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Unformatted text preview: International Political Economy Jeffrey Frieden and David Lake Part V: Trade Harry Truman never submitted the Havana Charter (which was to create the ITO- Intl Trade Org) / Instead the GATT filled the void in 1947 The Congress would never have ratified the Havana Charter The WTO took the place of GATT in 1995 WTO is based on 3 Norms: 1. Extension of Most-Favored Nation status to one another / No Preferential Treatment 2. Reciprocity- if trade partner lowers tariffs, you lower tariffs 3. Loopholes are acceptable if they are for temporary reasons or balance-of- payments problems There has been a rise in NTBs (Non-Tariff Barriers to Trade, modern protectionist tool) Most important NTB is Voluntary Export Restraint Chapter 19: Protectionist Trade Policies: A Survey of Theory, Evidence, and Rationale Cletus C. Coughlin, K. Alec Chrystal, and Geoffrey Wood Section 2: Trade Theory Since Ricardo New research suggests 3 sources of gains from Trade: 1. as the market potentially served by firms expands from an national to a world market, there are gains associated with declining per unit production costs. 2. reduction in the monopoly power of domestic firms. Domestic firms, facing more pressure from foreign competitors, are forced to produce the output demanded by consumers at the lowest possible cost. 3. the gain to consumers from increased product variety and lower prices. 305 Section 3: Forms of Protectionism 1. Tariffs 2. Quotas: the tariff generates revenue for the govt, while the quota generates a revenue gain to the owner of import licenses. Consequently, foreign producers might capture some of this revenue. 3. Regulatory Barriers: a. Make the regulations so vast that they are very difficult and perhaps costly to maneuver b. Use Product Standards 4. Subsidies: [A subsidy] involves the govt in paying out money, whereas tariffs generate income for the govt. 5. Exchange Controls: a govt that wishes to protect its exporting and import competing industries may try to hold its exchange rate artificially low. As a result, foreign goods would appear expensive in the home market while home goods would be cheap overseas. 307 Section 4: Costs of Trade Protectionism Harms to Domestic Consumers 1. their consumption of the protected good is reduced because of the associated rise in its price. 2. they consume less of other goods, as their output declines and prices rise Section 5: Costs of Protectionism in the US 3 recent studies of protectionism 1. Tarr and Morkre (1984): $12.7 billion in costs to consumers from only 4 products in 1983 2. Hickok (1985): $14 billion in losses from 3 products in 1984 / and low income families are harmed far more than high-income families 3. Hufbauer et al. (1986): Section 6: Costs of Protection throughout the World OECD study stresses the fact that a reduction in imports via trade restrictions does not cause greater employment. 310 Section 7: Arguments for Restricting Trade...
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This note was uploaded on 02/03/2012 for the course POLS 5308 taught by Professor Biglaiser during the Spring '11 term at Texas Tech.
- Spring '11
- Political Economy