【國際貿(mào)易理論課件】【International Trade Theories】CHAPTER 4Protection of Domestic Industries The Tariff.ppt

1、1,CHAPTER 4,Protection of Domestic Industries: The Tariff,2,OVERVIEW,Despite gains from trade, artificial barriers interfere with flow Commercial policy product of pressure groups Tariff most common barrier Tax on commodity crossing international border, designed to raise import price and protect in

2、dustries which have a comparative advantage,3,Some Institutional Considerations,Tariffs Import duties Export taxes Direct quota restrictions Export bans Tariffs and resource allocation,4,Some Institutional Considerations,Protection vs. Revenue Ad valorem duty (fixed percentage of value) Equitable an

3、d constant Specific duty (fixed sum per unit) Easy to apply and administer FOB, CIF, FAS Compound duty (combined tariff),5,Some Institutional Considerations,Tariff-setting a congressional prerogative Tariff classification long and complex Uncertainty hinders trade Statutory tariff Preferential statu

4、s Tariff schedule spikes,6,Economic Effects of the Tariff,Who pays the tariff? Import country consumers Exporters Terms of trade Export price divided by import price Volume of trade Both countries benefit Small countries vs. large countries Different abilities to affect world market prices and terms

5、 of trade,7,Economic Effects of the Tariff,Exports and imports determined by domestic and prevailing international prices In small importing country, domestic prices rises by full amount of tariff In large importing country, price rises by portion of tariff, exporting country absorbs other portion,T

6、he Belgian Market for Coffee,FIGURE 4.1,C4-8,The U.S. Market for Coffee,FIGURE 4.2,C4-9,10,Economic Effects of the Tariff,International price of imports artificially raised by full amount of duty Some consumers curtail import consumption, switch to less desirable domestic products Production of subs

7、titutes expands, drawing resources away from other industries (presumably higher ranking in comparative advantage) Loss of production efficiency for economy as a whole Income redistributed from consumers to producers of protected commodities and to government,Domestic Effects of the Tariff,FIGURE 4.

8、3,C4-11,12,The Economic Cost of the Tariff,Welfare economics Price consumers are willing to pay Consumers surplus Price at which sellers are willing to supply Producers surplus Welfare triangles Deadweight loss,Further Considerations:,Consumers Surplus,FIGURE 4.4,C4-13,Producers Surplus,FIGURE 4.5,C

9、4-14,15,The Economic Cost of the Tariff,Tariff produces gain to factors of production heavily utilized in the import-competing industries Total loss to country outweighs gain to particular resources Domestic taxes and subsidies better way to redistribute income,Further Considerations:,16,The Economi

10、c Cost of the Tariff,Indirect consequences Increasing degree of monopoly Lowering productive efficiency, Penalizing consumers Retarding economic growth Reduced competitive stimuli Inflationary pricing,Further Considerations:,17,The Economic Cost of the Tariff,Internal repercussions in exporting coun

11、try If importing country is smallno repercussions If importing country is largeprice of export good is depressed due to lower demand Curtailment of production, increase in domestic consumption Introduction of trade raises domestic prices Exporting producers subject to import taxes lose, consumers ga

12、in, country as whole loses,Further Considerations:,18,The Economic Cost of the Tariff,Real income of world is reduced Importing country loses real income by reducing trade volume, and gains due to improved terms of trade Optimum tariff maximizes net gain,Further Considerations:,The Optimum Tariff,FI

13、GURE 4.6,C4-19,20,The Economic Cost of the Tariff,Balance-of-trade implications Import duty improves countrys external trade position if unemployment is high If unemployment is low, labor resources moved from other (possibly export) sectors Exports may decline as much as imports, producing no improv

14、ement in trade position,Further Considerations:,21,The Economic Cost of the Tariff,Empirical studies based on multilateral reductions in tariff rates since WW II For world, terms of trade effects cancel out Volume of world trade rises Traditional measure of tariff cost as a percent of CDP is approxi

15、mately the square of the tariff rate,Further Considerations:,Schematic Effects of Tariff Reduction,FIGURE 4.7,C4-22,23,How Protective is the Tariff?,Protection difficult to measure For international or inter-commodity comparisons, specific duties must be converted to ad valorem equivalent Nominal ra

16、te (published tariff) Effective rate (protection accorded to domestic value added) Effective protection increases as nominal rate increases and as nominal rate imposed on materials used in production decreases,Effective Protective RateSimplified Formula,where: gj is the effective protective rate on

17、the final product j, tj is the nominal tariff rate on imported input i, and ag is the share of i in the total value of j in the absence of tariffs.,C4-24,Effective Protective RateSimplified Formula,The formula is derived as follows: Value added in industry j (per unit of output), without any tariff,

18、 is,Value added in industry j, with tariffs on both the input and the output, is,C4-25,Effective Protective RateSimplified Formula,where pj and pi are the prices of the output and input, respectively.,C4-26,Effective Protective RateSimplified Formula,When there are many inputs the formula is:,C4-27,

19、28,How Protective is the Tariff?,Most industrial countries admit raw materials duty free, semiprocessed goods at low duties, manufactures (especially labor-intensive) at moderately high rates Effective rates on many finished products are double their nominal counterparts,29,How Protective is the Tar

20、iff?,Tariff Escalation: Steep escalation of effective rates in industrial countries by degree of processing discourages industrialization of developing countries. Protection of Inputs and Outputs: Development of domestic production inputs via protection of intermediate inputs reduces effective prote

21、ction on final product. Exports and Protection: Exports may be harmed by protection of intermediate inputs.,30,How Protective is the Tariff?,Guides to Comparative Advantage: Ranking industries by effective protection is inversely related to ranking by comparative advantage. Another guide to comparat

22、ive advantage is ranking industries by DRC of a dollar earned by exports or saved by imports Aggregation Problems: No satisfactory way to average rates imposed on diverse commodities. Procedures to estimate average tariff rates across industries are generally biased downward.,31,Arguments for Protec

23、tion,Infant industry argument and “free market failure” assumption Optimum tariff Scientific tariffequalizes wage rates across countries Cheap foreign imports undersell local products National security Bargaining power in tariff negotiations Social goals,32,Approaches to Free Trade,International App

24、roach WTO and MFN Gains unequally distributed, some countries lose, world as whole gains Small countries may experience dynamic benefits,33,Approaches to Free Trade,Regional Approach CUs abolish trade restrictions among members, establish common, uniform tariffs against outsiders (EU). FTAs abolish

25、trade restrictions among members, each keeps own tariff rates against outsiders (NAFTA).,34,Approaches to Free Trade,Static Effects of CU Trade creation displaces inefficient production by imports from a member. Trade displaces imports from a nonmember by imports from a member. Less efficient organi

26、zation of world production Price reduction for CU member consumers,Static Effects of a Customs Union,FIGURE 4.8,C4-35,36,Approaches to Free Trade,The larger the CU, the smaller the scope for trade diversion, and The better the chance for a favorable effect. ExtremeCustoms Union encompassing world Th

27、e more similar the production patterns and the larger differences in production costs, the greater the scope for trade creation. The lower the common external tariff, the smaller the scope for trade diversion. Estimated annual trade creation in manufactures of EC is 5 times annual trade diversion. N

28、et trade diversion exists in agriculture. Mercursor had a net trading diversion in 1996.,37,Approaches to Free Trade,Dynamic Effects Market expansion Market competition infusion Scale of effect more powerful in smaller integrating countries Import changes from nonmember countries Stimulated investme

29、nt and growth Investment diversion,38,Summary,Tarifftraditional instrument of import protection A large country improves terms of trade by imposing a tariff. A small country cannot improve terms of trade by imposing a tariff; a deadweight loss occurs. Tariff escalation has unfavorable effects in industrial countries on ind