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Chapter 9

Chapter 9. Nontariff Barriers to Imports. Figure 9.1 – Major Types of NTBs. Figure 9.2 – The Effects of an Import Quota under Competitive Conditions, Small Importing Country. Tariffs Compared to Quotas Small Country Model. Consumption and Production Effects are the same

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Chapter 9

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  1. Chapter 9 Nontariff Barriers to Imports

  2. Figure 9.1 – Major Types of NTBs

  3. Figure 9.2 – The Effects of an Import Quota under Competitive Conditions, Small Importing Country

  4. Tariffs Compared to Quotas Small Country Model • Consumption and Production Effects are the same • Tariff - Gov’t gets tariff revenues • Quota - depends on how import licenses are allocated • Auction - Gov’t gets revenue similar to tariff revenue • Lottery - no gov’t revenue, kbut no rent seeking costs • To rent seekers - inefficiencies

  5. Tariffs Versus QuotasSmall Country Model • Consider a decrease in the world price • Tariffs • Domestic P down • Imports Up, Qs down, Qd up • Quotas • No change in domestic P, Qd, Qs, since imports cannot increase

  6. Import Quota on Sugar Began in 1983

  7. Tariffs Versus QuotasSmall Country Model • Consider an Increase in Domestic Demand • Tariffs • No change in the world price or the domestic price • Imports Up, Qs, no change, Qd up • Quotas • Domestic P up, Qd up, Qs up, and no change in imports since imports cannot increase

  8. Figure 9.3 – The Effects of an Import Quota under Competitive Conditions, Large Importing Country

  9. Tariff, Domestic Monopoly

  10. Import Quota, Domestic Monopoly

  11. Domestic Content Regulation • Stipulate the minimum percentage of a product’s total value to qualify for zero tariff rates • Purpose: Limit outsourcing • Pressurizes firms that sell products in the country to use domestic inputs in production • Often used by developing countries to foster domestic automobile production (Table 5.3)

  12. Voluntary Export Restraints (VERS • Voluntary restraint pact with the Japan (1981/ • Unpopular with smaller Japanese automakers • Record profits for Japanese auto majors • U.S. consumer paid higher prices • 44,000 jobs saved in the U.S.; consumer cost per job saved being $100,000 • By 1985: Japanese companies open plants in the U.S.; decline in imports coupled with decline in market share for U.S. firms

  13. Figure 9.4 - Losses and Gains from U.S. Protection, Selected Products, 1990

  14. World Trade Organization (WTO) • Oversees the global rules for government policies toward international trade. More than 140 member countries. Established 1995. • Succeeds and subsumes the General Agreement on Tariffs and Trade (“interim” agreement, 1947). • Principles: • Liberalization of trade restrictions, move toward free trade • Nondiscrimination among countries, often called the most favored nation (MFN) principle • No unfair encouragement for exports

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