中级宏观经济学及财务管理知识分析iugo.pptx

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1、Chapter 8The Instruments of Trade PolicyPrepared by Iordanis PetsasTo Accompany International Economics:Theory and Policy International Economics:Theory and Policy,Sixth Editionby Paul R.Krugman and Maurice Obstfeld1 Introduction Basic Tariff Analysis Costs and Benefits of a Tariff Other Instruments

2、 of Trade Policy The Effects of Trade Policy:A Summary Summary Appendix I:Tariff Analysis in General Equilibrium Appendix II:Tariffs and Import Quotas in the Presence of MonopolyChapter Organization2Introduction This chapter is focused on the following questions:What are the effects of various trade

3、 policy instruments?Who will benefit and who will lose from these trade policy instruments?What are the costs and benefits of protection?Will the benefits outweigh the costs?What should a nations trade policy be?For example,should the United States use a tariff or an import quota to protect its auto

4、mobile industry against competition from Japan and South Korea?3Classification of Commercial Policy Instruments IntroductionCommercial Policy InstrumentsTrade Contraction Trade Expansion Tariff Export taxImport quotaVoluntary Export Restraint(VER)Import subsidyExport subsidyVoluntary Import Expansio

5、n(VIE)Price Quantity Price Quantity 4Basic Tariff Analysis Tariffs can be classified as:Specific tariffs Taxes that are levied as a fixed charge for each unit of goods imported Example:A specific tariff of$10 on each imported bicycle with an international price of$100 means that customs officials co

6、llect the fixed sum of$10.Ad valorem tariffs Taxes that are levied as a fraction of the value of the imported goods Example:A 20%ad valorem tariff on bicycles generates a$20 payment on each$100 imported bicycle.5 A compound duty(tariff)is a combination of an ad valorem and a specific tariff.Modern g

7、overnments usually prefer to protect domestic industries through a variety of nontariff barriers,such as:Import quotas Limit the quantity of imports Export restraints Limit the quantity of exportsBasic Tariff Analysis6 Supply,Demand,and Trade in a Single Industry Suppose that there are two countries

8、(Home and Foreign).Both countries consume and produce wheat,which can be costless transported between the countries.In each country,wheat is a competitive industry.Suppose that in the absence of trade the price of wheat at Home exceeds the corresponding price at Foreign.This implies that shippers be

9、gin to move wheat from Foreign to Home.The export of wheat raises its price in Foreign and lowers its price in Home until the initial difference in prices has been eliminated.Basic Tariff Analysis7 To determine the world price(Pw)and the quantity trade(Qw),two curves are defined:Home import demand c

10、urve Shows the maximum quantity of imports the Home country would like to consume at each price of the imported good.That is,the excess of what Home consumers demand over what Home producers supply:MD=D(P)S(P)Foreign export supply curve Shows the maximum quantity of exports Foreign would like to pro

11、vide the rest of the world at each price.That is,the excess of what Foreign producers supply over what foreign consumers demand:XS=S*(P*)D*(P*)Basic Tariff Analysis8Quantity,QPrice,PPrice,PQuantity,QMDDSAPAP2P1S2D2D2 S22S1D1D1 S11Figure 8-1:Deriving Homes Import Demand CurveBasic Tariff Analysis9 Pr

12、operties of the import demand curve:It intersects the vertical axis at the closed economy price of the importing country.It is downward sloping.It is flatter than the domestic demand curve in the importing country.Basic Tariff Analysis10P2P*AD*S*P1XSPrice,PPrice,PQuantity,Q Quantity,Q S*2 D*2S*2D*2F

13、igure 8-2:Deriving Foreigns Export Supply CurveBasic Tariff AnalysisD*1S*1S*1 D*111 Properties of the export supply curve:It intersects the vertical axis at the closed economy price of the exporting country.It is upward sloping.It is flatter that the domestic supply curve in the exporting country.Ba

14、sic Tariff Analysis12Figure 8-3:World EquilibriumXSPrice,PQuantity,QMDPWQW1Basic Tariff Analysis13 Useful definitions:The terms of trade is the relative price of the exportable good expressed in units of the importable good.A small country is a country that cannot affect its terms of trade no matter

15、 how much it trades with the rest of the world.The analytical framework will be based on either of the following:Two large countries trading with each other A small country trading with the rest of the worldBasic Tariff Analysis14 Effects of a Tariff Assume that two large countries trade with each o

16、ther.Suppose Home imposes a tax of$2 on every bushel of wheat imported.Then shippers will be unwilling to move the wheat unless the price difference between the two markets is at least$2.Figure 8-4 illustrates the effects of a specific tariff of$t per unit of wheat.Basic Tariff Analysis15XSPTMDD*S*D

17、SPW2QT1QWBasic Tariff AnalysisFigure 8-4:Effects of a TariffP*T3tPrice,PQuantity,QPrice,PQuantity,QPrice,PQuantity,QHome market World market Foreign marketHome market World market Foreign market16 In the absence of tariff,the world price of wheat(Pw)would be equalized in both countries.With the tari

18、ff in place,the price of wheat rises to PT at Home and falls to P*T(=PT t)at Foreign until the price difference is$t.In Home:producers supply more and consumers demand less due to the higher price,so that fewer imports are demanded.In Foreign:producers supply less and consumers demand more due to th

19、e lower price,so that fewer exports are supplied.Thus,the volume of wheat traded declines due to the imposition of the tariff.Basic Tariff Analysis17 The increase in the domestic Home price is less than the tariff,because part of the tariff is reflected in a decline in Foreign s export price.If Home

20、 is a small country and imposes a tariff,the foreign export prices are unaffected and the domestic price at Home(the importing country)rises by the full amount of the tariff.Basic Tariff Analysis18Figure 8-5:A Tariff in a Small CountrySPrice,PQuantity,QDPW+tPWImports after tariffS1D1Imports before t

21、ariffD2S2Basic Tariff Analysis19 Measuring the Amount of Protection In analyzing trade policy in practice,it is important to know how much protection a trade policy actually provides.One can express the amount of protection as a percentage of the price that would prevail under free trade.Two problem

22、s arise from this method of measurement:In the large country case,the tariff will lower the foreign export price.Tariffs may have different effects on different stages of production of a good.Basic Tariff Analysis20 Effective rate of protection One must consider both the effects of tariffs on the fi

23、nal price of a good,and the effects of tariffs on the costs of inputs used in production.The actual protection provided by a tariff will not equal the tariff rate if imported intermediate goods are used in the production of the protected good.Example:A European airplane that sells for$50 million has

24、 cost$60 million to produce.Half of the purchase price of the aircraft represents the cost of components purchased from other countries.A subsidy of$10 million from the European government cuts the cost of the value added to purchasers of the airplane from$30 to$20 million.Thus,the effective rate of

25、 protection is(30-20)/20=50%.Basic Tariff Analysis21Costs and Benefits of a Tariff A tariff raises the price of a good in the importing country and lowers it in the exporting country.As a result of these price changes:Consumers lose in the importing country and gain in the exporting country Producer

26、s gain in the importing country and lose in the exporting country Government imposing the tariff gains revenue To measure and compare these costs and benefits,we need to define consumer and producer surplus.22 Consumer and Producer Surplus Consumer surplus It measures the amount a consumer gains fro

27、m a purchase by the difference between the price he actually pays and the price he would have been willing to pay.It can be derived from the market demand curve.Graphically,it is equal to the area under the demand curve and above the price.Example:Suppose a person is willing to pay$20 per packet of

28、pills,but the price is only$5.Then,the consumer surplus gained by the purchase of a packet of pills is$15.Costs and Benefits of a Tariff238$129$1010$911DFigure 8-6:Deriving Consumer Surplus from the Demand CurveCosts and Benefits of a TariffPrice,PQuantity,Q 24Figure 8-7:Geometry of Consumer Surplus

29、Costs and Benefits of a TariffabP1P2DPrice,PQuantity,Q Q2Q125 Producer surplus It measures the amount a producer gains from a sale by the difference between the price he actually receives and the price at which he would have been willing to sell.It can be derived from the market supply curve.Graphic

30、ally,it is equal to the area above the supply curve and below the price.Example:A producer willing to sell a good for$2 but receiving a price of$5 gains a producer surplus of$3.Costs and Benefits of a Tariff26Figure 8-8:Geometry of Producer SurplusCosts and Benefits of a TariffdcP2P1SPrice,PQuantity

31、,QQ2Q127Costs and Benefits of a Tariff Measuring the Cost and Benefits Is it possible to add consumer and producer surplus?We can(algebraically)add consumer and producer surplus because any change in price affects each individual in two ways:As a consumer As a worker We assume that at the margin a d

32、ollars worth of gain or loss to each group is of the same social worth.28Figure 8-9:Costs and Benefits of a Tariff for the Importing CountryCosts and Benefits of a TariffPTPWP*TbcdeDa=consumer loss(a+b+c+d)=producer gain(a)=government revenue gain(c+e)QTD2S2SS1D1Price,PQuantity,Q29 The areas of the

33、two triangles b and d measure the loss to the nation as a whole(efficiency loss)and the area of the rectangle e measures an offsetting gain(terms of trade gain).The efficiency loss arises because a tariff distorts incentives to consume and produce.Producers and consumers act as if imports were more

34、expensive than they actually are.Triangle b is the production distortion loss and triangle d is the consumption distortion loss.The terms of trade gain arises because a tariff lowers foreign export prices.Costs and Benefits of a Tariff30 If the terms of trade gain is greater than the efficiency loss

35、,the tariff increases welfare for the importing country.In the case of a small country,the tariff reduces welfare for the importing country.Costs and Benefits of a Tariff31Figure 8-10:Net Welfare Effects of a TariffPTPWP*Tb deD=efficiency loss(b+d)=terms of trade gain(e)ImportsSPrice,PQuantity,QCost

36、s and Benefits of a Tariff32 Export Subsidies:Theory Export subsidy A payment by the government to a firm or individual that ships a good abroad When the government offers an export subsidy,shippers will export the good up to the point where the domestic price exceeds the foreign price by the amount

37、 of the subsidy.It can be either specific or ad valorem.Other Instruments of Trade Policy33baFigure 8-11:Effects of an Export SubsidyOther Instruments of Trade PolicyPSPWP*SPrice,PQuantity,QExportsgfeSubsidydc=producer gain(a+b+c)=consumer loss(a+b)=cost of government subsidy(b+c+d+e+f+g)DS34 An exp

38、ort subsidy raises prices in the exporting country while lowering them in the importing country.In addition,and in contrast to a tariff,the export subsidy worsens the terms of trade.An export subsidy unambiguously leads to costs that exceed its benefits.Other Instruments of Trade Policy35Figure 8-12

39、:Europes Common Agricultural ProgramOther Instruments of Trade PolicyPrice,PQuantity,QSDEU price without importsWorld price=cost of government subsidySupport priceExports36 Import Quotas:Theory An import quota is a direct restriction on the quantity of a good that is imported.Example:The United Stat

40、es has a quota on imports of foreign cheese.The restriction is usually enforced by issuing licenses to some group of individuals or firms.Example:The only firms allowed to import cheese are certain trading companies.In some cases(e.g.sugar and apparel),the right to sell in the United States is given

41、 directly to the governments of exporting countries.Other Instruments of Trade Policy37 An import quota always raises the domestic price of the imported good.License holders are able to buy imports and resell them at a higher price in the domestic market.The profits received by the holders of import

42、 licenses are known as quota rents.Other Instruments of Trade Policy38 Welfare analysis of import quotas versus of that of tariffs The difference between a quota and a tariff is that with a quota the government receives no revenue.In assessing the costs and benefits of an import quota,it is crucial

43、to determine who gets the rents.When the rights to sell in the domestic market are assigned to governments of exporting countries,the transfer of rents abroad makes the costs of a quota substantially higher than the equivalent tariff.Other Instruments of Trade Policy39Price in U.S.Market 466World Pr

44、ice 280bcdDemanda8.45 6.32Supply5.14 9.26Price,$/tonQuantity of sugar,million tonsFigure 8-13:Effects of the U.S.Import Quota on SugarOther Instruments of Trade PolicyImport quota:2.13 million tons=consumer loss(a+b+c+d)=producer gain(a)=quota rents(c)40 V oluntary Export Restraints A voluntary expo

45、rt restraint(VER)is an export quota administered by the exporting country.It is also known as a voluntary restraint agreement(VRA).VERs are imposed at the request of the importer and are agreed to by the exporter to forestall other trade restrictions.Other Instruments of Trade Policy41 A VER is exac

46、tly like an import quota where the licenses are assigned to foreign governments and is therefore very costly to the importing country.A VER is always more costly to the importing country than a tariff that limits imports by the same amount.The tariff equivalent revenue becomes rents earned by foreig

47、ners under the VER.Example:About 2/3 of the cost to consumers of the three major U.S.voluntary restraints in textiles and apparel,steel,and automobiles is accounted for by the rents earned by foreigners.A VER produces a loss for the importing country.Other Instruments of Trade Policy42 Local Content

48、 Requirements A local content requirement is a regulation that requires that some specified fraction of a final good be produced domestically.This fraction can be specified in physical units or in value terms.Local content laws have been widely used by developing countries trying to shift their manu

49、facturing base from assembly back into intermediate goods.Other Instruments of Trade Policy43 Local content laws do not produce either government revenue or quota rents.Instead,the difference between the prices of imports and domestic goods gets averaged in the final price and is passed on to consum

50、ers.Example:Suppose that auto assembly firms are required to use 50%domestic parts.The cost of imported parts is$6000 and the cost of the same parts domestically is$10,000.Then the average cost of parts is$8000(0.5 x$6000+0.5 x$10,000).Firms are allowed to satisfy their local content requirement by