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International Trade Polic2 - GATT

international trade polics

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Emmanuel Bongay
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18 views5 pages

International Trade Polic2 - GATT

international trade polics

Uploaded by

Emmanuel Bongay
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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International trade policy

Describes collectively the international laws and multilateral trade


agreements that govern the sale of goods between different countries.
International trade policy is a policy related to trading across national
boundaries. A government establishes an international trade policy that
encompasses actions they will take to protect the best interests of their
citizens and companies.

 Some international trade policy is made by transnational


institutions such as the United Nations and the World Trade
Organization, which are not directly controlled by any particular
national government. Instead, member governments elect
representatives to these transnational bodies in much the same
way that citizens elect representatives to legislatures. Only very
basic international trade policies are made this way

 Most substantive international trade policy is actually in the form of


multilateral trade agreements, which are directly negotiated
between the governments of two or more countries. NAFTA and
the Trans-Pacific Partnership are examples of such trade
agreements. There are dozens of such agreements, neg
negotiated between various groups of countries. These
agreements primarily involve negotiating reductions in tariffs and
protections for intellectual property, but can also involve many
other issues, such as labor standards and environmental
regulations. These agreements are often negotiated in secret
directly between
executives of member governments and ratified with little oversight
by their respective legislatures or citizens.

An advantage of this method is that agreements can be resolved


relatively quickly and with less partisanship, but
a major disadvantage is that this lack of oversight can make the
process undemocratic and give undue advantages to particular interest
groups, especially multinational corporations.

 Some of the major actions governments take are free trade policies
or tariffs.
Free trade policies encourage trade between certain countries. A good
example of this is NAFTA, the North American Free Trade Agreement,
which allowed free trade throughout the United States, Mexico, and
Canada.

 Tariffs are sometimes imposed on other countries as possible


punishment for negative actions or to prevent the industry in those
countries from damaging similar domestic industries; a tariff
ensures the nation gets money from that trade and also
discourages as much trade in those certain areas.

A Tariff Barrier to trade between certain countries or geographical areas


which takes the form of abnormally high taxes levied by a government on
imports or occasionally exports for purposes of protection, support of the
balance of payments, or the raising of revenue.

Types of trade barriers: tariff and non-tariff


Tariff barriers can include a customs levy or tariff on goods entering a
country and are imposed by a government. ...

Non-tariff barriers can affect all forms of goods and services exports –
from food and manufactured products, through to digital services

 Trade Policy in Developing Countries


Preview Import substituting industrialization
Trade liberalization since 1985

Export oriented industrialization.

Which countries are “developing countries”?


The term “developing countries” does not have a precise
definition, but it is a name given to many low and middle
income countries.

Import Substituting Industrialization


Import substituting industrialization was a trade policy
adopted by many low and middle income countries before
the 1980s.The policy aimed to encourage domestic
industries by limiting competing imports.

It was often accompanied with the belief that poor countries


would be exploited by rich countries through international
financial markets and trade.

Import Substituting Industrialization

The principal justification of this policy was the infant


industry argument:
Countries may have a potential comparative advantage in
some industries, but these industries cannot initially
compete with well-established industries in other countries.
To allow these industries to establish themselves,
governments should temporarily support them until they
have grown strong enough to compete internationally.
Import substituting industrialization aimed to promote
economic growth by restricting imports that competed with
domestic products in low and middle income countries.
The infant industry argument says that new industries (e.g.,
in poor countries) need temporary trade protection because
of market failures:
imperfect capital markets that restrict borrowing problems
of appropriating gains from private investment

- Effect of tariff on producers and consumer surplus

The increase in the domestic price of both imported goods and the
domestic substitutes reduces consumer surplus in the market. ...

Importing Country Producers - Producers in the importing country are


better-off as a result of the tariff. The increase in the price of their product
increases producer surplus in the industry.

Consumers of the product in the exporting country experience


an increase in well-being as a result of the tariff. The decrease in their
domestic price raises the amount of consumer surplus in the market.

The main effect of a tariff is to raise the price, and reduce the volume, of
imports. The higher price protects the domestic industry from competition,
but it harms consumers—including businesses that buy the product as an
input. By reducing mutually beneficial trade, tariffs are harmful to the
economy as a whole

Tariffs Raise Prices and Reduce Economic Growth


One possibility is that a tariff may be passed on to producers and
consumers in the form of higher prices. Tariffs can raise the cost of parts
and materials, which would raise the price of goods using those inputs and
reduce private sector output.

Tariffs have three primary functions:

To serve as a source of revenue,


To protect domestic industries, and

To remedy trade distortions (punitive function).

The revenue function comes from the fact that the income
from tariffs provides governments with a source of funding

Static effect are basically concerned with the reallocation of production and
consumption

Trade creation and trade diversion effects are basic effects of economic
integration. Decreasing of administrative costs and improvement of trade
conditions with third countries are also referred to static effects

There are two kinds of effects of customs unions:

 Static and Dynamic.

The static effects relate to the impact of the establishment of the customs
union on welfare. Trade effects involve static effects, namely trade
creation and trade diversion effects.

The static effects of customs union are- (i) trade- creation and (ii) trade-
diversion

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