INTB 1209 Chapter Notes - Chapter 7: Uruguay Round, General Agreement On Tariffs And Trade, Final Good
22 Mar 2016
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Document Summary
Free trade refers to a situation in which a government does not attempt to restrict what its citizens can buy from or sell to another country. (cid:1) Tariffs: tariff is a tax levied on imports (or exports) fall into two categories. Specific tariffs are levied as a fixed charge for each unit of a good imported. Subsidies: subsidy is a government payment to a domestic producer. Ex cash grants, low interest loans, tax breaks: help domestic firms in two ways. Gaining export markets: subsidies can help firms gain a first mover advantage in an emerging industry, protect the inefficient and promote excess production. All raise prices in the country importing goods: quota rent the extra profit that producers make when supply is artificially limited by an import quota. Local content requirements: local content requirement is a requirement that some specific fraction of a good be produced domestically.
