CH08 The Instruments of Trade Policy(国际经济学-厦门大学 陈涛).ppt

If the terms of trade gain is greater than the efficiency loss, 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 Tariff Figure 8-10: Net Welfare Effects of a Tariff PT PW P*T b d e D = efficiency loss (b + d) = terms of trade gain (e) Imports S Price, P Quantity, Q Costs and Benefits of a Tariff 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 of the subsidy. It can be either specific or ad valorem. Other Instruments of Trade Policy b a Figure 8-11: Effects of an Export Subsidy Other Instruments of Trade Policy PS PW P*S Price, P Quantity, Q Exports g f e Subsidy d c = producer gain (a + b + c) = consumer loss (a + b) = cost of government subsidy (b + c + d + e + f + g) D S An export 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 Policy Figure 8-12: Europe’s Common Agricultural Program Other Instruments of Trade Policy Price, P Quantity, Q S D EU price without imports World price = cost of government subsidy Support price Exports Import Quotas: Theory An import quota is a direct restriction on the quantity of a good that is imported. Example: The United States 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 directly to the