Instruments of Trade Policy

8 Key excerpts on "Instruments of Trade Policy"

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  eBook - ePub

  Trade Protection in the European Community

  • Ludger Schuknecht(Author)
  • 2017(Publication Date)
  • Taylor & Francis

    (Publisher)

  Chapter 4

  THE TRADE POLICY INSTRUMENTS

  4.1 Introduction

  The interest group that goes “policy shopping” finds a wide array of trade policy instruments in the EC. The size of the EC’s political market allows a considerable product differentiation for redistributive trade barriers. The instruments are suitable for very diverse policy interests because of the institutional details regulating the application of each instrument. And as in many markets, specialized intermediaries (lawyers in lobby firms and associations) help the “shoppers” to find the right personal policy package. But can the EC afford to be protectionist?

  In 1989, the volume of EC exports passed one trillion ECU. The EC is the world’s largest trading unit with over one third of the world’s merchandise trade (International Monetary Fund, 1988). Close to 60% of the trade is intra-EC trade. Over 50% of the external trade is conducted with the EFTA countries, the US and Japan. The developing countries including the newly industrialized countries and OPEC account for over 30% of EC trade. The EC typically has a trade surplus in manufactures and a deficit in primary products. Exports contribute 25% on average to the GDP with this share being much higher for the smaller countries. Since close to half of this share is external trade, the EC can hardly afford to become more isolationist. Nevertheless, external protection is significant.

  Non-tariff barriers have replaced tariffs as the most important and most dynamic instruments over the past decades. Tariffs only constitute a major threat to foreign producers if applied under the antidumping regulation. Around 20% of the imports are covered by non-tariff barriers with the share having increased by 20% between 1981 and 1986 (UNCTAD, 1987). Imports from developing countries are hit twice as often as imports from industrialized countries.

  The previous chapter outlined the central role of the Council and the Commission in European Community policy. While the Commission exerts the executive functions and prepares legislative proposals, the Council has the final word in most trade policy choices. The Court preserves the supranational orientation of these policies.

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  Applied International Economics

  • W. Charles Sawyer, Richard L. Sprinkle(Authors)
  • 2020(Publication Date)
  • Routledge

    (Publisher)

  9 , we examined the effects of tariff and nontariff barriers to trade and discussed how protectionism tends to make a country as a whole worse off. However, these effects are not uniform. The gains to consumers tend to be widely dispersed and in many cases hardly noticeable. However, the losses to domestic producers and workers are very concentrated. As a result, some firms and workers might seek protection from the government. In this chapter, we will explain why most countries provide protection to some domestic industries. We begin by analyzing the political economy of protection. Protection from imports may not be in the country’s best interest, but it is in the interest of selected special interest groups. We also explain a country’s structure of protection by describing why the tariff is high for some goods and low for others. Next, we explain what is known as administered protection as it has become difficult for governments to explicitly raise tariffs. These bureaucratic mechanisms have been developed that allow tariffs to be increased in the presence of allegedly unfair foreign competition.

  The second part of the chapter presents the evolution of U.S. trade policy from 1792 to today. The nature and fundamental principles of U.S. trade law are much easier to understand if you know something about its historical roots. The last section of the chapter describes the evolution of the global trading system since World War II. The WTO is the product of nearly fifty years of international trade negotiations. This section discusses the history of those negotiations, the troubled state of world trade negotiations and the issues left to be negotiated. A final section covers the current challenges to the current arrangement of international trade relations.

  THE POLITICAL ECONOMY OF PROTECTIONISM

  Given that a country as a whole gains from trade, one would expect free trade to dominate most countries’ international trade policy. Trade barriers cost the economy more in lost consumer surplus than is gained by producers and the government. However, as we saw in the last two chapters, firms and workers in import-competing industries gain from trade barriers. As we will see in what follows, the interaction between the gains from trade for the country and the gains from trade barriers for producers explains the existence of trade barriers. The result is that free trade is not most countries’ international trade policy.

  In economics, policy refers to an action or actions that a government implements. For example, governments regulate industries and firms in a number of areas. These regulations are designed to modify economic activity in some way. In the presence of market failures, government regulation can improve the welfare of society. Such regulations are commonly observed for pollution or in the food and pharmaceutical industries. Not all government regulation of industries and firms works to the benefit of society as a whole; some regulations favor one segment of society. Industries and firms that benefit from regulation favor it.1 For example, it is illegal for firms to conspire to fix or raise prices. However, firms can legally raise prices if the government regulates and enforces minimum prices for an industry’s product. In this case, firms in this industry may find it in their own interest to accept regulation if it can enhance their profitability.2

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  eBook - ePub

  The Development of China's Information Resource Industry

  Policy and Instrument

  • Huiling Feng, Guojun Zhao, Minghui Qian(Authors)
  • 2020(Publication Date)
  • Routledge

    (Publisher)

  3

  Economic instruments refer to the granting or deprivation of material resources (whether in the form of material or money). Economic tools make it cheaper or more expensive in terms of money, time, effort, and other valuables to pursue certain actions. Information instruments refer to “moral suasion” or persuasion and cover the transfer of knowledge, moral suasion, exhortation, and other persuasive actions.

  6.2 Common policy instruments for the information resource industry

  IRI policy instruments are mechanisms for the state to adjust and normalize IRI activities in order to achieve IRI development goals. After evaluating relevant theories of industrial policies and policy instruments, as well as the features of the IRI, we classify IRI policy instruments into the following types.

  6.2.1 Organizational instruments

  For organizational instruments, the government relies on its own power to solve policy problems directly. As the main organization in society, the government enjoys an unrivaled edge over private organizations in terms of scale, economic strength, manpower, power, and morality. In many policy areas, the government can always resort to its own force to solve problems directly.

  The main forms of organizational instruments include:

  1. Government agencies. Government agencies directly complete many national affairs such as diplomacy and military actions, as well as domestic social affairs.
  2. National plans. They include various types of strategies, planning, plans, and action plans. There are mandatory or guiding programs.
  3. Public institutions and enterprises. Public institutions and enterprises in a country are often founded, managed, and supported by the government, and they are actually part of the public sector in a broader sense. In China, IRI policies (such as infrastructure, technology, industrial management, and other policies) are mostly executed by public institutions.

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  Globalization and the Transformation of Foreign Economic Policy

  • Pawel Bozyk(Author)
  • 2019(Publication Date)
  • Routledge

    (Publisher)

  Para-Tariff Instruments 4.3.1. The Concept of Para-Tariff Instruments The concept of para-tariff instruments of foreign economic policy refers to restrictions on foreign trade which are not customs duties but produce the same effects as customs duties. These are, thus, 'nearly' tariff instruments, starting the same or similar mechanism as the customs duty mechanism. Subventions are the only exception to this definition as they do not generate effects identical with those of customs duties and serve to stimulate exports rather than limit imports. Para-tariff instruments (with the exception ot subsidies) lead to the rise of the price of an imported product and reduce its competitiveness 011 the internal market of the importing country. 7 In this sense, para-tariff instruments can replace or complement customs duties. This is extremely useful given the fact that the importance of customs duties in foreign economic policy is marginal. Unlike customs duties, para-tariff instruments are not considered by international trade regulating institutions as complying with the market economy principles and, therefore, in this sense, are illegal. Nevertheless, in practice, they are often applied as being more effective and easier in comparison with customs duties. 8 Moreover, they are not universal in nature, which means that do not concern all participants in foreign trade. As selective instruments, they cover only certain economic subjects and selected goods. This causes them to be treated as discriminatory

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  Legal and Economic Principles of World Trade Law

  • Henrik Horn, Petros C. Mavroidis(Authors)
  • 2013(Publication Date)
  • Cambridge University Press

    (Publisher)

  KYLE BAGWELL, ROBERT W. STAIGER, AND ALAN O. SYKES 3 Border Instruments 3.1 Introduction The objective of this study is to analyze the treatment of border instruments in the WTO/GATT system from both a legal and economic perspective. Our goals are both positive and normative. From a positive perspective, we will draw on the economic theory of international trade and relevant aspects of economic history to explain the legal treatment of border instruments in the WTO/GATT system as it has evolved over time. From a normative perspective, we will build on an eco- nomic understanding of the function of the various legal disciplines to critique elements of the treaty text and the case law. We limit our focus to the disciplines on traditional instruments of import protection and export promotion that are applicable to all WTO Members. Because such border instruments are mainly relevant to trade in goods, we focus here on the GATT – GATS and TRIPs are outside the scope of the current study. We consider the core tariff bindings of GATT (Articles II and XXVIII pertaining to renegotiation), restrictions on quantitative restrictions and “other measures” (Article XI), and the nondiscrimination or “most-favored-nation” (MFN) obli- gations that apply to these measures (Article I) as well as brief attention to the exceptions created for preferential trading arrangements (Article XXIV) and spe- cial or differential treatment for developing countries. We also consider the disci- plines applicable to export subsidies in both the original GATT (as amended) and the Agreement on Subsidies and Countervailing Measures (SCMs Agreement). The study is organized as follows. In the remainder of this Section, we present the key treaty text. Section 3.2 concerns the rationale for negotiated con- straints on the traditional instruments of protection, while Section 3.3 follows with an analysis and critique of the pertinent case law in these areas.

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  eBook - ePub

  WTO Trade Remedies in International Law

  Their Role and Place in a Fragmented International Legal System

  • Roberto Soprano(Author)
  • 2018(Publication Date)
  • Routledge

    (Publisher)

  Differing from traditional forms of self-help, trade remedies are reactions to very narrowly defined acts. In fact, countermeasures, self-defence or retorsion do not clearly describe the act against which they can react. They address any form of aggression, violation of international law or interest, without entering into the details of the act. However, trade remedies can only be adopted to react to specific behaviours.

  3.3.1.1. Subsidies

  Subsidies are important and widespread instruments of economic policy employed by many governments to pursue domestic and social policies. This form of governmental assistance has a variety of purposes such as fostering production or exports, facilitating the creation and expansion of new industries, creating jobs, etc.62 On the one hand subsidies improve the conditions of some market agents in the domestic market. On the other hand, they may distort competition, negatively affecting non-subsidized competitors.

  Subsidies have different forms and characteristics. They may be granted to producers or consumers, be specific or general, direct or indirect, have the form of a grant, a ‘tax holiday’, a loan at a preferential interest rate, etc.63 The main distinction in international trade rules is between ‘domestic’ and ‘export’ subsidies. A domestic subsidy is granted to a recipient for the production of a good regardless of whether the good will be exported or sold in the domestic market.64 Let’s assume for example that the domestic industry of Patria, before receiving a subsidy for the production of good X, sells its product at $10 and cannot compete with foreign X goods imported into Patria’s market at $8. In such a case, the domestic industry of Patria would be excluded from the market. If, however, the government of Patria granted a subsidy of $4 to its domestic producer of good X, this product made in Patria would then be sold for less than the imported one and appear more attractive to consumers. In addition to a misallocation of resources into a product whose production would be ‘uneconomic but for the subsidy’,65

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  Lecture Notes on International Trade Theory and Policy

  • Richard Pomfret(Author)
  • 2008(Publication Date)
  • WSPC

    (Publisher)

  Workers losing their job after ten years suffer an average income cut of over 15% in their next job, while for workers who have been in a job for twenty years the salary cut exceeds 30%. For a 40–50 year-old worker suffering such income cuts, assistance during the relatively short period between jobs is nothing compared to the reduced income over the rest of their working life. Lalonde (2007, 20) advocates the extension of wage insurance, not as an anti-poverty program, but to address “a substantial market failure that affects middle-aged, middle-class workers and their willingness to embrace beneficial economic policies.” This page intentionally left blank This page intentionally left blank Chapter 13 Instruments of Trade Policy Tariffs or export taxes are the simplest trade barriers to analyse because they involve only the wedge between domestic and world prices. Other trade barriers not directly based on price can have equivalent effect if they create the same wedge, but non-tariff barri-ers often involve additional costs. The conditions for equivalence to hold, and plausible circumstances when it will not hold, can be most clearly shown for quantitative restrictions on trade. Other non-tariff barriers may be explicitly aimed at non-trade outcomes, e.g. safety and health standards, while indirectly providing barriers to trade, and an important policy issue is identifying when the trade effects are acceptable or not acceptable consequences. Finally, the chapter examines procedural measures, such as countervailing or antidump-ing duties, which are the most contentious trade policy instruments today. 141 142 Lecture Notes on International Trade Theory and Policy Tariffs Tariffs may be levied as a fixed amount (e.g. a specific tariff of 20 cents per shirt) or as a percentage (e.g. an ad valorem tariff equal to 20% of the shirt’s value). In the 19 th century most tariffs were specific because specific tariffs were harder to evade, e.g.

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  eBook - ePub

  International Trade Policy

  • F.V. Meyer(Author)
  • 2017(Publication Date)
  • Taylor & Francis

    (Publisher)

  6 INTRA-TRADE AND INTERNATIONAL TRADE POLICY

  1. Intra- and Inter-Trades under Free Trade

  Internal protection means that foreign economic policy remains a domestic issue. Decided upon unilaterally, it is virtually non-negotiable. Effects on foreign countries are incidental. Those countries are not expected to complain as long as they are treated alike. Before 1934, this was the US attitude towards all protection. Tariff rates were set according to domestic requirements. The same attitude prevailed elsewhere. For instance, the UK decided unilaterally whether to be free trade or protectionist. Trade agreements softened these attitudes. Once trade barriers became negotiable, the various national foreign economic policies became intertwined. An international trade policy emerged. In place of domestic policies with international implications came the integration of the various domestic policies into an international one.

  Old attitudes lingered however. The change came only gradually. The preceding chapters have pointed to certain landmarks in the history of trade policy. Yet it is not possible to say precisely when international considerations were given sufficient weight relative to domestic ones, to justify the term ‘international trade policy’. But it can be said that the change has taken place in industrial products and has not taken place in temperate zone agricultural commodities. True there were some reductions on tariff rates on some agricultural commodities. But these were virtually meaningless where national authorities continued to intervene in quantities and prices. To this day, US agricultural legislation has priority over trade agreements legislation. Quantities of relevant imports can still be unilaterally determined in order to ensure that imports do not frustrate domestic production plans. The EC tries to regulate agricultural production through intervention in prices. It wants no disturbance of such prices through outside influences. In different ways, both the US and the EC want production-led, rather than trade-led developments in their agriculture. So does Japan. GATT-style negotiations can lead to only limited results for such commodities.1

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