Economics
International Trade and Public Policy
International trade and public policy refers to the government's role in regulating and promoting trade between countries. It encompasses policies related to tariffs, quotas, subsidies, and trade agreements, and aims to balance the interests of domestic industries, consumers, and the overall economy. The goal is to create a framework that facilitates efficient and fair international trade while addressing potential negative impacts.
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6 Key excerpts on "International Trade and Public Policy"
- Luther Tweeten(Author)
- 2019(Publication Date)
- Routledge(Publisher)
12. INTERNATIONAL TRADE POLICIES by Shida Henneberry and David Henneberryl An individual who traded with no one would have a difficult and perhaps brief existence. Nations as well as individuals gain from specialization and economies of size that attend trade. Policy analysis is useful to gauge monetary gains and losses from trade or from government interventions in trade. OBJECTIVES Objectives of this chapter are to: 1. analyze the conceptual and empirical basis for gains from trade, and 2. show costs of interventions in trade. This chapter explains the fundamental propositions underlying the international exchange of goods and services. The modem theory of international trade, the law of comparative advantage (often referred to as the foundation of international trade theory) and the welfare impacts of trade are also explained. Domestic resource cost (DRC) coefficients are sometimes used to measure comparative advantage. The domestic resource cost measures the cost in terms of domestic resources for each dollar saved for imported competing goods or each dollar earned for exports. A detailed explanation and method of calculation of DRCs is provided. Many governments have adopted policies to protect their producers and consumers. Several of the most common measures of protection on world markets are presented in this chapter. Consumer subsidy equivalent (CSE) and producer subsidy equivalent (PSE) are used to quantify the impact of government policies on consumers and producers, lThe authors would like to express their appreciation to Mr. Eric Kocher, who reviewed the manuscript International Trade Policies 323 respectively. The effective rate of protection (ERP) and nominal rate of protection (NRP) are utilized to explain the percentage change in domestic value added after the imposition of import taxes on imported inputs and the final product compared to taxes imposed only on final products.
eBook - PDF- Andrew Walter, Gautam Sen(Authors)
- 2008(Publication Date)
- Princeton University Press(Publisher)
Odell, “Understanding Interna-tional Trade Policies: An Emerging Synthesis,” World Politics 43:1, 1990, 139–67. 16 Collective action problems refer to the difficulty that large groups have in organizing to pursue common goals, primarily because of the incentive for any one actor to free ride on others who may be willing to bear the costs of such organization. For a classic account, see Mancur Olson, The Logic of Collective Action: Public Goods and the Theory of Groups (Cambridge: Harvard University Press, 1965). 17 Stephen P. Magee, “Endogenous Tariff Theory: A Survey,” in David C. Colander, ed., Neoclas-sical Political Economy, The Analysis of Rent-Seeking and DUP Activities (Cambridge: Ballinger, 1984), 41–55; Gene M. Grossman and Elhanan Helpman, Interest Groups and Trade Policy (Prince-ton, N.J.: Princeton University Press, 2002); Elhanan Helpman, “Politics and Trade Policy,” in Richard E. Baldwin et al., eds., Market Integration, Regionalism and the Global Economy (Cam-bridge: Cambridge University Press, 1999), 86–116. TRADE POLICY 69 policies. Most of these models assume that governments are interested in maximizing their chances of retaining political office. According to Magee, “tariffs are an equilibrating variable in political market, which balance opposing forces in redistributional battles.” 18 Political parties compete by adopting commitments on trade that maximize their chances of appealing to domestic interest groups. A variant of this ap-proach employs the attributes of the median voter rather than interest groups to determine policy outcomes. 19 When the economy imports labor-intensive goods, if the median voter has a higher endowment of labor per unit of capital than the economy as a whole, the political equilibrium is positive tariffs, the revenues of which are redistributed to the public in proportion to income. By contrast, Magee assumes that informational costs put interest groups in a better position than voters to identify policy options.
eBook - PDF- Anneliese Dodds(Author)
- 2018(Publication Date)
- Bloomsbury Academic(Publisher)
8 Economic Policy Economic policy is often separated from broader discussions of public policy, due to disciplinary barriers between economists and policy analysts. Yet, in all devel-oped nations, ‘economics is married, if only at common law, to politics’ (Dahl and Lindblom, 1976 : xlv). This is, first, because of the continuing influence of states on economic activity, both within and beyond domestic borders. The extent to which competitive markets can arise, consolidate and grow in the absence of (pre-dominantly state) authority has preoccupied political economists for decades (see Hayek, 1988 ; and Polanyi, 2001 [ 1944 ], for contrasting views). Regardless of this, it remains indisputable that, even in those nations traditionally viewed as following a ‘laissez-faire’ approach to economic policy, governments and their bureaucracies play an essential role in funding, controlling, organizing and informing economic activity. As this chapter will show, this remains the case despite the influence of globalization. More than perhaps any other area of policy, economic policy decisions can have wide repercussions on other policy areas. This is because successful (or unsuccess-ful) economic policies can increase (or reduce) government capacity to finance other policies, by impacting on the ability to raise revenue through taxation or borrow-ing. Some have argued that economic policy also differs from other types of policy because its goals are almost universally accepted, as well as the means to achieve them. For these theorists, ‘full employment, stable prices, and steady levels of eco-nomic growth’ can be readily measured and are generally supported as policy aims (Heidenheimer et al., 1990 : 134). Others would suggest that whilst ‘[o]ther things being equal’ such goals are indeed ‘preferred’ by society, in practice, ‘these goals are not all positively related’ (Keech, 1980 : 345).
- Richard Pomfret(Author)
- 2008(Publication Date)
- WSPC(Publisher)
This page intentionally left blank This page intentionally left blank Chapter 12 The Political Economy of Trade Policy The theory of trade policy reaches strong policy conclusions about the desirability of free trade for a small country, and even for a large country attempts to take advantage of market power through an optimum tariff are likely to be self-defeating. To a large extent, these conclusions are reflected in actual policy decisions, as trade barriers have been substantially reduced worldwide since the 1940s, but they still beg the questions of why trade barriers have often been high and why trade policy debates remain contentious. The answer largely lies in the distributional impact of trade and of trade barriers. Those who benefit from a trade restriction have an incentive to seek protection, and legislators may respond to such pressure group politics. The losers from trade are owners of the scarce factor, such as the landowners in Ricardo’s England. Thus, labour unions in high-income countries and capitalists in low-income countries tend to be 129 130 Lecture Notes on International Trade Theory and Policy suspicious of trade liberalisation. At the microeconomic level, owners and workers often join together in calls for protection, as the specific factors model predicts: if all factors working in a particular activ-ity have some degree of specificity, then they may unite to protect that activity’s producer surplus. In this they may be pitted against consumers of their output or against exporters who see the general equilibrium consequences of protection, but consumers may be less well-organised than producers and exporters may not be as aware of the trade policy consequences (or may not yet exist if it is potential exports that are being excluded by protection). There may also be a loss-aversion bias insofar as the negative weight that people place on a loss of income is often greater than the positive weight placed on an equal-sized increase in income.
eBook - PDFNational Politics in a Global Economy
The Domestic Sources of U.S. Trade Policy
- Philip A. Mundo(Author)
- 1999(Publication Date)
- Georgetown University Press(Publisher)
2 Historical Overview of Trade Policy The national government has played a role in foreign trade since the founding of the republic. At stake from the very beginning was the fundamental question of the proper role of government in the econ-omy, of which trade policy was a part. Issues connected to this question included the nature of the economy—whether agrarian, commercial, or industrial; the distribution of the population—concen-trated in centers of commerce and industry or dispersed throughout the land on small farms; and the basic nature of government—limited or interventionist. The role the national government eventually played in trade policy reflects the ways national leaders ultimately resolved these questions. A second major aspect of trade policy in the United States is that it has always involved domestic political and economic considerations. From the 1780s through the early twentieth century, government officials raised and lowered tariffs mainly on the basis of domestic politics and economics. Through the middle and end of the twentieth century, other foreign policy considerations emerged, particularly as government officials recognized the effects trade policies had on inter-national affairs. The foreign policy component became more impor-tant in trade policy development, but domestic issues remained at its foundation. This chapter begins with the ideological split between Alexander Hamilton and Thomas Jefferson. Hamilton's and Jefferson's perspec-tives on the role of government in the economy established the pa-rameters of the debate and the policy that followed. Much of the National Politics in a Global Economy • 36 current debate on trade policy and on economic policy in general can still be understood in terms of the positions taken by Hamilton and Jefferson.
- Hamid Beladi, Kwan Choi, Sugata Marjit, Eden S. H. Yu, Hamid Beladi, Kwan Choi, Sugata Marjit, Eden S. H. Yu(Authors)
- 2008(Publication Date)
- Elsevier Science Ltd(Publisher)
SECTION VII International Trade Policy This page intentionally left blank CHAPTER 20 International Trade Agreements Wilfred J. Ethier Department of Economics, University of Pennsylvania, Philadelphia, PA 19104-6297, USA E-mail address: [email protected] Abstract Over the last 60 years, multilateral trade liberalization has reduced tariffs to historically low levels. The dominant theory of multilateral trade agreements, based solely on terms-of-trade externalities between national governments, is the conventional wisdom among international trade theorists. But it features two defects that render it inconsistent with reality. This chapter proposes a simple formulation of the political economy of protection that dispenses with terms-of-trade externalities, predicts the properties that empirical work has confirmed, and is free of the counterfactual implications of the dominant approach. The model is applied to trade agreements. Keywords: Trade agreements, the received theory, the terms-of-trade puzzle, the export-subsidy-transfer puzzle JEL classifications: F02, F13 A prominent twentieth-century accomplishment of international trade theory was its theory of international trade policy and trade agreements. Building on Harry Johnson’s classic paper ( Johnson, 1953/1954 ), scores of contributions developed and elaborated what can be called the ‘‘Received Theory.’’ The deservedly influential work of Bagwell and Staiger (1999, 2002) has triumphantly completed the research agenda implied by Johnson nearly half a century earlier. The multilateral trade liberalization of the previous six decades may well be the most successful deliberate exercise of economic policy in human history, so one could argue that understanding it is the most important task of applied economic theory. Another aspect 1 of the Received Theory, emphasizing political economy, emerged in the 1980s. Grossman and Helpman (1994, 1995, 1 See Hillman (1982, 1990) , Hillman et al.
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