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CHAPTER N I N E 9 International Economics Twelfth Edition Nontariff Trade Barriers and CHAPTER N I N E 9 International Economics Twelfth Edition Nontariff Trade Barriers and New Protectionism Solo 9. 1/2/4/5 Dominick Salvatore John Wiley & Sons, Inc. Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

Learning Goals: n Know the meaning and effect of quotas and other nontariff trade Learning Goals: n Know the meaning and effect of quotas and other nontariff trade barriers n Describe the effect of dumping and export subsidies n Explain the political economy of protectionism and strategic and industrial policies n Describe the effect of the Uruguay Round and the aims of the Doha Round Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

9. 1 Introduction n Though tariffs have historically been the most important form of 9. 1 Introduction n Though tariffs have historically been the most important form of trade restriction, there are many other types of trade barriers. n As tariffs were negotiated down during the postwar period, the importance of non-tariff barriers was greatly increased. Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

9. 2 Import Quotas n A quota is a direct quantitative restriction on the 9. 2 Import Quotas n A quota is a direct quantitative restriction on the amount of a commodity allowed to be imported or exported. n Import quotas are used to protect domestic industry and agriculture, and/or for balance of payments reasons. Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

9. 2 Import Quotas Partial Equilibrium Effects of an Import Quota n Identical to 9. 2 Import Quotas Partial Equilibrium Effects of an Import Quota n Identical to a tariff that raises price by the same amount, except for revenues from the higher price of imports. n Would be government revenue in the tariff case. n If the government auctions import licenses, then the revenue effect is identical. n In altri termini: la quota è una restrizione delle imp (es negli anni ’ 60 c’era una quota di imp di auto giapponesi pari a 5 mila). n Il prezzo del bene aumenta, per cui gli effetti (es. Sul benessere del consumatore) sono simili al dazio. n Chi ci guadagna dall’aumento del prezzo? I produttori esteri, a meno che il governo non metta all’asta le licenze di importazione. La concorrenza fra le imprese straniere sarà tale per cui la differenza fra il prezzo nuovo e quello vecchio andrà al governo come reddito dalla licenza. Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

FIGURE 9 -1 Partial Equilibrium Effects of an Import Quota. Trascurare la D’x. p=1 FIGURE 9 -1 Partial Equilibrium Effects of an Import Quota. Trascurare la D’x. p=1 prezzo int. consumo=70, imp=60. Con una quota sulle imp JH p=2. MN sono licenze all’imp al prezzo p=1, al prezzo di vendita p=2 JMNH ricavo governo. S

9. 2 Import Quotas n Import Quota vs. Equivalent Import Tariff with an Increase 9. 2 Import Quotas n Import Quota vs. Equivalent Import Tariff with an Increase in Demand NO n Import quota: n n n Domestic price rises. Domestic consumption rises, and domestic production increases by more than in the tariff case. Import tariff: n n Domestic price is unchanged. Domestic production rises, imports rise, and domestic consumption increases by more than in the quota case. Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

9. 2 Import Quotas Import Quota vs. Equivalent Import Tariff n Import quota involves 9. 2 Import Quotas Import Quota vs. Equivalent Import Tariff n Import quota involves distribution of import licenses, while tariff does not. n n If not auctioned by government in competitive markets, receiving firms will reap monopoly profits. Allocation decision often based on arbitrary judgments rather than efficiency concerns. Monopoly profits lead firms to lobby for licenses in rent-seeking activities. Thus, import quotas replace market mechanism , resulting in waste, and possible corruption. Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

9. 2 Import Quotas n Import Quota vs. Equivalent Import Tariff n Import quota 9. 2 Import Quotas n Import Quota vs. Equivalent Import Tariff n Import quota limits imports to specified levels with certainty, while the trade effect of an import tariff may be uncertain. n n n When elasticity of demand supply are not known, it is difficult to estimate the import tariff required to restrict imports to desired level. Foreign exporters cannot maintain export quantity simply adjust to barrier by increasing efficiency or accepting lower profits, as with tariff Because import quota is less “visible, domestic producers prefer them over tariffs. Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

9. 3 Other Nontariff Barriers and the New Protectionism studiare da soli 9. 3°/b/c/d/e 9. 3 Other Nontariff Barriers and the New Protectionism studiare da soli 9. 3°/b/c/d/e (farsi una sintesi per l’esame) n Voluntary Export Restraints (VERs) n With VERs, an importing country induces another nation to reduce its exports voluntarily, under threat of higher trade restrictions. n Sometimes called orderly marketing arrangements, VERs allow industrial nations to appear to support the principle of free trade. n Less effective in limiting imports than import quotas because exporters tend to fill the quota with higher quality, higher priced goods over time. Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

9. 3 Other Nontariff Barriers and the New Protectionism n Technical, Administrative, Other Regulations 9. 3 Other Nontariff Barriers and the New Protectionism n Technical, Administrative, Other Regulations n n Health and safety regulations may serve as barriers to international trade by raising the costs of imported products. Government purchasing restrictions may be biased against foreign goods. n n The Buy American Act of 1933 Rebates for indirect taxes may be given to exporters and imposed on importers of a commodity. Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

9. 3 Other Nontariff Barriers and the New Protectionism n International Cartels n Organization 9. 3 Other Nontariff Barriers and the New Protectionism n International Cartels n Organization of suppliers from different nations that agrees to restrict output and exports of a commodity with the aim of maximizing or increasing total profits. n For example, OPEC (the Organization of Petroleum Exporting Countries) quadrupled the price of crude oil between 1973 and 1974 by restricting production and exports. Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

9. 3 Other Nontariff Barriers and the New Protectionism Dumping: the export of a 9. 3 Other Nontariff Barriers and the New Protectionism Dumping: the export of a commodity at below cost, or the sale of a commodity at a lower price abroad than domestically. 1. Persistent dumping is the continuous tendency of a domestic monopolist to maximize total profits by selling the commodity at a higher price in the domestic market. 2. Predatory dumping is the temporary sale of a commodity at below cost or a lower price abroad to drive foreign producers out of business. 3. Sporadic dumping is the occasional sale of a commodity at below cost or lower price abroad to unload surplus of the commodity without reducing domestic prices. Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

9. 3 Other Nontariff Barriers and the New Protectionism n Trade restrictions to counteract 9. 3 Other Nontariff Barriers and the New Protectionism n Trade restrictions to counteract predatory dumping are allowed– antidumping duties to offset price differentials. n n n But the type of dumping is often hard to determine. In 1978, the U. S. introduced a trigger-price mechanism under which steel import prices below that of the lowest cost international producer was subject to a speedy investigation. Later antidumping suits include semiconductors, textile and apparel, chicken, and other industries. Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

9. 3 Other Nontariff Barriers and the New Protectionism Export Subsidies n The granting 9. 3 Other Nontariff Barriers and the New Protectionism Export Subsidies n The granting of tax relief to exporters or subsidized loans to foreign buyers to stimulate a nation’s exports. n n Can be regarded as a form of dumping. Export subsidies are illegal by international agreement, but often used in disguised form. n n Example: Export-Import Bank, a U. S. government agency that extends subsidized loans to foreigners to finance U. S. exports. Countervailing duties are often imposed to offset export subsidies. Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

9. 3 Other Nontariff Barriers and the New Protectionism Overall Trade Restrictiveness Index (OTRI) 9. 3 Other Nontariff Barriers and the New Protectionism Overall Trade Restrictiveness Index (OTRI) shows the restrictiveness and types of restrictions in various countries. Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

9. 3 Other Nontariff Barriers and the New Protectionism Partial Equilibrium Effects of Export 9. 3 Other Nontariff Barriers and the New Protectionism Partial Equilibrium Effects of Export Subsidies n Figure 9. 3 shows supply and demand for good X in Nation 2. n n n If the country subsidizes production, the domestic price rises. Consumer surplus falls, producer surplus rises, and the government incurs subsidy cost equal to the amount of the subsidy times the number of units exported. The nation now has a deadweight loss due to two factors. n Loss of domestic consumption. n Increase in production cost of the initial units produced. Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

FIGURE 9 -3 Partial Equilibrium Effect of an Export Subsidy. Salvatore: International Economics, 12 FIGURE 9 -3 Partial Equilibrium Effect of an Export Subsidy. Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

9. 4 The Political Economy of Protectionism SI Fallacious Arguments for Protection 1. Trade 9. 4 The Political Economy of Protectionism SI Fallacious Arguments for Protection 1. Trade restrictions are needed to protect domestic labor against cheap foreign labor. n n Even if domestic wages are higher than wages abroad, domestic labor costs can still be lower if the productivity of labor is sufficiently higher domestically than abroad. Mutually beneficial trade could be based on comparative advantage, with cheap labor nation specializing in labor-intensive commodities. affidarsi al libero mercato sulla base di teoremi opinabili Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

9. 4 The Political Economy of Protectionism Fallacious Arguments for Protection 2. Scientific tariffs 9. 4 The Political Economy of Protectionism Fallacious Arguments for Protection 2. Scientific tariffs are needed so that domestic producers can compete. n n A scientific tariff raises the price of imports to the domestic price. This would eliminate price differences and trade in all commodities subject to such “scientific” tariffs. Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

9. 4 The Political Economy of Protectionism Questionable Arguments for Protection n Protection is 9. 4 The Political Economy of Protectionism Questionable Arguments for Protection n Protection is needed to: 1. Reduce domestic unemployment, and 2. To cure a deficit in the nation’s balance of payments n n Protection would lead to substitution of imports with domestic production. These are beggar-thy-neighbor arguments for protection because they come at the expense of other nations. Other nations retaliate; all nations lose in the end. NON è così: se il paese A vuole fare politiche espansive e B no, questo genera disavanzo a sfavore di A. Allora A può imporre delle quote sui prodotti di B Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

Protezionismo e politiche espansive n n n These are beggar-thy-neighbor arguments for protection because Protezionismo e politiche espansive n n n These are beggar-thy-neighbor arguments for protection because they come at the expense of other nations. Other nations retaliate; all nations lose in the end. NON è così: se il paese A vuole fare politiche espansive e B no, questo genera disavanzo a sfavore di A. Allora A può imporre delle quote sui prodotti di B al livello iniziale. Quindi B non è danneggiato (gli si dice: noi non importeremo di meno, ma neppure di più impedendti di approfittare della nostra espansione).

9. 4 The Political Economy of Protectionism A Qualified Argument for Protection n Infant-industry 9. 4 The Political Economy of Protectionism A Qualified Argument for Protection n Infant-industry Argument n n Temporary trade protection is justified to establish and protect a domestic industry during its “infancy” until it can meet foreign competition, achieve economies of scale, and reflect the nation’s comparative advantage. To be valid, the return in the grown-up industry must be high enough to offset the higher prices paid by domestic consumers of the commodity during infancy. Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

The Political Economy of Protectionism n Infant-industry Argument n Requires several qualifications: 1. More The Political Economy of Protectionism n Infant-industry Argument n Requires several qualifications: 1. More justified for developing nations than industrial nations. 2. May be difficult to identify which industry qualifies for protection, which, once given, is difficult to remove. 3. What trade protection can do, an equivalent production subsidy to the infant industry can do better (with less distortion and thus less social welfare loss). l’UE vieta entrambe! Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

9. 5 Strategic Trade and Industrial Policies n According to the strategic trade policy 9. 5 Strategic Trade and Industrial Policies n According to the strategic trade policy argument, a nation can create a comparative advantage in industries deemed crucial to future growth in the nation. n Nation may use temporary trade protection, subsidies, tax benefits and cooperative government-industry programs. n Similar to infant-industry argument in developing nations. Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

9. 5 Strategic Trade and Industrial Policies n Concerns n Difficult to pick winners 9. 5 Strategic Trade and Industrial Policies n Concerns n Difficult to pick winners and devise appropriate policies to nurture them. n Efforts largely neutralized when leading nations undertake strategic trade policies at the same time. n Retaliation in other markets may eliminate any gains. Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

9. 5 Strategic Trade and Industrial Policies NO da qui Game Theory Analysis of 9. 5 Strategic Trade and Industrial Policies NO da qui Game Theory Analysis of Strategic Policy Airbus Produce Boeing Produce Don’t Produce (-10, -10) (100, 0) Don’t (0, 100) (0, 0) Produce n A single producer of a new aircraft would capture the world market and earn $100 million. n If both firms produce the new aircraft, each loses $10 million n If one produces and the other does not, the producing firm earns $100 million and the other earns zero profit. Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

9. 5 Strategic Trade and Industrial Policies Game Theory Analysis of Strategic Policy n 9. 5 Strategic Trade and Industrial Policies Game Theory Analysis of Strategic Policy n If Boeing enters the market first, Airbus is locked out, and vice versa. n But if European governments give Airbus a $15 million subsidy, it will still enter, and now Boeing loses $10 million. n The U. S. government might retaliate. n However, in general, it is difficult to predict the effects of such policies. Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

9. 5 Strategic Trade and Industrial Policies Game Theory Analysis of Strategic Policy n 9. 5 Strategic Trade and Industrial Policies Game Theory Analysis of Strategic Policy n Difficult to pick winners and devise appropriate policies to nurture them. n Efforts largely neutralized when leading nations undertake strategic trade policies at the same time. n Retaliation in other markets may eliminate any gains. Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

9. 6 History of U. S. Commercial Policy NO n 1930 – Smoot-Hawley Tariff 9. 6 History of U. S. Commercial Policy NO n 1930 – Smoot-Hawley Tariff Act n Raised average import duties to 59% by 1932. n Spurred international retaliation Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

9. 6 History of U. S. Commercial Policy n 1934 – Trade Agreements Act 9. 6 History of U. S. Commercial Policy n 1934 – Trade Agreements Act n Authorized the president to negotiate mutual tariff reductions by as much as 5%. n Reductions were based on the principle of most favored nation. n n The most favored nation principle extends to all trading partners any reciprocal tariff reduction negotiated with any trading partner. For example, a negotiated reduction with Canada would extend to Mexico if it had most favored nation status. Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

9. 6 History of U. S. Commercial Policy n 1947 – The General Agreement 9. 6 History of U. S. Commercial Policy n 1947 – The General Agreement on Tariffs and Trade (GATT) Designed to promote expanded international trade through multilateral negotiations. n GATT rested on three basic principles: 1. Nondiscrimination 2. Elimination of nontariff barriers 3. Consultation among nations in solving trade disputes n Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

9. 6 History of U. S. Commercial Policy n 1950 s – Movements away 9. 6 History of U. S. Commercial Policy n 1950 s – Movements away from free trade 1. Peril-point provisions prevented the president from negotiating tariff reductions that would seriously damage a domestic industry. 2. Escape clause allowed any domestic industry claiming injury from imports to petition for tariff reduction. 3. National security clause prevented tariff reductions when they would hurt industries important for national defense. Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

9. 6 History of U. S. Commercial Policy n 1962 – Trade Expansion Act 9. 6 History of U. S. Commercial Policy n 1962 – Trade Expansion Act n Authorized the president to negotiate across the board tariff reductions of up to 50%. n Introduced Trade Adjustment Assistance (TAA) to workers displaced by international trade. n Allowed the passage of the Kennedy Round negotiation of the GATT. Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

9. 6 History of U. S. Commercial Policy n 1974 – Trade Reform Act 9. 6 History of U. S. Commercial Policy n 1974 – Trade Reform Act n Authorized the president to negotiate tariff reductions of up to 60% and the elimination of tariffs below 5%. n Contributed to passage of the Tokyo Round negotiations of the GATT. Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

9. 6 History of U. S. Commercial Policy n 1984 – The Trade and 9. 6 History of U. S. Commercial Policy n 1984 – The Trade and Tariff Act n Authorized the president to negotiate international agreements for the protection of intellectual property rights. n Extended the Generalized System of Preferences (GSP), a system by which developing nation exports are granted preferential access to US markets. n Provided authority for negotiations leading to free trade with Israel. Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

9. 6 History of U. S. Commercial Policy n 1988 – The Omnibus Trade 9. 6 History of U. S. Commercial Policy n 1988 – The Omnibus Trade and Competitiveness Act n Required the U. S. Special Trade Representative to set a rigorous schedule for negotiating reductions in trade barriers with countries maintaining high barriers to U. S. exports. Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

FIGURE 9 -3 U. S. Average Tariff Rates on Dutiable Imports, 1900 -2012. Salvatore: FIGURE 9 -3 U. S. Average Tariff Rates on Dutiable Imports, 1900 -2012. Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

9. 7 The Uruguay Round, Outstanding Trade Problems, and the Doha Round n The 9. 7 The Uruguay Round, Outstanding Trade Problems, and the Doha Round n The Uruguay Round n GATT’s eighth round of negotiations, with 123 countries participating. n Began in September 1986 with completion scheduled for December 1990. n Disagreements between United States and European Union, on reducing agricultural subsidies, delayed conclusion for three years. n Agreement took effect in July, 1995. Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

9. 7 The Uruguay Round, Outstanding Trade Problems, and the Doha Round n The 9. 7 The Uruguay Round, Outstanding Trade Problems, and the Doha Round n The Uruguay Round Aims of the Uruguay Round: n n Establish rules for monitoring protectionism and reversing the trend. Bring services, agriculture and foreign investments into negotiations. Negotiate international rules for protection of intellectual property rights. Ensure more timely decision and compliance with GATT rulings on dispute settlements. Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

9. 7 The Uruguay Round, Outstanding Trade Problems, and the Doha Round n The 9. 7 The Uruguay Round, Outstanding Trade Problems, and the Doha Round n The Uruguay Round Major Provisions of Uruguay Accord: n Tariffs n n n Tariffs on industrial products to be cut from an average of 4. 7% to an average of 3%. The share of good with zero tariffs to increase from 20 -22% to 40 -45%. Tariffs removed on pharmaceuticals, constructions equipment, medical equipment, paper products, and steel. Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

9. 7 The Uruguay Round, Outstanding Trade Problems, and the Doha Round n The 9. 7 The Uruguay Round, Outstanding Trade Problems, and the Doha Round n The Uruguay Round Major Provisions of Uruguay Accord: n Quotas n n Quotas on agricultural products were to be replaced with less restrictive tariffs by 1999 Quotas on textiles were to be replaced with less restrictive tariffs by 2004 Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

9. 7 The Uruguay Round, Outstanding Trade Problems, and the Doha Round n The 9. 7 The Uruguay Round, Outstanding Trade Problems, and the Doha Round n The Uruguay Round Major Provisions of Uruguay Accord: n Antidumping n n Tougher and quicker resolution of disputes resulting from antidumping laws, but not a ban on their use. Subsidies n The volume of subsidized agricultural products was to be reduced by 21 percent, with government subsidies for industrial research limited to 50% of the applied research cost. Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

9. 7 The Uruguay Round, Outstanding Trade Problems, and the Doha Round n The 9. 7 The Uruguay Round, Outstanding Trade Problems, and the Doha Round n The Uruguay Round Major Provisions of Uruguay Accord: n Safeguards n n Countries barred from implementing health and safety standards that are not based on scientific research. Temporary tariffs allowed to protect domestic industries from temporary imports surges. Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

9. 7 The Uruguay Round, Outstanding Trade Problems, and the Doha Round n The 9. 7 The Uruguay Round, Outstanding Trade Problems, and the Doha Round n The Uruguay Round Major Provisions of Uruguay Accord: n Intellectual property n n Twenty-year protection of patents, trademarks, and copyrights. A 10 year phase-in period for patents over pharmaceuticals in developing countries. Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

9. 7 The Uruguay Round, Outstanding Trade Problems, and the Doha Round n The 9. 7 The Uruguay Round, Outstanding Trade Problems, and the Doha Round n The Uruguay Round Major Provisions of Uruguay Accord: n Services n n United States failed to gain access to markets in Japan, Korea and many developing nations for banks and security firms. United States did not succeed in having France and the European Union lift restrictions on showing American films and TV programs in Europe. Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

9. 7 The Uruguay Round, Outstanding Trade Problems, and the Doha Round n The 9. 7 The Uruguay Round, Outstanding Trade Problems, and the Doha Round n The Uruguay Round Major Provisions of Uruguay Accord: n Other Industry Provisions n n United States and Europe agreed to talks on limiting government subsidies to civil aircraft makers, opening up distance telephone market, and limiting European steel subsidies. United States expressed intention to negotiate opening Japanese computer chip market. Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

9. 7 The Uruguay Round, Outstanding Trade Problems, and the Doha Round n The 9. 7 The Uruguay Round, Outstanding Trade Problems, and the Doha Round n The Uruguay Round Major Provisions of Uruguay Accord: n Trade-Related Investment Measures n Phased out requirement that foreign investors buy supplies locally or export as much as they import. Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

9. 7 The Uruguay Round, Outstanding Trade Problems, and the Doha Round n The 9. 7 The Uruguay Round, Outstanding Trade Problems, and the Doha Round n The Uruguay Round Major Provisions of Uruguay Accord: n World Trade Organization (WTO) n n Established the WTO in place of the GATT Secretariat, with authority in industrial and agricultural products and services. Trade disputes to be settled by vote of two-thirds or three-quarters of nations rather than unanimously. Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

9. 7 The Uruguay Round, Outstanding Trade Problems, and the Doha Round n Outstanding 9. 7 The Uruguay Round, Outstanding Trade Problems, and the Doha Round n Outstanding Trade Problems n Continued widespread protectionism. n High subsidies and tariffs on agricultural products, and frequently abused antidumping laws. n Tendency for world to divide into three major trade blocs: n n n European Union (EU) North American Free Trade Area (NAFTA) Asian Bloc Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

9. 7 The Uruguay Round, Outstanding Trade Problems, and the Doha Round n Outstanding 9. 7 The Uruguay Round, Outstanding Trade Problems, and the Doha Round n Outstanding Trade Problems n Call by some developed nations for labor and environmental standards, to ensure “leveling of working conditions” and avoid “social dumping” Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

The Uruguay Round, Outstanding Trade Problems, and the Doha Round n Launched in November, The Uruguay Round, Outstanding Trade Problems, and the Doha Round n Launched in November, 2001, in Doha, Qatar. n Agenda included: n n Further liberalization of production and trade in agriculture, industrial products, and services. Further tightening of antidumping regulations, investment and competition policies. Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

The Uruguay Round, Outstanding Trade Problems, and the Doha Round n Developing nations reluctant The Uruguay Round, Outstanding Trade Problems, and the Doha Round n Developing nations reluctant to make concessions because of feeling that Uruguay Round failed to deliver on promises. n Developing nations insisted on making Doha Round a true “development round”. n n Intended to conclude by end of 2004, but collapsed in 2008 over disagreements over agricultural subsidies between developed and developing nations. All attempts to revive Doha Round have failed as of mid 2105. Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

Case Study 9 -3 Antidumping Investigations by G 20 Members Salvatore: International Economics, 12 Case Study 9 -3 Antidumping Investigations by G 20 Members Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

Case Study 9 -4 Agricultural Subsidies in OECD Countries Salvatore: International Economics, 12 th Case Study 9 -4 Agricultural Subsidies in OECD Countries Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

Case Study 9 -5 Pervasiveness of Nontariff Barriers Salvatore: International Economics, 12 th Edition Case Study 9 -5 Pervasiveness of Nontariff Barriers Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

Case Study 9 -6 Benefits to the World Economy from Complete Trade Liberalization Salvatore: Case Study 9 -6 Benefits to the World Economy from Complete Trade Liberalization Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

Case Study 9 -7 Gains from the Uruguay Round Salvatore: International Economics, 12 th Case Study 9 -7 Gains from the Uruguay Round Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

Case Study 9 -8 The Multilateral Rounds of Trade Negotiations Salvatore: International Economics, 12 Case Study 9 -8 The Multilateral Rounds of Trade Negotiations Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

Case Study 9 -9 Benefits from a Likely Doha Scenario Salvatore: International Economics, 12 Case Study 9 -9 Benefits from a Likely Doha Scenario Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

Appendix to Chapter 9 n Maximization of the International Cartel’s Total Profits n International Appendix to Chapter 9 n Maximization of the International Cartel’s Total Profits n International Price Discrimination n A Tariff vs. a Subsidy to Achieve a Domestic Goal Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

FIGURE 9 -4 Maximization of the International Cartel’s Total Profits. Salvatore: International Economics, 12 FIGURE 9 -4 Maximization of the International Cartel’s Total Profits. Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

FIGURE 9 -5 International Price Discrimination. Salvatore: International Economics, 12 th Edition © 2016 FIGURE 9 -5 International Price Discrimination. Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

FIGURE 9 -6 A Tariff vs. a Subsidy to Achieve a Domestic Goal. Salvatore: FIGURE 9 -6 A Tariff vs. a Subsidy to Achieve a Domestic Goal. Salvatore: International Economics, 12 th Edition © 2016 John Wiley & Sons, Inc.

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