国际经济学第六课.ppt

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1、Slides prepared by Thomas BishopCopyright 2009 Pearson Addison-Wesley.All rights reserved.Chapter 8The Instruments of Trade PolicyPreviewPartial equilibrium analysis of tariffs:supply,demand,and trade in a single industryCosts and benefits of tariffsExport subsidiesImport quotasVoluntary export rest

2、raintsLocal content requirements2Copyright 2009 Pearson Addison-Wesley.All rights reserved.Types of TariffsA specific tariff is levied as a fixed charge for each unit of imported goods.For example,$1 per kg of cheeseAn ad valorem tariff is levied as a fraction of the value of imported goods.For exam

3、ple,25%tariff on the value of imported cars.Lets analyze how tariffs affect the economy.3Copyright 2009 Pearson Addison-Wesley.All rights reserved.Supply,Demand,and Trade in a Single IndustryLets construct a model measuring how a tariff affects a single market,say that of wheat.Suppose that in the a

4、bsence of trade the price of wheat in the foreign country is lower than that in the domestic country.With trade the foreign country will export:construct an export supply curveWith trade the domestic country will import:construct an import demand curve4Copyright 2009 Pearson Addison-Wesley.All right

5、s reserved.Supply,Demand,and Trade in a Single Industry(cont.)An export supply curve is the difference between the quantity that foreign producers supply minus the quantity that foreign consumers demand,at each price.An import demand curve is the difference between the quantity that domestic consume

6、rs demand minus the quantity that domestic producers supply,at each price.5Copyright 2009 Pearson Addison-Wesley.All rights reserved.Fig.8-1:Deriving Homes Import Demand Curve6Copyright 2009 Pearson Addison-Wesley.All rights reserved.Fig.8-2:Deriving Foreigns Export Supply Curve7Copyright 2009 Pears

7、on Addison-Wesley.All rights reserved.Supply,Demand,and Trade in a Single Industry(cont.)In equilibrium,the quantities ofimport demand=export supplydomestic demand domestic supply=foreign supply foreign demandIn equilibrium,the quantities ofworld demand=world supply8Copyright 2009 Pearson Addison-We

8、sley.All rights reserved.Fig.8-3:World Equilibrium9Copyright 2009 Pearson Addison-Wesley.All rights reserved.The Effects of a TariffA tariff can be viewed as an added cost of transportation,making sellers unwilling to ship goods unless the price difference between the domestic and foreign markets ex

9、ceeds the tariff.If sellers are unwilling to ship wheat,there is excess demand for wheat in the domestic market and excess supply in the foreign market.The price of wheat will tend to rise in the domestic market.The price of wheat will tend to fall in the foreign market.10Copyright 2009 Pearson Addi

10、son-Wesley.All rights reserved.The Effects of a Tariff(cont.)Thus,a tariff will make the price of a good rise in the domestic market and will make it fall in the foreign market,until the price difference equals the tariff.PT P*T=tPT=P*T+tThe price of the good in foreign(world)markets should fall if

11、there is a significant drop in the quantity demanded of the good caused by the domestic tariff.11Copyright 2009 Pearson Addison-Wesley.All rights reserved.Fig.8-4:Effects of a Tariff12Copyright 2009 Pearson Addison-Wesley.All rights reserved.The Effects of a Tariff(cont.)Because the price in domesti

12、c markets rises(to PT),domestic producers should supply more and domestic consumers should demand less.The quantity of imports falls from QW to QT Because the price in foreign markets falls (to P*T),foreign producers should supply less and foreign consumers should demand more.The quantity of exports

13、 falls from QW to QT 13Copyright 2009 Pearson Addison-Wesley.All rights reserved.The Effects of a Tariff(cont.)The quantity of domestic import demand equals the quantity of foreign export supply when PT P*T=tIn this case,the increase in the price of the good in the domestic country is less than the

14、amount of the tariff.Part of the effect of the tariff causes the foreign countrys export price to decline,and thus is not passed on to domestic consumers.But this effect is sometimes not very significant:14Copyright 2009 Pearson Addison-Wesley.All rights reserved.The Effects of a Tariff in a Small C

15、ountryWhen a country is“small,”it has no effect on the foreign(world)price of a good,because its demand of the good is an insignificant part of world demand.Therefore,the foreign price will not fall,but will remain at Pw The price in the domestic market,however,will rise to PT=Pw+t15Copyright 2009 P

16、earson Addison-Wesley.All rights reserved.Fig.8-5:A Tariff in a Small Country16Copyright 2009 Pearson Addison-Wesley.All rights reserved.Effective Rate of ProtectionThe effective rate of protection measures how much protection a tariff or other trade policy provides domestic producers.It represents

17、the change in value that firms in an industry add to the production process when trade policy changes.The change in value that firms in an industry provide depends on the change in prices when trade policies change.Effective rates of protection often differ from tariff rates because tariffs affect s

18、ectors other than the protected sector,causing indirect effects on the prices and value added for the protected sector.17Copyright 2009 Pearson Addison-Wesley.All rights reserved.Effective Rate of Protection(cont.)For example,suppose that automobiles sell in world markets for$8,000,and they are made

19、 from factors of production worth$6,000.The value added of the production process is$8,000-$6,000 Suppose that a country puts a 25%tariff on imported autos so that domestic auto assembly firms can now charge up to$10,000 instead of$8,000.Auto assembly will occur in the domestic country if the value

20、added is at least$10,000-$6,000.18Copyright 2009 Pearson Addison-Wesley.All rights reserved.Effective Rate of Protection(cont.)The effective rate of protection for domestic auto assembly firms is the change in value added:($4,000-$2,000)/$2,000=100%In this case,the effective rate of protection is gr

21、eater than the tariff rate.19Copyright 2009 Pearson Addison-Wesley.All rights reserved.Costs and Benefits of TariffsA tariff raises the price of a good in the importing country,so we expect it to hurt consumers and benefit producers there.In addition,the government gains tariff revenue from a tariff

22、.How to measure these costs and benefits?We use the concepts of consumer surplus and producer surplus.20Copyright 2009 Pearson Addison-Wesley.All rights reserved.Consumer SurplusConsumer surplus measures the amount that consumers gain from purchases by the difference in the price that each pays from

23、 the maximum price each would be willing to pay.The maximum price each would be willing to pay is determined by a demand(willingness to buy)function.When the price increases,the quantity demanded decreases as well as the consumer surplus.21Copyright 2009 Pearson Addison-Wesley.All rights reserved.Fi

24、g.8-7:Geometry of Consumer Surplus22Copyright 2009 Pearson Addison-Wesley.All rights reserved.Producer SurplusProducer surplus measures the amount that producers gain from a sale by the difference in the price each receives from the minimum price each would be willing to sell at.The minimum price ea

25、ch would be willing to sell at is determined by a supply(willingness to sell)function.When price increases,the quantity supplied increases as well as the producer surplus.23Copyright 2009 Pearson Addison-Wesley.All rights reserved.Fig.8-8:Geometry of Producer Surplus24Copyright 2009 Pearson Addison-

26、Wesley.All rights reserved.Costs and Benefits of TariffsA tariff raises the price of a good in the importing country,making its consumer surplus decrease(making its consumers worse off)and making its producer surplus increase(making its producers better off).Also,government revenue will increase.25C

27、opyright 2009 Pearson Addison-Wesley.All rights reserved.Fig.8-9:Costs and Benefits of a Tariff for the Importing Country26Copyright 2009 Pearson Addison-Wesley.All rights reserved.Costs and Benefits of Tariffs(cont.)For a“large”country,whose imports and exports can affect foreign(world)prices,the w

28、elfare effect of a tariff is ambiguous.The triangles b and d represent the efficiency loss.The tariff distorts production and consumption decisions:producers produce too much and consumers consume too little compared to the market outcome.The rectangle e represents the terms of trade gain.The terms

29、of trade increases because the tariff lowers foreign export(domestic import)prices.27Copyright 2009 Pearson Addison-Wesley.All rights reserved.Costs and Benefits of Tariffs(cont.)Government revenue from the tariff equals the tariff rate times the quantity of imports.t=PT P*T QT=D2 S2Government reven

30、ue=t x QT=c+ePart of government revenue(rectangle e)represents the terms of trade gain,and part(rectangle c)represents part of the value of lost consumer surplus.The government gains at the expense of consumers and foreigners.28Copyright 2009 Pearson Addison-Wesley.All rights reserved.Costs and Bene

31、fits of Tariffs(cont.)If the terms of trade gain exceeds the efficiency loss,then national welfare will increase under a tariff,at the expense of foreign countries.However,this analysis assumes that the terms of trade does not change due to tariff changes by foreign countries(that is,due to retaliat

32、ion).29Copyright 2009 Pearson Addison-Wesley.All rights reserved.Fig.8-10:Net Welfare Effects of a Tariff30Copyright 2009 Pearson Addison-Wesley.All rights reserved.Export SubsidyAn export subsidy can also be specific or ad valoremA specific subsidy is a payment per unit exported.An ad valorem subsi

33、dy is a payment as a proportion of the value exported.An export subsidy raises the price of a good in the exporting country,decreasing its consumer surplus (making its consumers worse off)and increasing its producer surplus(making its producers better off).Also,government revenue will decrease.31Cop

34、yright 2009 Pearson Addison-Wesley.All rights reserved.Export Subsidy(cont.)An export subsidy raises the price of a good in the exporting country,while lowering it in foreign countries.In contrast to a tariff,an export subsidy worsens the terms of trade by lowering the price of domestic products in

35、world markets.32Copyright 2009 Pearson Addison-Wesley.All rights reserved.Fig.8-11:Effects of an Export Subsidy33Copyright 2009 Pearson Addison-Wesley.All rights reserved.Export Subsidy(cont.)An export subsidy unambiguously produces a negative effect on national welfare.The triangles b and d represe

36、nt the efficiency loss.The subsidy distorts production and consumption decisions:producers produce too much and consumers consume too little compared to the market outcome.The area b+c+d+f+g represents the cost of government subsidy.In addition,the terms of trade decreases,because the price of expor

37、ts falls in foreign markets to P*s.34Copyright 2009 Pearson Addison-Wesley.All rights reserved.Export Subsidy in EuropeThe European Unions Common Agricultural Policy sets high prices for agricultural products and subsidizes exports to dispose of excess production.The subsidized exports reduce world

38、prices of agricultural products.The direct cost of this policy for European taxpayers is almost$50 billion.But the EU has proposed that farmers receive direct payments independent of the amount of production to help lower EU prices and reduce production.35Copyright 2009 Pearson Addison-Wesley.All ri

39、ghts reserved.Fig.8-12:Europes Common Agricultural Program36Copyright 2009 Pearson Addison-Wesley.All rights reserved.Import QuotaAn import quota is a restriction on the quantity of a good that may be imported.This restriction is usually enforced by issuing licenses to domestic firms that import,or

40、in some cases to foreign governments of exporting countries.A binding import quota will push up the price of the import because the quantity demanded will exceed the quantity supplied by domestic producers and from imports.37Copyright 2009 Pearson Addison-Wesley.All rights reserved.Import Quota(cont

41、.)When a quota instead of a tariff is used to restrict imports,the government receives no revenue.Instead,the revenue from selling imports at high prices goes to quota license holders:either domestic firms or foreign governments.These extra revenues are called quota rents.38Copyright 2009 Pearson Ad

42、dison-Wesley.All rights reserved.Fig.8-13:Effects of the U.S.Import Quota on Sugar 39Copyright 2009 Pearson Addison-Wesley.All rights reserved.Voluntary Export RestraintA voluntary export restraint works like an import quota,except that the quota is imposed by the exporting country rather than the i

43、mporting country.However,these restraints are usually requested by the importing country.The profits or rents from this policy are earned by foreign governments or foreign producers.Foreigners sell a restricted quantity at an increased price.40Copyright 2009 Pearson Addison-Wesley.All rights reserve

44、d.Local Content RequirementA local content requirement is a regulation that requires a specified fraction of a final good to be produced domestically.It may be specified in value terms,by requiring that some minimum share of the value of a good represent domestic valued added,or in physical units.41

45、Copyright 2009 Pearson Addison-Wesley.All rights reserved.Local Content Requirement(cont.)From the viewpoint of domestic producers of inputs,a local content requirement provides protection in the same way that an import quota would.From the viewpoint of firms that must buy domestic inputs,however,th

46、e requirement does not place a strict limit on imports,but allows firms to import more if they also use more domestic parts.42Copyright 2009 Pearson Addison-Wesley.All rights reserved.Local Content Requirement(cont.)Local content requirement provides neither government revenue(as a tariff would)nor

47、quota rents.Instead the difference between the prices of domestic goods and imports is averaged into the price of the final good and is passed on to consumers.43Copyright 2009 Pearson Addison-Wesley.All rights reserved.Other Trade PoliciesExport credit subsidiesA subsidized loan to exportersU.S.Expo

48、rt-Import Bank subsidizes loans to U.S.exporters.Government procurementGovernment agencies are obligated to purchase from domestic suppliers,even when they charge higher prices(or have inferior quality)compared to foreign suppliers.Bureaucratic regulationsSafety,health,quality,or customs regulations

49、 can act as a form of protection and trade restriction.44Copyright 2009 Pearson Addison-Wesley.All rights reserved.SummaryTariffExport subsidyImport quotaVoluntary export restraintProducer surplusConsumer surplusGovernment net revenueNational welfareIncreasesIncreasesIncreasesIncreasesNo change:rent

50、s to license holdersIncreasesDecreasesDecreasesDecreasesDecreasesDecreasesNo change:rents to foreignersAmbiguous,falls for smallcountryAmbiguous,falls for smallcountryDecreasesDecreases45Copyright 2009 Pearson Addison-Wesley.All rights reserved.Summary(cont.)1.A tariff decreases the world price of t