hill_gbt6e_PPT_Chapter06 - 6-1IntroductionFree traderefers...

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Unformatted text preview: 6-1IntroductionFree traderefers to a situation where a government does not attempt to restrict what its citizens can buy from another country or what they can sell to another countryWhile many nations are nominally committed to free trade, they tend to intervene in international trade to protect the interests of politically important groups 6-2Instruments of Trade PolicyQuestion:How do governments intervene in international trade?There are seven main instruments of trade policy 1.Tariffs –specific andad valorem 2. Subsidies3. Import quotas4. Voluntary export restraints5. Local content requirements 6. Antidumping policies 7. Administrative policies 6-3The Case for Government InterventionQuestion:Why do governments intervene in trade?There are two types of arguments1. Political argumentsare concerned with protecting the interests of certain groups within a nation (normally producers), often at the expense of other groups (normally consumers) 2. Economic argumentsare typically concerned with boosting the overall wealth of a nation (to the benefit of all, both producers and consumers)6-4The Case for Government InterventionPolitical arguments for government intervention include1.protecting jobs2.protecting industries deemed important for national security3.retaliating to unfair foreign competition4.protecting consumers from “dangerous” products5.furthering the goals of foreign policy6.protecting the human rights of individuals in exporting countries6-5The Case for Government InterventionEconomic arguments for government intervention in international trade include 1.The infant industry argument2.Strategic trade policy6-6The Revised Case for Free TradeNew trade theorists believe government intervention in international trade is justified Classic trade theorists disagreeSome new trade theorists believe that while strategic trade theory is appealing in theory, it may not be workable in practice – they suggest a revised case for free trade Two situations where restrictions on trade may be inappropriateRetaliationDomestic Policies 6-7Development of the World Trading SystemUp until the Great Depression of the 1930s, most countries had some degree of protectionismIn 1930, the U.S. enacted the Smoot-Hawley Act, which created significant import tariffs on foreign goodsOther nations took similar steps and as the depression deepened, world trade fell further 6-8Development of the World Trading System Since World War II, an international trading framework has evolved to govern world tradeIn its first fifty years, the framework was known as the General Agreement on Tariffs and Trade (GATT)Since 1995, the framework has been known as the World Trade Organization (WTO) 6-9Development of the World Trading SystemSince its establishment, the WTO has emerged as an effective advocate and facilitator of future trade deals, particularly in such areas as services So far, most countries have adopted WTO recommendations for trade disputes...
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This note was uploaded on 04/24/2010 for the course ECON 12123 taught by Professor Donald during the Spring '10 term at Johnson County Community College.

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hill_gbt6e_PPT_Chapter06 - 6-1IntroductionFree traderefers...

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