Lesson_42_Trade Remedies

Lesson_42_Trade Remedies - Trade Remedies Beyond statutory...

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1 Lesson 42 1 Trade Remedies Beyond statutory tariff rates, U.S. uses variety of policies to shield firms from foreign competition Also has policies to reduce burden of adjustment costs Lesson 42 2 X Unjustifiable and burdensome regulations In Foreign Market Genuine cost advantage Dumping Export Subsidies In U.S. Market Fair Behavior Unfair Behavior Lesson 42 3 Start with “unfair” behavior in U.S. market Dumping undertaken by firms Export subsidies provided by governments
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2 Lesson 42 4 Dumping is defined as a situation where a firm exports a product for a price that is either (a) lower than its cost of production; or (b) lower than the price charged in the firm’s domestic market Lesson 42 5 Motives for dumping To drive out foreign competition (predatory dumping) To respond to different market conditions in different countries (international price discrimination) Lesson 42 6 Example of profit-maximizing price discrimination Assume two countries (Home and Foreign) Assume oligopoly Assume that the representative home- country firm faces more intense competition in Foreign market than in Home
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This note was uploaded on 09/14/2009 for the course ECON 340 taught by Professor Leidholm during the Summer '08 term at Michigan State University.

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Lesson_42_Trade Remedies - Trade Remedies Beyond statutory...

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