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Free Trade vs
Free Trade vs
Free Trade vs
Free Trade vs
Free Trade vs
Free Trade vs
The Gains from trade
The Gains from trade
The Gains from trade
The Gains from trade
The Gains from trade
The Gains from trade
Free Trade vs
Free Trade vs
Trade Restrictions
Trade Restrictions
Tariffs
Tariffs
}
}
Nontariff barriers
Nontariff barriers
The Import Quota
The Import Quota
Arguments for trade restrictions
Arguments for trade restrictions
Strategic Trade Policies
Strategic Trade Policies
Strategic Trade Policies – an example
Strategic Trade Policies – an example
Strategic Trade Policies – an example
Strategic Trade Policies – an example
Strategic Trade Policies – an example
Strategic Trade Policies – an example
Strategic Trade Policies – an example
Strategic Trade Policies – an example

Презентация: «Free Trade vs». Автор: PETIA. Файл: «Free Trade vs.ppt». Размер zip-архива: 137 КБ.

Free Trade vs

содержание презентации «Free Trade vs.ppt»
СлайдТекст
1 Free Trade vs

Free Trade vs

Protectionism

Frederick University 2009

2 Free Trade vs

Free Trade vs

Protectionism

“If there were an Economist’s Creed it would surely contain the affirmations: ‘I understand the principle of comparative advantage’ and ‘I advocate free trade’” Paul Krugman

3 Free Trade vs

Free Trade vs

Protectionism

Trade Protection (Protectionism) - Policies that limit imports, usually with the goal of protecting domestic producers in import-competing industries from foreign competition

4 The Gains from trade

The Gains from trade

}

Oz widget market

Local consumer's extra gains = d+e Local producer’s extra gains = -d

S

P

a

a

4

Po= 4

d

e

b

Pw = 2

c

Imports = 28

D

Qo =16

Q = 44

Qo = 30

Q

Trade: world price = 2; Qo= 16, Q imports = 28, Q = 44 Consumer surplus = a+d+e Producer surplus = c

No trade: Oz price = 4; Q = 30 consumer surplus = a producer surplus = b

5 The Gains from trade

The Gains from trade

}

Zo widget market

Zo consumer’s extra gain = -i Producer’s extra gains = i + j

P

Exports = 28

S

S

h

P = 2

j

i

f

1.5

Pz = 1.5

D

g

D

g

Q

50

78

Qz = 60

Trade: P = 2; Q = 78 Consumer surplus = h = f – i Producer surplus = g + i + j

No trade: P = 1.5; Q = 60 Consumer surplus = f Producer surplus = g

6 The Gains from trade

The Gains from trade

Total: + e + j

Surplus before trade

a

c + d

h + i

g

Surplus after trade

c

h

g + i + j

d + e + a

Oz consumers

Oz producers

Zo consumers

Zo producers

7 Free Trade vs

Free Trade vs

Protectionism

Showing that free trade is better than no trade is not the same thing as showing that free trade is better than sophisticated government intervention

8 Trade Restrictions

Trade Restrictions

Tariffs - taxes levied basically on imported goods. They are imposed as an attempt to raise foreign exchange revenue and increase the welfare at the expense of other nations. Nontariff barriers - all forms of trade restrictions other than tariffs.

9 Tariffs

Tariffs

ad valorem import tariff - expressed as a percentage of the invoice value of the imported good specific tariff - a fixed sum levied on a physical unit of the good no matter what its invoice price is compound duty - a combination of ad valorem and specific duties variable levy - calculated daily official prices - a basis for ad valorem duty calculations

10 }

}

}

The Effect of a Tariff

S

a – producer gain

a + b + c + d – consumer loss

Pd

c – government collection

Pt

a

} t

b

c

d

Pw

D

b + d – deadweight loss

M

Dt

b – consumer loss due to the demand shift to domestic supply - production effect

Sd

St

Q

Dd

d –consumer loss due to the reduction in consumption consumption effect

P

11 Nontariff barriers

Nontariff barriers

quantitative restrictions Quotas - numerical limits for a specific kind of good that a country will permit to be imported without restriction during a specified period Voluntary export restraints Tariff quotas -permit a stipulated amount to enter the country duty free or at a low rate, but when that quantity is reached, a much higher duty is charged for subsequent importations technical regulations administrative regulations other regulations of imports

12 The Import Quota

The Import Quota

}

a – producer gain

Sd

Dd

a + b + c + d – consumer loss

Sq

c – transfer from domestic consumers to someone else

Pq

b + d – a loss to the country

a

b

c

d

Pw

q

Qs

Qd

Qdq

Qsq

P

Q

13 Arguments for trade restrictions

Arguments for trade restrictions

The need of protection of domestic labour markets against cheap foreign labour The desire to reduce domestic unemployment The need to counteract dumping in international trade The need to protect the infant industries Protect industries important for national defence Decrease the national balance of payments deficit Improve the nation’s terms of trade and welfare Strategic trade policies The scientific tariff The need to protect national health and safety standards

14 Strategic Trade Policies

Strategic Trade Policies

economies of scale justify the operation of just one firm in the world market as a whole lucky firms in the industry may be able generate returns higher than the opportunity costs of the resources they employ the country can raise its national income at other countries’ expense if it can somehow ensure that the lucky firm that gets to earn excess returns is domestic rather than foreign

15 Strategic Trade Policies – an example

Strategic Trade Policies – an example

Assumptions: Two companies from two countries are capable of producing a good Neither country has any domestic demand for the good – the good is intended solely for export The producer surplus coincides with the national interest Each firm faces only a binary choice – either to produce or not to produce The market is profitable for either firm if it enters alone, unprofitable for both if both enter

16 Strategic Trade Policies – an example

Strategic Trade Policies – an example

The Payoff Matrix

The Payoff Matrix

The Payoff Matrix

The Payoff Matrix

Airbus

-5

0

Boeing

-5

100

100

0

0

0

The good is a 150 – seat passenger aircraft The firms are Boeing and Airbus The countries are the U.S. and the EU

P

N

P

N

17 Strategic Trade Policies – an example

Strategic Trade Policies – an example

Boeing has some kind of head start that allows it to commit itself to produce before Airbus’s decision Boeing earns 100 while deterring entry by Airbus The EU decides to subsidize Airbus at a point before Boeing is committed to produce The EU pays a subsidy of 10 to Airbus if it produces the plain, regardless of what Boeing does

18 Strategic Trade Policies – an example

Strategic Trade Policies – an example

The Payoff Matrix after European Subsidy

The Payoff Matrix after European Subsidy

The Payoff Matrix after European Subsidy

The Payoff Matrix after European Subsidy

Airbus

Boeing

5

0

- 5

100

110

0

0

0

P

N

P

N

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