ITother - Trade Exam 3 Chapter 9-Nontariff Trade Barriers...

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Trade- Exam 3 Chapter 9-Nontariff Trade Barriers and the New Protectionism Quota is the most important nontariff trade barrier. It is a direct quantitative restriction on the amount of a commodity allowed to be imported or exported. Import Quotas can be used: -to protect a domestic industry - to protect domestic agriculture -balance-of-payments reasons very common in Western Europe immediately after WWII. Since then been used by practically all industrial nations to protect their agriculture and by developing nations to stimulate import substitution of manufactured product and for balance-of-payments reasons. Differences between an Import Quota and Import Tariff 1) With a given import quota, an increase in demand will result in a higher domestic price and greater domestic production than with an equivalent import tariff. With a given import tariff, an increase in demand will leave the domestic price and domestic production unchanged but will result in higher consumption and imports than with an equivalent import quota. Replaces the market mechanism rather than simply altering it (like import tariffs do) 2) import quotas involves the distribution of import licenses. If the government does not auction off these licenses in a competitive market, firms that receive them will reap monopoly profits. In that case, the government must decide the basis for distributing licenses among potential importers of the commodity. results in waste and corruption. 3) import quota limits imports to the specified level with certainty while the trade effect of an import tariff may be uncertain domestic producers prefer import quotas to import tariffs Other Nontariff Barriers and the New Protectionism Voluntary Export Restraints -These refer to the case where an importing country induces another nation to reduce its exports of a commodity voluntarily under the threat of higher all-round trade restrictions, when these exports threaten an entire industry.
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-Voluntary export restraints same economic effect as import quota except they are administered by the exporting country, and so the revenue effect or rents are captured by foreign exporters. -Voluntary export restaurants were less effective in limiting imports than import quota because the exporting nations agree only reluctantly to curb their exports. Foreign exporters also tend to fill quota with higher priced, higher quality unit of the product over time. Technical, Administrative, And Other Regulations includes safety regulations for automobile and electrical equipment, health regulations for the hygiene production and packaging of imported food products, and labeling requirements showing origin and contents. Other trade restrictions have included laws requiring governments to buy from domestic suppliers (government procurement policy) Border taxes-rebates for internal indirect taxes given to exporters of a commodity and imposed (in addition to the tariffs) on importers of a commodity. International Cartels
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ITother - Trade Exam 3 Chapter 9-Nontariff Trade Barriers...

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