Chapter 6 notes - Chapter 6 The Political Economy of...

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Chapter 6 The Political Economy of International Trade Free trade - the absence of government barriers to the free flow of goods and services between countries Tariff - a tax levied on imports. Oldest and simplest. Most times tariffs are placed on imports to protect domestic producers from foreign competition by raising the price of imported goods. Produce revenue for the government. Pro-producer, anti-consumer. Reduce overall efficiency of world economy. Special tariffs -a tariff levied as a fixed charge for each unit of good imported Ad Valorem tariff - a tariff levied as a proportion of the value of an imported good Subsidy - government financial assistance to a domestic producer. It can include cash grants, low interest loans, tax breaks, and government equity participation in domestic firms. They help domestic producers: compete against foreign imports, and gaining export markets. Main gains are to domestic producers whose international competitiveness is increased. Import quota
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This note was uploaded on 12/04/2011 for the course MKT 310 taught by Professor Tunga during the Summer '10 term at Michigan State University.

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