griffin09_final_im - CHAPTER 9 Formulation of National...

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CHAPTER 9 Formulation of National Trade Policies After studying this chapter, students should be able to: > Present the major arguments in favor of and against government intervention in international trade. > Identify the advantages and disadvantages of adopting an industrial policy. > Analyze the role of domestic politics in formulating a country’s international trade policies. > Describe the major tools countries use to restrict trade. > Specify the techniques countries use to promote international trade. > Explain how countries protect themselves against unfair trade practices. LECTURE OUTLINE OPENING CASE: The Political Economy of Steel The opening case details the changes in the U.S. steel industry over the last decade, and the ways the U.S. government has intervened. Overall, the U.S. steel industry has suffered because of lower price steel imports, and the U.S. government has intervened to protect U.S. producers from foreign competition. Key Points The U.S. steel industry is concentrated in several states (Ohio, Pennsylvania, West Virginia) critical to President Bush’s re-election. Imposing tariffs on imported steel would increase the costs of many U.S. firms producing goods that utilize steel (e.g. autos, appliances) – which would raise consumer prices and make these firm’s less. The Bush administration sponsored international negotiations to reduce worldwide overcapacity in the steel industry. The Bush administration also imposed a “safeguard” tariff to protect U.S. steel producers. The safeguard tariffs are to expire in three years. The administration also created a means for steel dependent U.S. firms to apply for exemptions from the tariff on foreign steel if they could demonstrate that U.S. producers could not provide the type of steel products they require.
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126 Chapter 9 Bush’s actions led to multiple appeals to the WTO by other steel producing countries, denouncing the tariffs as a violation of WTO rules. The steel tariffs have succeeded in raising prices in the United States – as well as in stimulating consolidation in the steel industry. One study found that steel-using firms shed 900,000 workers in 2002. Some claim that up to 200,000 of the lost jobs are due to the fact that higher steel prices made U.S. firms uncompetitive against foreign rivals. CHAPTER SUMMARY Chapter Nine explores the issue of national trade policy. The chapter begins with a discussion of why governments intervene in the free flow of trade and then considers the various types of trade barriers and how they are used. I. RATIONALES FOR TRADE INTERVENTION There are two basic issues to consider when developing a national trade policy. First, should a national government intervene to protect its domestic firms by taxing
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This note was uploaded on 01/06/2012 for the course ECONOMIC 101 taught by Professor Waise during the Spring '11 term at Academy of Art University.

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griffin09_final_im - CHAPTER 9 Formulation of National...

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