IB 3101 Lecture Notes - Lecture 6: Mercosur, General Agreement On Tariffs And Trade, Free Trade Areas In Europe
3 Apr 2016
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Document Summary
Free trade: a situation where a government does not attempt to restrict what its citizens can buy from another country or what they can sell to another country. Many are nominally committed to free trade, but they tend to intervene in international trade to protect the interest of politically important groups. Instruments of trade policy (how governments intervene in international trade) Protect domestic producers by restricting imports (4 ways) Make domestic producers more competitive by transferring money to them. Subsidies (this restricts imports because they will be less price competitive) Force foreign firms to make stuff in the local market. Tarrifs: tax levied on imports that raise the cost of imported products relative to domestic products. Tariffs are the most transparent form of protection. These have been reduced dramatically over the past four decades due to the wto, nafta, eu, ect.
