tailieunhanh - Lecture International economics: Chapter 6 - Hendrik Van den Berg

Chapter 6 - Protectionism: How nations restrict trade. After completing this chapter, students will be able to: Use both partial equilibrium and general equilibrium models to explain the effects of tariffs; use the general equilibrium model of a tariff to explain the important lerner symmetry theorem; extend the analysis to trade quotas, and demonstrate the similarities between tariffs and quotas; describe some the many other ways in which governments restrict international trade. | Protectionism: How Nations Restrict Trade In a regime of Free Trade and free economic intercourse it would be of little consequence that iron lay on one side of a political frontier, and labor, coal, and blast furnaces on the other. But as it is, men have devised ways to impoverish themselves and one another; and prefer collective animosities to individual happiness. (John Maynard Keynes, 1920) The Goals of this Chapter Use both partial equilibrium and general equilibrium models to explain the effects of tariffs. Use the general equilibrium model of a tariff to explain the important Lerner Symmetry Theorem. Extend the analysis to trade quotas, and demonstrate the similarities between tariffs and quotas. Describe some the many other ways in which governments restrict international trade. Introduce the concept of rent seeking and how it applies to trade policy from both a static and an growth perspective. The Economics of a Tariff A tariff is simply a tax on imports An ad valorem tariff is a tax that is expressed as a percentage of the value of the import being taxed A specific tariff is an import tax expressed as a fixed dollar amount per unit of imports The Economics of a Tariff The economic analysis of a tariff makes use of the two-country partial equilibrium model of trade. This model can be applied to trace the effects of a tariff on producers and consumers in the market for a traded good in both the exporting and importing countries. The Economics of a Tariff First, we look at the effect of a tariff on the importing country. The domestic effects can be seen by looking at the two left-most diagrams in Figure . That is, look just at the Homeland market and the International Market. The Economics of a Tariff Suppose an ad valorem tariff is applied to imports. Such a tariff is illustrated in the International Market diagram as an increase in the supply curve of imports. The effective decrease in foreign supply raises the Homeland price and reduces the quantity . | Protectionism: How Nations Restrict Trade In a regime of Free Trade and free economic intercourse it would be of little consequence that iron lay on one side of a political frontier, and labor, coal, and blast furnaces on the other. But as it is, men have devised ways to impoverish themselves and one another; and prefer collective animosities to individual happiness. (John Maynard Keynes, 1920) The Goals of this Chapter Use both partial equilibrium and general equilibrium models to explain the effects of tariffs. Use the general equilibrium model of a tariff to explain the important Lerner Symmetry Theorem. Extend the analysis to trade quotas, and demonstrate the similarities between tariffs and quotas. Describe some the many other ways in which governments restrict international trade. Introduce the concept of rent seeking and how it applies to trade policy from both a static and an growth perspective. The Economics of a Tariff A tariff is simply a tax on imports An ad valorem tariff

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