ADM 3318 Lecture Notes - Lecture 6: Import Quota, Corn Laws, Voluntary Export Restraints
2 Dec 2016
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6 political economy of international trade (192-220) Oldest and simplest instrument; however, have been decreasing in use. Tariff: a tax levied by governments on imports or exports: divided into 2 categories. Specific tariff: levied as a fixed charge for each unit of good imported. Ad valorem tariff: levied as a proportion of the value of the imported good: purpose: protect domestic producers from foreign competition by raising the price of imported goods. Pro-producer, and anti-consumer (raise foreign and domestic prices) Reduce the overall efficiency of the world economy. Subsidy: government financial assistance to a domestic producer. Variations: cash grants, low-interest loans, tax breaks, and government equity participation in domestic firms. Purpose: help to compete against foreign imports, and gain exports markets. Critic: allow inefficient farmers to stay in business, encourage countries to overproduce heavily subsidized agricultural products, encourage countries to produce products that could be grown more cheaply elsewhere and imported, reduce international trade in agricultural product.
