Lecture 8 Political Economy

1. International Economics
Lecture 8

2. Instruments of Trade Policy
Tariffs
Subsidies
Quotas
Voluntary Export Restraints
Local Content Requirements
Administrative Policies
Antidumping Duties

3. Tariff
Fixed Charge
SR100 per unit
Percent of value
5% of price

4. Tariff
Winners:
Government - revenues
Some domestic producers
Losers:
Domestic consumers
Some domestic producers

5. Export Tariff
Stop companies from exporting
goods and services

6. Subsidies
Government Assistance
Cash
Loans
Tax breaks
Equity - Government buys
Farmers

7. Quotas
Limit quantity
Combine with tariffs

8. Voluntary Export Restraint
VER
Limit quantity to avoid
tariffs and quotas

9. Local Content Requirement
Some percent must be made
locally

10. Administrative Policies
Bureaucrats
Red Tape

11. Antidumping Policies
Dumping - Selling below cost
Impose duties to raise price

12. Arguments for Intervention
Jobs
Security
Retaliation
Consumers
Environment
Infant Industry

13. Free Trade
Environment
Human Rights
Labor Issues

14. Issues
Antidumping
Protection of Farmers
Intellectual Property
Nonagricultural goods and
services