Post on 15-Dec-2015
Trade protectionism 1
Trade protectionism 2
What is Protectionism?
Trade protectionism is the policy that restricts the volume of ______ and, in particular, the volume of ________.
Measures:1. Tariffs
2. Import quota 3. Voluntary export restraint programmes 4. Production subsidies
5. Embargoes
6. Foreign exchange control
tradeimports
Trade protectionism 3
$50 $50$100
Customs
Tariff Tariff
Tariffs
A tariff is a tax on _____________.
On an _________ basis or a ________ basis.
An extra tax on top of the regular tariff is called an _______________ .
imported goods
per unitad valorem
import surcharge
Trade protectionism 4
What are the economic effects of tariffs?
The price of imports will _______.
Price ($)
ImportsD
S0
P0
Q0Q1
tP1
The amount of imports will ________.
Amount of tariff revenue
= ______________________________
increase
decrease
tariff rate × the quantity imported
S1
Trade protectionism 5
Import Quota
The_________ limit on the quantity of goods that can be ___________ a country.
maximum
imported into
CustomsNo more quota!
HK
HK
Trade protectionism 6
What are the economic effects of a quota?
Part of the supply curve becomes ________ at the quota limit.
The price of imported goods _________.
The amount of imports ________.
vertical
decreases
increases
Price ($)
Imports
D
S0
P0
Q0
S1
P1
Q1
Trade protectionism 7
The effect on the total expenditure on imported goods is ________, depending on the _______ _________ for imports.
Price ($)
Imports
D
S0
P0
Q0
S1
P1
Q1
uncertain
elasticity
If the demand for imports is inelastic, total expenditure will ________. increase
What are the economic effects of a quota?
of demand
Increase in total expenditure
Decrease in total expenditure
Trade protectionism 8
Voluntary Export Restraint Programmes
Importing country sets a limit on the __________ export volume for the exporting country.
Below this limit, the imported goods will be taxed at a _______ tariff rate.
If the limit is exceeded, the extra imports will be taxed at a much _______ tariff rate.
It is voluntary in the sense that the exporting country can ______ decide the amount of exports given the tariff structure imposed by the importing country.
maximum
lower
higher
freely
Trade protectionism 9
Production Subsidies
Subsidies to the local producers lower the _______________ and the ______ of the locally produced goods.
Effects:
Since locally produced goods and foreign goods are _________ for each other, the demand for imports will ________.
Therefore, the volume of imports will ________.
cost of production price
substitutes
decrease
decrease
Trade protectionism 10
Embargoes
A _____ on trade.
Can be either a _____ embargo or a ______ embargo.
ban
total partial
Total embargo Partial embargo
The ban in ivory products
Ivory products
No ivory products
Embargo imposed by the UN on Iraq
Iraq
Trade protectionism 11
Foreign Exchange Control
The government controls the ____________ and the availability of ________________.
exchange rateforeign currencies
Foreign currencies on market
Exchange rate
$A / US$
$A / Euro
1
1.1
Trade protectionism 12
Effects:
More difficult and costly for importers to obtain ________________.foreign currencies
As _____ foreign currency is available to pay for foreign goods, import will ________.
lessdecrease
Foreign Exchange Control
Trade protectionism 13
Quiz One
A tariff restricts the price of imports only while a quota restricts the quantity of imports only.
A tariff _______ the prices and ______ the quantity of imports; a quota _______ the supply and _______ the prices of imports.
raises lowersreduces
raises
True / False.
Explain whether this statement is correct or not.
Trade protectionism 14
Quiz Two
To restrict the amount of imports, using a quota is more effective than imposing a tariff. Why?
The amount of reduction in imports by tariff depends on the _________________________ whereas the import quota directly restricts the _________ amount of imports.
elasticity of demand for
maximumimports
Trade protectionism 15
Quiz Three
If the government increases the amount of per-unit tariff, the tariff revenue will increase.
Explain whether this statement is correct or not.
Trade protectionism 16
Price ($)
Quantity
D
S0
P0
Q0
S1
S2
Gain in tariff revenue
Loss in tariff revenue
S0: supply curve before tariff
S1: supply curve after imposing the original tariffS2: supply curve after imposing the new (higher) tariff
Quiz Three
P1
P2
Q1Q2
Trade protectionism 17
Quiz Three
The effect of increasing the per-unit tariff amount depends on the gain in total tariff revenue due to ____________________________ and the loss in tariff revenue due to _________________________.
an increase inthe tariff rate
a smaller
Price ($)
Quantity
D
S0
P0
Q0
S1
S2
P1
P2
Q1Q2
quantity imported
Gain in tariff revenue
Loss in tariff revenue
Trade protectionism 18
Quiz Three
If the demand for imports is inelastic, the gain in tariff revenue will be _______ than the loss in tariff revenue and the total tariff revenue will ________, vice versa.
greater
Price ($)
Quantity
D
S0
P0
Q0
S1
S2
P1
P2
Q1Q2
increase
Gain in tariff revenue
Loss in tariff revenue
End