9 lecture_antidumping

Jusgcagon for trade policy two cases 1 a tari today

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Unformatted text preview: RaGonale for Trade Policy BIG QUESTION 2: When should a government intervene in interna7onal markets using trade policy? From efficiency stand ­point, only in cases of market failure !!! Underlying jusGficaGon for the infant industry case for protecGon Infant Industry ProtecGon •  What is the main moGvaGon? –  Industries are too young to withstand foreign compeGGon. –  If given Gme to grow, the industries will be able to compete –  Short ­term protecGon from imports is therefore needed. •  JusGficaGon for trade policy (Two cases): 1.  A tariff today increases Home producGon and lowers future costs. 2.  A tariff today increases output and reduces future costs for other firms in the industry or other industries. •  Key for infant industry protecGon case: The firm’s learning shies down the en7re average cost curve to the point where it is compeGGve at the world prices, even without a tariff. Infant Industry ProtecGon •  What is the main moGvaGon? –  Industries are too young to withstand foreign compeGGon. –  If given Gme to grow, the industries will be able to compete –  Short ­term protecGon from imports is therefore needed. •  JusGficaGon for trade policy (Two cases): 1.  A tariff today increases Home producGon and lowers future costs. 2.  A tariff today increases output and reduces future costs for other firms in the industry or other industries. •  Key for infant industry protecGon case: The firm’s learning shies down the en7re average cost curve to the point where it is compeGGve at the world prices, even without a tariff. Infant Industry ProtecGon •  What is the main moGvaGon? –  Industries are too young to withstand foreign compeGGon. –  If given Gme to grow, the industries will be able to compete –  Short ...
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