Trade Policies

• Non-tariff is an obstacle to free trade other than a tariff
• Tariffs are a tax imposed on imported goods
• Protectionism is measures taken by a country to restrict international trade
• Quotas are an agreement by a country to limit its exports to another country to a given quantity
• Protectionism motivations are:

  • Response to import dumping
  • Response to chronic trade gap/deficits
  • Employment protection
  • Protect infant sectors
  • Protect key strategic industries
  • Raise extra revenues for government
  • Response to recession/stagnation in domestic demand
• Import dumping refers to when firms sell products abroad at below costs, an example would be China's steel industry dumping products in the European Union
• Trade creation occurs when a customs union results in high-cost domestic production being replaced by imports from a more efficient source within the customs union
• Trade diversion occurs when a customs union results in trade switching from a low-cost supplier outside the customs union to a less efficient source within the customs union
• World Trade Organisation criticisms:

  • Rich countries exploit developing countries
  • Exploitation of natural resources
  • 'American' way of life
  • Impoverishment of developing countries
  • Ownership of rules to 'rich countries'
• Anti-dumping tariffs can come in 3 forms:

  • Ad Valorem Duty
  • A specific duty
  • A variable duty