Improving Policies in a Sec
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Summary of the Theory of the Second
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9.4 Unemployment and Trade Policy L
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Suppose that international market c
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9.2 "Welfare Effects of an Import T
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Begin with the same surge of import
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eliminate the same unemployment imp
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A the variable change is ambiguous
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their own production efficiency imp
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Suppose that the infant industry ar
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This means that in the second perio
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The Economic Argument against Infan
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world efficiency standards, protect
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9.6 The Case of a Foreign Monopoly
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Assuming the monopolist maximizes p
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Import tariff effects on the import
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This shows that although a tariff c
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2. Recognize that a trade policy ca
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consider a large importing country
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the subsidy is set too high, the lo
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9.8 Public Goods and National Secur
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nonexcludable because once it is th
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efficiency loss. Nevertheless, the
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5. The term describing a ìgoodî l
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the environment. On the other hand,
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Pollution Effect National Welfare
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Govt. Revenue Pollution Effect + e
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A Source of Controversy For many en
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This statement points out that many
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noneconomists, providing permits th
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[4] World Trade Organization, “Tr
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product categories. This type of tr
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The key question of interest concer
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Figure 9.10 "Harmful Trade Diversio
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Free trade area effects on Country
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We assume that A has a specific tar
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The simple way to do that is to ima
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Chapter 10 Political Economy and In
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do indeed seek to maximize national
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a representative democracy, governm
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3. This type of lobbying does not i
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much larger than the number of firm
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We can now ask whether a household
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Large groups are much less effectiv
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Because the per-producer benefit of
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clearly he or she would vote for th
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10.7 The Lobbying Problem in a Demo
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Chapter 11 Evaluating the Controver
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the results from any one model. Ins
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increase in national welfare. This
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4. The enhancement of this is what
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of the real world. The real world c
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Another way to deflect the concern
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For example, an optimal tariff or o
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Stuart Mill in hisPrinciples of Pol
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11.5 The Economic Case against Sele
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to eliminate some of the inefficien
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effects, it would then need to meas
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to avoid the use of any such policy
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Selected protection requires detail
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11.6 Free Trade as the “Pragmatic
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